For my final blog this semester, I wanted to look more at Russia. Russia scored incredibly high on Hofstede’s scale on the Power Distance dimension, with a score of 93. This number clearly shows the difference between the people, and the inequalities between finances of the Russian population. “The huge discrepancy between the less and the more powerful people leads to a great importance of status symbols” (Hofstede, 2019).
“Officials see Russia’s widespread poverty as a main obstacle to the country’s economic growth”(Meyer-Olimpieva, 2018). The minimum wage in Russia is 9,500 rubles monthly, which equates to about $140.00. Based on this number alone, it is clear to most people that the minimum wage needs to be raised; at least to compete with the minimum cost of living per month in Russia which is 11,000 rubles, or approximately $190.00.
The question then becomes, how is this even possible? How can a country, who has a relatively low unemployment rate of 4.9% not pay most of their workers enough to even be able to live for the month, when the president of the country is rumored to be worth more than $40 billion?
The answer lies in the fact of the working poor. These are the five million Russians who are working for minimum wage, but does not account for the people who are making the 11,000 rubles per month, the minimum amount needed to survive, which is almost impossible to do as it is. Since “the minimum wage is an official measure that is used to monitor and regulate salaries all over Russia” (Meyer-Olimpieva, 2018), the problem lies in the fact that most of the work in Russia, about 80%, is in Moscow. The Moscow employers could pay their workers a little bit more, but what about the smaller businesses in a lesser populated area? If they pay their workers more, then they will not be able to survive, and thus, they will suffer. The minimum wage is something that is federally regulated, which means that as of right now, there is no real answer to the problem.
Vladimir Putin, during a re-election campaign, promised in May 2018 that he would raise the minimum wage to equal that of the cost per living per month in the country. This would be an investment of about 80 billion rubles in the people and population of the country.
On the opposite end of the spectrum, besides the extremely wealthy president, Russia is home to more than 106 billionaires, and “since 2017, the businessmen’s net worth climbed by $25 billion to a collective $485 billion in 2018” (Times, 2018).
The chart shows the average net worth of Russian citizens, as of 2018, broken down into US dollars. With more than only 106 people having a combined net worth of $485 billion dollars in a country with more than 144.5 million citizens, it’s no wonder that they scored so high on Hofstede’s scale.
References:
Hofstede, G. (2019) National Culture – Hofstede Insights. Retrieved from https://www.hofstede-insights.com/models/national-culture/
Meyer-Olimpieva, I. (2018). The Tragedy of the Working Poor and the Populism of Russia’s Presidential Campaign. Retrieved from https://www.wilsoncenter.org/blog-post/the-tragedy-the-working-poor-and-the-populism-russias-presidential-campaign
Russia: population by wealth 2018 | Statistic. (2018). Retrieved from https://www.statista.com/statistics/482573/russia-population-by-average-wealth/
Times, T. (2018). Number of Russian Billionaires Grows by Third in 2 Years — Forbes. Retrieved from https://www.themoscowtimes.com/2018/04/19/number-russian-billionaires-grows-third-since-2016-forbes-a61212
Jennifer Deangelo says
Hi Megan,
Your discussion of the income disparity in Russia was very interesting. You brought up some great points about the number of working poor in the country and the net worth of the “haves” vs. the “have-nots.” I think, though, that raising the minimum wage is not a solution to the issue as past research has clearly shown that wage increases lead companies to reduce employment, reduce profit, or raise prices to make up the difference in wages (Lenos, 2008, p. 2). In Russia, where many of the small business owners in the poorest areas are already poor themselves, they will not be able to reduce profit margins any further, thus leading to staff cuts or price increases. Staff cuts would mean the people who are below the monthly cost of living would then have no income at all and price increases would mean that the monthly cost of living would increase above the newly set minimum wage level, thus negating the effects of the minimum wage increase.
I think that to find a solution to the poverty in Russia, one must turn to the overall economy. Russia has been wholly unsuccessful in entering the global market, which means that they have seen little economic growth compared to other developed countries (Larson, 2006, p. 265). This ties to what we are learning in this course because a large part of the problem Russia is facing in the global economy is that it is extremely difficult for multinational corporations to enter their market because of corruption, which drastically slows down economic processes (Larson, 2006, p. 267). Russia was ranked 138 out of 175 countries in corruption, with 1 being most corrupt and 175 being least corrupt (trading Economics, 2019, n.p.). In fact, corruption is so prevalent now that the anti-corruption plan suggested by Putin actually moves to decrease the amount of corruption by decriminalizing some forms of it, rather than even trying to prevent it (The Moscow Times, 2019, n.p.). This corruption works at all levels of the economy in Russia and not only increases the economic disparity in Russia, but continually increases the difficulty of doing business in the country as government workers require bribes in every step of the regulations process so they can supplement their income (Schulze, Sjahrir, & Zakharov, 2016, p. 136).
