Economists from Moscow State University have proposed a novel approach to defining social group boundaries in Russia, incorporating social, economic, and behavioral factors. This approach aims to address the limitations of the traditional income-only method, which fails to acknowledge a significant segment of the population situated between the middle class and the poor.
According to the data presented in the article titled «Overcoming Poverty and Ensuring Sustainable Growth of the Middle Class: Distribution Criteria and Policy Measures (Part 2)», approximately 4% of the population in Russia, on average, belonged to the «sustainable middle class» during the period of 2019-2021. Moreover, about a third more could be categorized as the middle class «with a high degree of probability». The authors classified the remaining 60% as the poor population, out of which 17.7% met all three poverty criteria proposed by them.
The authors introduced three key characteristics for determining poverty: a financial decision-making horizon of fewer than three months, a lack of long-term financial goals, and having sufficient funds only for purchasing food and clothing. The authors believe that the more of these characteristics overlap, the higher the likelihood of a person being classified as poor.
Applying these criteria for the period spanning from 2019 to 2021, the authors found that 17.7% of households in Russia exhibited all three signs of poverty (these households could be classified as poor). Additionally, 45.7% of households showed two out of the three signs, while 32.6% displayed one sign of poverty (placing them closer to the middle class). Finally, 4.1% of households did not exhibit any of these signs of poverty and could be classified as either middle class or rich class.
During the period under review, the study revealed that over 60% of the population, on average, fell into the category of poor, as they exhibited two or three signs of poverty.
Professor Alexander Safonov from the Financial University under the Government highlighted an important aspect in his comment to RBC. He pointed out that the study's focus was more on economic poverty, which refers to the inability to actively develop the economy, promote investment, and purchase high-value-added goods, rather than on social poverty, which revolves around the boundary of physiological survival.
The country's response to military actions in Ukraine, particularly the imposition of sanctions, had a profound impact on increasing poverty levels and shrinking the middle class in Russia. To address these challenges, the government needs to implement a series of compensatory measures, in addition to the actions already taken. The authors of the study propose several such measures, including increasing pension indexation, raising the indexation of the subsistence minimum and minimum wage, boosting unemployment benefits and student scholarships, and equalizing the amount of maternity capital for the first and second child, among others.
To implement these measures effectively in the years 2024-2025, economists estimate that approximately 5.9 trillion rubles of budget funds will be required.
Source — RBC
