Social security in Russia under economic transformation

Social security in Russia under economic transformation

Vladimir Mikhalev

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 thus imply emergency measures, new institutional development and adjustment within the established social security system.(1)

Although the scope of the task facing the Russian social security institutions is unique, it is nevertheless important to draw on international experience, for example in some Latin American countries, which may provide useful guidelines. So this article examining the present state of social security in Russia and the change under way will also refer to some lessons from Latin American experience. It will conclude with a discussion of policy options for Russia and their likely impact on the social situation.

Russian social security: features of the system

To understand the problems surrounding the development of the Russian social security institutions it is important to define their role within the inherited pervasive system of state social provision. Under state socialism free and universal health care, education and vocational training were provided to all citizens. The heavily subsidised housing, though scarce and mostly of inferior quality, helped to practically eliminate homelessness. The state or trade unions also provided very cheap recreation as well as child care services to ensure employment for female labour. With a strictly observed guaranteed right to a job, formal unemployment was virtually non-existent – though at the price of low labour productivity. Many mass consumption goods and services were heavily subsidised, also at the cost of massive inefficiencies. With universal employment and social provision the socialist state pursued an income levelling policy. The centralised control over employment and wages served as a powerful means to regulate incomes and keep them close to subsistence level. The average personal income was not much higher than the minimum amount necessary to cover very basic needs. Thus both the quantity and the quality of what society provided for the majority left much to be desired and caused a certain amount of popular discontent, but it nevertheless provided people with some sense of security and the hope of better things to come. People generally agreed to accept a relatively low standard of living as long as there was no open income disparity.

Another very important consequence of the Soviet system of social provision and social security was that people had virtually no social risks while the state took care of their education, job placement, health and child care, accommodation and provision for old-age or disability. While it had certain important merits, it also had an obvious negative outcome in a very low level of social mobility and adaptability. Accustomed to state paternalism, people in many cases lacked enough initiative and were unprepared to cope with unemployment or social insecurity in general. With the transition to the market, accompanied by rapid deterioration of state social provision and falling living standards, it is particularly hard for them to adjust. Not only have they no experience of the new conditions of insecurity; the social shock is even deeper, for what people expect and demand of the economic reforms is an improvement over what they have experienced in the past, not a decline in the amount and quality of social welfare provided by the old system.(2)

The social security institutions designed under the previous system were no better prepared to meet the increased social risks incurred in the crisis and the transition. Unemployment insurance was non-existent, while the bulk of social security was provided by old-age pensions, sickness and maternity benefits as well as by invalidity and survivors’ pensions, the latter representing a minor proportion of social expenditure. In mid-1992 over half of the total of 6% of GDP spent on social safety nets went on old-age pensions, 16% on various types of family allowance, and 8% on sick pay. Less than 3% of social cash transfers was spent on social assistance and virtually nothing on unemployment benefit. The remainder of under 23% of expenditure went on disability and survivors’ pensions, and on a number of other small benefits.(3)

The pension system in Russia has a long history and well-established administrative structures. For a long time, however, there was no idea of employer and worker contributions to a pension fund, while all benefits were paid from the state budget and funded through general tax revenues. Not until early 1991 was a first step taken towards an insurance contribution-based pension system. The Pension Fund of the Russian Federation was founded to function independently of the budget and bear responsibility for collecting contributions. The Pension Fund’s revenue is derived from an employer contribution of 28% of the payroll in 1994-95. The contribution rate for agricultural enterprises is 20.6% of the payroll, while for self-employed individuals (whether in the rural or urban sectors) it is 5% of their total income.(4) There is also an employee contribution of 1% of salary. From these sources the Pension Fund pays all the basic pension benefits falling into the category of ‘labour pensions’, while social pensions continue to be funded from the federal budget. The funding for all types of pensions, both from insurance contributions and from the federal budget, is accumulated in the Pension Fund. The latter finances the social security offices which administer entitlement to and paying out of pensions.

Old-age labour pensions form the core of the Russian social security system, determining social conditions for 80% of the total of 36 million pensioners, i.e. for 19.5% of the Russian population.(5) Pensionable age is normally 60 for men and 55 for women but may be lower for a number of occupational groups including the military, coal miners, civil aviation pilots and many others. Contribution conditions generally require 25 years of service for men and 20 for women. There is no retirement condition, so an individual may continue to work full-time, receiving both pension and full salary, while additional years of work after receiving a pension add to the length of service and lead to a higher pension level.(6)

The Pension Fund also pays invalidity pensions for those whose invalidity is work-related as well as to those who were in service prior to invalidity when it is not work-related. The benefit level is equal to the minimum old-age pension except for group 3 invalids, who have limited capacity to work. The latter receive two-thirds of the minimum pension. Group 1 invalids require additional care and receive additional benefit for that, equal to two-thirds of the minimum pension. Survivors’ pensions paid by the Pension Fund provide for a benefit of two-thirds of the minimum pension for surviving children, stepchildren, spouse and, in limited circumstances, parents and grandparents.

Social pensions that are funded through the federal budget apply to individuals who do not have even five years of service. Their pension is two-thirds of the minimum old-age pension. Invalidity pensions to individuals who have not been in service vary depending on invalidity group but are not higher than the minimum old-age pension. The federal budget also pays supplementary benefits to war veterans.

The system of social insurance benefits in Russia has also been reorganised along lines similar to those of the pension system. In August 1992 the Social Insurance Fund was created to take care of funding for sick, maternity and child care benefits. Like the Pension Fund, the Social Insurance Fund derives its revenue from a payroll contribution of 5.4% applying to every business or enterprise regardless of form of property. Both contributions and benefits are wage-related. As a rule, 74% of the contributions raised is left at the disposal of the enterprise to administer payment of benefits to its employees. The remaining 26% is transferred to the Fund to finance centrally administered benefits.(7)

Sick pay is available to every employee without any contribution or previous work conditions. The level of benefit is equal to 100% of the individual’s previous wage for employees with eight or more years of service, to parents of three or more children, to war veterans and to Chernobyl victims; 80% for individuals with five to eight years of service and 60% for those with less than five years of service. Sick pay is generally provided until recovery unless an invalidity pension is granted. An individual caring for a sick family member may also be eligible for a benefit. It is of the same level as sick pay, though the duration is limited to three days if caring for an adult and to 14 days if caring for a child.

