Training on SF, June 15–16

How much Russia’s working population makes and what it spends that money on

Household income and expenses

In 2018, the following regions had the highest W/SM ratio: Yamalo-Nenets Autonomous Okrug (6.3), Saint Petersburg (5.5), the Sakhalin region (5.5), and Moscow (5.2). The W/SM ratio was lowest in the Pskov region, the Republic of Ingushetia, the Kabardino-Balkarian Republic, and the Chechen Republic, each with 2.5. In almost all Russian regions, with the exception of the Arkhangelsk and Pskov regions and the Kabardino-Balkarian and Chechen Republics, the ratio increased over the analyzed period. In the Kaliningrad region, the ratio decreased, but only slightly.

Household income is a projection of macroeconomic conditions. In 2009-2018, there was a slight increase in monthly wages relative to the subsistence minimum (W/SM ratio). The rate of the average annual growth in wages was often faster than that of the subsistence minimum. In 2018, the W/SM ratio reached 4.3, whereas in 2009, it was 3.6 in the Russian Federation as a whole.

During this period, several factors may have influenced the W/SM ratio and its distribution among regions.

In 2011-2012, the growth rate of wages outpaced the growth rate of the subsistence minimum, even though the structure of the consumer basket, which is used to determine the size of the subsistence minimum, changed in 2012 to increase the share of goods that indicate growth in living standards. As a result, the number of regions with a W/SM ratio1 higher than 32 increased from 51 to 64.

In 2014-2015, even despite the May decrees3, the growth rate of the subsistence minimum was higher than that of wages amid inflation caused by the weakening of the national currency. As a result, the number of regions with a W/SM ratio higher than 3 decreased from 56 to 39.

In 2018, the number of regions with a W/SM ratio higher than 3 returned to its pre-crisis value. In this case, the rapid growth in average wages was partly due to the fact that the minimum wage was equated to the subsistence minimum4. As a result, the average wage increased amid a slightly changed subsistence minimum.

Figure 1. The number of regions with a W/SM ratio higher than 3 increased in 2015-2018

Sources: Federal State Statistics Service, ACRA
1 The subsistence minimum is calculated individually for each region.
2 Conditional differentiation level of low and average wages according to ACRA’s Methodology for assigning credit ratings to regional and municipal authorities of the Russian Federation.
3 Presidential decree of May 7, 2012.
4 In 2017, during the routine revision of the consumer basket, the list of goods and the volume of their consumption did not change.

Regions with the lowest proportion of workers earning below three subsistence minimums:

Regions with the highest proportion of workers earning below three subsistence minimums:

1.     Saint Petersburg (23.9%)

2.     Yamalo-Nenets Autonomous Okrug (23.9%)

3.     Sakhalin region (27.4%)

4.     Leningrad region (29.9%)

5.     KhMAO-Yugra (30.6%)

6.     Moscow (33.9%)

7.     Amur region (37.8%)

8.     Republic of Tatarstan (39.1%)

9.     Kemerovo Region – Kuzbass (39.6%)

1.     Republic of Ingushetia (80.6%)

2.     Kabardino-Balkarian Republic (77.4%)

3.     Republic of Dagestan (75.4%)

4.     Pskov region (74.7%)

5.     Chechen Republic (74.4%)

6.     Karachay-Cherkess Republic (73.6%)

7.     Ivanovo region (72.2%)

8.     Republic of Kalmykia (71.8%)

 

If, in the current economic situation, the growth rate of the subsistence minimum outpaces the growth rate of wages again, the distribution of the W/SM ratio among regions will worsen again. For more information about regions with a W/SM ratio below 3 in 2018, see Appendix 1.

The gap between the highest and lowest wages has narrowed. In 2003, the lowest wage was 30x lower than the highest, while in 2019 it was only 13x lower.

Figure 2. The reduction in the wage gap is due largely to 2008-20095


*PF – Payroll Fund.
Sources: Federal State Statistics Service, ACRA

5Due to the frequency of data reporting since 2007, the assessment is performed every two years, meaning in some cases it is not possible to indicate a specific year.

This is because the growth rate of wages increased 19.8x from 2003 to 2019 for the bottom ten percent of earners compared to 8.6x for the top ten percent. According to official data on the level of inflation, consumer prices for goods and services increased by 3.5x during this period. Significant growth in low wages occurred twice, after 2007 and after 2017. Wage growth in 2008-2009 may have been influenced by the gradual transition to a new wage system for employees of federal institutions and public sector organizations6. According to reports on the execution of the consolidated budget of the Russian Federation, the amount of funds allocated to pay salaries to these employees increased by almost 30% in 2008, and by more than 15% in 2009.

The increase in low wages after 2017, as noted above, was due to the equating of the minimum wage to the subsistence minimum in 2018.


