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Elderly Support and In-Kind Transfers: Taxation Options
in Rural Russia
By: Cynthia Buckley
Comparative Economic Studies, Spring, 1995
Fundamental shifts in demographic, social and economic conditions pose serious problems for the post-retirement population in rural Russia. Changes in population growth, migration and mortality have combined to increase the absolute number, as well as proportion of citizens, past retirement age. With an increasing proportion of the population over 80 years of age (the "oldest old"), the post retirement population itself has aged. Although the Russian population is aging rapidly, increases in the post-pension population and rising average ages among pensioners are more pronounced in the rural areas.
The privatization of state assets, the rapid decreases in industrial production, the granting of tax exclusions to new businesses, and a clumsy and ineffective tax system have seriously depleted state coffers. International and internal forces have voiced significant opposition to the state's inflationary "printing press" approach to meeting obligations like state pensions. Recent political developments have emphasized the importance of maintaining at least basic social support systems, if market-oriented reformers are to preserve their base of political support.
The survival of the elderly depends on some sort of scheme to transfer wealth and resources from the young to the old. In this paper, we find that the western practice of funding cash transfers to the elderly with monetary tax revenue is not likely to be a solution for the problems of Russia's rural elderly in the mid- to near-term. Rather, we argue that the young should "pay" the tax by providing a direct in-kind transfer of labor power or agricultural inputs to the rural elderly. We argue this system will be more effective in preserving living standards of the elderly in rural Russia than conventional monetary tax transfers. Although in-kind transfers are typically seen as less efficient than cash transfers, the immediate nature of elderly demands, the underdeveloped nature of rural service markets, and increasing decentralization of political power in the Russian Federation, encourage the maintenance and perhaps potential expansion of in-kind transfers to the rural elderly that were commonplace in the Soviet system.
The post-retirement population in the Russian Federation is growing rapidly, as seen in Table 1. Nearly one in five males and more than one in four females were past official retirement age in 1989 (60 for men, 55 for women). Relative proportions of the population past retirement age have been and continue to be much higher for women than men, reflecting not only lower retirement age but also the lower mortality rate of women in Russia. The proportionate size of the elderly population, of both genders, is much higher in rural areas. Nearly one third (31.4 %) of all rural women were past retirement age in the last census. While these proportions will rise over the next 30 years, the proportion of the population over 80 will rise more rapidly.[1] The persistent growth of the post-retirement population increases the importance of pension provision. The relatively larger burden the elderly present in rural areas increases the importance of the socioeconomic context in which retirees exist. When planning to meet the needs of this growing population in the future, the patterns of past development and government support will prove important.
The Rural Elderly in Historical Context
The current expectations for government pension support in the Russian Federation are in large part a function of the institutional history of the Soviet pension system. These pensions historically have strongly differentiated urban industrial workers from rural agricultural laborers in terms of inclusion, payments level, and reliance on in-kind subsidy. The differential treatment of rural and urban elderly under the Soviet pension system generated differences in expectations between. industrial and agricultural workers, bifurcating the institutional context in which individuals make life course plans concerning employment, savings, and retirement.
The establishment of government support for older workers was identified as a high priority in the post-revolution Bolshevik social agenda (Tikhomirov 1931). Initial attempts to establish pensions focused on municipal efforts in larger cities. A uniform pension system for industrial and service sector workers was adopted by the Soviet Union in the mid 1950s. Pension requirements were set by age (60 for men, 55 for women) and work experience (30 for men, 20 for women). Pension payments were related to previous earnings and were adjusted to encourage work past retirement age.[2]
Collective farmers were not covered under the official state pension system until late 1965.[3] Several motivations for this exclusion existed. After the collectivization drive of the 1930s, official policy encouraged collective farms (kolkhozi) to become state farms (sovkhozi). The denial of pensions to collective farmers may have been intended as an incentive to encourage converting collective farms into state farms. Official discussion of the exclusion also mentioned the difficulty of establishing the required tenure for a pension among collective farmers, whose work was viewed as highly seasonal, due to the cyclical nature of agrarian production (Merkubva 1957). The exclusion can be seen as reflective of state policies that marginalized agriculture and agricultural laborers. Well into the early 1960s, collective farmers were paid for their labor with farm production rather than in rubles.[4] This policy appears consistent with an overall strategy of excluding collective farmers from the industrialized sectors of the economy, which were more monetized.
