The Minimal Consumer Budget (MCB) is a social norm, which determines the standard and consumption level of material wealth and services required for normal life at the achieved level of socio-economic development in the actual and value form on the basis of scientifically substantiated minimum norms.

The subsistence minimum is the aggregate value of a set of material benefits and services calculated on the basis of the minimum consumer budget, which ensures the minimum socially admissible level of personal consumption. Depending on a number of factors (regional conditions of life, sex, age, family composition, the socio-economic situation, etc.), different (in volume and structure) material and cultural requirements of various population groups are formed. For example, in the Russian Federation, considerable differences in living standards mean that the subsistence minimum must be developed separately for each regional group with approximately the same natural and climatic conditions. One should also calculate the subsistence minimums for different population groups, such as pensioners, students, etc. The subsistence minimum is a key index of social statistics. Its size determines the poverty line and allows one to count the size and structure of the population with incomes below this line. (One should distinguish between concepts of poverty and low income as they are based on different criteria. One can say that the borders of poverty and low income characterise respectively the absolute and relative impoverishment of the population.)

The subsistence minimum is an instrument of state income policy, as it is the basis for establishing the minimum wage and its territorial differentiation, minimum pensions, child allowances, stipends and other payments financed from the budget.

The material composition of the MCB, namely food consumption norms, a set of items of personal and family use, and paid services, can be used during the drafting of measures, which ensures the necessary volume and structure of cheap goods production.

The current socio-economic situation in the territories dictates major limitations both in the drafting of the minimum consumer budget and in the calculation of the subsistence minimum, and opportunities to maintain it. Therefore one must count two variants of the subsistence minimum, namely full and reduced (physiological). They differ in the following manner. In the reduced variant, the MCB is restricted to the current consumption of necessities, ensuring only physiological requirements, such as foodstuffs and hygienic items.

The rising inflation rate, continued devaluation of the rouble and growing state budget deficit hamper the adjustment at this stage of the minimum levels of people's monetary incomes to the full subsistence minimum. A considerable increase in monetary incomes, not backed by goods, will boost inflation and yield virtually no positive results in terms of real consumption of material benefits and services for broad population groups. Consequently today one can only talk about creating conditions which will help end the deterioration of living standards and preserve the existing correlation between the subsistence minimum and the main types of population's monetary incomes. On the other hand, a decline in consumption below the physiological subsistence minimum is inadmissible in any socio-economic conditions as it leads to famine.

Consequently, at present the size of the full subsistence minimum serves as a guideline, while the physiological is the real instrument of social policy, which allows one above all to correctly estimate the number of people in dire need of special forms of social support.

In an inflationary situation the subsistence minimum and the minimum income levels must be adjusted regularly to preserve their real content.

The offered methodical recommendations can be regarded as temporary and limited owing to the extreme situation in the consumer market, rising inflation and a poor information base.

2. Methodological Approaches to the Drafting of the Minimum Consumer Budget

1) Information sources used to devise the MCB. Scientifically substantiated norms of goods and services consumption should constitute the basis for devising the MCB, considered as a social norm. At present no officially established consumption norms have been developed in detail, which take due account of the natural, climatic, national and territorial characteristics of the regions.

Consequently, expert estimates and statistics on actual consumption are used for different population groups on a number of articles, when calculating the MCB.

The food consumption norms calculated by the Food Institute of the Russian Academy of Medical Sciences for the country as a whole and approved by the Ministry of Public Health are the most thoroughly developed and substantiated today. Other norms are still in the making.

The shortage of normative data is compensated for by the actual statistics figures. These include, above all, the results of budget surveys of workers', employees' and collective farmers' families. When drafting a budget, special attention should be paid to chapters, which deal with the consumption of food and nonfoods, expenses, family composition and average purchasing prices. In items of other population groups, one must use the results of simultaneous selective surveys, for example, surveys of families of pensioners, young families, etc. conducted by statistics bodies.

Since the modern budget statistics is imperfect and insufficiently represented in certain territories, one should use state statistical figures, in particular, population and trade statistics. To specify the territorial and demographic characteristics when calculating the subsistence minimum, one should take into account the commodity structure of retail trade and the system of retail price indices - group average and representative goods. Consequently, at present the subsistence minimum aggregates both normative and statistics data. Serious work should be done to specify and officially approve a system of norms and standards needed to devise the minimum consumer budget. It should be conducted both centrally and at regional level, where enlarged standards can be specified and worked out in detail with due account of age and sex population structure, and other regional characteristics.