6Government resolution No. 583, dated August 5, 2008, “On introducing new wage systems for employees of federal budgetary institutions and federal state bodies…”

However, depending on the region, 24% to 81% of the working population still receives no more than three subsistence minimums. From 2003 to 2019, average wage growth for both groups of earners (lowest and highest wages) outpaced growth in consumer prices. Starting in 2016, the average growth in consumer prices was within 4% and the rate of wage growth for this period was 9% on average. However, the current macroeconomic situation will accelerate the growth rate of consumer prices, which in the future may negatively affect the level of real wages.

Figure 3. The growth rate of wages has outpaced that of consumer prices

Sources: Federal State Statistics Service, ACRA

Depending on the region, 24% to 81% of the working population still receives no more than three subsistence minimums a month.

The share of expenses on food7 is decreasing, but continues to be the main household expense. According to ACRA, in 2018, the share of expenses on food in 10 regions8 exceeded 40% of household consumption expenses, while in 11 regions these expanses accounted for less than 30%. A high share of expenses on food is usually observed in regions with low per capita incomes (PCI9). However, there are a number of regions, such as the Chukotka, Nenets, and Yamalo-Nenets Autonomous Okrugs, as well as the Magadan region, which are characterized by high levels of PCI. Food accounts for a significant share of expenses, which is due to the high subsistence minimum in these regions. For more detailed information about the structure of expenses and the levels of PCI in Russian regions, see Appendix 2.

Over the past 15 years, the share of household expenses on food in Russia has decreased overall. In 2004, it was 42.9% and in 2018 it was 33.1%. During this period, the number of regions whose food expenses exceeded 40% of total expenses significantly decreased from 72 to 10. The Yamalo-Nenets Autonomous Okrug was an exception showing an increase of 3%, but this is due to the initially low share of food expenses.


7The share of food expenses from all consumption expenses on average per household member.
8Source – a sample study of household budgets conducted by state statistics agencies in all regions of the Russian Federation in 2018.
9PCI is adjusted for mandatory payments, e.g., taxes and fees, insurance payments, contributions to public and cooperative organizations, and interest paid by the general public on loans (the Tyumen region is not included in the calculations).

Table 1. Top ten regions by share of food expenses

Region

Food expense rank in 2018

Food expense rank in 2004

Share of expenses on food in 2018

Share of expenses on food in 2004

PCI growth (2004/2018)

Republic of Ingushetia

1

1

58.6%

79.1

820%

Republic of Dagestan

2

2

54.6%

60.3

678%

Chukotka Autonomous Okrug

3

25

48.3%

48.8

424%

Smolensk Region

4

7

47.8%

54.2

485%

Kabardino-Balkarian Republic

5

3

45.0%

55.8

558%

Ryazan Region

6

4

43.7%

55.6

599%

Republic of Mordovia

7

35

43.4%

47.4

471%

Saratov Region

8

26

40.3%

32.8

436%

Tula Region

9

8

40.2%

48.8

582%

Bryansk Region

10

5

40.1%

54.1

615%

Sources: Federal State Statistics Service, ACRA

Further reduction in the PCI gap for Russian regions is questionable. Over the past 15 years, the number of leading regions by PCI and outsiders has remained almost unchanged. However, the difference in income between the most prosperous and the most disadvantaged regions has decreased. In 2004, the PCI in the Yamalo-Nenets Autonomous Okrug was 12x higher than in the Republic of Ingushetia, and in 2018, the Okrug’s PCI was only 5x higher than in the Republic of Tuva (the region with the lowest PCI at the end of 2018).

In the current macroeconomic situation, the slow reduction of social and economic inequality both between regions as well as between different demographics will undoubtedly be put to a serious test. This year, the levels economic welfare achieved may decrease, and the number of subjects with a W/SM ratio below 3 is likely to increase again. The wage gap between the bottom ten percent of earners and the top ten percent may also widen again.

Appendix 1. List of regions with a W/SM ratio lower than 3, 2018

 

Regions

W/SM ratio

1

Kabardino-Balkarian Republic

2.46

2

Chechen Republic

2.49

3

Pskov Region

2.53

4

Republic of Ingushetia

2,54

5

Ivanovo Region

2.60

6

Republic of Dagestan

2.70

7

Altai Krai

2.73

8

Karachay-Cherkess Republic

2.75

9

Kirov Region

2.82

10

Bryansk Region

2.82

11

Republic of Kalmykia

2.86

12

Kostroma Region

2.87

13

Oryol Region

2.89

14

Smolensk Region

2.90

15

Republic of North Ossetia – Alania

2.99

16

Kurgan Region

2.99

Sources: Federal State Statistics Service, ACRA

Appendix 2. Structure of household expenses by region

  

Sources: Federal State Statistics Service, ACRA

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