RUSSIA LONGITUDINAL MONITORING SURVEY RESULTS FOR 2006

UNCLAS MOSCOW 003506 SIPDIS SIPDIS STATE FOR EUR/RUS TREASURY FOR CETINA E.O. 12958: N/A TAGS: ECON RS SUBJECT: RUSSIA LONGITUDINAL MONITORING SURVEY RESULTS FOR 2006 SUMMARY -------------- ¶1. (U) In 2006, Russian incomes were up 16 percent from the previous year, while unemployment and consumer prices fell, according to researchers from the University of North Carolina (UNC) and Russia's Center for Economic and Financial Research (CEFIR) in their annual survey of socio-economic data and analysis compiled for the Russia Longitudinal Monitoring Survey (RLMS). The 2006 data for the project, which began in 1992 to assess demographic, employment, income and inflation trends, show continued improvement across a wide spectrum of macroeconomic indicators. Not all of the changes, however, have been welcome. Polling results show that Russians are evenly divided on whether they are better off now than they were 15 years ago. Increased housing, utilities and food costs have prompted an interest in government-driven price controls. A majority of respondents also indicated support for the nationalization of industry, commenting that early 1990s privatizations were insufficiently transparent. End Summary. RLMS 2006: Wages Up, Some Costs Up -------------- 2 (U) Since 1992 and with substantial support from the U.S. Agency for International Development, the University of North Carolina project has tracked and assessed demographic, employment, income, household consumption, and inflation trends as well as changes in attitudes toward the country's economic management. The data collected for the latest round of the Russia Longitudinal Monitoring Survey (RLMS) showed that socio-economic conditions in Russia generally improved during 2006. In keeping with previous years' findings, 2006 revealed that the average Russian had more money to spend. Average wage income increased 16 percent to USD 448 per month. Women's pay increased 15 percent, reducing the gender gap differential to 26 percent. Consumption trends have been changing, as some spending on food has given way to durables and other goods. Food took only 36 percent of household budgets compared to 72 percent in the mid-1990s. But some of the increase in wages has gone to cover higher rent, utilities and fuel costs. Unemployment decreased to 5.2 percent, according to the study, and during the year, the consumer price index reached single-digit territory (9 percent) for the first time. Attitudes Divided on Improvements -------------- ¶3. (U) According to RLMS survey data, Russians were evenly split on whether the economic transition since 1992 has improved their lives. Not surprisingly, education, income, work opportunities and age constituted major factors in public perception of the effects of economic transition: 64 percent of Russians above 60 years of age said that the economic transition had negatively affected their lives, while only 47 percent of those between 35 years and 60 years old said so; 32 percent of Russians below 35 years of age responded that the economic transition had negatively affected their lives. Of respondents without a university degree, 51 percent said their lives had been negatively affected, in contrast with 41 percent of those with a university degree who responded the same, while 65 percent of the poorest 10 percent of the population responded that the economic transition had worsened their lives. A majority of those surveyed responded that privatized state assets should be nationalized or resold under a more transparent process. The vast majority of Russians (above 90 percent) also believe that there should be price controls on communal services, real estate, and gas and fuel ¶4. (U) Summary of findings for 2006: -Price increases have been moderate for the past eight years. From December 2005 to December 2006, the consumer price index rose only 9 percent. -Real household income increased by 15 percent during the past year, the highest level over the 15-year survey period observed by the RLMS. -Households at the top income quintile had a 25 percent increase in real income over the past year in contrast to an 8 percent increase in the bottom quintile. Other quintiles experienced a 10-14 percent increase. -Wage income increased by 16 percent over the past year; income of those working for private sector organizations increased by almost 18 percent. -Wage income of those working for private sector businesses and organizations reached nearly the same level as wage income from state-owned enterprises. -Gender earnings differentials fell during 2006 to a 26 percent wage gap. Women's pay increased by 15 percent over the past year, while for working men it rose only 9 percent. -Transfer payments from the State rose by 6 percent during the past year and are now at their highest real level in the history of RLMS. Pensions make up almost 90 percent of transfer payments. -Household expenditures increased by 25 percent from October 2005 to October 2006, driven mainly by non-food expenditures. The average food budget share fell to 36 percent, below previous levels of 72 percent over a decade ago. -The budget share of rent, utilities, and fuel continued to rise, with real payments doubling since 2000. Rent and utility payments now comprise 13 percent of expenditures for the poorest households. -Unemployment rates fell over the past year, from 6.6 percent to 5.2 percent. The percentage of adults participating in the labor force by gender is 84 percent of males and 80 percent of females. These results are similar to those found by other economic surveys. Rosstat reports that in the first quarter of this year, real income increased 13 percent y-o-y. A poll by the Levada Analytical center found that 68 percent of those polled in 2006 said that that year had been "successful" or "very successful" for them. The percentage of people living below the poverty line, also an indicator of economic growth, has been shrinking according to recent studies. The All-Russian Center for Living Standards (ARCLS) found that the percentage had decreased from 13.3 percent in 2005 to 11.9 percent in 2006. Rosstat notes a decline from 20.3 percent of the population living below the poverty line in 2003 to 17.6 percent in 2004, and estimates the current level at under 15 percent of the population. BURNS