The Poorest of the Population Spend the Largest Portion of their Income on Utilities and Communication

10 may 2017

The share of paid services in consumer spending in Russia is less than in the developed countries as well as in a number of developing countries, Analytical Center experts note in their new bulletin on the current trends in the Russian economy titled Household Demand for Paid Services.

The analysts believe that a lot of paid services that emerged in Russia in the 1990s are still viewed as services targeting the rich and the paid services market in the country is still characterized by a high degree of social inequality. The consumption of paid services by the richest 10 % of the population in Russia in the first three quarters of 2016 was 11 times greater than for the poorest 10 % of Russians. For health care services the difference in consumption between the richest and the poorest 10 % exceeded 60 times, for entertainment and culture the rich consumed 80 times more than the poor and for fitness and resorts the rich consumed almost 200 times more paid services than the poorest 10 %.

As for the make-up of the household spending on paid services in Russia, it has remained fairly unchanged over the past few years, the experts, note. Utilities remain the key type of paid services people are spending money on (21.3 % of all spending on paid services in 2016), followed by transport (20.0 %) and communication services (15.1 %).

Demand for health care services in Russia remains at the 2014 level in comparable prices (declining by a barely noticeable 0.2 %), while consumption of educational services was falling by 2-3 % a year in 2014-2016. Sales of tourism services (including tour operator services) have been falling even faster: sales of tourism services were down 16.6 % in 2016 on the 2013 level.

The survey of household budgets conducted by the Federal Statistics Services helps estimate how household spending on different types of services changes as real household income declines. The poorest segments of the population are spending the largest portion of their income on utilities and communication, while people with income close to the median are spending the most on transport and educational services and finally the most affluent segments of the population spend the most on entertainment and medical services. The reason for this kind of distribution is that utilities and communication constitute "basic needs" (demand for them is not as elastic), while private health care and entertainment are "nice extras", the experts explain.

For more see the bulletin Household Demand for Paid Services.

For the other bulletins on the current trends in the Russian economy, please see Publications.