Social Security in Russia under Economic Transformation

Abstract

THE SOCIAL POLICY implications of the Russian economic transformation pose challenges unprecedented either in former communist or developed Western societies. The deep crisis inherent in the collapse of the centrally planned economic system, combined with major systemic change, has resulted in massive economic decline and social hardship. Complicated by the effects of wage and price liberalisation-primary steps to economic adjustment-the social consequences of market-oriented transition embrace a general decline in the standard and quality of life for the majority. In addition there are growing income disparity, unemployment and the emergence of new poverty groups. Stabilisation and adjustment measures urgently needed for economic recovery necessitate the elimination of price controls, the reduction of consumer subsidies and cuts in public expenditure on social services. Marketisation of production and social services, combined with fiscal crisis and high inflation, have undermined the ability of state social security institutions to provide adequate levels of protection. Concomitantly, the growing risks of unemployment and impoverishment for a considerable part of the population have greatly increased the need for social support. While the demand for income transfers and safety nets has grown tremendously, the availability of fiscal resources, as well as the administrative capacity for their efficient distribution, is sharply decreasing. Thus a new social security system capable of addressing both efficiency and distributional objectives simultaneously by directly investing in labour and by protecting low-income and vulnerable groups is in urgent need. Social policy responses to these adverse and dangerous consequences of transition would