Reducing Poverty through Growth and Social Policy Reform in Russia

Reducing Poverty through Growth and Social Policy Reform in Russia

Reducing Poverty through Growth and Social Policy Reform in Russia

Reducing Poverty through Growth and Social Policy Reform in Russia

Synopsis

Following the 1998 financial crisis, four out of every ten people slipped into poverty, not able to meet basic needs. Luckily, post-crisis economic rebound was impressive and broad-based-albeit uneven-across sectors and regions. This title explores the nature of poverty, both nationally and regionally, to identify the groups with a high poverty risk. It then examines growth-poverty linkages through the labor market, as well as the contribution of growth and inequality to the recent poverty reduction. It also considers the expected impact of WTO accession on overall growth and poverty. Finally, it focuses on the scope for improving social policy in ways that will have a direct impact on the poor.

Excerpt

Poverty measures in Russia are used to formulate public policy, administer
social protection programs, and conduct research at the national and
regional levels. The government adopted its first official poverty methodol
ogy in 1992, relying on an absolute poverty line grounded in a nutrition
ally based food basket supplemented by an allowance for nonfood needs. The
methodology was updated in 2000, when a normative basket for both food
and nonfood goods was created and greater regional differentiation was in
troduced in the determination of poverty. Official poverty estimates are cal
culated by Goskomstat using the Household Budget Survey, which was
improved substantially in 1997, and an “imitation” model that ensures
conformity with macroeconomic aggregates.

Despite its achievements in improving poverty monitoring, the current
methodology has several drawbacks. The welfare aggregate is income based,
derived from expenditure data and subjected to various adjustments to con
form to aggregates from the national accounts. The poverty line is region
ally inconsistent and normative, with prescribed baskets for both food and
nonfood goods.

This chapter briefly reviews the official methodology for poverty mea
surement; identifies areas for improvement; proposes an alternative
methodology directly based on survey data, with a consumption-based
welfare aggregate and an objective poverty line grounded in household
behavior; and spells out the implications of adopting the recommended
methodology. Serious consideration of the proposed methodology is impor
tant, given the Russian government's commitment to reducing poverty
dramatically by 2007.

Russia was home to 31.8 million poor people in 2003–20.4 percent of the population, according to official estimates. A key policy objective of the second Putin presidency is to fight poverty.

Official poverty measurements are used to formulate broad public policy. Poverty measurement is also used in the administration of targeted social assistance and in policy research at the national and regional levels. The new Labor Code declares a goal of eventually raising the minimum wage to the minimum subsistence level, as the poverty line is called. The . . .

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