Incomes and expenditures.

Compared to the 1990 level, the Russians’ real incomes today are a mere 70 percent. However, the authors of the report cautiously record some barely perceptible positive shifts. First, in 1996, it proved possible to stop the drop in incomes; second, the gap between the high and the low income groups has somewhat lessened.

Social transfers (maternity and child benefits and so forth) play a marginal role in family budgets because they are not regularly adjusted to the growth of prices and are often delayed. Pensions are growing, but the correlation of pensions and average wages remains invariable (38 percent). An average pension is 16 percent higher than a pensioner’s subsistence level, while an average wage is 100 percent higher than the subsistence level of a working person.

On what, then, are the Russians’ meager incomes mainly spent?

The purchasing power of the population has undergone serious structural changes: People buy more food (the food market grew between 102 and 140 percent) and less consumer goods and services. Decline in the purchasing power has been especially pronounced in transport and housing and utility expenses.

Unemployment and employment.

According to official statistics, the number of unemployed is approximately 10 percent of the economically active population. People in the most able-bodied age group — between 30 and 49 — prevail among the officially registered unemployed. Another 34 percent are young people aged 16 through 29, which is an extremely dangerous social factor. The third largest group is constituted by women, while their share is growing.

The scale of latent unemployment is greater. Owing to production decline, millions of people have been forcibly put on a reduced working day (or week). In 1996, approximately 2.5 percent of the able-bodied population were forced to go on leave. Another 3 million employees (4.1 percent of the total work force) of large- and medium-sized enterprises, according to a special survey by the State Committee for Statistics, had at the time a monthly wage of 150,000 rubles, which constitutes only one-third of the minimum wage. They were also classified among latent unemployed.

The informal sector of the economy has become a cushion for negative social processes. In the estimate of the State Committee for Statistics, in 1996, more than 5 million people working in industry had additional sources of income on a secondary employment basis. It could be presumed that approximately 10 million people are, in fact, involved in this process. Unregistered unemployment leads to unregistered growth in GDP which is in the “tax shadow”. Yet it also produces a compensatory impact on the social sphere, which, in particular, accounts for the absence of mass conflicts.

Education and the labour market.

In 1992 through 1996, consolidated expenditures on education in Russia were approximately 3.5 percent of GDP. At the same time, GDP itself shrank considerably — approximately 40 percent and so the actual level of spending was far lower. As a result, the real financing of higher education per student in 1996 fell 50 percent compared to the 1994 level.

Nonetheless, the authors of the report contend, the educational system in Russia has managed not only to stay afloat, but by many indicators to approach contemporary standards. In the 1990s, the number of state and other educational establishments has grown by 38, as has the number of nonstate schools, lycees, and gimnasiums. The number of college and university students has increased by approximately 160,000, while the number of high school students has grown by 600,000.

The present system of education, in the authors’ opinion, helps increase the occupational mobility of the population. Student intake at engineering and technical departments has fallen considerably, but has grown at liberal arts departments by 46 percent (full-time day departments, 72.3 percent) and economic departments, by 34.5 percent (full-time day departments, 94.5 percent). Meanwhile, former vocational and technical colleges are actively setting up retraining programs for the adult population, funded by the Federal Employment Service. While in 1990 such programs reached a mere 9,000 people, in 1996 they embraced 200,000.

Thus, Russia’s educational system itself helps, on the one hand, compensate for the loss of jobs at “socially redundant” enterprises and, on the other, helps create new jobs requiring high qualifications.

Conclusions.

The main conclusion that follows from the report is this: The Russian state does not and will not in the foreseeable future have financial or other resources sufficient for meeting all needs of human development. This, of course, does not mean that the state should fully abandon its social support and other functions related to the development of human potential. However, at present federal agencies are mainly and primarily expected to provide financial resources. The real role of the state, however consist in eliminating all sorts of administrative, tax, and legal barriers to the development of nonstate institutions and procedures capable of stimulating economic growth.

The presentation of the Russian report on human development at the UN — if we assess it from the viewpoint of investment policy interests, in other words, of attracting capital to priority sectors — is perhaps not a very important event. The UN Development Program is doing some very necessary things for Russia, which, however, may not look big in absolute terms even with outside resources — and the UNDP attracts private donors who trust it and its projects — over the past two years it has invested only approximately $20 million to $25 million. It is noteworthy, however, the UNDP is ready to work in our regions because it understands that Moscow is attracting investment just the same, without any meditation. And although it has also undertaken a transport infrastructure project for Moscow, it seeks to operate mainly in the provinces — where people are thus far seeing only negative implications of reform. The UNDP chooses specially targeted projects that help develop production on a small scale — at the level of a town, several towns, a district. At present such projects are being successfully implemented in more than 20 regions.

The UNDP bases its choice precisely on the analysis of human development factors: how a person lives, how much he makes, how much money he needs to educate his children, what the ecological situation around him is, his life expectancy, and so forth. It is through these simple notions that the UNDP tries to identify problem areas and to project international investment cooperation priorities onto them. Private capital usually sets tough conditions and looks for major projects. The UNDP, however, looks for such niches where something concrete can be done, by investing small resources which do not require any far-reaching obligations on the part of Russia — thus improving people’s lives, if only a little, and maybe even stimulating the inflow of new investment. In this context, the Russian report on the development of human potential is valuable not in that it gives a picture of Russian life, but in that its philosophy reaches out to investors and international organizations that cooperate with Russia.

The report on the development of human potential has been published by the UN Development Program since 1990. National reports on Europe and the CIS have been prepared since 1995. The 1997 human development report for the Russian Federation is the third in the series of annual reports launched at the joint initiative of the Russian Federation Government and the UNDP Regional Bureau for Europe and the CIS countries.

Key terms.