Poverty has crossed the border

At the end of 2022, the poverty rate in Russia decreased to 10.5%, updating the historical minimum for the entire post-Soviet period. Among the main reasons for the reduction in the number of poor people in the Russian Federation, experts cite the expansion of measures to support children in low-income families and the record low unemployment rate in the country. To move further towards the poverty target of 6.6% by 2030, the government may also need new measures, such as indexation of pensions for working pensioners.

At the end of 2022, the number of Russians living below the poverty line amounted to 15.3 million people, or 10.5% of the country’s population, Rosstat said on Friday. Compared to 2021, the indicator decreased by 0.7 million people, or 0.5 percentage points. As a result, the historical minimum level of poverty in the Russian Federation has been updated since the beginning of the calculation of this indicator in the early 1990s – the previous lowest value was reached in 2012 (10.7%).

Recall that to calculate the number and share of the poor, Rosstat uses the cost of the consumer basket for the fourth quarter of 2020, taking into account accumulated inflation, on average in 2022 this amount was 13.5 thousand rubles. Although since 2021 the Ministry of Labor has been operating with the new concept of “poverty line”, it means the same methodology introduced by Rosstat back in 1992.

Last year, wages accounted for the largest share in the structure of household income (decreased from 57.3% in 2021 to 57.2%). The share of social payments increased from 20.6% to 20.7%, income from entrepreneurial activity – from 5.5% to 6.2%. According to Dmitry Platygin, general director of the All-Russian Research Institute of Labor, the expansion of the program of targeted payments for families with children has made the main contribution to reducing poverty. “If in 2021 only single parents could receive assistance for children from 8 to 17 years old, then from April 1, 2022, monthly payments will also be extended to complete families with low incomes. Parents of 5.4 million children received such support, its total amount is 570 billion rubles,” the expert explained.

Targeted support for the poor has also led to a reduction in the Gini coefficient. Over the past year, this indicator, which characterizes the degree of inequality in the distribution of income within population groups, decreased from 0.409 to 0.402. This is its lowest value for the last 20 years – it was lower only in 2002 (see Kommersant of March 1). The situation on the labor market also contributed to the reduction in the number of poor people. Since mid-2022, the Russian Federation has set record low unemployment rates. The increase in wages in nominal terms for the year amounted to 12.6% – up to the national average of 64.2 thousand rubles. In real terms, however, given the high inflation, they decreased by 1%.

While reducing the poverty rate by the end of 2022 makes the government’s goal of reducing it to 6.6% by 2030 increasingly achievable, this year, according to Vice-Rector of the Higher School of Economics Lilia Ovcharova, the rate of decline in the share of the poor may slow down. “This will happen if the income of the population from property and entrepreneurship, as well as in non-observed sectors of the economy, decreases,” she says (according to Rosstat, about 15 million people are employed in the informal sector of the Russian Federation).

According to the expert, the effect of the 10% increase in the minimum wage announced by the government from 2024 will be noticeable only if, as a result of this, the minimum wage exceeds the subsistence minimum by 1.75 times, which is possible only with low inflation. Among other social support measures that can further reduce poverty, Lilia Ovcharova names the indexation of pensions for working pensioners, which can affect every fifth household in the country. The decrease in the poverty indicator can be slowed down if it is taken into account when calculating the standard of living of the population in the annexed regions.

Anastasia Manuylova