Locating the “poverty threshold” in Russia

Abstract

The present paper focuses on identification of relative “poverty line” and a threshold of high poverty risks. The paper also studies key poverty factors in contemporary Russia. It demonstrates that the relative approach to poverty which is widely used in Western countries is applicable in Russia too. However, the relative poverty thresholds set at 0.5 and 0.75 medians per capita family income identify quite different groups of the poor. The threshold of 0.5 median income indicates deep poverty happened mostly to the unemployed workforce. The relative poverty threshold equal to 0.75 median income identifies the poverty of the elderly who are not considered as the poor by the absolute approach because pensions of Russians have been recently equalized to the subsistence level. Above all, the paper provides econometric estimates of socio-economic determinants of both absolute and relative poverty. It was revealed that the relative deep poverty of the working population was primarily caused by “bad” jobs rather than by “bad” human capital. Absolute poverty of workers is more or less determined by both factors.