DIRT-CHEAP LABOR

[from WPS Monitoring Agency]

AN INTERVIEW WITH YEVGENY GONTMAHER, ECONOMIC ANALYST. THE AVERAGE WAGE IN RUSSIA WAS 3,000 RUBLES A MONTH IN APRIL AND ABOUT 3,300 RUBLES ($112) A MONTH IN JUNE. MANY MILLIONS OF WORKERS ARE LIVING BELOW THE POVERTY LINE; THE SITUATION IS IMPROVING, BUT ALL TOO SLOWLY.
 

"Global poverty, the current scourge of three billion people on the Earth, poses a hazard to the common social structure and safety of the international community," asserts James Wolfensohn, former president of the World Bank. In the next 25 years the population of developing nations is expected to grow by another two billion people. If snowballing global poverty is not ended, then, according to the well-known economist, "we will fail to cope with a wave of asperity, indigence, and despair".

Much is being spoken nowadays about the plans to urgently raise salaries of Russian state employees, pensions, and welfare payments. But does the government have a long-term strategy of combating poverty? We interviewed Yevgeny Gontmaher, Ph.D. in economics, who chairs the Social Development Department within the Cabinet administration.

Question: To begin with, could you give the exact number of Russian citizens living below the poverty line? Media reports offer contradictory figures, but official data have not yet been published this year.

Yevgeny Gontmaher: The reason why there have been no official reports about the poverty level in Russia is that the law on the consumer basket (which serves as the basis for calculating the living wage) had been designed to operate for one year, and expired in December 2000. Such a short term was chosen because in case of necessity (high inflation or other unforeseen factors) the government could alter the set of goods and services.

However, specialists do not consider it necessary to make any alterations in the consumer basket in 2001 or 2002. The Cabinet submitted corresponding documents to the Duma requesting extension of the law. As usual, the Duma procrastinated a lot, so a new law had gone through all the three readings only by June. On July 13 it was signed by the head of state. The composition of the consumer basket remains unchanged. Now the Cabinet needs to make calculations, after which the official report you have asked about will be published.

Question: But does the Cabinet know at least some rough figures?

Gontmaher: According to a preliminary appraisal by the Economic Development and Trade Ministry, in the first quarter of 2001 the per capita living wage amounted to 1,396 rubles a month; in the second quarter this figure was 1,507 rubles. If we proceed from these rough appraisals, then 54.4 million Russian citizens were below the poverty line in the first quarter and 42 million in the second quarter - a 12 million drop is something to be proud of. This trend is stable - the scale of poverty in Russia is diminishing. In comparison: in the first quarter of 2000 about 60 million citizens were living below the poverty line.

We have taken only the very first steps. Paradoxically, poverty is becoming especially acute now, when the economy has already started to revive. Today, against the background of the slight economic growth and a considerable increase in the living standards of tens of millions of Russian citizens, the utter poverty of their compatriots strikes the latter especially severely.

Apart from the humanitarian aspect there is also a merely economic one. Further economic revival in Russia should to a great extent rest on growth of the consumer demand.

There will always be people unable or unwilling to work: vagrants, refugees, alcoholics, drug addicts, the disabled, etc. There is even a special term for this category: natural poverty. In Germany this natural poverty amounts to 7% of the population, in Sweden it is 5%, in the US it's 20% (but only 7% among white Americans). In general, the average level of natural poverty in the majority of developed countries does not exceed 10% of the population. In Russia, the figure is 30%. Another cause of concern is the composition of the poor stratum of society, atypical compared with the rest of the world since working people account for a fair share of the poor in Russia. This is a completely abnormal situation, when workers can't even live on their own wages, let alone support a family.

No less than half of Russians living below the poverty line are workers. This is absurd! In general, over 20 million workers are living in poverty. Specialists call them the "Nouveau Poor", by analogy with the "Nouveau Riche". This situation is not found in developed nations.

Question: But there are also shadow incomes...

Gontmaher: There certainly are shadow incomes, including in the form of individual garden plots. If it weren't for these gardens, millions of Russians would have starved long ago. However, we can't call it normal for surgeons, for example, to be rushing off to weed their gardens after a long and complicated operation. This can be a hobby but not a means of survival.

Here are some average wage figures for April 2001:

190,000 workers earned 100 rubles or less per month;
1 million workers earned between 100 and 200 rubles per month;
2.5 million earned between 200 and 400 rubles per month;
3.3 million earned between 400 and 600 rubles per month;
3.5 million earned between 600 and 800 rubles per month;
3.5 million earned between 800 and 1,000 rubles per month;
6.8 million earned between 1,000 and 1,400 rubles per month.

These incomes are lower than the living wage. I will not give you all the figures, but I should note that about 9 million Russian workers earn between 5,000 and 10,600 rubles a month, and another 2.5 million earm over 10,600 rubles a month. The average wage in Russia was 3,000 rubles a month in April and about 3,300 rubles ($112) a month in June.

As soon as next year, the wages of state-sector employees will be doubled. In the private sector, wage rises will be covered by an increase in productivity and upgrading of machinery. Inefficient enterprises will have to be shut down and employees thus freed will be retrained. Development of small businesses is another important reserve. Here we may expect considerable progress after the final adoption and fulfillment of a packet of bills on deregulation and continuation of the fiscal reforms, recently submitted to the Duma by the president and Cabinet.

It is the state's task to raise wages of state-sector employees.

Question: When will the minimum wage become equal to the living wage?

Gontmaher: I think this will happen no earlier than 2005. According to expert forecasts, by then the living wage and the minimum wage will be equal, at between 2,000 and 2,300 rubles a month.

Comment: Естественная бедность и странное богатство