Report - UNDP Russia

Chapter 3Personal Incomes, the Energy Sector andthe CrisisOne of the three components of theHuman Development Index (HDI) is calculated byassessing levels of income – mainly wage incomeof employees – and differences between incomelevels. So analysis of processes that determineincome and employment trends is an integralpart of any human development report. Thepresent Report assesses main living standardindicators in the context of the continuingeconomic crisis and looks at main humandevelopment issues via impact of the energysector on the economy and living conditions. Thischapter, which deals with personal incomes,therefore offers estimates of how energy-relatedbusiness influences levels of income andinequality in its distribution.3.1. Incomes, employmentand poverty at various stagesof the economic cycleEconomies traditionally adapt to acrisis situation through reduction of incomesand business activity. However, each countryworks out its own adaptation model to copewith decline of GDP and industrialproduction, usually via reduction of the priceor quantity of labor, as well as reduction ofsocial expenditures and their restructuring inorder to target the poorest members ofsociety. How did the labor market andpersonal incomes react to the crisis and whatlevels of income security and employmenthad Russia attained on the eve of the crisis?Descriptive analysis of main living standardindicators, published by Rosstat (the FederalState Statistics Service), will help us findanswers to these questions.We begin by studying the evolution ofincome level and structure, with wages andpensions separated out (Figure 3.1). Russia’spost-Soviet development has beencharacterized by volatility of per capitaincomes, which have been pulled downperiodically by economic and institutionalcrises. The first such crisis (in 1992) resulted inthe deepest drop of real incomes. In the lastyears of the Soviet era personal incomestructure was much the same as in otherFigure 3.1Development of incomes, salaries and pensions compared with 1991 (1991=100%), December data100GDP in % vs. 1991Real cash incomesReal official wagesReal salaries (official and unofficial)Real pensions121.0118.692.476.20100 86 78 68 65 63 64 60 64 71 74 78 84 90 95 103 111 1171991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Source: Authors’ calculations based on official data provided by Rosstat.51