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Russians' huge income disparity dangerous to state - analysts

February 17, 2015, 18:13 UTC+3 Zamyatina Tamara
© Vladimir Smirnov/TASS

MOSCOW, February 17. /TASS/. The unprecedented stratification of Russians in terms of their incomes creates problems for the economic development and is fraught with social instability, polled experts have told TASS. According to the federal state statistics service Rosstat, at the moment the 10% of the wealthiest Russians are 16.8 times richer than the 10% of the poorest. This ratio is 1.6 times above the maximum permissible level recommended by the United Nations. At the recent forum in Davos the problem of property inequality was recognized as one of the most topical ones on a list of 50 global risks.

The minimum wage in Russia on January 1, 2015 was 5,865 rubles (less than $100 according to the current rate of exchange). Many employers use this figure as a benchmark to pay their employees’ wages and salaries below the subsistence level of 8,192 roubles. In the meantime, according to the oil company Rosneft’s report each of the thirteen members of its management board was paid an average of 215.4 million rubles ($5.7 million according to the 2014 rate). This example illustrates the state of affairs only in one of the country’s largest companies.

It is not surprising, therefore, that Rosstat in 2014 said Russia’s average wage stood at 31,000 rubles.

"Rosstat’s data regarding the social stratification in Russia is grossly understated. It does not reflect the real incomes of offshore aristocracy. Otherwise the real gap between the richest of the rich and the ten percent of the poorest of the poor would be as wide as 2000% or more," economist Yury Boldyrev, a former deputy chief of Russia’s Accounts Chamber, told TASS.

"The worst threat post-Soviet Russia’s unprecedented gap between the incomes of the rich and the poor is fraught with is the middle class and the relatively well-off hired employees have the feeling any attempt to work harder would be useless. Naturally, business activity dwindles. This factor is extremely important. It slows down economic development," the analyst believes.

"Social stratification uncontrolled by the state is a colossal, artificially created disincentive. Hence the growing feeling of apathy in society, soaring suicide rates and ever more cases of destructive behavior. All this breeds social instability, because any injustice causes protest," Boldyrev believes.

"In the meantime, in their attempts to retain their possessions Russia’s big business tycoons have so far managed to manipulate with the public opinion, for instance, by persuading the population that the progressive system of taxation existing in other countries is not in the people’s interests," he said.

"That a tremendous share of the country’s population is in the low income brackets is an effect of the economy’s chaotic structure, lack of its diversification and reform, and insufficient investment attractiveness," the deputy director of the Institute of the World Economy and International Relations (IMEMO), Yevgeny Gontmakher, told TASS.

"In order to ease this sharp stratification tax policies must be changed first thing in order to redistribute funds from the rich to the poor," Gontmakher believes.

"To make the economy work there is to be domestic demand — the engine of development. But an overwhelming amount of incomes ends up in the hands of a handful of multi-millionaires, who spend very little on consumption inside the country. The rich prefer to keep their wealth outside the country. The Russian economy has no growth engine," the president of the Neocon consultancy, Mikhail Khazin told TASS.

"The government has at its disposal all required mechanisms for easing the property inequality, for regulating the incomes differentiation by economic and fiscal methods, for instance, by increasing taxes on the rich. For this there must be the political will," Khazin said.

"In its efforts to address the problem of incomes inequality — and the Russian president himself has stressed it is danger to society — the government has been taking specific anti-crisis measures. I would single out such an important component for raising the incomes of the middle class as measures of support for medium and small businesses, introduced on January 1, 2015, including tax breaks and lower administrative pressures," Deutsche Bank’s chief economist in Russia, Yaroslav Lissovolik, has told TASS.

"The government’s most fundamental measure taken along these lines so far has been an attempt to level the inequality of regions. Budget funds are being redistributed in favor of those constituent territories of Russia that compete for investment, for human resources, for the creation of new jobs and for raising the people’s incomes," Lissovolik believes.

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