People have experience of rational behavior in crisis situations but they need their local problems solved

21 july 2016

The Analytical Center has held a Round-table titled Employment, Income and Personal Consumption in Russia during the Socio-Economic Crisis: Regional Aspect. Experts talked about types of regions and how the economy of each region and the living standards of the population depend on the local conditions, they also discussed the decline in real household income and how consumer demand is shifting towards more and more groceries. Other topics that were discussed included the redistribution of employment between the formal and informal sectors of the economy and other social problems.

“When we talk about various socio-economic development issues in the regions we have to have the final outcome in mind rather than concentrating on any quantitative indicators,” said Adviser to the Head of the Analytical Center Nurali Rezvanov at the start of the round table.

The Chief Adviser to the Head of the Analytical Center Leonid Grigoriev called the attention of those present to the differences of the current crisis from past crises. “This crisis is far deeper than one might think by simply looking at the GDP figures but at the same time it is having a more gradual effect on the population. Both the general public and businesses have plenty of experience dealing with crises in the past: consumption is falling as a result of inflation and loss of bonuses rather than as a result of direct layoffs and the process of wealth redistribution between the rich and the poor kicks in,” the expert noted.

According to the Analytical Center expert Anna Lobanova, in 2015 real worker pay fell by 9% while inflation totaled 15.5% and grocery prices went up by 21%. Naturally people have cut back on consumption. If we consider the different types of regions that we have in Russia, in more industrially developed regions, household income has already gone up somewhat but in other regions it has kept falling, even though the rate of decline in household income has been slowing down. On the whole, the minimum worker pay in the country is below the living wage, the expert noted.

"In 2015 real worker pay fell by 9% while inflation totaled 15.5% and grocery prices went up by 21%"

Anna Lobanova, Analytical Center for the Government of the Russian Federation

As a result of people cutting back spending, retail sales of both groceries and other goods have taken a dive across all regions with the largest decline seen in Moscow and Saint Petersburg, the two regions that formerly had the highest per capital retail sales in Russia. In this situation spending is falling even faster than income but there is a lot of variation there too: spending on entertainment is plummeting but the share of spending on food is growing. In 2015, the share of food in total household spending went up from 47% to 49% across all regions, Analytical Center expert Alexander Golyashev said in his report. “The share of food in total household spending went up the most in less developed regions that had the lowest grocery prices prior to the crisis,” Mr. Golyashev stressed. In the first quarter of 2016, the average employee pay in Russia fell by 0.6%, the average real income fell by 4.1% and the average real spending fell by 6%.

In 2015, the share of food in total household spending went up from 47% to 49% across all regions. The share of food in total household spending went up the most in less developed regions that had the lowest grocery prices prior to the crisis"

Alexander Golyashev, Analytical Center for the Government of the Russian Federation

In addition to nation-wide problems, some regions are facing their unique problems that also need addressing. Thus North Ossetiya-Alania representative Vladimir Mildzikhov pointed to a high level of informal employment among the population and the need to develop production while Chechen Republic representative Evelina Tashtamirova noted a trend that has taken deep roots among some people in the Republic since the 2000s to only survive on social benefits only even though the number of available jobs in the region has seen sustained, albeit slow, growth. Permanent representative of the Republic of Ingushetia with the Russian President Ruslan Khautiev said that his region saw an increase in the number of people employed in agriculture, which too was a response to the current economic situation.

The Director of the Social Policy Institute of the Research University of the Higher School of Economics Liliya Ovcharova and the Director of the Expert Analytics Center of the Russian Presidential Academy of National Economy and Public Sector Administration Nikolai Kalmykov took an active part in discussing employment issues. The experts called for more attention to be paid to small and medium-sized businesses as the most promising sector in a crisis and proposed a number of measures to more successfully integrate young professionals in the labor market in the regions. “There is no growth of small and medium-sized businesses,” Ms. Ovcharova concluded. - “Big business is cannibalizing the niches of small business, completely failing to understand that partnership rather than competition is need to weather out this crisis.”

Speaking about human resources, Alexander Alekseyev, professor of the Geography Department of the Moscow State University, also noted that there was a sharp across-the-board decline in the amount of skilled professionals in rural areas. In his view the HR policy in rural areas should be changed.

Participants in the discussion concluded that discussing regional problems with regional representatives had been a success and planned to hold similar events in the future on a regular basis and to invite representatives from more regions to them.

See our Bulletin on the issue.