BOFIT Viikkokatsaus / BOFIT Weekly Review 2019/31

Alfa Bank, Russia’s largest private commercial bank, has released a study claiming that 30 % of the Russian population, about 43 million people, are “middle class.” The middle-class reached its apex in 2014 at 37 %.

Estimating the size of a middle class is a non-trivial exercise. Depending on the methods used, a substantial majority or tiny minority of persons may be considered middle class. A recent Sberbank survey found that 47 % of Russians claim to belong to the middle class, while the same survey in 2014 found that 60 % of respondents claimed to be middle class. Under the Credit Suisse definition, the middle class consists of persons with savings amounting to at least double their annual earnings. By this definition, only 4 % of Russians could call themselves middle class, when the equivalent numbers for Germany are 42 % and 38 % for the United States. The OECD defines a member of the middle class as someone whose annual income is within the 75–200 % range around the national median income. For Russia, that range is 26,000–70,000 rubles (370–1000 euros) a month. By this measure, 53 % of Russians belong to the middle class. Alfa Bank uses the OECD definition of income, but limits its middle-class definition to those deciles in which at least half of the members own a car.

The consuming habits of Russia’s middle class suggest relatively nonaffluent lives. They spend about 27 % of their income on food, which is a much larger share than in other industrialised nations. The middle classes in the US and Germany, for example, spend about 10 % of their incomes on food, while the middle classes in Poland and China spend about 15 %. In 2017, 26 % of Russia’s middle class worked in the commerce and transportation branches, while 20 % in mining or industry. 15 % of the Russian middle class consisted of officials and members of the armed forces (up from 10 % in 2003).

The Alfa Bank study found that real incomes of Russia’s middle class declined slightly during 2008–2018. For the top earnings decile, real incomes climbed 11 %, while those with small incomes rose by 4 %. The declining real earnings of Russia’s middle class are reflected in its attitudes. Borrowing of the middle class and Russia’s richest decile fell sharply as Russia experienced recession in 2015, but only borrowing of the top decile recovered after the economy emerged from recession. Russian risk aversion accounts in part for the negative perception of entrepreneurship. The study refers to a 2017 survey by the Levada Center that found 12 % of Russians wanted to start their own business (57 % in the US).

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