Window on Eurasia: Incomes Rise in Russia’s Regions as They Fall in Moscow, Transforming the Economic Landscape

Paul Goble

            Staunton, December 27 -- Average incomes in Russia’s regions are continuing to rise even as they have been falling in the capital, a reflection among other things of the fact that the greatest increases have come not in the energy sector but in government-financed ones like education and health and among pensioners.

            Drawing on data issued by the Russian State Statistics Committee (Rosstat), the Moscow Institute on Globalization and Social Movements, according to a report by Tatyana Shestakova in “Versiya” this week, concludes that incomes in the fuel and energy sectors grew 6.6 times over that decade while those in education grew 11.3 times and in health 11.8 times (versia.ru/articles/2012/dec/24/bogat_bednyak).

            Sergey Zhavoronkov, a scholar at the Moscow Institute of the Economy of the Transitional Period, noted that the most rapid rate of growth over that period “was notin pay but in pensions,” which increased 7.5 times over that decade and 11.8 times if one takes 2010 and 2011 into account.

            If inflation is taken into account, these figures are quite as impressive, but the growth is impressive: real pay for Russians increased between 2000 and 2012 increased by 4.7 times and the real market value of pensions rose over the same period by 4.9 times, Shestakova calculates.

            A similar pattern holds among the regions, she says, in which those who lagged the furthest behind in 2000 made the greatest gains over the following decade, a trend that continue even now with “incomes in the regions continuing to grow” while “in Moscow they are declining.”

            “According to Rosstat,” Shestakova suggests, “the real income of Muscovites from the start of the current year through September contracted at an annual rate of almost seven percent,” even as “incomes for the country as a whole rose by 3.8 percent and in Moscow oblast by almost 11 percent.”

            This “fall in the incomes of the residents of the capital is unprecedented,” the “Versiya” analyst says: “Even in the crisis nothing like it was observed in Moscow.” Experts have identified at least five reasons for this, she says.

            First and most obviously, Shestakova says, Muscovites have a higher proportion of income which “official statistics do not ‘catch.’” Second, they owe more to banks and “now are paying off” these debts. Third, they buy more foreign currency. Fourth, there is a smaller proportion of small business in the capital. And fifth, the low wages of the numerous gastarbeiters depress the city’s average income figure.

            Obviously, Shestakova observes, “the poverty of Muscovites” is only “relative” because residents working in the capital still make more and often far more than those working in the same sector in the regions.  But if this trend continues, she says, “one can expect significant changes in Moscow and in the regions.”

             In Moscow, more attention is likely to be devoted “to the needs of the average citizens” rather than to those at the top of the income pyramid. In the regions, online trading is likely to grow rapidly as residents have more money to spend and few places to spend it near where they live.

            “Banking and development activity” is likely to shift from the capital to the regions, Shestakov says, given that there are more opportunities and fewer restrictions in the latter and because residents in the region are less well protected legally and “much more responsible with regard to their obligations” including paying down debts.

            At the same time, she suggests, the number of private cars in the regions is likely to grow at even faster rate than it has in Moscow, not only because a car gives a rural resident new mobility but also because Muscovites have other transportation options.

            Over the longer term, Shestakova concludes, “one can expect a reverse flow of migration: Muscovites especially those who come from the regions will return to the provinces after a period of intense work in the capital,” a pattern that “is taking place today” elsewhere in the developed world.

            She cites the observation of Vladimir Zharikhin, the deputy director of the Moscow Institute of the CIS Countries, that Russian “life is becoming ever more like the cities of well-off western countries,” especially in that people in both are increasing their attention to “quality of life” issues after their incomes have risen to a certain point.