All mothers are paid a maternity grant which is a single payment equal to five times the minimum wage. In addition, mothers who have been in work receive a maternity allowance on the same terms as sick pay. It is 100% of the mother’s wage, irrespective of length of service, payable through the whole period of maternity leave, that is up to 126 days. After that time mothers are eligible for child care allowance, equal to the minimum wage, for a period of one and a half years.(8)

The development of the unemployment insurance system is at its initial stage. The Employment Fund created in 1991 collects mandatory contributions of 2% of the payroll from all enterprises. It also receives budgetary transfers. The funds raised by contributions are shared 45% to 55% between local district and provincial governments. The province (oblast’) receives 55% of total funds through transfers from districts (raiony). Out of that amount it then transfers 10% to the central Employment Committee to help deficit areas.(9) Eligibility for unemployment benefit is very wide and applies to virtually everyone seeking a job. There are only variations in the level of benefits. New entrants to the job market receive a benefit equal to the minimum wage. Those who were laid off, regardless of circumstances, receive 75% of their previous average wage for the first three months out of a job, 60% for the following four months and 45% thereafter.(10) The benefit is normally payable for up to 12 months. The Employment Fund also pays stipends for those taking retraining courses which are not lower than unemployment benefit.

Family benefits in Russia mainly include child and single mothers’ allowances paid from the budget of regional administrations in republics or provinces (oblasti). Thus responsibility for a number of social programmes has been devolved to lower levels of the federal system.

A system of means-tested benefits that would provide social assistance is non-existent in Russia. Local funds only offer limited emergency relief in the form of free meals, distribution of food and second-hand clothes, and provision of shelter for the homeless.

Thus the major structure of Russian social security still remains the same as that inherited from the Soviet system. The change that is underway relates to the modification of the sources of funding in favour of a contribution-based insurance system. It has not affected the principle of universal coverage, nor the entitlement conditions for major benefits. Thus the financial requirements of social security remain immense and can only increase in the face of the adverse social consequences of the transition. Administrative problems are mounting too, while improvements in administrative procedures, if visible at all, are very slow. We shall discuss both the financial and administrative aspects of the functioning of the social security institutions in Russia in more detail in the following section.

Pensions: administrative and financial problems

Despite a substantial change in the Russian social security system designed to address the effects of reform policies, the social security institutions still face considerable administrative and financial problems and need further adjustment. The major problem of pension finance in Russia, as elsewhere, is the acute resource constraint and the high cost of the existing pension regime. The core issue underlying the financial problems of social security is how to divide national output between workers and pensioners in general and in a situation of continuing deep recession in particular.

Until 1991 all the funding for pensions was tax-based and was allocated from the state budget on the so-called ‘residual principle’. The planning system accorded too low a priority to social policy. As a result resources were diverted from welfare purposes to meet high-priority investment programme targets. To safeguard resources assigned to social policy objectives special off-budget funds were established in 1991. Resources of the Pension Fund are to go strictly to paying pensions. Thus funding is now dependent on contributions collected.

Here lies the Pension Fund’s major fiscal constraint. The payment crisis (widespread interenterprise and wage arrears) which is paralysing the Russian economy has deeply affected the pension system. Enterprise arrears in payment of insurance contributions became typical in a situation of massive insolvency. As the contributions are based on the payroll, many enterprises, particularly in the new private sector, find various ways to under-report their payroll. A considerable part of the payroll is shown as transport and other expenses or various benefits and bonuses to workers which are legally tax-exempt. Being short of cash, many enterprises also pay wages to their workers in kind – in food or consumer goods, often produced locally – in which case it becomes impossible to collect contributions. In 1993 the total enterprise debt to the Pension Fund amounted to one trillion rubles, or nearly one-quarter of that year’s total Pension Fund expenditure of approximately 4 trillion rubles.(11) By May 1994 these arrears had increased to 2.5 trillion rubles.(12) The Pension Fund actually managed to raise only two-thirds of the expected revenue.

The opportunity costs of rising unemployment are also high as people who lose their jobs no longer pay contributions. According to some estimates, revenue from the payroll taxes would fall on average by 0.15% of GDP for each percentage point increase in unemployment.(13) In cases of early retirement, which is practised as a counter-unemployment measure, former employees become entitled to pension benefits instead of paying contributions. Of course the general decline in production and real wages also limits the tax base for collecting pension contributions. Owing to the financial weakness of the Pension Fund it has virtually no investments of its own which could earn additional resources.

Meanwhile for demographic reasons the burden on pension finance has increased considerably in recent years. The drop in the birth rate over the past few decades has resulted in an increase in the proportion of the population above pensionable age. During 1993 the total number of pensioners increased by 730 000, and in the first half of 1994 by 500 000.(14) The ratio of those in employment to pensioners has become less than three to one. In the coming years a smaller number of people born during World War II will reach retirement. The number of new pensioners will then decrease while that of the working will increase. The financial burden on the working population providing for pensioners will thus become easier, although only for a relatively short period. From 2005 onwards the demographic trend will revert to a sharp increase in the share of the elderly population. By 2020 the ratio of workers to pensioners will reach two to one.(15)

Financial constraints are aggravated by administrative rigidities. The management of the pension system is now split between two different authorities. The Pension Fund, together with its regional branches, are responsible only for collecting contributions, as well as fines for arrears etc. The Ministry of Social Protection is responsible, through regional social security offices, for calculating entitlement, for uprating benefits to take account of inflation as well as for paying out pensions themselves. The administrative infrastructure is very underdeveloped. Computer support is either very limited or non-existent. In most cases even photocopiers are not available. So records are kept on paper, typed or handwritten. With such limited facilities it is really hard and costly to process all the necessary data. For entitlement to a pension the social security offices require a complicated form setting out a detailed employment history of the claimant. These long personal files are difficult to handle, especially when recalculating pensions in order to uprate them for inflation. In fact these routine procedures inherited from the old practice are not fully necessary. What the pension office really needs is the length of service and the previous wage, which may be supplied by enterprises.(16)

The Ministry for Communications, notably the postal service, and the Savings Bank are also involved in the delivery of pensions. Some people receive pensions at home through their local post offices, others have them paid into their Savings Bank accounts. Owing to inconsistencies in these agencies the whole system appears to be administratively inefficient. The Ministry for Social Protection presents its financial requirements to the Pension Fund, which the latter is obliged to meet. Meanwhile the needs of social security offices include not only old-age pensions but also social assistance and poverty relief, which are financially the responsibility of the Social Insurance Fund, not the Pension Fund. So sometimes social security offices make unjustified claims on the resources of the Pension Fund which go beyond the latter’s responsibility. Meanwhile the Pension Fund’s revenue is inadequate to satisfy completely even the demands of the pension system.