Older collective farmers were expected to either support themselves with production from their private plots or rely upon the support of their families and the collective farm. When collective farmers were finally included in the state pension scheme, their benefits were set at approximately 80% of pensions provided to workers and state farmers.[5] The lower pension payments were justified on the grounds that rural elderly retained their private plot holdings after retirement. Through private plot production, the rural elderly were to subsidize their pensions (Arkhipov 1967).
Collective farms heavily subsidized the state pension payments to older workers, but typically these subsidies were comprised of in-kind transfers. According to a 1987 government survey of pensioner households (summarized in Table 2), farms offered valuable assistance such as garden tilling, private plot inputs, animal feed, heating materials, home repair, and transport. Other forms of unofficial subsidization may have occurred, through petty pilfering and "borrowing" of farm equipment. This in-kind subsidization reinforces the view of the Soviet economy as redistributive in nature, as access to goods and services were administratively controlled.[6] This administrative dependence on in-kind subsidization was strengthened by the lack of alternative factor markets in rural areas through which goods and services could be acquired.
The urban bias of the Soviet state was clearly reflected in the low levels of rural capital investment (Razymov 1991). Transportation networks, communication systems, sewage, gas and water lines were all concentrated in urban centers, often bypassing rural areas completely (Medvedev 1989, Zaslavskaya and Kupriyanova 1987). Rural shops and services have been few in number and generally low in quality. Often, if infrastructure was developed at all, it was done so with direct subsidization by collective farms.[7] As a result, rural inhabitants, the elderly included, now often find themselves in areas where access to commerce is limited, transportation services inadequate and basic social services absent.
Related problems stem from the lack of diversity in the rural economic base of the former Soviet Union. Historically, rural economies have been centered on the direct production of agricultural goods. Even agriculturally related processing industries (such as butter or cheese factories) were concentrated in urban areas, especially after the agglomeration program in the 1960s. Particularly in areas such as western Siberia, collective farms have been the sole provider of employment. In cases where subsidiary production took place it was typically controlled through the collective farm and done in slack periods of agricultural production. If one were to remain in a village, agricultural work was traditionally the only labor opportunity.
Faced with challenging conditions in rural areas, the young and ambitious seldom remained resident. Even with the exclusion of collective farmers from the Soviet internal passport system, rural youth have historically left the villages in droves, with rural out-migration peaking after World War II.[8] At present, the uncertainty concerning property rights, particularly as they relate to land, may motivate youth to consider staying in rural areas.[9] However, the lagged pace of economic reform in rural areas may accentuate the relative advantages and opportunities of urban residence for rural youth.
The economic, political and social transformations underway in the Russian Federation raise serious issues regarding the stability and level of government social assistance programs for both urban and rural elderly. In a public opinion poll of individuals conducted in 1990, 75.9% were in favor of establishing a unified pension system for workers, service sector employees, and collective farmers.[10] Although the Russian Federation has recently attempted to administratively discontinue the split system of pension provision, the continuation of pension differentials may be justified in light of the specific institutional history of pension provision in rural areas and the unique socioeconomic conditions facing rural inhabitants during the transitional period.
The Context of Market Transition
Much attention has been devoted to issues of market transition and the pace at which marketization should proceed. Generally, the shift from a centrally planned economy toward an economy based more directly upon market forces involves three specific adjustments. First, the heavily centralized nature of economic control must be decreased, as emphasis and control become concentrated at the regional and local level. Secondly, state-owned assets are privatized in favor of cooperative or even individual control. Lastly, the socioeconomic sphere shifts from a system of economic guarantees and obligations to one of economic rights and responsibilities.
