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 Stories for April 8, 1998

Russian Paychecks Plunge
New Data Shows Workers’ Income Plummeting Since the Fall of Communism

by Patricia McBroom, Public Affairs
posted Apr. 8, 1998

Real wages have declined by 50 percent in Russia since the fall of communism, after adjusting for inflation, according to two sociologists who have evaluated Russian data on jobs and wages since 1991.

The loss in wages affects Russian citizens across all employment sectors and reflects a widespread economic regression in that country, said Michael Hout, professor of sociology.

Hout’s work with Theodore P. Gerber, a former graduate student, now assistant professor at the University of Oregon, also reveals that unemployment has increased from 1.1 percent in 1991 to 13 percent in 1996, reaching 22 percent among 18 to 25 year olds.

“That represents a loss in the GDP (gross domestic product) of 33 percent, larger than during the American Great Depression when our GDP sank by 27 percent,” said Hout.

The Gerber/Hout analysis is based on raw survey data from 1991-96, available in English for the first time. It adds specifics to a general perception that the Russian economy is struggling, if not foundering, under reform measures instituted since the demise of communism.

Publication of the Gerber/Hout paper in the upcoming July issue of the American Journal of Sociology coincides with action by Russian President Boris Yeltsin to fire his main economic reformers.

“The ineffectiveness of Russian economic reforms provides the background for all of this political maneuvering by Yeltsin,” said Hout.

“We have discovered that, in spite of some well-publicized success stories in Russia, the general rule is economic decline, not advance,” he said.

“Privatization has yet to create a dynamic private sector in that country. Few new businesses have emerged to pick up the slack of the declining state sector,” said Hout.

“When we hear the words economic reform, we think about new business opportunities and the privatization of state run firms. These data show that neither have come to Russia despite five years of shock therapy.

“Currently only 2 percent of the Russian work force runs a small business (compared to 13 percent in the United States and 17 percent in Hungary). Overall, only 20 percent of Russian employees work in a privatized firm,” said Hout.

The authors purchased the raw wage and employment data from Moscow’s All-Russian Opinion Research Center, formerly an agency of the federal government, now a private research institute.

It comprises a total of 8,716 interviews of Russian adults conducted between February 1991 (six months before the fall of communism) and January 1996. There were 1,500 to 2,000 interviews per year in a nationally representative sample. The yearly data has been available within Russia, but this is the first time it has been available in English or combined to reveal an overall detailed picture of economic reform.

Hout said the analysis reveals not only falling wages and rising unemployment but a sharp rise in economic inequality during the period.

Older workers and women have been the hardest pressed, but middle-aged male professionals and service workers are also losing ground, he said.

The full text of the paper, “More Shock than Therapy,” scheduled for July publication by the American Journal of Sociology, can be found on the web at

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