BOFIT Viikkokatsaus / BOFIT Weekly 2017/44

A new study from the government's Analytical Center finds that roughly 17 % of the working population, about 12.1 million Russians, must scrape by on inadequate incomes. The working poor are defined as individuals whose incomes are insufficient to cover the minimum needed to support a family. Many working poor households rely on microcredit, payday loans or consumer credit. This is reflected in rising indebtedness among Russia's poorest households.

Low wages are a particular problem in public-sector fields dominated by female labour. Rosstat figures show that 7 % of wage-earners on average are paid wages below the monthly subsistence minimum. Over 17 % of people working in the education sector or various municipal services earn below-subsistence wages. The regional variation in the economic structure and the public sector's role are reflected in the regional variations in working poor numbers. For example, in many regions of the North Caucasus Federal District over a fifth of workers are paid wages below the subsistence minimum.

Raising the minimum wage to the level required by the law, i.e. the subsistence minimum, has been discussed for years and is now set to be achieved by 2019. The minimum wage was raised twice in 2016, and at the beginning of July 2017 the monthly minimum wage was increased to 7,800 rubles (115 euros). The official minimum wage is now about 60 % of the average subsistence minimum and about 20 % of the average monthly wage, which is quite low by international standards. The minimum wage in most OECD countries is about 40 % of the average wage.