The transition has not been smooth in the Russian Federation. Increasing regional economic control not only placed relatively resource-poor regions at a disadvantage, it has led to significant difficulties in inter-regional and inter-sectoral trade which had previously been supervised and controlled by central planners. The privatization of state assets has led to questions concerning equity as well as difficulties with regional unevenness. Newly privatized firms still find themselves subject to state monopolies in areas of supplies and transport. The shift from guarantees and obligations to rights and responsibilities entails a rapid repudiation of the previous social contract, where goods such as housing and health care were officially guaranteed, albeit at questionable levels of quality. Although each of these transformations is important, policy makers and advisors have increasingly come to appreciate the importance of social contract negotiation. Without broad-based political and social support, overall economic reforms will be impossible (Sachs 1994, Adams 1991).
Yeltsin's Russian government is far from stable, politically or economically. Previous elections have shown widespread discontent concerning the social costs of reform. Recent monetary policy has generated triple-digit inflation and the state's ability to collect revenue remains limited at best.[11] The problem with tax collection has been intensified by granting special tax exclusions to many of the new private enterprises.[12] These specific problems affect the provision of state pensions in two ways. First, high inflation rates make the indexation of pensions (not an acknowledged problem under the Soviet system) problematic. In the first nine months of 1993, pensions were adjusted three times, with September pension minimums set at 14,620 rubles in comparison with the initial minimum of 2,250 rubles in January of 1993.[13] Second, the precarious economic stability of government revenues diminishes the ability of the state to maintain pension payments.[14] Given the rapid growth of the pension-aged population, such difficulties are bound to increase. Difficulties in raising tax revenues may tempt the government to pay for these obligations by printing more currency.
The difficulties the Russian Federation faces in the transition to increased marketization are monumental. The previous planned economy was clearly inefficient, perhaps most noticeable in its inability to make use of contemporary technology.[15] Clearly, change was and is needed. The problems have been notoriously pronounced in agriculture. The central government has repeatedly advocated the dismantling of state and collective farms as the answer to the agricultural crisis (Dem'ianenko 1993).
In the midst of rural economic reorganization, large-scale in-migration from other successor states (the near abroad) of Russian nationals has at least temporarily increased rural populations. As Morozova and other demographers have observed, the repatriation migration stream is far smaller than many have estimated but still numbers in the hundreds of thousands.[16] Most of these in-migrants were residents of urban areas in the near abroad, but nonetheless are being resettled into rural villages. Few of the "refugees" possess economic resources or extensive agricultural skill, and most indicate a desire to eventually establish residence in urban locations in the Russian Federation. Refugee resettlement areas are concentrated in southern regions of the Russian Federation, in border areas nearest the largest sending areas.[17] These regions have rural populations in which nearly 30% are past retirement age. Refugees often find themselves without employment, with little desire to establish long-term commitments to their place of settlement, offering a target of scorn for established rural residents (Rotar 1993).
The perceived hostility of rural residents toward resettled refugees from the near abroad may be linked to the objectively disadvantaged position of rural residents, rather than peasant disdain for "outsiders." The rural elderly have seen their three primary sources for support, co-locational children, the collective, and the state abandon them. Long-term processes of out-migration have left rural areas with extremely "old" age structures and have decreased the number of co-locational children upon whom the elderly could rely. Collective farms, previously important for in-kind transfers and pension supplements, are in the process of reorganization and dissolution. The central Russian state either compensate for the loss of collective farm supplements or maintain the value of pension payments during the inflationary transition period. Economic and political power in the Federation has become increasingly decentralized in nature, increasing the probability that areas with higher concentrations of elderly residents will experience difficulty in providing a reasonable level of pension support.
