Poverty is not a threshold



A well-known economist found in Russia a lot of people with low incomes. Let’s see whether he is right

Famous economist Andrei Klepach has come up with a new way of defining a poor person. According to his calculations, there are about 60 % of poor people in Russia, and 37 % belong to the middle class with or without a stretch. Only 4 % are uncompromisingly rich, and this seems to be true. Let’s analyze what poverty is, and why — the salary seems to be good, all the attributes of external prosperity are present, but there is no happiness.

Bread. Water. Joy

Andrei Klepach is one of the few economists whom journalists love. “I’m going for Klepach” — a phrase that a reporter threw, going to a press conference, meant for the editor that the text will be great, and you can safely plan to publish. Klepach is known for bright ideas and the ability to articulate them: both are incredibly rare. Now he (with co-authors) has published a scientific article, and all the attention, of course, to it.

What is so difficult about identifying poverty? I know a retired woman who pays her entire pension to doctors, and eats — literally — bread and water. Of course she’s poor.

But such clear-cut cases are rare. Mostly a person balances somewhere. He bought an iPhone and then switched to bread and water. He took out three loans, did not stop eating at restaurants, but he cannot pay his previous loans and is thinking about a fourth. And so on — to infinity.

The Federal State Statistics Service (Rosstat) generally relies on one criterion in assessing poverty: income, although it recognizes the multifactorial nature of poverty as a phenomenon. Since some time, counting the poor is simple: the government designates a certain poverty line, and whoever falls below it is the loser. The poverty line is calculated in various complicated ways, but in general people who are engaged in this work have not been to the store since 2010, as it seems to me.

Rosstat defined the poverty line at the end of 2022 as 13.7 thousand rubles per person per month. Accordingly, it turns out that 7.9 % of residents are below the line, which is a historical minimum (in the first quarter of 2023, the figure rose to 13.5 %). Rosstat does not directly define the criteria of the middle class. According to indirect signs (Rosstat periodically publishes all sorts of methodology) it appears that people with incomes above 30 thousand and savings of more than 721 thousand are middle class. If so, then Russia’s middle class is about 33 %.

It turns out that according to the methodology of Klepach the middle class is approximately the same as in the understanding of Rosstat, but the share of the poor differs dramatically.

And here’s the point. Klepach included in the poor those who do not belong to either the first or the second. Actually, Klepach writes: in Russia’s system there is a certain layer of people who are not poor and not middle class. They are not covered by any government programs, and something must be done about it. What Klepach “did” is hardly helpful for public use: he invented different types of poverty and wrote down the “hesitant” there, the result is a figure that hurts the eye. But for internal calculations, so to speak, for understanding, it is very useful.

But it’s time to say, what’s his methodology?

Three shades of lack of money

Klepach looked not so much at income itself, but at “lifestyle”. You’ve probably seen those videos on Tik Tok, “how a poor person and a millionaire behave.” A poor person buys an iPhone, while a rich person with a button phone makes billions (this is not true, of course). Here are three criteria of poverty according to Klepach:

• all income is used for current consumption;

• income is fast-changing, unstable;

• no long-term financial plans.

17.7 % of the population meets all three criteria. 45.7 % have two attributes, 32.6 % have one, and 4.1 % have none.

So, those poor people with three attributes are, in Klepach’s opinion, “the real poor.” This is close to the estimate of Rosstat. Almost half of the population with two characteristics belongs to them. Together these people (63.4 %) form the class of the poor, although, as you can see, there are beggars (let’s be blunt) and not yet hopeless ones. The people with one attribute are middle class, and the people with no attributes at all, those paltry 4 % are the “rich”. Of course, it is funny that Klepach defines wealth as the absence of poverty, but there is logic in it, you must agree.

Klepach obtained his figures by analyzing survey data for several years. Of course, surveys are not the most reliable tool (for example, people prefer to hide their incomes), and these figures should be treated with caution, but in general, the figures can probably be trusted.

The other thing is, are the criteria themselves good? On the face of it, yes. For example, I would attach importance to such an indicator as income volatility. As a rule, this is the case of seasonal workers, Santa Clauses and those who rent apartments to tourists. If such a person manages to earn money for the rest of the year, he will not have the other two attributes, and he will fall into the middle class. Everything is fair.

There are some things we can argue about. For example, what are “long-term financial plans”? How about this: a person took a loan, and thus began to play with the bank for a long time. Does he have long-term plans? Sort of, yes. Further, let’s assume that he has a stable salary, but — the loan must be paid back — almost the entire monthly income is spent. Such a person falls into the middle class category (one criterion out of three), but he is not middle class at all.

