Over 5 million Russians dived below the official poverty line in 2015. According to Russian officials, the financial crisis is over. However, Russian people are not getting wealthier.
Russian companies save on wages
To overcome the crisis, Russians had to pay a high price: 5 million Russians dived below the poverty line last year. They are called “the new poor”. This term applies to people whose income dropped below the official poverty level in 2014-2015 due to the economic downturn in the country.
Andrey Belousov, an assistant to the President of Russia, predicts that it will take several years to restore the income level that the population had before the crisis of 2014, Lenta.ru reports.
According to the monitoring report by HSE.ru, actual wages in Russia dropped by 34% from USD $847 in 2014 to $558 in 2015.
In April 2016, the level of real income dropped further by 7,1% as compared to the same period of the last year. Today the average monthly wage in Russia is 31,342 rubles (around $475).
The monthly wages didn’t change as compared to January 2016, however, the USD to ruble exchange rate is more favourable: You get more dollars today than in the beginning of the year. But once prices grow in Russia, they rarely drop back to the same level. This means, retailers are making more profit but savings are not passed to citizens.
The Russian government proudly announced that the country managed to overcome the acute and most difficult stage of the crisis.
- Gold and foreign currency reserves are substantial ($391 billion as of May 2016)
- The external public debt is at its minimum in 5 years time ($516 billion).
- The trade balance surplus has increased by $11,2 billion to $69 billion in 2015.
- The capital outflow from the country has dropped significantly from $152,9 billion to $58,1 billion.
However, the new poor do not care about these numbers. According to the Ministry of Labor, incomes of 19 million Russians were below the poverty line in 2015.
If we consider the total population of Russia as 143 million, it’s 13.2% of residents that live in poverty.
Russian employers spend the extra income on development of their companies rather than on wage increases. It means a continuing drop of real income and more people falling into “the new poor” category.
The Russian Ministry of Economic Development and Trade published a scenario showing that the worst times are ahead. The share of poor people in Russia will reach its maximum in 2018 and compose 13,9% out of the total population.
In critical times employers tend to spend all the profit on development of the company rather than offer increase in wages to the workers. On one hand, this will promote economic growth in Russia. But on the other hand, it will lead to a decline in real income of the working populations. Only after the economy recovers, the income level is expected to grow.
Again, it is the Russian people will have to suffer to let the country survive. Why is it always people that have to incur losses?
Many economists in Russia believe that considerable reforms are needed to change the development model in the country.
Ruslan Dzarasov, the head of the department of political economy at Plekhanov Russian University of Economics, stated that at the moment Russian economy is mostly oriented towards the export of raw materials. The manufacturing industry along with science and education are diminished. Unfortunately, the government prefers to maintain the old model, where the main burden of the crisis is carried by the population. If this doesn’t change, the welfare of average Russians will continue to deteriorate, the expert states.
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Who says that crisis is over? In my point of view it is raising until now. May be it is so because of sanctions. According to Andrey Belousov the level of income will be higher in several years. And what about people? Could we live in such a difficult conditions? When the average check rose from 500 to 1500 rubles. And what about retirees? Their pensions remained the same. And the prices have risen to unprecedented heights! And I don’t believe that only 13.2% of residents live in poverty. It can’t be so.
It is because of the USA and its foreign policy – they are at open war with Russia, only using economic war instead of weapons. They play high stakes poker against Russia, and use the EU’s money via sanctions to do it…and will not stop until they can have their unipolar world. Neocons run amok in Washington.
One can have a lot of views of US and EU policies. But there is no doubt that Russia’s economic problems are mainly home made (this should not be confused with ordinary Russians and the Russian Pelle) The failure of Putin and his cronies to reform is monumental. They still rely on oil and gas only. Corruption levels are in line with African states as like Sierra Leone and Gambia (according to Transparency International Index) Improvements are not in sight, rather the contrary, since media freedom is deterorating and since there is no independent judiciary system in sight. In such… Read more »
Wait until the harridan gets elected and appoints Nuland her SoS…you clearly are not familiar with the neocon power structure in the USA. And this isn’t coming from “Russian state controlled media” – they openly write about it in their own publications such as Foreign Affairs.
US foreign policy is simply summarized succumb, or be crushed.
To MVP: Please do not confuse the American people with the American government. Just like Russians, Americans love their country. But, a vast majority do not trust our government and would like for our country to stop meddling in other countries affairs. While Americans may earn more money, the cost of living is much higher. The majority of the American people are in the same situation as the Russian and Eastern European people. Our buying power is being eroded by inflation. The world Baby Boom generation is huge and it is aging to the point it can not contribute of… Read more »
People who have money will never think about those people who don’t have. They don’t care. This situation is very sad but I doubt that it will ever change. I wish that the government will begin to think not only about themselves but also about ordinary people, too.
The financial crisis continues, prices are rising, salaries are the same. But still now it is easier to live than in hungry 90s. Then we withstood, and now we can. There is light at the end of the tunnel!
Wow! Unfortunately, it is true. I live in a big city in Russia. there are about 1,5 million people. How have i understood that there is a crisis now? I just went to a mall! Suprisingly, threre were very few people. In compare with 2 years ago, it is really little. As for me, people just don’t have any excess money to spend them in a mall 🙁