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RIA Novosti
September 27, 2004
THE SPECIFICS OF RUSSIAN POVERTY

MOSCOW, (RIA Novosti political analyst Yana Yurova)

In the World Bank's Poverty Assessment Report on Russia, researchers concluded that the situation in Russia had essentially improved. Since the poverty levels peaked in 1999 at 41.5%, poverty was cut in half by 2002 to 19.6%. About 30 million people have improved their financial standing, however the number of people in poverty is still high - every fifth Russian lives well below the official poverty line. According to the World Bank, the most vulnerable group was the rural population. About 30.4% of the rural population lives in poverty, while 15.7% of the urban population is poor. Children under 16 have a higher incidence of poverty, about 25%. According to the report, the North Caucasus, South Siberia and parts of Central Russia are the poorest regions in Russia.

The Russian government's difficult task is to halve the poverty incidence by 2007. The World Bank report said that in order for poverty to be reduced to 10.2% by 2007, the annual consumption levels should grow by 5%. However, if annual consumption levels grow only by 3%, poverty would only be reduced by about a third.

The World Bank also made recommendations for how Russia could reduce poverty. The recommendations include economic diversification (to reduce the federal budget's dependence on oil prices), stable economic growth, increasing targeted actions to decrease poverty, focusing aid on the poorest citizens, and implementing different social policies with regard to the poor, which calls for the redistribution of specific benefits using a point system. The most impoverished people receive the most points accordingly, this system would not provide the wealthy with any benefits.

In the last 10 years, poverty has been very popular issue. Many international organizations, including the International Labor Organization, have analyzed poverty, however the Russian government has rarely implemented their findings and proposals because foreign experts usually do not take into account the specifics of Russia, and instead apply international standards.

The World Bank said that the methodology it used for the report was to analyze household incomes (consumptions levels) rather than family budgets. However, the World Bank report does not differ greatly from the findings of Russian experts. Therefore, it is highly unlikely that Russia will change the relevant methodology base. Moreover, World Bank experts, who singled out those in need of selective aid, did not consider those individuals' personal assets such as dachas, apartments and personal holdings. A unique feature of poverty in Russia is that many people may have low incomes and consumption levels, but live in expensive apartments in the center of Moscow and can receive benefits.

The World Bank's proposal to redistribute specific benefits in favor of poor regions is suspect. Russian experts have established that the amount of misappropriated funds is directly proportional to federal budget subsidies to any territory for poverty elimination purposes. Poverty in Russia is now connected with the situation in the labor market. Poor households account for 26% of Russia, while about 60% of all poor Russian families have at least one unemployed adult, thus making up for 70%-80% of the entire income deficit. Instead of redistributing benefits, regional poverty must be reduced because the first option facilitates sponging attitudes. Those specific regions, which post average economic growth rates, must create additional jobs to effectively combat poverty.

Rural Russia, which has a surplus of manpower, suffers from chronic poverty. Even the most selective social aid cannot rectify this situation because everyone would have to get such benefits all the time. It is dear to create alternative jobs there. Labor migration is just about the only quick and cheap solution.

Ineffective social programs are a result of the ineffective performance of Russia's social institutions, rather than an ineffective methodology for identifying the most underprivileged groups. Russia's social institutions are mostly focused on helping the elderly, the handicapped, and veterans. In reality, poor people often are not members of these three groups and therefore fail to influence local politicians accordingly. Veterans organizations, groups representing the handicapped and Chernobyl cleanup workers managed to wrest additional privileges from the government. But this boils down to political-economic aspects of the poverty-elimination process. The state can settle these issues, if wants to. Beginning on January 1, 2005, Russian territories will have to pay all monetary benefits, which may drastically change Russia's poverty-elimination situation.