Economist Nikolaev predicted a further drop in incomes of the population

— The real disposable money income of the population is one of the key and most sensitive indicators of the state of the economy, since it concerns specific people. The Ministry of Economic Development predicted their decline by 2.8% at the end of the year. Do you agree with this forecast?

“Obviously, people’s incomes are falling. According to Rosstat, in the first half of this year, they decreased by 0.8% compared to the same period in 2021. At the same time, let me remind you that in June pensions for non-working pensioners, the minimum wage and the subsistence minimum were additionally indexed by 10%. It turns out that even such a serious increase did not make it possible to increase the dynamics of real disposable income, in the formation of which the same pension payments play a very significant role. I would also note that this negative trend was a continuation of the trend that emerged in 2014. According to Rosstat, in 2014-2021, revenues decreased by 6.1% in total. As for 2022, the recorded statistic is largely determined by the low base effect. It is with this effect in mind that the income situation does not look catastrophic. Let me remind you that the initial government forecast for the current year provided that real disposable money incomes of the population would grow by 2.4%.

It is now obvious that they will continue to fall in 2022 and, with a high probability, in 2023. And this exacerbates the problem of poverty, increases the risks of social tension, ultimately creating a threat to the prospects for economic development. The negative dynamics of real incomes is predetermined, first of all, by the continuing decline in GDP, as well as by rather high inflation in annual terms. In May, the Ministry of Economic Development predicted that by the end of 2022 they would decrease by 6.8%, in August it adjusted the figure to minus 2.8%, but in any case, this will be a significant drop, given the dynamics over the past eight years.

– In mid-February, Vladimir Putin demanded an increase in real incomes of Russians by at least 2.5% per year. It was also reported that in the next three years, 41.5 trillion rubles are expected to be allocated for social support measures. But will the Ministry of Finance have the money for this in the current conditions?

— As we can see, in order for incomes to become positive at the end of the current year, even a very capital-intensive measure in the form of a ten percent indexation of pensions and other social benefits was not enough for this. But significant funds were allocated – about 600 billion rubles. The question is: will there be money for such increases in the future? Judging by the fact that the crisis is dragging on, and the budget has already become scarce even with high oil prices, it is not worth counting on such gifts. Of course, there will be indexations of the same pensions, but so that like this, at 10%, and even unscheduled, there are few chances for this.

– How should citizens be in this situation – should they rely solely on the “mercy” of the state, should they expect any social concessions? Or can people themselves somehow help themselves in terms of increasing their income? For example, go to the employer and ask for a pay raise…

– In my opinion, in any situation, relying only on the “mercy” of the state is not worth it. Otherwise, you may regret it. The problem is that some categories of citizens – the same pensioners, for example – can not count on anyone other than the state. But if there is even the slightest opportunity to increase your income, earn extra money, then this should be done. Today we live in conditions of the highest economic uncertainty, it is not known what will happen tomorrow. Since the crisis is still developing, it is better to be prepared for anything. As regards specifically such a form as an appeal to the authorities about an increase in salary, this is normal. But you just need to be sure that your request will be correctly perceived. And that they will not want to fire you in response. In Russia, in relations between an employee and an employer, requests of this kind are still, alas, not natural and involve risks.

– When incomes fall, the effective demand of the population also decreases. The economy, domestic commodity markets, and the service sector do not receive the necessary monetary support from households. It turns out a vicious circle. Is there a way out of it, and if so, what is it?

– First, we need to try to make the demand solvent. The state simply does not need to be greedy. And then they saved up, saved up reserves, but it turned out – in vain. Secondly, solvent demand is not the only driver of the traditional economy. There is also investment demand, both from private business and the state. It is possible and necessary to try to ensure the growth of the economy with the help of these mechanisms. There will be GDP growth – people’s incomes will grow. So he said this, and he stopped himself. The problem is that the second does not necessarily follow from the first. By the way, the 6.1% drop in real incomes of the population in 2014–2021, which was already mentioned above, occurred against the backdrop of economic recovery: over that period, GDP added 8–9%. So a separate important task is to ensure that the growth of the economy leads to an increase in the incomes of citizens. And it shouldn’t be otherwise. And it turns out just like the legendary Soviet sports television commentator Nikolai Ozerov: “No, we don’t need such hockey.”

