The Effects of the Informal Sector on Income of the Poor in Russia

Abstract

This paper clarifies the social and economic effects of employment in the informal sector on the poor in Russia in recent years. The article describes the extent to which the figures for informal sector at large and unofficial employment in particular vary in different estimates and the effect they have on the average labor income of the poor. The major impact of the research consists of the development of a universal method for the estimation of the scales of labor income of the poor in the informal sector. Using the latest available data from Russian Federal State Statistics Service, this indicator is calculated for the poor and than compared with average wages in the formal sector and the subsistence minimum (official poverty line). The study concludes that the informal sector is a factor of social stability in a postsocialist transition economy, which, however, cannot alleviate poverty.