Rus­sia’s New Poor

The on­go­ing cri­sis has de­voured Rus­sia’s small mid­dle class

The Moscow Times - - 6 LOOKING FORWARD -

This win­ter will mark three years since Rus­sia abruptly em­barked on a course of po­lit­i­cal and eco­nomic iso­la­tion. Lower oil prices and the de­val­u­a­tion of the ru­ble dealt a se­ri­ous blow to the pop­u­la­tion’s eco­nomic well-be­ing.

By its own eval­u­a­tion, Rus­sia’s mid­dle class shrank by more than 16 per­cent, shed­ding an in­cred­i­ble 14 mil­lion peo­ple.

This is the fresh data of the so-called “Ivanov Con­sumer In­dex” (in honor of Rus­sia’s most wide­spread sur­name), eval­u­ated by Sber­bank CIB an­a­lysts.

A Sber­bank CIB survey found that in Au­tumn 2014, prior to the de­val­u­a­tion of the ru­ble, 61 per­cent of Rus­sians con­sid­ered them­selves mem­bers of the mid­dle class. That num­ber now stands at 51 per­cent, with the “missing” ten per­cent now mem­bers of the lower class. The rea­son: costs are ris­ing faster than rev­enues. Those with the low­est in­comes must re­duce con­sump­tion of all but vi­tal ne­ces­si­ties and find cheaper op­tions for the goods and ser­vices they do pur­chase. As of this sum­mer, real in­comes had fallen by 7 per­cent year on year, and real pen­sions were down 4 per­cent af­ter ad­just­ments for in­fla­tion.

Sber­bank CIB has pub­lished its Con­sumer Con­fi­dence In­dex since early 2013. Every quar­ter since, the con­sumers who felt their eco­nomic situation had wors­ened in re­cent months out­num­bered those who felt it had im­proved. The two worst periods were the win­ter of 2014-15, when the ru­ble fell and prices rose, and the win­ter of 2015-16, when price hikes be­gan no­tice­ably out­strip­ping in­comes. Since then, in­di­ca­tors have im­proved slightly but re­main neg­a­tive over­all, and have yet to re­turn to the level of 2013 when in­comes were still ris­ing.

Con­sumers have some cause for op­ti­mism in that in­fla­tion has slowed and a num­ber of com­pa­nies have be­gun hir­ing again, calm­ing fears of job loss. Over­all prospects for the fu­ture, how­ever, re­main bleak.

What is Rus­sia’s mid­dle class? It depends on the def­i­ni­tion and, over­all, is very hard to as­sess be­cause of the dis­pro­por­tion­ate fi­nan­cial dis­tri­bu­tion across the coun­try. The So­ci­ol­ogy In­sti­tute of the Rus­sian Academy of Sci­ences con­sid­ers it the 44 per­cent of all Rus­sians who, as of one year ago, had in­comes to­tal­ing 23,000 rubles ($365) per month per fam­ily mem­ber, in­clud­ing chil­dren and the el­derly.

But even more im­por­tant is the fact that 10 to 20 per­cent of that group feel they are no longer mem­bers of the mid­dle class. What’s more, many of those who still con­sider them­selves part of the mid­dle class have had to econ­o­mize.

Rus­sia’s coun­ter­sanc­tions aimed at food prod­ucts from Europe and Ukraine have played a ma­jor role: they not only de­prived the up­per ranks of the mid­dle class of the var­i­ous im­ported del­i­ca­cies to which they had be­come ac­cus­tomed, but also caused Rus­sian food prices to climb dra­mat­i­cally.

Rus­sian fam­i­lies are stretched al­most to their limit now in pay­ing for the ab­so­lute essentials of food, wa­ter, elec­tric­ity,

Con­sumer Con­fi­dence

and heat­ing, ac­cord­ing to the Rus­sian Pres­i­den­tial Academy of Na­tional Econ­omy and Pub­lic Ad­min­is­tra­tion headed by Ta­tiana Mal­eva.

A size­able 41 per­cent of Rus­sia’s mid­dle class con­sid­ered its fi­nan­cial situation to be good in Fe­bru­ary 2014, ac­cord­ing to the So­ci­ol­ogy In­sti­tute. That num­ber fell to just 22 per­cent by fall 2015. At the time Rus­sia an­nexed Crimea, 53-66 per­cent of the mid­dle class was sat­is­fied with its liv­ing con­di­tions, cloth­ing, and food. Last fall, only 36-45 per­cent were sat­is­fied.

As of Spring 2015, the se­vere eco­nomic cri­sis had turned into slug­gish stag­na­tion. Un­like pre­vi­ous crises, this stag­na­tion has hit the mid­dle class and res­i­dents of Rus­sia’s largest cities even harder than the poor­est mem­bers of so­ci­ety. There is no sign the situation will im­prove.

Those la­bor­ing in the pri­vate sec­tor—in in­dus­try, con­struc­tion, trans­porta­tion, and com­mu­ni­ca­tions — jus­ti­fi­ably feel the great­est un­cer­tainty.

Those who make their liv­ing sell­ing high-end goods are es­pe­cially pes­simistic. Auto sales have al­most halved in the past four years, and con­tinue to fall.

Demand is also de­clin­ing for fit­ness, en­ter­tain­ment, and for­eign do­mes­tic travel, and the peo­ple work­ing in those fields are los­ing both rev­enue and jobs. Rus­sians are also buy­ing fewer medicines. By con­trast, in pre­vi­ous years, house­hold ex­pen­di­tures for health care grew faster than govern­ment spend­ing for that sec­tor.

In the 2000s, Rus­sians thanked Pres­i­dent Vladimir Putin for sta­bi­liz­ing the econ­omy. Now, 18 months af­ter the worst phase of the cri­sis has passed, sta­bil­ity has re­turned—but as a neg­a­tive trend.

The pop­u­la­tion has be­gun tak­ing a sober assess­ment of the eco­nomic situation. Ac­cord­ing to the Pub­lic Opin­ion Foun­da­tion, 41 per­cent of all Rus­sians had only enough or not enough money for food in sum­mer 2016, but most Rus­sians see no con­nec­tion be­tween the empti­ness of their wal­lets and the ac­tions of the au­thor­i­ties — ei­ther in for­eign af­fairs or the do­mes­tic econ­omy.

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