Elderly rural residents continue to rely on their private plots for subsistence, but are hindered by the fall of in-kind subsidies. Kalugina, in her in-depth examination of private plot importance to rural inhabitants, found plots to be both a source of consumption and income for rural residents. Besides providing nearly 80% of the vegetables and over half of the dairy products consumed by rural households, 20 to 25% of production from these plots is marketed, providing additional vegetables, fruit, meat and milk for emerging agricultural markets.[18] Budget studies examining collective farm families typically find over one quarter of all income is derived from private plot production.[19] As seen in Figure 1, rural pensioners previously relied on private plot production and kolkhoz supplements for nearly half of their pensions, in stark contrast to urban pensioners, who received 75% of all their income from pension payments.
Two trends threaten the stability of private plot production for the rural elderly. First, the dissolution of collective farms threatens the traditional source of pension supplements for rural residents. These supplements contributed significantly to the well-being of the elderly by increasing the productivity of private plots. Secondly, the post-retirement population itself is aging. Increasing proportions of the elderly are among the oldest old (80 and older), where mortality and morbidity patterns point to their decreasing physical capacity.[20] As the rural old become even older, their physical ability to maintain private plot production, without outside labor inputs, becomes questionable.
In this socioeconomic context, we propose that one policy avenue worthy of examination is the maintenance and possible expansion of in-kind labor subsidies to the rural elderly. Specifically, we posit that rather than paying monetary taxes for pensions, rural residents in the working ages (including resettled refugees) could "pay the tax" by providing labor or other agricultural services to the elderly. In the current period of market transition, in spite of elderly support programs being generally accepted in capitalist economies, such a suggestion may appear antithetical to the goals of establishing a free-market economy. Yet the unique situation of the rural Russian economy forces us to reexamine traditional arguments concerning the inefficiency of in-kind subsidies.
The standard welfare literature postulates that in-kind transfers are less efficient than transfers of monetary income. This argument, illustrated in Stutzer (1984) and Rosen (1992), assumes in-kind transfers that cannot be costlessly resold. Thus, transfers may make a consumer choose more of a good that would be optimal for them when compared to receiving an equivalent amount of cash. The value of the transfer to the consumer is typically less than the estimated value of the transfer, and thus inefficient.
The critique of in-kind transfers based on inefficiency assumes that transferring 40,000 rubles of food to a person is worth less than 40,000 rubles. Therefore, the valuation of in-kind transfers, and how they should be included in income statistics, becomes highly problematic. This value problem has been the focus of much of the work examining in-kind transfers (Moffitt 1989, Murray 1994). Others have concentrated on the effectiveness of in-kind transfers in reducing poverty (Smeeding 1977, Weinberg 1985), and how these programs have affected the incentive to work (Leonesio 1988a, 1988b). Less is known about the potential effectiveness of in-kind transfer programs in economies where markets are developing.
In spite of the inefficiency of in-kind subsidies, governments of market economies use a variety of in-kind transfers programs. The standard economic justifications revolve around the ability of in-kind transfers to overcome various information problems. In-kind transfers can help governments differentiate between rich and poor individuals. Transferring goods, rather than dollars, decreases the incentive for individuals who are relatively well off to "impersonate" an impoverished person in order to receive a transfer. Following this selection effect, Nichols and Zeckhauser (1982) illustrated how in-kind transfers could allow a government to increase transfers to the poor beyond the level of programs relying on cash subsidization.
Ross (1991) indicated that in-kind transfers increase the probability that government aid is acquired by the intended recipients. Since aid is typically transferred to households rather than individuals, one person in the household could easily spend the entire household's cash payment, but may be less likely to use the entire family's allotment of an in-kind food transfer or health benefits. A related argument centers on commodity egalitarianism, which assumes agents in a society are not concerned about the overall well-being of other agents, but their consumption of certain "essential" goods, such as good, medicine or housing (Rosen 1992).
Each of these economic arguments, both those for and against in-kind transfers, assume basic structures present in market economies, that were not present in the Soviet command economy, and are currently absent from the rural Russian economy. First, they assume that if a cash payment is given, desired goods can be purchased for a cash price. If the good being transferred cannot be purchased with cash, then in-kind transfers may be superior, particularly if the good is useful to the consumer.