2) Territorial Differentiation of the MCB Among other factors, the size and structure of the MCB are largely influenced by different requirements, stipulated by the regional characteristics of living standards. Consequently the territorial calculations of the MCB should be preceded by the typology of republican regions. The distinguished types of regions should unite territories which are the closest to each other in structure of minimum requirements. This approach will enhance the effectiveness of MCB calculations and make the results more comparable in territorial terms.

3) The Formation of the Consumer Basket Given the unbalanced consumer market and considerable differences in the level and structure of public consumption in different areas, one cannot strictly regulate a large list of food products, nonfoods and services in the MCB is impossible. Consequently we propose the formation of a consumer benefits' basket on the basis of enlarged commodity groups common to all territories. The specification of suggested groups is conducted on the spot, on the basis of the situation in the consumer market.

4) Substantiated Budget Structures The definition of the budget structure and, in particular, the share of food expenses, is crucial for the drafting of the MCB. The absence of scientifically substantiated consumption norms, above all, in nonfoods and services, prevents us from determining an optimum budget structure "from below", proceeding from the standard consumer basket. On the other hand, the long time expended on budget information processing makes it impossible to estimate promptly the influence of new social policy measures, such as the introduction of a paid medical service and education, the abolition of housing subsidies and a transfer of budget subsidies for key consumer goods to the public's monetary incomes, on the size and structure of the subsistence minimum in terms of a family budget analysis.

Consequently, the substantiation of the MCB structure comprises two stages. Firstly, a combined method is used, based on family budget figures for the previous year (quarter) and characterising expenditure structure in terms of per-capita income groups. In essence, the cost of food expenses is determined by a normative method while the share of other budget components is calculated from the actual expenditure structure of a specific income group, selected on the principle of the proximity of the value assessment of the minimum basket to the actual food basket. The cost of the latest measures implemented in the current year (quarter), but not yet reflected in the family budget, is estimated. The amount of inevitable extra expenses caused by these measures per capita of the regional population or per family member is determined. The MCB composition specified in this way is used to determine the final variant of its structure.

5) The Regularity of MCB Calculations The rapidity of changes in the living standards of the population in different regions, the state of the consumer market income growth rates, etc. require an annual revision of the MCB basket. As the socio-economic situation in the country reverts to normal, the interval can be increased to three years. The MCB should be specified every quarter, according to the results of the latest family budget surveys (1st stage) and changes in family expenditure caused by the latest measures adopted by the local authorities should be listed every month (2nd stage). Owing to the high inflation rate, the subsistence minimum should be re-evaluated every week using price indices for representative goods.

6) The Consumer Basket Value Assessment (types of prices used).

The value assessment is the most difficult part of MCB calculations. Owing to the lack of specific retail price indices differing from one region to another and reflecting

the inflationary process, the instability of the economy as a whole and the consumer market in particular, we cannot confine ourselves to current retail prices. To ensure greater accuracy different price types should be used: -- average purchase prices (based on the budget surveys of workers', employees' and collective farmers' families); -- average group retail prices (trade statistics); -- minimum current prices in a cross-section of enlarged commodity groups (fixed state prices for a limited range of consumer goods, if they are used in the region.) The choice of the price type is made, with due reference to each MCB unit and is essential for all territories. Different price types should not be used within one unit.

3. Formation of the MCB Calculation

The minimum consumer budget is formed in several stages. 1) Choice of calculation method The minimum consumer budget can be calculated either as per capita average, or per family member, or as a regional average. In each case the calculations are based on a consumer goods and services standard, devised for different age and sex groups and subsequently aggregated either in accordance with regional sex and age breakdown or in accordance with the model family pattern.

The first method of calculation seems preferable today, as it enables us to avoid inaccuracies connected with the specification of an average family, and errors made during index aggregation at republican level. In addition, this variant of the subsistence minimum is easier to compare with monetary incomes, wages, pensions and other payments. However, in this case the MCB cannot be adjusted according to the family-life coefficient, which reflects changes in general expenditure caused by family size, sex and age breakdown. If necessary, the MCB can be worked out for individual social groups, such as pensioners and students.

