Pandemic has Increased Income Inequality in Russia, Rosstat Figures Show

Paul Goble

            Staunton, October 20 – According to Rosstat statistics for September, the decline in the disposable incomes of Russians as a whole, the result of the pandemic and falling oil prices, slowed; but income inequality grew with the situation of employees of major and mid-sized companies improving and that of those in small firms and the shadow sector getting worse.   

           VTimes journalist Elizaveta Bazanova examines these and related data and suggests that the most disturbing news is that the incomes of those who own their own businesses – “the entrepreneurs,” has “fallen to the lowest level in 20 years” even as the social payments they must make remain historically high (vtimes.io/2020/10/20/neravenstvo-v-rossii-prodolzhaet-rasti-a1091).

            That means that the sector out of which diversification and growth could most likely emerge is being squeezed and therefore will attract fewer people in the future. As a result, Russia is likely to have to rely on the export of largely unprocessed raw materials like oil and gas far longer, something especially problematic given generally falling commodity prices. 

            In the third quarter, Bazanova says, real disposable incomes for Russians as a whole fell at an annual rate of 4.8 percent, far better than the 8.4 percent during the second quarter. She notes that Rosstat raised the latter figure by 0.4 percent, “a record quarterly fall in comes since 1999.”

            Real disposable incomes had been falling even before the pandemic hit. They fell in the years 2014 to 2017, rose a statistically insignificant 0.1 percent in 2018, and showed a 1 percent improvement in 2019 before plunging this year. Economists suggest that it will be several years before they show any growth again.

            Unemployment and under-employment both explicit and hidden all increased during the first three quarters of this year. Labor Minister Anton Kotyakov expects unemployment to fall to 5.7 percent by the end of the year and to below 5 percent by 2022. But whether this will be from a shift to hidden unemployment or not remains uncertain.

            Bazanova notes one paradox in this situation: “the decline in incomes and the growth of unemployment in a surprising way has been combined with a continuing growth in wages and salaries.” Thus, those who have full-time work have seen their incomes rise while those who have lost their jobs or suffered from reduced hours have seen the reverse.

            This paradox also suggests that hidden unemployment, in which firms continue to list people as employees even though they are not being paid, is likely far larger than officials now admit. It also contributes to growing income inequality because small firms have been more likely than large ones or state enterprises to shed workers.

            The VTimes journalist cites studies by the Higher School of Economics that during the pandemic, 6.1 percent of working people who had been in the middle class have fallen into the category of the poor, 8.7 percent of them have lost work, and 3.9 percent have retained it but only with lower pay.

            This pattern is likely more politically salient than the increasing differences between the bottom half of the population and the extraordinarily wealth in the top one percent because it affects more directly how those nearer the bottom view their own situation and that of others similarly situated, even though it has so far attracted less attention from analysts.