– Will the poverty rate increase, that is, the number of citizens with incomes below the subsistence level? And if so, how much?

— How many poor people there are in the country is the most important indicator of the socio-economic development of the country. It is possible to set targets for accelerating GDP, but if all this statistical growth does not ultimately translate into a reduction in the number of poor people, then the price is not high. In the first decade of the 21st century, an encouraging trend was observed in Russia: the number of citizens with incomes below the subsistence level decreased from more than 40 million people in 1999–2000 to 15.4 million in 2012. But then this process stalled and even turned in the other direction. It is not for nothing that the task of reducing the level of poverty (by half by 2024) has become one of the priority national goals. It happened with some delay – in 2018. And already in 2020, it became obvious that there were big problems with the implementation of the plan: if in 2018 there were 18.4 million poor people in the country, then in the first half of 2020, there were already 19.4 million of those. The deadlines were shifted to 2030 : by this time, poverty in Russia should be halved compared to 2017, when citizens from this social category accounted for 12.9% (18.9 million people) of the total population. Accordingly, the new target should not exceed 6.5%. But, according to Rosstat, in the first quarter of 2022, the number of Russians with incomes below the subsistence level reached 20.9 million people, or 14.3% of the total population. This is significantly worse than the indicators of the base year 2017. Thus, the threat of growing poverty is already being realized in full.

– What is happening with unemployment – official and hidden?

– According to Rosstat, the total number of unemployed today is about 3 million people. As for the officially registered unemployed, according to Rostrud, there are about 700,000 of them. These are quite good figures. We can say that our unemployment rate is low. But for the sake of objectivity, let’s take into account that a lot of people have been transferred to part-time work and some receive half-time, and some – a quarter of the rate. All of them are formally listed among the employed. We are talking about part-time employment, and this is sort of like a different issue. The practice in Russia is quite common, since company executives really don’t want to explain to the authorities and supervisory authorities why they suddenly fired people en masse. And so everything seems to be in business, outwardly the situation looks quite decent. Plus, it is necessary to take into account the specifics of economic development under sanctions. There is a simplification, the demand for unskilled labor increases. It will also curb the rise in unemployment. Nevertheless, in the foreseeable future, its level will increase slightly. Including because some foreign companies leaving the country against the backdrop of sanctions, after several months of inactivity, are beginning to slowly part with their employees. And most importantly: the economy is in recession, which means that, by definition, it is not capable of providing a stable demand for labor.

— How will the situation with falling incomes affect the Russian middle class?

– It will reflect badly. The state will help the poor with various kinds of social payments, you should not worry about the rich at all, but the middle class will suffer. After all, what happens in a crisis, at whose expense the number of poor people grows? It is increasing precisely at the expense of those representatives of the middle class who are rapidly losing income. Such is the bitter prose of life.

— You said that people’s incomes should start growing along with GDP growth. When will the economy return to pre-crisis levels?

– According to official forecasts, the decline will continue in 2023, but already in 2024 our economy will begin to grow steadily. Thus, the Central Bank expects GDP growth in the range of 1.5-2.5%, in 2025 – 2.6%. In my opinion, these are unreasonably optimistic estimates. We must be prepared for someone, that the most severe sanctions for the economy in the form of a complete embargo on the supply of Russian energy carriers are being implemented in the coming years. In any case, the West is acting in this direction. Then the restoration of the Russian economy by 2025 is hardly possible. In general, building long-term forecasts now is a thankless task. The uncertainty is extremely high: even in a month or two, a lot can change, not to mention a year or two. In the meantime, I propose to take comfort in the universal statement that all crises end sooner or later. This one will also end. I wish everyone that this happens soon.

How did the real disposable income of the population of the Russian Federation change (%):

2012 +4.6

2013 +4.0

2014-1.2

2015-2.4

2016-4.5

2017 -0.5

2018 +0.1

2019 +1.0

2020 -3.5

2021+3.1

2022 (first half) -0.8

Source: Rosstat