2) Definition of MCB articles of expenditure At this stage articles of expenditure included in the minimum consumer budget are substantiated. They mostly coincide articles of expenditure distinguished in the actual family budgets, obtained by selective budget analyses. The MCB comprises articles which characterise the minimum food consumption level. Expenses on consumer goods, rent, utilities and transport services, etc., are established. Taxes, dues and other obligatory payments, as well as "normal" savings, are also taken into account.

3) The development of the MCB in kind Food baskets are compiled on the basis of articles of expenditure. The size of the consumer basket depends on the saturation of the consumer market. In the present situation it can be confined to basic foodstuffs.

4) Evaluation of the consumer basket. Size of the subsistence minimum Evaluation of the consumer basket constitutes the next stage of work at the MCB, when the aggregate minimum per capita expenditure, i.e. the subsistence minimum, is counted. If a family is chosen as a calculation object, the sum obtained should be divided by the number of family members to determine the subsistence minimum. The resulting figure will indicate the average per capita subsistence minimum.

4. MCB calculation of individual expenditure items The consumer basket is tentatively divided into three main compartments, namely foodstuffs, consumer goods and services.

1) Foodstuffs

All foodstuffs constituting the food basket are merged into ten aggregated groups, used to work out minimum consumption norms:

Annual food Russian Children aged Men aged Women aged basket for year, kg population 1-7 7-15 16-59 over 60 16-54 over 55

------------------------------------------------------------ Bakery products 102 62 115 117 114 98 97 Potatoes 105 73 135 135 102 88 80 Vegetables, melons 110 102 128 106 117 100 113 Fruit, berries 41 72 90 26 24 26 24 Meat, meat prod. 50 38 71 58 41 46 35 Milk, dairy prod.324 436 408 296 306 281 280 Fish, fish prod. 15 13 18 15 18 15 15 Eggs 246 256 311 280 132 280 132 Sugar 28 24 34 31 29 27 2 Oil, margarine 8.7 2.9 8.2 10.9 10.9 8.9 8.9 Chemical composition grams per day proteins 80 70 98 86 80 74 69 fats 79 65 96 88 81 74 68 carbohydrates 336 261 393 374 357 311 307 calories 391 1,916 2,849 2,653 2,492 2,219 2,129 ------------------------------------------------------------

Diets developed on the basis of the "Standard Physiological Requirements for Food and Energy for Different Population Groups" (approved by the Ministry of Public Health on May 28, 1991) meet scientific requirements for mineral salts, calcium, phosphorus and vitamins. The food baskets for the able-bodied adult population took into account food and energy expenses in the first group of labour intensity (easy physical work), and for children, in accordance with rational consumption norms.

The offered baskets and consumption norms can be specified, by taking account of local conditions in territories with different food supplies, national consumption characteristics and agricultural production structures. A specific assortment of foodstuffs in each commodity group is devised by territorial organisations independently and includes foods consumed by the majority of the population. The minimum food basket is valued at average regional purchase prices according to budget statistics. The choice of the territory's average prices is determined by the fact that today current prices for basic foodstuffs correspond to the purchase prices of the low-income population group.

Once regional trade and price statistics have been perfected, one will have to specify the method used to calculate the food basket. The increasing number of supply channels, considerable price differentiation between different types of trade and within each group, in the face of rapidly changing prices, will lead to a situation where the average sale prices will provide more objective information than budget purchase prices. To avoid any recalculations, the transition to a new system of MCB calculation will require some changes in the actual method of calculation (at the second stage).

2) Nonfoods

The absence of justified standards of nonfoods minimum consumption on a regional plane makes it necessary to use a statistical (structural) method to create the nonfoods basket. This approach is also preferable, as it is impossible to form a list of nonfoods from the assortment, constantly available in shops and representative of the consumption of the bulk of the population with low per capita incomes. As the economic situation improves, this approach will be abandoned and a scientifically substantiated budget variant based on the normative base will be devised. Today's normative developments of the Consumer Demand Institute (VNIIKS) and other research units cover a small range of goods and are closer to the rational rather than minimum consumption.

