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Moscow Times
March 4, 2005
Income Gap Reaches a Dangerous Level
By Francesca Mereu
Staff Writer

The gap between rich and poor has widened over the past year, crossing a threshold beyond which social discontent could reach dangerous levels.

In 2004, the richest 10 percent of Russians earned 14.8 times more than the poorest 10 percent, according to data published by the State Statistics Service earlier this week.

The real disparity may be a differential of up to 40 times because people don't declare fully their incomes, sociologist Vyacheslav Lokosov said.

"We have a polarized country -- one [part] lives according to Western standards, the other is just trying to survive," said Lokosov, deputy director of the Institute for Social and Political Research at the Russian Academy of Sciences.

In Western European countries, a disparity in income greater than 10 times is considered the acceptable limit before social discontent bubbles over, he said.

Even according to official statistics, the gap is growing. In 2001, the richest tenth of the population earned 10 times more than the poorest tenth. In 2002 the factor rose to 13 times and in 2003 to 14.3 times, according to the statistics service.

Lokosov said the real gap ranges between a factor of 30 to 40, because many people do not fully disclose their incomes. This year, the situation is likely to get worse, Lokosov said, with the monetization of welfare benefits affecting some 40 million people.

The controversial reform, backed by President Vladimir Putin, took effect Jan. 1 and replaced benefits such as free public transportation and medicine with meager cash payments.

"After the reform I won't be surprised to see the gap widening to 16 times -- according to official data, of course," Lokosov said.

The income gap could reach grave proportions in a country that lacks the social structures able to support the weakest segments of society, said Alexei Novikov, analytical director of ratings agency Standard & Poor's.

"In countries with a good social infrastructure, such a gap would not be as serious as in Russia," he said.

In 2003, the richest 10 percent accounted for 29.8 percent of the country's total personal income, while the bottom 10 percent accounted for 2 percent, according to the statistics service.

Despite a rise in incomes, inflation caused Russians' purchasing power to drop 9.6 percent in January year-on-year, the statistics service said.

Utilities and other housing costs have risen 23.5 percent this year, the price of pork has gone up 40 percent and the price of diesel has jumped 56 percent, Noviye Izvestia reported this week.

Not surprisingly, an opinion poll published this week showed that more Russians want a return to communism than the government's current reform plan. Only 17 percent of respondents backed the reform program while 21 percent favored a "return to socialism," ROMIR Monitoring found in a survey of 1,500 Russians. Fifty-seven percent of respondents said that reform should be more socially targeted.

The last time more Russians wanted communism than a reforms was in May 2001, ROMIR said.