It should be noted that the existence of separate off-budget social funds may cause other financial and administrative problems. Resources of the Pension Fund cannot be redistributed to finance unemployment compensation or social insurance. Moreover, as each of the funds is responsible for collection of its own contributions there is duplication of collection costs. The amount of resources available to each fund largely depends on the commitment and competence of its tax collectors or fund raisers.

Being unable to provide all the necessary funding, the Funds proved still to be dependent on state budget subsidy. In September 1994 the first deputy chairman of the Pension Fund, Yurii Lublin, complained that the Fund had not received an expected one trillion rubles from the budget as a subsidy.(17) On the other hand, the Finance Ministry, responsible for state budget expenditure, complains of inability to control the resources of the off-budget funds or use them even when one of them has a surplus.(18)

Prompted by acute budget problems in 1994, the government opted for a more flexible relationship between the off-budget funds and state budget resources. Budget allocations became a regular source of supplementary funding for the off-budget funds. At the same time the government gained access to the funds’ resources. Such access helps the government to avoid a formal increase in the state budget deficit which is under close watch by the international financial institutions, particularly the IMF. This actually has produced a fiscal illusion. By taking social services off the budget, the government reduces the share of the state in GDP as well as the size of the budget deficit. Nevertheless it does not diminish the state’s responsibility for social policy, regardless of the existence of such off-budget funds. The state still retains the duty to finance social programmes adequately. Thus the existence of the off-budget funds makes no difference regarding the public sector deficit in general. It is the overall public sector financial requirements, in which social expenditures form an important part, not the state budget deficit narrowly defined, that affect the economy as a whole.(19)

It is worth mentioning that payroll taxes amounting to 35-40% constitute a significant indirect labour cost. According to some estimates, in 1993 the payroll taxes raised a private firm’s labour costs to about 1.7 times the take-home wage, not including the excess-wage tax.(20) This may create a considerable disincentive to take on more workers at a time of rising unemployment and may lead to even greater tax evasion and growth of the informal sector. Moreover, in many cases, when payroll taxes are paid the resulting higher labour costs can be easily passed into higher prices, finally falling on consumers of manufactured goods and public services, including pensioners and other low-income groups.

There are also problems in the delivery of pensions. The postal service charges as much as 4% to 6% of the sum delivered and these charges fall on social security offices? In the first half of 1994 they had to pay 600 billion rubles as postal charges.(22) There may be considerable delays in delivery due to lack of cash at post offices or for other technical reasons. That is why both the Pension Fund and social security offices are dissatisfied with the postal service.

A presidential decree in autumn 1994 proposed a unification of all the functions within a Federal Pension System. The latter is meant to become responsible for collecting funds, assessing entitlement, calculating, funding and paying of pensions. The idea is to enlarge the responsibilities of the Pension Fund together with its local branches. The Pension Fund is ready to assume additional responsibilities and is also eager to get greater financial freedom to engage in investment activity. As regards social security offices, they would concentrate on social assistance and anti-poverty programmes, handing over work on pensions to the Pension Fund. However their staff, particularly senior officers, are not keen to give up assessment of entitlement and calculation of pensions. Owing to these bureaucratic and other obstacles the actual reform had not yet even started by the end of 1994.

The social impact of the pension system

Despite universal coverage the level of pension expenditure as a share of GDP in Russia is only 5.5%,(23) which is much lower than in any developed Western country, where pensions generally amount to more than 10% of GDP.(24) Even in Latin American countries like Chile and Uruguay pension spending as a proportion of GDP was as high as 9.8% and 8.0% respectively (data for 1983). In large Latin American countries the equivalent proportion ranged from 4.3% for Argentina to 3.5% for Brazil and as low as 0.63% for Mexico.(25) Thus by this standard Russia clearly falls within the category of a developing country. This may suggest that there is very little scope for any reduction in pension expenditure. The low level of spending on social security is seriously affecting the living standards of pensioners.

Pensions are based on wages including wage supplements. The average wage replacement rate for Russia in 1994 was 33.2% though there are significant regional variations from 50% to 20%.(26) The pension is initially awarded as 55% of the individual’s wage over the previous two years, or over any other two continuous years with maximum wage level, plus 1% of the wage base for each year of service over 25 (20 for women). The minimum pension is set legislatively and is regularly adjusted for inflation.

The method of calculating pensions is very complicated and provides for a wide variety of supplements. The key problem, however, is the revaluation of pensions in the face of high inflation. Inflation has reduced the real value of the earnings record on which people’s pensions were based, apart from eroding the real value of pensions themselves. The response was to index people’s past earnings by a coefficient, ranging from 11.2 for 1971 earnings to 2.9 for 1991 earnings. In April-June 1994 these coefficients were increased 1.8 times and 1992 earnings were also indexed. In addition to that the government adjusted the level of pensions themselves. From 1993 onwards the value of new pensions is determined on the basis of the value of earnings in the preceding 12 months. In 1992 the minimum pension was increased twice, then indexation of all pensions was introduced and pensions were indexed three times, after which, in November 1993, indexation was replaced by flat compensation of 11 700 rubles a month, added to each pension. In February 1994 this compensation was increased to 19 700 rubles a month. A presidential decree issued in August 1994 indexed all pensions by 1.3 times for September 1994 and by 1.51 times from October 1994 onwards.(27) A later decision by the State Duma increased the minimum pension by a further 1.2 times. So from 1 November 1994 the minimum pension was fixed at 34 440 rubles a month. Together with the flat compensation of 19 700 rubles, which had been retained, this brought the minimum pension actually paid up to 54 140 rubles – only US$19 at the November 1994 market exchange rate.

These measures could not fully counteract the devaluation of pensions by inflation. The increases in the minimum pension were no more than one-third of the rate of inflation. As a result the average pension level was moving closer to the subsistence minimum while the difference between the minimum and maximum pension was diminishing. By law the maximum pension may not be higher than three times the minimum pension. In September 1994 one pensioner in nine received the minimum pension while 80% of pensioners received 1.0-1.5 times the minimum.(28) The actual [TABULAR DATA FOR TABLE 1 OMITTED] maximum pension in the first half of 1994 was equal to 1.9 times the minimum pension. Only 11% of old-age labour pensioners receive the maximum pension.(29) Meanwhile the gap between the highest and the lowest wage has reached 26 times.(30) Thus pensions no longer reflect workers’ real contributions and previous wage level, pushing all pensioners into basically the same income category, living on or below the subsistence minimum (see Table 1).

