Economists urged not to be deluded by the growth of real incomes of the population

There are fewer and fewer opportunities to improve the indicator

Real cash incomes of Russians over the ten months of 2023 increased by 3.9% compared to the same period in 2022. Deputy Prime Minister Tatyana Golikova announced this, leaving the indicator without comment. Indeed, there is nothing special to be happy about here: behind the seemingly positive figure from Rosstat there are not the most rosy trends. In addition, the indicator of real income of the population itself is not very representative: the word “disposable” is clearly missing.

Income in nominal terms for the least wealthy citizens increased by an average of 8.5%, Golikova also noted at a meeting of the Council for Strategic Development and National Projects with the participation of the president. “If we translate this into the number of people, then 1.1 million of our citizens have come out of poverty,” the Deputy Prime Minister clarified. As for the overall poverty level, in the third quarter it was 0.3 percentage points lower than the value in July-September 2022. As Golikova recalled, a register of Russians in need will begin to operate from January 1, 2024, this will allow for more rapid monitoring of the dynamics of income of low-income groups of the population. The goal is to identify potential recipients of additional support and improve its targeting.

All this, of course, is wonderful, but only one indicator announced by the Deputy Prime Minister is truly indicative – plus 3.9% to the level of January-October 2022. How to treat it – enthusiastically or calmly, what does it testify to, what will happen to the real incomes of citizens in 2024, what are the main sources of growth? “MK” addressed all these questions to the experts.

“Income growth continues, but its pace has been declining in recent months,” states Alexei Zubets, a professor at the Financial University under the Government of the Russian Federation. – We are talking about the high base effect. The end of last year turned out to be quite successful from a macroeconomic point of view: the economy accelerated, largely due to the fiscal stimulus, and people had additional money. Now the situation is somewhat different; accordingly, real incomes are increasing at a slower pace – mainly due to the growth of wages and business revenues, as well as the indexation of pensions and relatively low (less than 8%) inflation. But if you look at the dynamics of this indicator over two years, there will be only about one percent growth.”

As for the indicator of overall poverty mentioned by Golikova, it is by and large not very informative. This, according to our interlocutor, is a purely accounting value that has nothing to do with the real economy. It would be more correct to talk about people who consider themselves poor because they are deprived of the opportunity to satisfy even basic needs. According to Zubets, at least half of the country’s population is like that.

“Real income takes into account only inflation, but not mandatory payments – for utilities, loan servicing, and so on,” says Nikita Maslennikov, a leading expert at the Center for Political Technologies. – Of course, the growth figure of 3.9% can warm someone’s souls, but at the same time it is much less representative of the indicator of real disposable income. The latter quite adequately reflects the level of well-being of citizens. Yes, in general this level has increased, but in terms of curbing inflation, no significant success has yet been seen. This means that it is clearly premature to trumpet victory marches. What is alarming is that the annual dynamics are slowing down, associated not only with real incomes, but also with business activity and the macroeconomy as a whole.”

Two-thirds of the income growth is due to rising wages – both real disposable and nominal. However, the statistics in this case are lagging: we only have Rosstat data for October so far. There is, again, a slowdown in the pace: if in September nominal wages increased by more than 15%, then in October they increased by more than 13%. The picture with real disposable income is similar: in September the growth was more than 9%, in October – by 7.4%. Maslennikov gives the following explanation: many companies are no longer able to increase either wage funds (in the fight against personnel shortages) or labor productivity, since resources are close to exhaustion. In addition, it is impossible to increase selling prices indefinitely, trying to compensate for rising costs. This practice also has its natural limits.

So the Russian population has no particular reason to seriously count on a further increase in income.