MOSCOW — The Russian recession, which began in mid-2014, is among the leading causes of poverty in the Russian Federation. Lower oil prices, sanctions by the United States and the European Union for Russian actions in the Ukraine, and Russian counter-sanctions in response, have also added to an economy already slowed by the global economic crisis.
Due to the recession, the poverty rate hit a nine-year high. In 2016, 19.2 million Russians (about 13.4 percent of the population), lived under the poverty line, representing a substantial increase over the 16.1 million people living in poverty at the start of the crisis. How many are at risk of poverty?
The World Bank in Russia in 2009 reported, “Poverty is fairly shallow in Russia, with a large number of people concentrated around the poverty line––this implying high vulnerability of the non-poor to economic shocks.”
In the European Union, 23.7 percent of the population as a whole is at risk of poverty. Extrapolating an AROPE rate for Russia is impossible because the country does not keep those kinds of statistics. However, experts at the World Public Forum say that 16 percent of Russians are on the “borderline of poverty,” and an additional 27 percent have “low personal income.”
The World Bank in 2016 put the rate even higher. One statement by the organization said “The vulnerable population … reached 51 percent [in 2015], reverting many of spared prosperity gains of recent years.”
Perhaps as many as 40 percent of Russia’s poor are the working poor. Moreover, children in Russia are very vulnerable to poverty. While 34 percent of Russian families have children under the age of 16, reports the Russian Federal State Statistical Service, that percentage jumps to 63 among poor households.
As bad as things are today, when the Russian Federation was the United Soviet Social Republics, and the government denied poverty altogether, at least 20 percent of the population lived below the poverty line. When socialism collapsed, a different kind of poverty in the Russian Federation took its place. State-guaranteed jobs disappeared, and by the time Vladimir Putin took office in 2000, 29 percent of the population lived in poverty.
The changeover from socialism to capitalism was so radical that trying to compare statistics from before and after the Soviet Union’s collapse is not particularly useful. Now that the situation has stabilized, comparisons make a little more sense. Unemployment due to the global economic downturn, for instance, spiked in 2009 at roughly 9.5 percent. It is currently 5.4 percent, which is close to the U.S.’s unemployment rate.
As retirees experienced a sharp drop in income due to the Russian recession, so did the employed. The average monthly wage fell 9.5 percent in 2015 and 8 percent in 2016. Also, disposable income continued to decline in real terms, falling by 5.8 percent in 2016.
Income inequality also impacts poverty in the Russian Federation. “G20 emerging economies with growing [income]inequality account for over half the world poor,” reports the World Bank and International Monetary Fund. Russia is among those countries. The richest 10 percent in Russia own 87 percent of the country’s wealth, and only the poor keep their money in rubles.
This fact may explain why Russian oligarchs and their children are spending in the tens of millions of dollars on real estate in Manhattan. Ekaterina Rybolovleva, for instance, whose father Dmitry Rybolovlev, is worth $9.5 billion, bought a penthouse in Central Park West for $88 million in 2011, while the rest of the world recovered from the banking crisis.
Although unrest over the level of income inequality has grown, power remains in the hands of Putin and Russian oligarchs. Putin is one of the many variables contributing to poverty in the Russian Federation. Fluctuations in energy prices, the state of the global economy and the policies Putin pursues in Russia and abroad are the influencers on economic change and poverty in the Russian Federation.
However, the poverty levels in the Russian Federation may change, but their causes remain the same.
– Laurie Gold