As Table 1 shows, in autumn 1994 the minimum old-age pension was equal to roughly 60% of the subsistence minimum for pensioners, while an average pension was only 10-20% above that minimum. Most pensioners experienced a clear deterioration in their position relative to those in employment. In 1990 the average pension was 39% of average earnings. In 1992-94 it was seldom higher than 35%, falling in certain periods to less than 25% of the average wage. For comparison, the average pension in most industrial economies equals between 40% and 60% of the average wage.

It is no wonder that the majority of pensioners fall within the income category affected by poverty. Their standard consumption pattern completely matches that of the poor. Pensioners spend 75% of their income on foodstuffs. The bulk of their diet is provided by staples: bread, potatoes, milk and vegetable oil. An average pensioner can afford 7-8 kilos of bread, 4-5 litres of milk, 1.5-2.5 kilos of meat per month.(31) Fruit, vegetables and sweets are in most cases very scarce or non-available. So the income level of pensioners allows them to avoid hunger though it is far from providing a healthy diet. As for other expenses like purchase of an overcoat or a fridge, or repair of a flat, these are practically impossible for an average pensioner. As many as 65-80% of them are unable to purchase any consumer durable goods?

Like everyone in society, pensioners try to adjust to the new market conditions, striving to earn additional income. Some engage in street retail trade, others take occasional jobs. A considerable proportion of pensioners also continue to work at their enterprise, receiving both pension and salary. A survey in three big Russian cities, St Petersburg, Petrozavodsk and Vyazniki, revealed 20% of old-age pensioners staying at work.(33) This group of pensioners falls into the middle or even higher income category. Those in a really hard situation are fully retired lone pensioners who lack any support from children or relatives.

Despite the low level of basic pension benefits and the resulting poor living standards of most pensioners, social surveys reveal other groups of the population even more severely hit by poverty.

Poverty relief: the role of social assistance

The material presented above has shown how the deep crisis inherent in the transition to a market economy has produced an enormous strain on the pension system – a core of the social policy institutions in Russia. Although it has undergone certain modifications, the structure of the pension system did not change radically and continues to function mainly as it did in Soviet times. Faced with serious challenges, the pension system has managed, albeit with many shortcomings, to offer a minimum level of protection for the elderly population. However, this is not the case for other parts of the social security system, i.e. family support or poverty relief, which have not seen sufficient changes to address the effects of the crisis. The existing safety net failed to cope with the increased level and urgency of security and redistributional problems. Thus it proved unable to counteract the emergence of substantial poverty in Russia.

The fall in industrial output, the appearance of unemployment, the growing income disparity and high inflation have all contributed to the expansion of poverty. In addition to ‘traditionally’ poor groups like families with three or more children, single-parent or new young families, as well as unskilled workers and pensioners, poverty has affected a wide group of ‘newly’ poor, i.e. households that had recently been in the middle income category.

Official statistics in Russia use the subsistence minimum to calculate the population affected by poverty. The subsistence minimum as a statistical category was introduced in early 1992 and is applied as a poverty line for the purposes of government policy. It is based on a food basket which guarantees a minimum nutritional level corresponding to the recommendations of the WHO, the FAO and the Russian national institutions in the field. This basket differs for children, the able-bodied and pensioners. On average the subsistence minimum provides for 68% of income to be spent on food. For pensioners this proportion is 80% of their income.

Individuals with incomes of less than the subsistence minimum are officially acknowledged to be below the poverty line. On average their proportion of the total Russian population increased from 24% in 1992 to 32% in 1993.(34) By autumn 1994 the proportion had decreased again to about 20% or approximately 30 million people.(35)

However, the official subsistence minimum understates the real incidence of poverty in Russia. The subsistence minimum was calculated as a temporary definition designed for the conditions of acute economic crisis. It was expected to be in use for about one year to help to overcome the most difficult initial stage of transition. Since the economic situation did not radically improve the subsistence minimum remained as both a statistical and a political instrument for much longer. Meanwhile the subsistence minimum allowed only one-third of personal income for clothes, footwear, medicines and services, and virtually nothing for consumer durables. Of course it was totally inadequate, especially in a situation when prices for those goods were soaring. People affected by poverty were forced to give up purchases of most non-food consumer items. If they were able to survive through the first reform year of 1992, perpetuation of this situation throughout 1993-94 has made their position much worse, for the need for warm clothes and other essential goods became more acute. Moreover, marketisation of housing and public utilities will soon raise the share of rent as well as that of the water, electricity and telephone bill in an average family budget from the current 3-5% to 15-20%, with particularly adverse effects on the poor.(36)

Thus real poverty in Russia is much greater than can be judged by the official subsistence minimum. On the basis of nine surveys by VTsIOM (The Russian Centre for the Study of Public Opinion) carried out in 1993, Tat’yana Zaslavskaya estimated the incidence of poverty in Russia at as high as 54% of the population.(37) A later study by VTsIOM in 1994 revealed 58% of respondents in a representative sample living in conditions of poverty.(38) The same survey also yielded important conclusions concerning the social composition of the poverty group.

One of the important determinants of poverty in Russia has always been large family size. The average size of families is higher among the poorest 25% (see Table 2). Families with three or more children are very likely to be poor: 72% of such families fall below the subsistence minimum.(39) In addition 22-29% of poor households also have adult dependents and in 5-6% of cases disabled family members who need everyday care.

However, low wages of adult working family members appear to be a more important determinant of poverty than is the number of dependents. In 72% of poor households the breadwinner has a permanent job, in 6% of them even a second job. The lowest paid jobs are found in the public sector of industry, in agriculture, and particularly in education, culture and health care services.(40) By professional status unskilled industrial workers would be more likely to be poor. However, poverty has widely affected skilled workers and engineers as well, particularly in heavy industry.

Some 7-9% of the poor in general are unemployed but the proportion is twice as high among the poorest 25%. Pensioners on the contrary are found only half as frequently among the poorest 25% as among the poor in general. According to official data only 28% of all pensioners have incomes below the subsistence minimum.(41)

Thus adults of working age, not pensioners, form the bulk of the poor in Russia. This situation is created by the low wage level in certain industries and public [TABULAR DATA FOR TABLE 2 OMITTED] services. It is further aggravated when a family has two, three or more children. The newly unemployed also add to the group hit by poverty.

