Page 35 - RPTRusFeb17

4.5.2 Income dynamics
Wage growth in December, in both nominal and real terms, was subject to an upward revision. Wage inflation in both the private and public sectors was higher than in November, printing 9.3% y/y and 7.3% y/y (vs. 9.1% and 6.3%, respectively). More active growth in the public sector came on the back of public administration and defence, where the growth in wages accelerated from 7.3% y/y to 11.6% y/y. The flash estimate of nominal wage growth in January is 8.3% y/y, supporting the higher wage growth trend that started in 2016.
Real disposable income increased 8.1% in January, the first improvement in the indicator since October 2014, according to Rosstat data. The agency notes, however, that the increase was due primarily to a one-off RUB5,000 ($86.28) pension indexation payment. Incomes contracted by a total of 5.9% last year. Real disposable income fell every month since 2014 and is expected to go back to negative numbers in March on the order of 3%-4% monthly contractions. However, the trend is for this number to go positive later this year.
Almost one fifth (19%) of a Russian's average income stems from payments from the state budget , signifying the highest ever level of dependence on the government, Vedomosti reported on February 15. The dependence on the government looks even greater, given the fact that one quarter of the entire working population is employed by the government, not taking into account government-owned corporations. Between 2000 and 2008, payments from the federal and local budgets accounted for only 13.4% of Russia's average income, while in the Soviet era, the figure stood at about 15%. The increase of government payments comes against the backdrop of declining revenues of other types. Since 2000, people's incomes from entrepreneurial activities have nearly halved, the newspaper reported.
A fresh World Bank report finds Russia's social security costly and complex. S ocial spending on federal and regional levels, and via social funds, is the consolidated budget's largest spending category – about 35% of all spending in 2016 (12–13% of GDP). Of that, about two-thirds consist of pension spending, with the rest going to other social safety spending. Many social benefits are tied to age, domicile or former profession. The average pension is small, so many social programmes are designed to complement pensions.Despite the federal government's central role in financing social spending, implementation of social policies is dispersed. There is wide variation across regions for the amount and efficacy of programmes. Russia has over 150 social programmes managed by the federal government, and at least 500 programmes by the regions. Programmes often overlap. Only about 15% of all social spending goes to means-tested programmes that take into account the needs of the recipients. Moreover, most of the support formats are rigid to administer and do not adjust flexibly to the changing circumstances of beneficiaries.
Russia has the highest income inequality of 24 OECD countries the organ found with a coefficient of 0.34 vs the two highest Israel (0.38) and the USA (0.37).
35 RUSSIA Country Report February 2017 www.intellinews.com