Higher School of Economics Calls Security Officials Russia’s New ‘Middle Class’

March 24 (Reuters) – Improvement in the real income of Russians and reduction of poverty is only possible with the growth of the world economy and the easing of sanctions against the Russian Federation, but even so, the middle class will shrink and increasingly consist of security officials, according to a study conducted by the Institute of Social Policy of the National Research University of Economics.

Experts presented four scenarios of changing the standard of living of Russians by 2030. The estimates are based on a survey conducted in 2022 among experts from economic institutions, representatives of business and public organizations.

The first optimistic scenario assumes a simultaneous easing of sanctions and an increase in global GDP. If it is implemented, the real income of the population by 2030 may exceed the 2021 level by about 2%, and the poverty rate in 2026-2030 may fall to 9.8% from 11.8% in 2022.

At the same time, the size of the middle class will continue to shrink until 2030 – to 14-31%, while currently, according to various estimates, its share is 20-50%.

“So even with the most favorable development of events, a deterioration in the position of the middle class and the socio-psychological well-being of the population can be expected,” write the authors of the study.

The second scenario assumes the growth of the global economy while tightening sanctions against Russia. In this case, real money income and wages in the future by 2025 could fall by about 7% compared to 2021.

The peak of the poverty rate – 14% – under this scenario can be expected in 2023-2025, after which the situation should slowly improve, but even by 2030 the rates will not return to the pre-crisis period. In this scenario, the middle class will shrink even more.

The third scenario is implemented in a situation of easing sanctions against the backdrop of stagnation or recession in the global economy. The projections of real money income, poverty levels and the shrinking middle class in the second and third scenarios are almost convergent, but an increase in chronic poverty – the proportion of people who live in poverty for a long time – is added as an additional risk.

In the fourth, most pessimistic scenario, assuming an increase in the pressure of sanctions in conjunction with the global crisis and stagnation of the world economy, by 2030 there may be a decrease in the real income of the population. The average estimate of the poverty rate for the period 2026-2030 is 18.7%, and to the additional risks is added the possibility of the emergence of a group of new poor.

This scenario is burdened with the most negative effects on the middle class – it is assumed that in 2030 the middle class in Russia will constitute only 10-15% of the population, which, as the authors note, will throw the country back to the situation of the 1990s.

“On the one hand, there will be an increase in the concentration of wealth and further separation of the “top”, and on the other hand, inequalities will shrink from the bottom due to the convergence of the position of the middle (or former middle) stratum with the poor,” the authors comment.

All four scenarios will be accompanied by a significant increase in the share of security forces in the structure of the middle class, experts wrote, and an increase in inequalities in the level and quality of life could lead to an increase in social tensions.

At the end of last year, experts from the Center for Macroeconomic Analysis and Short-Term Forecasts (CMASF) also wrote that the sanctions shock threatens the middle class, which will shrink due to falling incomes.

Western sanctions in response to Moscow’s “special operation” in Ukraine deprived Russia of access to Western technologies, cut off Russian companies and banks from the global financial system and the global capital market, almost a quarter of exports and imports were banned, dozens of foreign companies left the country or suspended activity.

At the end of last year, the real disposable income of the population of the Russian Federation, according to Rosstat, fell by 1.0% on an annual basis, having grown by 3.2% in 2021. Before Moscow launched its “special operation”, the authorities counted on a 2.4% increase in real income in 2022.

President Vladimir Putin announced that one of Russia’s national development goals is to reduce poverty by half by 2030 from the 2017 level – to 6.5%. (Daria Korsunskaya. Editor Dmitry Antonov)