The incidence and the social composition of poverty clearly indicate the holes in the social safety net. Traditional means of social assistance, i.e. means-tested safety net benefits, cannot apply to a situation when poverty embraces over half of the adult population. They will not even work to support the poorest quarter of Russians. Over half of them are working and their poverty is caused by low wages rather than the existence of dependents or disability. Obviously the way out for the majority of them lies in more productive employment and adequate pay levels. Surveys of public opinion also show that an overwhelming majority (over 70%) in all income categories, including the poorest, prefer to solve their problems themselves rather than request any support from the government. Thus a targeted means-tested form of assistance, which does not yet exist in Russia, would apply to those who cannot survive without government protection, in the first instance pensioners and the unemployed who have incomes of less than half the subsistence minimum. According to VTsIOM estimates these are 11% of pensioners and 14% of the unemployed.(42)

The general conception prevailing in the Russian social policy institutions is that adults of working age should provide for themselves through employment. Where appropriate they are entitled to unemployment benefit, sick pay and maternity benefit, which are universal with no restrictions. As regards family support, to alleviate the adverse effects of income inequality, particularly on children, this is meant to be achieved through child allowances.

The system of family allowances was introduced in 1990 and has existed since then with a few minor revisions.(43) The core of the system is formed by child allowances, which differ for children aged under 6 and between 6 and 16. Children under six years old are eligible for a benefit at the rate of 70% of the minimum wage. For children of single mothers or divorced mothers who are unable to get alimony this benefit is 1.5 times higher, i.e. 105% of the minimum wage. Children aged 6 to 16 get a benefit of 60% of the minimum wage or 90% of it if in a single mother’s family.(44) This variation in the level of child benefit depending on age was criticised on the grounds that it costs more to support a child aged 6 to 16 than under 6. So in December 1993 a presidential decree introduced a universal child benefit regardless of age. It had not, however, come into effect by autumn 1994.

In October 1994 the benefit for a child under 6 was 14 350 rubles a month or only 15.9% of the subsistence minimum which for children equalled 90 000 rubles.(45) No wonder that child allowances accounted for only 5% or less of the family budget in half of all households. In 80% of families it was 10% or less of their budget.(46) Such a level of child benefit is clearly insufficient even for low-income households; 59% of the poorest 20% of families consider the level of child support insignificant. At the same time 57% of them declared that they would not be ready to give up this form of support voluntarily.(47)

Thus the very low level of child benefit may certainly be regarded as a cause of poverty in large and single-parent families. To address the issue of poverty it would be necessary either to provide a much higher level of protection in general, which does not seem realistic, or to reform considerably the structure of social assistance by introducing well-targeted income-tested forms of support. Evgenii Gontmakher, deputy head of the Council on Social Policy under the President, suggests that child allowances should no longer be universal but become income-tested and targeted on the needy.(48) This would require a significant redistribution of resources allocated to social purposes. It may entail a certain change in the pension system and the other forms of social security provision. It would be useful to look further at some international experience in the field.

What can we learn from Latin America?

Latin American countries have acquired considerable experience in operating social security institutions. In many of them social security funds similar to those founded in Russia date as far back as the 1920s. Like Russia, these countries have suffered from severe economic crisis aggravated by large external debt burdens, depressed production and investment, and deterioration of living standards. They had to undertake profound reforms oriented towards the greater role of the private sector as opposed to the state, privatisation of state-owned enterprises and liberalisation of market mechanisms. In a few cases, of which Chile is the most important example, these policies embraced a reform of social security institutions to make them both more efficient and more equitable. Despite the different economic and social context in which these reforms were carded out, some lessons from Latin American experience may be instructive for understanding the nature of the problems facing the Russian social security system as well as for choosing particular reform policy options.

Latin American social security funds are governmental institutions and, as in Russia, are funded both through payroll taxes and state budget subsidies. As in the case of Russia wage-based contributions to social security funds are paid only in the formal sector, though the size and significance of the informal sector in the dual economies of Latin America is obviously much greater than in Russia. On the other hand, with the transition to the market informal activities are growing in Russia too.

Several Latin American countries (Chile, Costa Rica, Brazil, Uruguay and some Caribbean countries) have succeeded in extending the coverage beyond the formal urban sector, making the situation there even closer to Russia, which has universal coverage. In other Latin American countries only a limited part of the population, i.e. those employed in the urban formal sector, enjoys access to social security benefits. The coverage is not only low but also unequal by region, occupational groups and economic activities. The bulk of the poor, who in these countries are concentrated either in the urban informal sector or in the rural areas, are excluded from social security systems.(49)

More similarities to the situation in Russia are to be found in the functioning of Latin American social security funds. For example, the social security fund in Brazil derives its resources from 21% payroll contributions and pays for pensions and other benefits administered by social security offices. Unlike in Russia, the employee contribution is also a significant component of Latin American social security funds’ revenues.

The most developed pension systems of Latin American countries are characterised by relatively generous benefits and liberal entitlement conditions. These provisions may include retirement with 20 or 30 years of service regardless of age; setting the pension equal to the wage level of the last month of work; and automatic adjustment of pensions to the cost of living. The system may also offer full compensation by sick pay and maternity benefits as well as generous and expensive medical care schemes providing for contact lenses, orthodontics and payment for treatment abroad. Civil servants and the military enjoy special privileged pensions up to eight times higher than the general level. The vulnerable mother and infant group is usually underprotected compared with the able-bodied and retired population, who take the bulk of benefit expenditure. The development of Latin American social security systems was accompanied by escalating costs and growing actuarial and financial imbalances. Financial constraints impeded extension of coverage, had a regressive impact on income distribution, and eventually led to the erosion of real pensions.(50)

Latin American social security funds have considerable experience with investment activities, which generate on average 15% of social insurance revenue. However, this experience in general has not been very successful. Owing to investment inefficiency the oldest of the pension funds have decapitalised their reserve, as investment-generated revenues were declining. In the end they had to replace capitalisation a by pay-as-you-go system which lacks substantial reserve funds and so has very limited investment capacity. This is typical of the current situation with the Pension Fund in Russia, although it never had any substantial investment before. The negative investment experience of Latin American pension funds can still be instructive for Russia. Such investment activities were poorly managed, a weakness which was aggravated by the underdevelopment of capital markets and inflation which devalued reserves.