But there are more serious complaints. I missed a deeper analysis of the consumption structure. For example, two persons spend all their monthly income in full. But one spends it on food, while the other one goes to coffee shops and movies, constantly buys clothes and dyes hair (let’s hope he is a woman).

Let’s not be too harsh. Things related to lifestyle, mentality — they are generally complex and difficult to formalize. But for the issue of poverty and wealth, they are, in fact, key.

The paradox of the golden swan

For a couple of decades economists have avoided defining poverty, as well as the middle class boundaries, by focusing only on income. Two approaches have emerged. One operates with what can be called “lifestyle”, while the other focuses on internal self-perception (“happiness”).

The worst of all was “happiness”, although about 15 years ago this method was the main hope. When representatives of Bhutan came to the UN and proposed this thing, it was supposed: I have no shoes, but I feel good, because I am an adherent of Porfiry Ivanov. Ask me if I’m happy and I’ll answer, but don’t look at me, my house, my car. Well, that makes sense.

What has this turned into? We open the latest UN World Happiness Report and realize that nobody is going to ask people. Experts (oh, those experts) assess income, level of corruption, life expectancy, level of social support and a couple of other criteria, and then use an elementary formula to calculate an index. And it turns out that the happiest country is Finland (I don’t believe it), and the unhappiest is Afghanistan (I believe it). And the moral is very simple: if there is money, there is happiness. Capitalism has once again defeated these meditations of yours. The idea has been perverted.

So those who try to study “lifestyles” deserve more attention, and Klepach is among them.

Although science has come up with 16 ways to define poverty, the approaches are still being explored. For example, it is more or less clear that the poor will rather buy nourishing and calorie-dense food, sausages of all sorts, which are cheaper, and forget about healthy lifestyle. “Why are you chopping dill for me? Feed me well!” But there are rich people who are gluttons, aren’t there? Of course there are.

Another example is fitness. It is clear that a poor person will work three jobs or get drunk, and will not go to the gym. And this is a very powerful criterion. At the same time, it is easy to imagine a grandmother who goes to “active longevity” program and does full splits there, but she has no money.

Coffee and coffee shop culture in general. Absolutely useless thing, an unnecessary waste of money. If I drink coffee, I have money to spend (and free time), right? Well, not really. For example, students drink coffee because it is fashionable. It is important for young people to be in a certain system, a cluster.

Finally, demonstrative consumption. This is my favorite topic. It’s an old term, dating back to feudalism. Buying bright, expensive things using the last of your money to “show everyone” — but you have nothing to eat. Who hasn’t seen a girl from the dorm with an iPhone? Who doesn’t know those with luxury cars, all on credit? The poor are incredibly prone to demonstrative consumption, and the rich are more likely to want to blend in with the proletarian masses. But there are exceptions! Gilded swans on the front of a country house — why? It is good if the bourgeoisie has settled down, has had enough of it, but in Russia it hasn’t.

You see, it’s not easy. The truth is somewhere near, but you can’t catch it.

Class consciousness

As a result of searches and speculations, world economic thought tends to define the middle class through conscious consumption. What is it? Don’t litter, save the Earth, buy food from the local farmer, love wool, cotton, kraft paper and walk.

All together this is considered a “real” sign of the middle class, and I don’t know how many of them there are in Russia. Five percent, ten? I don’t want to guess, because Russia is a unique country, and the criterion of consciousness doesn’t work well here as well.

The reason is the rich experience of life in the USSR, which has not gone anywhere. Any Soviet grandmother, straining her eyes, reads the composition of cottage cheese. Because she is accustomed: either you read the composition, or — then — the medical history. Who in the U.S., in Walmart, reads labels? People who hardly even read labels go to Walmart. Any woman in Russia knows that wool is good. That there’s fresh air at the dacha. That tap water should be filtered. In the USSR people lived poorly, but cleanly, and in other aspects even luxuriously. Sometimes they continue such life, and it is wildly mixed with the patterns of the market economy.

In general, well done Klepach, you have started well, but you need to continue. We need to study the Russian consumer more deeply. There is a lot of interesting stuff there.

And the most interesting thing that I would also like to know is: does the Russian middle class have class consciousness? In fact, if we have found a certain class, these people must think in their own way.

The Russian poor do not have some kind of lumpen consciousness, in my opinion. Go to America, talk to the guys who wait every night for a night shelter to open — that’s it. In Russia, a poor person either tries to get rich or, if he is elderly, proudly carries his moral superiority.

I don’t understand middle class consciousness at all, which is why I think Russians don’t really have it. Let’s not talk about the rich. Things are even murkier there.

And in general, there probably won’t be any classes in Russia in the Western sense. And that’s good. Class is a predetermination, hopelessness. That’s not Russia’s way.