The structural method ensures that all main MCB units, excluding food expenditure, are determined from the given budget structure. Consequently by using the aggregate cost of foodstuffs, calculated by the normative method in advance, an income group with a food expenditure close to the minimum is determined according to budget analysis materials. The adjusted expenditure structure of the group is used to calculate the MCB.

The actual consumption structure had to be adjusted, as some consumer goods, reflected in actual budget expenditure, are not needed to satisfy minimum requirements and are based on individual preferences. This group includes goods which are traditionally considered a luxury in this country, such as cars or sophisticated household appliances, as they pertain to the quality of life rather than the standard of living. In addition, the expenses for some types of goods (such as tobacco goods) should be distinguished from the consumer basket, as the estimate of their minimum consumption is based on different principles. The actual cost of consumer goods cleared in this way is used to recalculate the general structure of consumer expenditure.

The obtained share of the nonfoods basket is, in its turn. subdivided into four basic kinds of nonfoods expenditure, namely -- clothes;

-- sanitary products;

-- durables;

-- other nonfoods.

At the final stage of MCB calculations, we move from percentage to value terms of this unit of consumer expenditure.

When calculating the MCB according to the reduced variant, we should exclude durables and other goods from the consumer basket, retaining only items which reflect minimum current consumption, which can also be subjected to quantitative adjustments. This method of appreciating the value of consumer goods has its shortcomings, mainly its abstraction from actual price dynamics. However, given the objective interrelation and interdependence of retail prices for foods and nonfoods, and the tariffs for paid services, it may be assumed that the food basket value assessment and the budget structure formation on its basis indirectly reflect the value changes of other budget components.

3) Paid services

The satisfaction of minimum requirements for paid services includes rent, utilities, city and interurban transport, post-office, laundries and hairdressers'. The total expenses for minimum paid services can be divided into four groups:

-- rent and utilities;

-- household;

-- transport;

-- other.

The total value of services is calculated in a similar way to nonfoods expenditure. However, the actual structure of their consumption in the given income group does not require an additional adjustment. This can be attributed, above all, to the poverty of the existing market of paid services, where the variant of their minimum assortment concurs with the average.

When the reduced MCB is calculated, expenses for household and other services are excluded from the paid service value. It should be borne in mind that today this MCB unit is the most unstable, as we are now witnessing a mass transition of traditionally free services into paid services. The list of services and their share in the total MCB value should be adjusted on the basis of budget statistics and corrections at the final stage of calculations.

4) Tobacco goods and spirits

Calculations of tobacco and alcohol expenses in the subsistence minimum deserves special attention. Although their consumption is not rational, these goods should not simply be excluded from the budget. The value of tobacco goods and alcohol should be counted only for adults proceeding from their real consumption in the minimum income group at the lowest state prices. The official norm is calculated in the MCB in territories where these goods are rationed and the established norm is lower than real consumption in the minimum income group.

5) Obligatory payments

Taxes, dues, fees and other obligatory payments are calculated in the MCB at a level, which corresponds to actual expenditure in families of the aforementioned income group.

6) Other expenses

Even the most thorough analysis of minimum requirements cannot take into account all articles of expenditure. Consequently the MCB comprises an "other expenditure" section, which includes

-- other expenses;

-- savings.

By other expenses we mean presents and other unforeseen costs. They are established at the level of actual expenses in the minimum income group.

The size of the minimum necessary "normal" savings is valued at 1% of the MCB's total value.

7) Subsistence minimum

At the final stage, the share of consumer goods, services and "normal" savings is recalculated in the MCB in terms of value.

As there is a considerable time lag (from a quarter to one year) between the use of budget statistics and the final calculation of the MCB, one needs to calculate socio- economic measures in the subsistence minimum on a monthly basis, which inevitably influence the value and structure of minimum consumption in the region. The cost of such measures per capita (or per family member) is added to expenditure on the respective MCB item. Once all the corrections have been made, the MCB structure is recalculated. Later on this adjusted structure serves as the basis and is used at the first stage of subsistence minimum calculations. The general scheme of MCB calculations in full and reduced variants on enlarged groups of consumer benefits and services is represented in the following table.