Pension funds in Latin American countries usually did not invest in bank fixed-term deposits or shares. They were often forced to cover state budget deficits in the form of forced loans through purchase of bonds. Part of their investment was determined by considerations of social assistance to the insured, to whom they offered personal or mortgage loans; they also made loans for the construction of hospitals, administrative buildings or housing which were not financially profitable. They also financed stores and services with subsidised prices for the insured(51). To make investment profitable it would be necessary to (i) eliminate or reduce government interference; (ii) reduce funds in fixed and current assets to a minimum; (iii) diversify the portfolio; (iv) invest in long-term investments with the highest yields; and (v) index interest rates to inflation.(52) All these points apply equally to Russia.

The costly liberal pension regimes in Latin American countries, which may not be justified by economic considerations, are maintained largely for political reasons. In Latin America (as in Russia) pensioners are a very important part of the electorate. Their interests may conflict with the need to undertake essential structural reforms aimed at the efficiency of social services. The political interests of certain groups of pensioners may therefore block reforms which would make the pensions system more efficient and more equitable. The influence of powerful pressure groups may allow them to receive a greater share of state subsidies and transfers. Their power, lying either in their military strength, their position in the government administration, the scarcity of their skills in the labour market, or their unionisation, helps them to enjoy wider coverage and more generous benefits. The existence of such privileges increased the cost of the system and impeded universalisation of coverage. The few countries of the region that were able to achieve universal coverage managed it at a very high economic cost and in most cases inequalities were not significantly corrected. All that contributed to actuarial and financial imbalances which were exacerbated by the economic crisis of the 1980s.

The economic crisis and the austerity measures of structural adjustment had an adverse effect on Latin American social security systems. The fall in real wages, the growth of unemployment and the expansion of the informal sector resulted in a decline of insurance contribution revenue. High inflation also stimulated greater employer evasion and payment delays. As in Russia, evasion in Latin America is a grave problem, ranging in some countries from 23% to 60%.(53) State budget subsidies to social security were cut as part of adjustment programmes. Meanwhile the crisis raised expenditure because employees’ salaries and benefits increased owing to inflation; unemployment payments rose, and the number of people on welfare grew. All these developments led to a considerable financial deficit where current revenues from payroll contributions were no longer able to cover benefit expenditure. As the social security funds were governmental institutions, the government had obligations to support them and pay all legitimate benefit claims. Such a situation was similar to a growing state debt, provoking inflation and macroeconomic instability.(54)

In the 1980s the Latin American social security systems faced an urgent need to cut financial deficits which the state was no longer able to sustain. Reforms were necessary also to correct inequalities in benefits coverage and to improve managerial efficiency. There were virtually no sources to increase revenues except through the control of evasion and payment delay. Payroll contributions and state subsidies could not increase any more, so the only way to financial balance was to cut expenditure. This was an approach attempted by moderate reforms in Brazil, Costa Rica, Argentina and Uruguay. It was also advocated by the World Bank experts who spoke for provision of limited but effective insurance targeted specially at the poor. Most reform proposals emphasised the need to cut some of the benefits, especially those falling within privileged pension programmes for the middle class, to increase the retirement age, lower the replacement rate and introduce a pension ceiling. As a possible solution, establishment of a universal basic pension (which could be means-tested) was suggested, combined with a supplementary pension programme provided publicly or privately and based on personal security accounts, keeping records of the premia paid.

The attempts to restructure the social security system provoked strong opposition from privileged groups, the population close to retirement age, and from the politicians seeking the support of the electorate. The bureaucratic elite would also resist any cuts in administrative expenditure and personnel reduction. Owing to these obstacles the actual reforms in Brazil, Argentina and Uruguay proved very limited. Chile is the only country in the region where such a reform was implemented consistently and on a larger scale.

The Chilean reform initiated in 1981 addressed the problem of imbalance between social security expenditure and revenue by means of an overall restructuring of the system. Before the reform pension expenditure accounted for about 12% of GDP and over a quarter of central government expenditure.(55) As the government was no longer able to subsidise social security on such a scale it opted for privatisation of the pension system. The government assumed all the current obligations to pay for existing retirement benefits and continued to support welfare pensions, unemployment compensation and family allowances. At the same time the old pension system was gradually replaced by privately administered pensions with personal security accounts. Workers were encouraged to affiliate with private insurance companies on a defined contribution basis. Thus the government does not assume any further benefit obligations, and so can gradually reduce the volume of subsidies to the old system, which will still remain substantial for a considerable time. Nevertheless the Chilean government found a way out of the virtual bankruptcy of the public finances that might originate from insolvency of the pension system.

The above overview of Latin American social security systems shows that many of the problems encountered by those countries are very close to those faced by Russia. Although, unlike some Latin American countries, Russia does not have the problem of excessive generosity of the pension regime, on the one hand, and of inequality of benefits, on the other, the financial problems of the pension system are in many respects similar. These problems may pose the question, as some Western experts do, whether a costly pension regime with liberal entitlement conditions is affordable in a country like Russia at its present stage of development, particularly in a situation of acute crisis. The consequent policy recommendations may include economising on financial resources, an increase in retirement age and higher individual contributions.

However, another important similarity of Russia to Latin American countries lies in the importance of pressure groups and in the political influence of pensioners as a very important part of the electorate. The feasibility of any reform proposal for Russia can only be evaluated taking into account the local social and political context. Meanwhile these conditions may seriously modify any reform policy options which would seem relevant from the financial or macroeconomic perspective.

Conclusion: an approach to the reform of the social security system in Russia

The experience which Russia has already accumulated in the course of transition may speak for a cautious gradualist approach to the reform of the social security system. Changes that are taking place in other areas of social provision have demonstrated that radical restructuring may destroy the old system much faster than a new one can be created. The introduction of health insurance and partial commercialisation of health services have seriously undermined publicly provided universal medical care with particularly adverse effect on the old and the rural population. The process of divestiture of social assets by enterprises, the transfer of enterprise housing and kindergartens to the city administration without adequate financial support, resulted in considerable deterioration of housing and child care provision as well as in poor maintenance of the housing stock. A similar radical change in the pension system and social assistance may also have negative initial results with adverse consequences for a considerable part of the population. This would undermine the social and political stability greatly needed for the progress of the reforms.