Second, all of these models are static. Real prices and monetary prices are assumed to be the same and remain the same over time. In an environment of high inflation, it has been shown that even with indexation, people dependent on fixed government payments are typically disadvantaged as payment increases fail to keep pace with price increases. Transferring goods directly lessens the risk to beneficiaries because it guarantees the real value of the transfer, independent of the inflation rate.
Third, these models assume that the government is able to provide cash to the recipients as easily as it can provide goods. This assumes that taxpayers have cash to pay their taxes, and the government has a well-defined mechanism for collecting and redistributing that money. In medieval times, when many families were relatively self-sufficient, tax payments were often made with agricultural products or other home-produced items rather than cash. Since these people rarely traded in markets, they had little use for cash and it was much easier for them to pay their taxes with goods. If an economy has relatively little market activity, tax collection and transfer distribution in goods, rather than cash, may be more efficient, until such time as markets develop.
All three of the conditions described above are relevant to the current socioeconomic context of rural Russia. cash payments are not always helpful in acquiring food due to transport difficulties and questions linked to availability. Additionally, the inflationary policies of the Russian government have contributed to food prices soaring well above what most rural pensioners can afford. Food purchased on the market is likely to be much more expensive than self-production, as the rural elderly have a low opportunity cost for their time, access to land, and experience in cultivation. The subsidy that would be most helpful to the rural elderly appears to be labor and other direct inputs for private plot production (fertilizer, plowing, etc.) Moderate levels of cash subsidies may not be able to finance these inputs. Rural labor markets have yet to develop.[21] In many cases the reorganization of collective farms has left in doubt the issue of who owns the farm machinery and who should receive payment for its use.
As political and economic authority decentralizes, responsibility for the support of the elderly may fall increasingly to local governments. Rural governments may lack a sufficient monetary tax base to generate substantial revenue. Production is declining, new farmers are tax exempt, and unemployment is high, especially among the new in-migrant population. More importantly, the elderly are not equally distributed throughout rural Russia. In the central agricultural regions, the post-retirement population is a far greater percentage of the total population in comparison to other regions. Supplying monetary benefits would place a disproportionate strain on local budgets in areas such as central Russia.
In the case of the Russian rural elderly, a direct in-kind subsidy of farm labor provides a promising avenue to explore. Since a developed market for labor inputs does not currently exist, the most efficient solution is to provide them with the labor directly. This also solves several of the problems related to taxation and the generation of revenue. Under and unemployed individuals can "pay" their taxes by working on the private plot of a retired resident. As many of the unemployed are in-migrants with fairly limited agricultural skill, this system of payments not only provides the elderly with physical labor inputs, but may potentially provide farm experience to migrants which would prove useful if they remain in rural locations. Finally, this system provides the elderly with support without additional monetary subsidies from the Russian government. This can be of indirect benefit as it decreases the pressure on central officials to print more currency, which would only intensify inflationary pressures. Rough calculations show that as little as three additional hours of labor per week could increase the private plot production of the elderly by 12.5%.[22]
In order for this policy to be effective, there must be enough residents who are sufficiently productive to make a significant difference in the income of the elderly. This paper does not try to completely answer this question, we offer some preliminary evidence that the policy may be effective in some areas. Large-scale in-migration of ethnic Russians (feared after the collapse of the Soviet Union) has not materialized, however, the Russian Federation did receive approximately two million refugees and economic migrants in 1993 alone.[23] Although much of the migration stream may be unregistered, administrative channels for resettlement assistance, as delineated in laws on refugees and forced resettlers, exist.[24] The type of transfer scheme suggested here could utilize regional registration channels in identifying potential participants. Federation funds for migrant resettlement schemes, while limited, have provided some benefits to refugees, and could perhaps supply incentives for program participation.
While this evidence is preliminary and somewhat inconclusive, the lack of a viable alternative from the national government or the family seems to make local policies such as the one proposed here, a more feasible alternative for providing for the needs of the rural elderly in the short term.
