Research Objective: A comprehensive analysis of the dynamics of the Russian welfare state and the population's well-being, and instrumental-methodological development of models that simulate the effects of economic policy, the taxation system, and the social protection system--including pension and family policy--on the population's standard of living and quality of life. This is a long-term project that, in 2013, was predominantly focused on creating a reliable methodological base for simulating the impact of fiscal, economic, and social policies on the household sector.
Empirical Base of the Research:
As part of the informational base of this project, data from the following household surveys was used:
- The NOBUS household income survey (World Bank, 2002);
- The RLMS Household Panel Survey;
- Data from RosStat quarterly surveys of household budgets (HHBS);
- Data from the panel survey “Parents and Children, Men and Women in Families and Society” (PCMWFS), carried out by the Independent Institute for Social Policy (IISP), with the financial support of the Pension Fund of the Russian Federation (PFRF) in 2004, 2007, and 2011.
The study begins with an analysis of the dynamics of the Russian population's living standards in the post-Soviet period, using a system of monetary and non-monetary indicators characterising Russian households' income, expenditures, and consumption. An analysis of the main indicators of income and consumption over the past 20 years shows that, currently in the household sector, we are dealing with a qualitatively new level of material resources. The Russian population is moving towards the establishment of a new consumer standard, which creates opportunities to invest resources in improving the quality of human capital and life-saving behavior. These trends are especially evident when it comes to the urban population and are even more pronounced when we examine the consumption of the wealthiest residents of large cities – the urban middle class. The main limitations for further development in this direction are high income inequality and weak mechanisms for upward mobility.
1. The study describes in detail the approach to building a new tool to analyse Russia's tax-benefit system – the static microsimulation model ‘Stand-Russia’.
2. We provided an analysis of the methods used to adjust the structure of sample surveys in order to make correct generalisation of sample estimates to the level of official government estimates of the population.
3. The study describes the results of applying new algorithms and models of weighing survey data and simulating income distribution in Russia.
4. In addition, the study discusses the algorithms and software used to adapt the methodology of the ‘Stand-Russia’ model to the design of a new large-scale household survey, Survey of Income and the Population's Participation in Social Programs, launched by RosStat in 2011.
5. We analyse the effects of several scenarios of social development listed in the President of Russia's May Decrees. Not all the measures can be simulated using the current version of the model, but it is obvious that for social policy to be effective, potential scenarios have to be tested in terms of their impact on various population subgroups. Underestimating this factor may lead to increased social tension in society due to the irrational distribution of resources at the level of individual households. A regular analysis of the distributive effects of social and fiscal reforms will help us to find the right strategy for increasing the population's material well-being and, in the long run, raise the country's birth rate.
6. The study also has an element of comparative cross-country analysis. Specifically, it looks at the programmes of cash allowances for children and compares their effectiveness in combating child poverty in Russia and four EU countries – Sweden, Germany, Belgium, and the United Kingdom. These countries are selected as representatives of alternative family policy models.
7. Using microsimulation models (RUSMOD and EUROMOD), this study estimates the potential gains if the Russian system were to be re-designed along the policy parameters of these countries and vice versa. Such an exercise rests on the idea of policy learning and provides policy-relevant evidence on how a policy would perform, given different national socio-economic and demographic settings.
The results confirm that the poverty impact of the program design in Russia is smaller than that of the level of spending. Other conditions being equal, the best outcomes for children are achieved by applying a mix of universal and means-tested child benefits, such as those employed by the UK and Belgium. At the same time, the Russian design of child allowances does not appear to be less effective in terms of its impact on child poverty when transferred to European countries in place of their current arrangements.
8. The research on pension issues focuses on identifying and analysing the causes of the current crisis in the pension system and the methodology for doing long-term forecasting of pension system performance at the macro-level. Being of independent scientific value, this analysis acts as a necessary preliminary step in the preparation of the microsimulation model of the Russian pension system, aimed at identifying the winners and losers in the pension system at the micro-level.
The current study highlights the main internal problems and the main external challenges of the current Russian pension system, and discusses the model of the new pension system adopted in late 2013 and the risks associated with its future development. Projections at the macro-level until 2030 show that population ageing is the most important challenge facing Russia's pension system, but its impact will depend, first, on the state of the economy and the labor market in general, and second, on whether the pension system will be able to cope with the task of increasing the effective retirement age. Placing some income limitations on the most wealthy working pensioners could also increase the efficiency of the pension system. In addition, the study recommends dividing a pension's fixed (basic) portion and its insurance portion, in terms of both the calculation formula and the funding source. These measures would allow the government to restrain the payroll tax growth in conditions where the population is ageing and employment patterns are changing.