Maintaining Minimum Goodwill

Tai Adelaja's picture
Maintaining Minimum Goodwill

Despite losing an overwhelming majority in Parliament, Russia's ruling United Russia Party may be spearheading specific initiatives aimed at preventing more Russians from sliding into poverty.

Still reeling from a surprise challenge to its decade-long dominance in December, Russia’s ruling United Russia party appeared to be trying a new way of maintaining ties to its traditional constituency as it pushes for an increase in the country's miserly minimum wage. The pro-Kremlin party, which still maintains a slim majority of 238 out of 450 seats in the State Duma, said last week that it is stepping up efforts to index the federal minimum wage, which it said has been nearly “eaten up” by inflation. But analysts say the move, which came on the heels of a wave of popular protests against the December 4 parliamentary election, could be a belated attempt by the party to stem the rising tide of public anger.

The Russian Parliament plans to enact a three-step increase in federal minimum wage through a parliamentary resolution to be considered "very soon," Andrei Isayev, State Duma Labour and Social Policy Committee Chairman told. Isayev, who is also a senior member of the pro-Kremlin United Russia party, said the proposals, which will combat poverty, include mandating the government to adopt a triple indexation scheme that should see the minimum wage top 6,500 rubles ($207) by October. According to the three-step schedule,the minimum wage will first be raised from the current 4,600 rubles ($146) to 5,000 rubles in March. By June 1, it will be increased to 5,500 rubles, and finally to 6,500 rubles by October 1. The new minimum wage, he said, will be enough to meet last year's official minimum subsistence level.

The minimum wage, which serves as a basis for calculating payments to unskilled workers and some federal and regional government employees, was last doubled in January 2009 from the previous year's level to 4,330 rubles ($138). However, supporters of pay raises, including Mikhail Shmakov, the Chairman of the Independent Unions Federation, have been pressuring the government to raise salaries as a way to stimulate demand and boost the economy at a time when prices keep growing despite people's thinner wallets. The number of Russians currently living below the poverty line grew by more than 2 million over the past year, the State Statistics Service (Rosstat) reported in September. About 15 percent of the population, or 21.1 million people, now subsist below the poverty line, up from 19.1 million people in September last year, according to Rosstat. The current subsistence income is 7,023 rubles ($221) a month for a working adult, 5,141 rubles ($165.8) for a pensioner and 6,294 rubles ($203) for a child. In last year's first quarter, it was, respectively, 5,956 rubles ($192), 4,395 rubles ($142) and 5,312 rubles ($171).

However, with economists warning that fulfilling pre-election promises could punch a hole in the budget after the Presidential elections, the government has been wary of raising the minimum wage in violation of promises to control the budget. Russia currently spends more than 15 percent of its gross domestic product on social and welfare programmes and has struggled to keep wages above inflation, so the nation's poor won't be poorer, the Eurasian Development Bank said in a recent report. Isayev offered last week to help the government to raise the minimum wage to meet the poverty threshold. “We are working on the necessary resolution. And we’re prepared to defend this before the government in order to resolve the issue”, Isayev said.

The average nominal income of employed Russians stands at 23,154 rubles ($738) per month, or 330 percent higher than the subsistence income, according to Rosstat. But while the numbers of the impoverished dropped steadily in the early 2000s, amid climbing oil prices and economic growth, they have remained relatively static since 2007. According to the State Statistics Service, in 2001 about 50 million Russians, or 33 percent, were living below the subsistence level. This number improved to 24.5 percent in early 2005, and 14.8 percent in the third quarter of 2007. The Ministry of Economic Development earlier predicted that the minimum subsistence level would rise to 8,579 rubles ($273) by 2014. But because of the rising costs of a consumer basket of goods and services, the percentage of the poor could increase from 12.7 percent in 2012 to 12.8 percent in 2013, while the poverty rate could reach 12.5 percent in 2014.

But even as many Russians are coming to grips with a declining era of relative stability and prosperity, the number of Russian super-rich has increased, making Moscow home to more of the world's wealthiest people than New York. According to Forbes magazine, Russia had 101 billionaires in 2011 – almost double the number in the previous year. Social and economic polarity has become so palpable that Prime Minister Vladimir Putin, who is seeking another term as President, told a United Russia congress in September that taxes on the rich could be raised, while acknowledging "dangerous levels of social inequality". Such public acknowledgement from the Kremlin is a sign that party members, who have dominated the top echelons of business and institutions under the Prime Minister, may have to share their wealth and power with a wider circle of Russians, analysts say.