In the long term, this system of paying taxes with labor, rather than cash, should be replaced with a more conventional system where workers are paid for their labor, and use some of that income for tax payments. However, skipping to this sort of market solution immediately will not be effective in all areas of rural Russia, given the cultural background, seasonal nature of agricultural output, and nascent market instability. As noted earlier, individual contracting of labor was not permitted for many years under the Soviet regime and, while taxes existed implicitly, there was not an explicit tax system with which citizens of capitalist countries are familiar. The system of tax payments we propose allows for a transitional step; mixing something familiar (in-kind transfers) with something unfamiliar (explicit taxes).
The other problem with the elderly making direct payments for labor arises from the uncertainty and seasonality associated with agriculture. The only way for the elderly to afford to pay these workers would be to offer them some portion of the private-plot output. Given that the current payment for labor depends upon an uncertain future outcome, workers may be less than willing to participate in this type of payment schedule. Making today's labor the payment of a current tax obligation helps solve this problem until better markets for current and future crop yields develop.
The only other local solution to this problem would be to give younger residents their own land and allow them to pay their tax obligations in-kind with produce from their plot. In the case of in-migrants, almost all have migrated from urban areas, are not likely to have locational agricultural skills, and would not generate significant yields from their private plots. While the elderly have diminished physical capacity, they still possess large amounts of location-specific human capital. Since these two groups are unlikely to contract with each other in the short term, for the reasons discussed above, this system of in-kind transfers allows these complementary inputs to come together in a reasonable efficient manner. It is possible the skills gained by the workers while fulfilling their tax obligations would make them more productive on their own plots and may eventually make private production and tax payments in agricultural output or cash a more efficient system.
This proposal is neither a perfect nor a complete solution. Valuing the quantity and quality of the work provided may prove problematic, especially due to the heterogeneous nature of farm labor. The elderly, who get help from more highly skilled workers are, in some sense, receiving a higher payment than others. The valuation of equipment-based inputs, such as machinery or hand tools, donated with labor also presents an equity problems. Issues of "tax evasion" will be more difficult to deal with when payments are in-kind rather than in cash. Time on the job and effort would have to be monitored.
These problems are all more manageable when the generation and distribution of these subsidies occur at a local level. In the case of resettled Russians, their labor "tax" payment can be administered through channels currently in place to distribute relocation aid and housing. The plots of the elderly are small, with most owners already in possession of the hand tools necessary for production. Machinery is only required at specific points in the production process, spring tilling for example. The use of machine time is an issue perhaps best left to other methods of distribution and supplement provision.
The central question of whether the ratio of the population in the working ages to the retired population in rural Russia will allow a meaningful amount of labor to be transferred to the elderly by a reasonable labor tax remains. Due to difficulties in acquiring accurate data, on both the supply of taxpayers due to immigration and the demand of rural elderly for labor transfers (as such demand would vary with physical capacity), answering this question is problematic. Available data indicates that in the southern regions of Russia, where the majority of the refugees have been settled, such labor transfers productive may prove promising. In Stavropolskii Krai, the 1989 census enumerated 251,483 rural residents over the official retirement ages. Three years later (1992), resettlement statistics indicated that over 45,663 refugees had been temporarily resettled in the Krai, but only 686 had found employment.[23] As the post-retirement population becomes older, physical capacity is likely to diminish, threatening the 43% of income rural pensioners generate on private plots. As local governments attempt to address the needs of the rural elderly, a variety of potential policy options should be explored. In-kind transfers, although on the surface seemingly incompatible with market reforms, are one such option.
Conclusion
Unlike the younger Russian population, who may be able to take advantage of new opportunities, the elderly in rural Russia participated in a social contract promising to provide a decent living after a lifetime of work. The government with which that contract was held has disintegrated, replaced by one with more pressing problems than the support of the elderly in often remote farming villages. Overall, most would argue that this transition to an economy more deeply rooted in incentive mechanisms and consumer sovereignty is for the best. The Soviet system was riddled with inefficiencies and failed to provide its people with satisfactory levels of goods and services. A market-oriented system will doubtlessly be more productive and provide for a higher standard of living.
