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Books by Grigory Yavlinsky
Economics and Politics in Russia
The Center for Economic and Political Research (EPIcenter)
Nizhni Novgorod-Moscow, 1992


4.2.3 Adjustment of the Population Monetary Incomes



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The formation of a new income level and structure of incomes during the implementation of measures to stabilise the situation in the region, presupposes a gradual transition to new ways of working out the minimum consumer budget and creates the prerequisites for a partial indexation of the population's monetary incomes. Each of the aforementioned measures is worked out separately and taken into account when the subsistence minimum is calculated.

The introduction of indexation requires several conditions:

a) a reliable inflation indicator. A consumer price index calculated by the regional statistics bureau can be used as such an indicator. On the whole the CPI calculating method used in the republic meets standard requirements. It can be specified, in accordance with offered recommendations on methods which will be cited below;

b) the subsistence minimum of the Nizhni Novgorod Oblast population has to be calculated to substantiate minimum monetary incomes (wages, pensions and allowances). These calculations are being made. Current methods should be complemented to specify calculation methods, as the monetary income adjustment system is introduced;

c) as the minimum level of some payments does not correspond to the calculated subsistence minimum, a crisis threshold should be determined: the correlation between the monetary income and the subsistence minimum should not fall below this level. In the region this threshold has been defined at 80 per cent.

d) the emergence of new sources of income (second jobs, individual enterprise, etc.) means that personal income declarations must be drafted and introduced. In addition, the introduction of the indexation system is the federal government's prerogative and provides for the existence of a normative basis and permanent sources of financing. The local bodies can specify the offered mechanism, proceeding from the financial resources at their disposal and social policy priorities.

Proceeding from aforementioned facts, in the near future we can speak about the regional income adjustment system with great certainty, including price rises. Employees' monetary income adjustment will be introduced at the expense of local sources, if their average monthly income constitutes 80% or less of the subsistence minimum. Payments are also envisaged for pensioners, whose pensions are lower than the subsistence minimum.

Given existing technical facilities for recalculating people's monetary incomes, local subsidies and compensations to employees can be paid at their place of work or education within five to seven days of a decision and to pensioners, in the next month after the decision, together with their pension. In future, once a computerised social insurance network devised specially for the region starts operating, and small businesses have been set up to provide pensions and benefits, payments will be made within ten days of the decision.

These payments cannot be called indexation. Orientation to the poorest population groups gives one grounds for considering them as a social support system.


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