The introduction of the off-budget Pension Fund deriving its revenue from payroll contributions has been an important step towards an insurance-based pension system. Through this fund labour pensioners’ entitlement to a certain level of benefit became financially guaranteed. Suggestions to use the resources of the Pension Fund for other social purposes (e.g. unemployment compensation or poverty relief) even occasionally do not seem justified. The fund was created specially to ensure the use of the resources for paying pensions. Pensioners’ entitlement to benefits that have been earned over their years of work should be protected legally and financially.

The new system, however, is not without its problems as the Pension Fund faces actuarial imbalance. It functions on a pay-as-you-go basis, having very limited resources for investment. Even if larger resources are accumulated the prospects for investment do not look very promising. We have seen that Latin American experience in this field has not been encouraging. In Russia investment by the state Pension Fund may face problems typical of a bureaucratic state-owned enterprise i.e. inefficiency, corruption, dependence on the will of powerful bureaucrats and the influence of political considerations. These problems may be exacerbated by high inflation, general investment instability and lack of reliable outlets for investment that would generate stable profits in the longer run.

There is hardly any scope for increasing the Pension Fund revenue through a rise in payroll contributions. Although the share of labour costs in output in Russia is very low, payroll taxes still increase industrial costs and produce an inflationary effect as they are passed on into output prices. By creating disincentives for employers, higher payroll taxes would also impede job creation. Thus for several reasons higher employer contributions to the Pension Fund are not realistic. Individual contributions, however, are very low and it may be reasonable to raise them.

Greater individual contributions could supplement the resources available to the pension system. The Ministry of Labour suggested that individual contributions should rise to 10% of salary from the current 1%.(56) Half of this amount would be credited to a personal security account while the rest would be distributed among pensioners as a ‘solidarity contribution’. This is meant to strengthen the relationship between social insurance benefits and individual contributions. At the same time, given the current demographic situation of Russia, this would also considerably increase the burden on the employed to support the retired generation.

Few options seem available regarding possible cuts in pension expenditure. Unlike Latin American countries, the pension regime in Russia cannot be considered excessively generous. The replacement rate of 40% is regarded as an adequate retirement stipend in developed countries. Recommendations to lower that rate for a country with severe resource limitations do not seem appropriate for Russia. The general wage level in Russia is extremely compressed, while the average pension is barely above the subsistence minimum, so there is virtually no scope for a further fall in pensions relative to wages.

Some experts propose a rise in retirement age as a source of pension expenditure cuts. Such arguments are based on the example of industrial countries, where the retirement age is normally 65, or 60 for women and 65 for men. In Estonia it was decided to increase the retirement age by six months a year until it reaches 60 for women and 65 for men. This measure was expected to generate savings equivalent to 0.3% of GDP in 1994 alone and reduce entitlement to old-age pensions from current levels by around 5.5% of the population by the year 2003.(57)

However, the idea of a higher retirement age is very unpopular in Russia owing to low life expectancy. Over the past seven years life expectancy has been steadily declining. It fell from 70 years in 1987 to 66 in 1994, while for men it is now 59, which is below the pensionable age. By life expectancy Russia is now five to ten years behind developed industrial countries. Public opinion is firmly opposed to any increase in pensionable age because many do not even reach their retirement. The problem is exacerbated by the unfavourable health situation of the elderly population. An increase in the retirement age would also complicate the unemployment situation, which is becoming a serious challenge to Russia. Therefore this option is not currently acceptable for several economic, social and demographic reasons.

The provision allowing pensioners to receive a full pension while continuing in full-time work may really seem generous and there is good reason to change it. A pensioner deciding to stay in work after becoming entitled to a pension receives a considerably higher total income compared with the pre-pension period. This is naturally a strong incentive to delay retirement. Working pensioners form a higher income group compared to an average able-bodied employee. This is hardly justifiable given the general resource constraints and comparing the higher overall remuneration for working pensioners with their actual labour input.(58) In Estonia pension benefits for working pensioners were reduced to 38% of their old-age pension. It would not be inappropriate for Russia to withdraw the right to combine full pension with full-time work.

The above analysis has shown that the real value of pensions in Russia is low compared with the actual cost of living, and so for the most part cannot provide an adequate living standard. It is nevertheless important that a certain minimum of benefits is guaranteed and such guarantees should be reinforced. Adjustment of the pension level to the rate of inflation has been regularly delayed owing to fiscal constraints, so pensioners were forced to take a disproportionately high share of the burden of financial stabilisation. This is hardly a correct strategy from both the social and even the political point of view, taking into account the influence of pensioners on past and future elections. The mechanism of pension adjustment to the cost of living needs considerable improvement. The minimum level of major benefits should be at or above subsistence and should be fully protected against inflation.(59) Nevertheless it is obvious that under conditions of economic crisis the state-guaranteed pension system could only ensure a minimum level of provision which would be unlikely to be sufficient for the majority.

A higher level of social security benefits can be achieved through privately administered supplementary pension schemes. Additional private pensions can be earned by better-off groups while those sections of the population (including pensioners) who fall below the poverty line should become the target of government social assistance and poverty relief.

The development of independent privately provided pension funds in Russia started in 1992. By early 1995 they numbered about one thousand. However, the number of those which really work to fulfil their function of pension provision is very limited. The legislative basis for their activities is not yet developed. Most such funds are located in Moscow and St Petersburg. The volume of accumulated capital is very low, and they therefore mainly function as small-scale investment companies. Their investments are mainly short-term, which cannot serve the development of pension schemes.

The non-state pension funds generally cooperate with industrial enterprises which opt for supplementary pension schemes for their employees, paying part of their profits as insurance contributions. Individual membership of private pension funds is much less widespread. The Ministry of Labour estimates that only 10% or less of the population are able to invest in private pension schemes, spending 5-10% of their household budget for this purpose. Popular confidence in private pension funds has been undermined by numerous recent bankruptcies of investment companies and commercial banks which have been actively accumulating individual deposits by promising high rates of interest.

The bulk of pensioners in Russia cannot rely on privately provided benefits. For those of them who fall below the poverty line state assistance should be made available. The currently existing social assistance is not targeted on poverty-stricken individuals or households but is offered to broad groups of the population – pensioners, large families, single mothers – taking no account of their individual income situation. Such a system fails to support the poorest, swells the total social expenditure and fuels inflation. There is a clear need to introduce a federal means-tested poverty relief benefit which would be granted by application.