However, a well-developed market-oriented system is still far from reality in the Russian Federation. In the interim, the rural elderly are left with a smaller pension than they anticipated. Even if investment opportunities similar to private pension funds were to become available, they would be of no use to the current elderly. Until well-established markets exist for food and labor, monetary payments will not be of much use to this segment of the population. Until state revenues stabilize, the central government may not be able to provide meaningful monetary support. Strangely enough, a system of in-kind transfers, similar to the transfers employed during the Soviet period, may be the best solution during the transition to a market-based economy.
Notes
1. See Velkoff and Kinsella (1993) regarding the rise in the post-retirement population. CIR (1993) provides projections of the post-retirement population for Russia.
2. See Bulganin (1956) for a complete discussion of the first nationally uniform Soviet pension system.
3. Arkhipov (1966) summarizes the specifics of the collective farm pension scheme, established nearly a decade after full pension coverage for all other sectors of the Soviet economy.
4. Medvedev (1987) documents the use of in-kind wage payment for collective farmers well into the 1960s. Collective farmers were paid based on credits obtained for each day they worked on the farm in a calendar year.
5. This figure varied for collective farm professionals and elected leaders.
6. The distributive nature of state socialism has previously been explored by both Nee (1988) and Szelenyi (1978).
7. This "company town" nature of rural villages has generated significant difficulties during the reform process. See Gavriliuk (1993) and Emelyanov (1991).
8. The Soviet internal passport system excluded collective farmers from its inception in 1932 until 1974. Nonetheless, rural youth found ways to migrate out of villages by circumventing or breaking resident permit laws. See Perevedenstev (1989).
9. Some rural youth may find it advantageous to remain in rural villages in anticipation of privatization of collective farm assets. Still, as Ustinov and Shirokalova (1993) point out, the pace and path of agricultural privatization remains unclear.
10. Sotsialnoe Razvitie (1989), p. 110.
11. As early as 1992, complaints rose from Moscow regarding the difficulties in collecting tax revenues from the provinces. These complaints referred to areas claiming autonomy from the Federation in economic matters (such as the Sakha Republic, formerly Yakutia), areas of labor unrest (such as the coal regions of the Kuzbass). See Nezavisamaya Gazeta, November 2, 1993, p. 2; Izvestia, October 26, 1993, p. 1; Sevodnya, December 2, 1993, p. 3.
12. For example, to encourage private farming, independent farmers are exempt from land and income taxes under a 1992 statute. See 'Zakon RSFSR o plate za zemliu ot Oktiabr 1991 g.' (On the payment for land), 1991, Vedomosti C'ezda Narodonikh deputatov Rossiiskoi Federatsii i Verkhovnogo Soveta Rossiiskoi Federatsii, No. 44, p. 1424.
13. Minimum pension value as compared with the average wage deteriorated in the last three years in spite of efforts to keep pension payments in pace with inflation. Charges that the indexation timing was linked to election scheduling have been leveled against the Yeltsin government. Even with indexing, in 1990 minimum pensions equaled 24% of the average wage, by September of 1993 they fell to 18% of the average wage. See Sevodnya, November 6, 1993, p. 6. More recently, analysts have charged that current indexation policies are geared toward dramatically decreasing the number of pensions above the minimum level. See Sevodnya, May 12, 1994.
14. Ibid.
15. The most comprehensive analysis of this phenomenon can be found in Hewett (1988).
16. According to the Federal Migration Service, between 650,000 and 1.2 million refugees were to have arrived in Russia by the end of 1993. Many refugees have been settled in Voronezh, Stavropol and Belgorod Oblasts, strong agricultural areas where they have little opportunity for employment (Pravda, October 13, 1993, p. 4). Over 23 million ethnic Russians remain outside of the Russian Federation and although public opinion polls in 1992 indicated that the vast majority did not wish to migrate to Russia at that time, the Federation fears that future economic and political uncertainty may lead to large scale population movements. Rossiskaya gazeta, October 21, 1992, p. 7). Estimates for 1993 indicated that there were probably between 1.7 and 2 million refugees registered and unregistered in the Russian Federation. Rossiya, May 18-24, p. 4.