Until Russians takes steps to curb corruption as one means to increase an international corporate presence in their country, which is unlikely to happen due to how corrupt their leaders are, it is unlikely that the economy will grow enough to materially improve the lives of their poorest people. Because Putin is clearly uninterested in honestly tackling the problem and instead wants to legalize corruption, I do not believe there will be any change while he is in power.
References:
Larsson, T. (2006). Reform, corruption, and growth: Why corruption is more devastating in Russia than in China. Communist and Post-Communist Studies, 39(2), 265-281. Retrieved from: https://pages.uoregon.edu/myagkov/rmsm12_3.pdf
Lemos, S. (2008). A Survey of the Effects of the Minimum Wage on Prices. Journal of Economic Surveys, 22(1), 187-212. Retrieved from: https://lra.le.ac.uk/bitstream/2381/7440/1/dp06-9.pdf
The Moscow Times. (2019, January 29). Russia moves to decriminalize ‘unavoidable’ corruption, following Putin’s proposal. The Moscow Times. Retrieved from: https://www.themoscowtimes.com/2019/01/29/russia-moves-decriminalize-unavoidable-corruption-following-putins-proposal-a64316
Schulze, G. G., Sjahrir, B. S., & Zakharov, N. (2016). Corruption in Russia. The Journal of Law and Economics, 59(1), 135-171. Retrieved from: https://www.journals.uchicago.edu/doi/pdfplus/10.1086/684844
Trading Economics. (2019). Russia corruption rank. Trading Economics. Retrieved from: https://tradingeconomics.com/russia/corruption-rank
jme204 says
Nice blog on the social standings of those in Russia. From your post it is clear to me there is a large gap between the working poor and super rich. It appears Russia has minimal middle-class individuals. It was shocking to see how many of the individuals were working for less than what the average wage was to be considered. I agree with you in this supports Russia being one of the top on the power distance scale. The text this semester shows us that power distance is “the extent to which a society accepts that power in institution and organization is distributed unequally” (Moran, R., Abramson, N., & Moran, S., 2014). In the example of Russia, it is clear to me based on the statistics you provided and the chart example that there is an unequal distribution of power. However, if Russia overall is a 93 on the power dimension scale it leads me to believe they are overall accepting of the power gap, which might make it difficult for them to close the gap. If there continue to be large differences in the working poor and super rich I believe there may always be this type of structure within Russia. In most countries, we see that power and money tend to hand in hand. Until they can equally distribute the wealth they will have difficulties distributing the power.
References:
Moran, R., Abramson, N., & Moran, S. (2014). Managing cultural differences. Abingdon: Routledge.
Timothy Yamanaka says
Hey Megan,
I thought that your post this week was very interesting to the point of how much of a difference in pay that the minimum wage would only be $140 a month in dollars. Do you think that this minimum wage will ever be raised? It makes me wonder what will happen here in America when the minimum wage is raised to $15.00 per hour. I appreciate the idea of the government raising the minimum wage, but it also scares me that the possibility of small businesses closing or raising prices through the roof. I understand from what I have heard the minimum wage here would be raised in increments of a few dollars every year until it reaches $15.00 per hour. Can you believe that with a country that is as large as Russia have 80% of its work done in Moscow? I find that amazing it is almost like saying that 80% of America’s work is done in NYC. When I worked at a restaurant ten years ago we would have Russian students that would come at work at our restaurant for the summer, and the students were only paid barely above minimum wage but they did without a blink of an eye. I first used to wonder why in the world they would work for such a little amount of money until I found out that when they returned home that every dollar would turn into 33 rubles (this was in 2001) I am not sure what it is today. The Russian students were very good workers and most were very smart, most would not spend too much or would buy something here that they would not be able to buy in Russia such as a laptop computer, iPad, etc. There were even a few girls that stayed here and never went back, I know a few that have gotten married here to American guys and one is living in NYC with her boyfriend. Amanda great post this week and enjoyed the information from it.
Best Wishes,
Tim
Zhane Woodall says
Megan, you were able to educate me on the cost of living in Russia in a depth that I had not had before. Very little is said about Russia in America that is more than their Communist past and the politics between their President and our President. I think a lot of this mystique that surrounds Russia comes from the fact that they are not a third world country, so our people are not as concerned for the Russian people as our people are for the smaller countries that struggle for basic needs. But what we lose sight of, by only caring for the deeply oppressed and crisis countries. is that the large countries like Russia, are still not easy places to live. Many countries around the world call us the Police State because we become involved with the matters of other countries. But I think it is hard to ignore the people who hurt and live under leadership that will not take care of them. You have shown the great disparity between the very wealthy and the very poor in Russian, if President Putin has not taken care of closing the gap- who will?