Universal child allowances too have lost their significance as family support owing to their extremely low level. Since no resources are available to raise these benefits, it would be reasonable to make them targeted and income-tested. In that case individual child support may increase in volume and become really significant to the needy.

In spite of frequent declarations on the importance of social policy, in the reality of reforming Russia it has been subordinate to the goal of monetary stabilisation. Adjustment of the minimum wage and social benefits to the rate of inflation has been regularly delayed, so that social security and social provision bear the main burden of the tight monetary policies. The fall in living standards, open income disparity and substantial poverty seriously undermine popular support for reform. Thus combatting poverty and providing a social safety net considerably increase in significance in view of the coming parliamentary and presidential elections, which will determine the country’s further economic and political course.

Institute of World Economy and International Relations, Russian Academy of Sciences

Research for this article was supported in part by a grant from the International Research & Exchanges Board (IREX), USA, and with funds provided by the Carnegie Corporation of New York. Neither IREX nor the Carnegie Corporation is responsible for the views expressed.

1 Claus Offe, ‘The Politics of Social Policy in East European Transition: Antecedents, Agents, and Agenda of Reform’, Social Research, 60, 4, 1993, p. 652.

2 Ibid., p. 660.

3 Nicholas Barr, Income Transfers and the Social Safety Net in Russia. Studies of Economies in Transition Paper No. 4 (Washington DC, The World Bank, 1992), p. 3; Carlos Cavalcanti, Bridging the Poverty Gap in the Former Soviet Union (Washington DC, The World Bank, 1994), pp. 5-16.

4 Ekonomika i zhizn’, 1993, 51, p. 4.

5 Delovoi mir, 21-27 March 1994, p. 22.

6 Barr, Income Transfers and the Social Safety Net in Russia, p. 6.

7 Ekonomika i zhizn’, 1993, 51, p. 4.

8 Chelovek i trud, 1994, 2, pp. 60, 61.

9 Ekonomika i zhizn’, 1993, 51, pp. 4, 5.

10 Chelovek i trud, 1994, 2, p. 57.

11 Delovoi mir, 21-27 March 1994, p. 22; Izvestiya, 30 March 1994.

12 Ekonomika i zhizn’, 1994, 28.

13 Cavalcanti, Bridging the Poverty Gap in the Former Soviet Union, p. 19.

14 Ekonomika i zhizn’, 1994, 28; Argumenty i fakty, 1994, 38.

15 Delovoi mir, 21-27 March 1994, p. 22.

16 Barr, Income Transfers and the Social Safety Net in Russia, p. 27.

17 Argumenty i fakty, 1994, 38.

18 Ekonomika i zhizn’, 1994, 19.

19 Alastair McAuley, Social Welfare in Transition: What Happened in Russia (Washington DC, The World Bank, 1994), p. 64.

20 Martha de Melo & Gur Ofer, Private Service Firms in a Transitional Economy. Findings of a Survey in St. Petersburg (Washington DC, The World Bank, 1994), p. 28.

21 Delovoi mir, 21-27 March 1994, p. 22.

22 Argumenty i fakty, 1994, 38.

23 Delovoi mir, 21-27 March, 1994, p. 22.

24 Gosta Espig-Andersen, The Three Worlds of Welfare Capitalism (Princeton, Princeton University Press, 1990), p. 79.

25 Calculated on the basis of William McGreevey, Social Security in Latin America. Issues and Options for the World Bank (Washington DC, The World Bank, 1990), pp. 55, 60 (Tables 3 and 12).

26 Delovoi mir, 21-27 March 1994, p. 22.

27 Delovoi mir, 18 August 1994.

28 Argumenty i fakty, 1994, 38.

29 Kratkii informatsionno-statisticheskii sbornik za 1993 god (Moscow, The Pension Fund, 1994), pp. 2, 20.

30 Delovoi mir, 21-27 March 1994, p.22.

31 Ibid.

32 N. M. Pavlova, ‘Usloviya zhizni pensionerov’, in Izmeneniya v urovne zhizni i sotsial’nye problemy adaptatsii naseleniya k rynku (Moscow, Institute for Social and Economic Problems of the Population, 1994), p. 42.

33 Ibid., p. 32.

34 Sotsial’no-ekonomicheskoe polozhenie Rossiiskoi Federatsii v yanvare-noyabre 1993. Obzor N 12 (Moscow, Goskomstat, 1993), p. 64.

35 Trud, 4 November 1994.

36 Trud, 22 September 1994.

37 Ekonomicheskie i sotsial’nye peremeny: monitoring obshchestvennogo mneniya, 1994, 2, p. 5.

38 Ekonomicheskie i sotsial’nye peremeny, 1994, 4, p. 25.

39 Argumenty i fakty, 1993, 33.

40 On wage differentials in the Russian economy see Vladimir Mikhalev, ‘Wage Policies under Economic Restructuring: The Relevance of the Third World Experience to Russia’, European Journal of Development Research, 6, 2, 1994; Vladimir Mikhalev & Nils Bjorksten, Wage Formation during the Period of Economic Restructuring in the Russian Federation (Paris, OECD, 1995).

41 Argumenty i fakty, 1993, 33.

42 Ekonomicheskie i sotsial’nye peremeny, 1994, 4, p. 29.

43 See McAuley, Social Welfare in Transition, pp. 57-59.

44 Chelovek i trud, 1994, 2, p. 61.

45 Argumenty i fakty, 1994, 43.

46 Argumenty i fakty, 1994, 38.

47 Ekonomicheskie i sotsial’nye peremeny, 1994, 5, p. 45.

48 Nezavisimaya gazeta, 25 February 1995.

49 McGreevey, Social Security in Latin America, p. 10; Carmelo Mesa-Lago, Social Security and Prospects for Equity in Latin America (Washington DC, The World Bank, 1991), pp. 44-69.

50 Mesa-Lago, Social Security and Prospects for Equity in Latin America, pp. 69-88.

51 Ibid., pp. 28, 29.

52 Ibid., p. 31.

53 Ibid., p. XI.

54 McGreevey, Social Security in Latin America, pp. 30, 31.

55 Ibid., p. 32.

56 Kommersant-Daily, 13 September 1994.

57 Cavalcanti, Bridging the Poverty Gap in the Former Soviet Union, p. 11.

58 Pavlova, ‘Usloviya zhizni pensionerov’, p. 39.

59 Barr, Income Transfers and the Social Safety Net in Russia, p. 31.

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