17. See Nezavisimaya Gazeta, June 3, 1993, p. 1.
18. Kalugina (1991), p. 168.
19. Sotsialnoe Razvitie (1989), p. 111.
20. Although the data on old-age morbidity and mortality are in some instances questionable for Russia (Kingkade 1987), it is clear that advancing age bring with it diminished physical capacity (Shapiro 1983). Anderson and Silver (1991) have documented the worsening mortality profile of those in the working ages, especially men, which may result in further capacity deterioration among the post-retirement population as these cohorts age.
21. According to recent press reports, rural laborers receive 65% to 70% of the average national wage. Much of the remuneration carried out in rural areas still relies on in-kind transfers (which is tax exempt). See Sevodnya, January 14, 1995, p. 2.
22. According to figures from Sotsialnoe Razvitie (1989 and 1990), a typical household in rural Russia has about 2.3 times the income of a pension household. Pensioners get 43% of their income from private plots while typical households get 25%. Typical households spend about 12 hours a week on their private plot. Thus, if I = pension income (2.3)(I) is the income for a typical household. Pensioners receive 43% of their income from private plots [(.43)(I)]. Private households receive 25 % of their income from private plot production. As a function of elderly income, twelve hours produce (.125)(2.3)N, or 57% of elderly income.
23. See Rossiya, May 18-24, 1994, p. 4 (reported in FBIS-USR-94-063, 14 June 1994, p. 6). This estimate is attributed to the Federal Migration Service of Russia. Unofficial estimates, including registered and non-registered migrants, run as high as 5 million.
24. Descriptions of both laws can be found in Rossiyskaya gazeta, March 20, 1993, p. 4 (summary reported in FBIS-USR-94-063, 14 June 1994, p. 6).
24. Pravda, October 13, 1993, p. 4.
TABLE 1
Aging Indicators for the Russian Federation, Census Years
1959 1970 1979 1989
Percent of Population
Over Retirement Age[a]
Total 11.8 15.4 16.3 18.5
Men 6.2 7.6 8.5 10.1
Women 16.3 21.9 23.0 25.8
Urban 10.2 13.8 14.7 17.2
Men 5.0 6.2 7.8 9.5
Women 14.3 19.7 20.6 23.8
Rural 13.5 18.0 20.0 22.1
Men 7.5 9.0 10.1 11.4
Women 18.3 25.4 28.3 31.4
Percent of Population
Over Age 80
Total 0.9 1.2 1.2 1.8
Men 0.5 0.6 0.6 0.7
Women 1.1 1.6 1.9 2.8
Urban 0.6 0.9 1.1 1.6
Men 0.3 0.4 0.5 0.7
Women 0.8 1.3 1.6 2.4
Rural 1.1 1.6 1.9 2.4
Men 0.7 0.9 0.8 2.7
Women 1.4 2.2 2.0 3.7
a Retirement ages are 55 for women and 60 for men.
TABLE 2
Private Plot Assistance Received by Pensioners from State and Collective Farms, Soviet Union, 1986.[a]
Total Percent Percent Percent
Requesting Receiving Receiving Receiving
Assistance Assistance Full Partial
Request Request
Animal Feed 824 54.1 16.0 38.1
Tilling 1126 74.6 53.8 20.8
Harvesting 492 36.6 26.8 9.4
Transport 898 60.6 43.4 17.2
Heating 1013 40.2 21.9 18.3
Home Repair 600 9.3 3.2 6.1
Source: Sel'skoe Khoziastvo SSSR (Agriculture in the USSR) 1988. Moscow, p. 481. Information is based upon a survey of 1300 pensioner households (without wage earner present).
GRAPH: Figure 1 Income Sources for Urban and Rural Pensioners
References
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