The ‘gap’ between rich and poor in Russia is widening sharply

According to the Center for Macroeconomic Analysis and Forecasting (CMACAP), Russia’s labor shortage is driving up wages but also contributing to a sharp increase in inequality.

“Income inequality between the main social groups in Russia increased sharply at the end of 2023,” CMACAP stated in the study “The well-being of the population: unequal growth,” cited on Tuesday in the magazine Jornal Independente.

Real monetary incomes of the population are growing at record rates and exceeding the forecasts of the Russian Ministry of Economy and independent experts, and the most important component of growth this year is wages.

Wages rose 7.8 percent in 2023 — the highest since 2018, when they rose 8.5 percent — and they rose 10 percent from January to May this year.

Wage growth affected almost all sectors, including finance (16 percent), construction (13 percent), administrative activities (12 percent), manufacturing (13 percent) and mining (12 percent), due to “labor shortages in almost all sectors of the economy,” CMACAP says.

Experts also point to a “disproportion” in evolution between different social groups, with “some groups becoming richer and others becoming poorer.”

“However, at present, the country is seeing an increase in the standard of living of all socio-economic groups. Thus, in Russia, the deepening of inequality is accompanied by a simultaneous decrease in the poverty level,” he emphasizes.

According to the authors of the study, the greatest benefits from the increase were received by military personnel on the front lines of the Russian-Ukrainian conflict and representatives of industries where the import substitution process is underway.

Political scientist and leader of the Civil Solidarity movement Georgy Fedorov is skeptical about the distribution of income growth.

“The growth of inequality breeds discontent. Even if we hear statements about a general increase in income, we take into account the dynamics of prices in stores or the growth in the cost of housing and services (…). It becomes clear that in reality, the majority of the population is getting poorer, while the rich are getting richer,” Fedorov told Jornal Independente.

“We are seeing a crazy rise in the cost of medical services,” and “oligarchs and high-ranking officials, people connected to the state budget, are constantly improving their quality of life,” he adds.

Soldiers at the front, Fedorov emphasizes, “spend a significant portion of their salaries on medical treatment or the maintenance of their families” and “sometimes use their earnings to buy uniforms or things needed at the front,” so “This cannot be.” said that all soldiers working at the front are getting rich.”

“And then, people are outraged not by the successes of military entrepreneurs, but by the fact that officials and oligarchs continue to live as if the difficulties that surround them do not concern them,” the analyst said.

Alexander Safonov, professor at the Financial University of the Russian Federation, notes that the study in question reflects a temporary change in the wage structure.

“We still don’t know how the situation will change, how, after achieving political goals, the industries oriented towards the combat front or our military-industrial complex will be restructured,” says Safonov, emphasizing how positive it is that the State, having raised the minimum wage above the inflation rate, will force employers to change their attitude towards wages from 2020.