--------------------------------------------------------- Expense items unit MCB composition ------------------------ ____________ Measuring_______full___ reduced --------------------------------------------------------- Stage I

1. Food products roubles + +

including:

bakery products roubles + +

vegetables,

melons roubles + +

fruit, berries roubles + +

meat, meat prod. roubles + +

milk, dairy prod. roubles + +

fish, fish prod. roubles + +

eggs roubles + +

sugar roubles + +

oil roubles + +

2. Alcohol roubles + -

Nonfoods % roubles + +

including

clothes %, roubles + +

sanitary prod. %, roubles + +

durables %, roubles + -

other %, roubles + -

4. Tobacco goods roubles + -

5. Paid services %, roubles + +

including

utilities %, roubles + +

household %, roubles + -

transport %, roubles + +

others %, roubles + -

6. Obligatory

payments roubles + +

7. Other expenses roubles + -

including

other expenses roubles + -

savings %, roubles + -

Total MCB value _____roubles___ sum ___sum

Stage II

1. Abolition of subsidies for major consumer goods roubles

2. Abolition of housing subsidies roubles

3. Introduction of paid medical service roubles

4. Introduction of paid education roubles Adjusted subsistence minimum roubles sum of sum of stages I,II stages I,II

---------------------------------------------------------

5) MCB calculations at local level

Labour management and trade organisations, and statistics services should coordinate their efforts to calculate the MCB. Close cooperation with the local authorities and trade union organisations is necessary at all costs. MCB calculations should be carried out systematically. Together with current calculations one should try to improve the substantiation of the MCB and specify its calculation methods. This work should proceed along the following lines:

-- development and specification of the normative base;

-- perfection of budget statistics;

-- development of a system of control over retail price dynamics through the budget and retail trade network. Statistical bodies should form a representative network of family budgets. Budgets should be based on a territorial rather than production principle. The budgetary network should be developed by including new population groups. The independent work of individual regions to develop the methodology and calculate the size of the subsistence minimum should be well coordinated. The MCB can be used as a criterion to conduct a comparative analysis of regional living standards and substantiation of inter-regional social programmes only on the basis of single methodological principles of MCB calculation.

--------------------------------------------------------- (1) Variant of minimum food basket for adult population based on 1989 diet (kg a year)

--------------------------------------------------------- ___________________Men aged________ Women aged

---------------------------------------------------------

_________________18-59 60-74 75 over 18-54 55-74 75 over

-----------------------------------------------------------

BAKERY PRODUCTS 125.7 99.68 86.73 106.85 91.01 82.33

rye flour 35.0 27.76 24.15 29.75 25.34 22.93

wheat flour 64.0 50.75 44.16 54.40 46.34 41.92

first-grade

wheat flour 7.0 5.55 4.83 5.95 5.07 4.59

pasta 7.0 5.55 4.83 5.95 5.07 4.59

rice 3.0 2.38 2.07 2.55 2.17 1.97

semolina 0.8 0.63 0.55 0.68 0.58 0.52

millet 1.6 1.27 1.10 1.36 1.16 1.05

buckwheat 2.6 2.06 1.79 2.21 1.88 1.70

oats 0.8 0.63 0.55 0.68 0.58 0.52

beans 3.0 2.38 2.07 2.55 2.17 1.97

other 0.9 0.71 0.62 0.77 0.65 0.59

POTATOES 110.0 87.23 75.90 93.50 79.64 72.05

VEGETABLES,MELONS 135.0 107.06 93.15 114.75 97.74 88.43

cabbage 35.0 27.76 24.15 29.75 25.34 22.93

tomatoes 20.0 15.86 13.80 17.00 14.48 13.10

carrots 10.0 7.93 6.90 8.50 7.24 6.55

cucumbers 8.0 6.34 5.52 6.80 5.79 5.24

beets 10.0 7.93 6.90 8.50 7.24 6.55

onions 10.0 7.93 6.90 8.50 7.24 6.55

other vegetables 22.0 17.45 15.18 18.70 15.93 14.41

melons 20.0 15.86 13.80 17.00 14.48 13.10

FRUIT,BERRIES 52.6 41.71 36.29 44.71 38.08 34.45

grapes 5.0 3.97 3.45 4.25 3.62 3.28

citrus plants 1.0 0.79 0.69 0.85 0.72 0.66

stone fruit 6.0 4.76 4.14 5.10 4.34 3.93

berries 3.0 2.38 2.07 2.55 2.17 1.97

nuts 0.0 0.00 0.00 0.00 0.00 0.00

apples 34.0 26.96 23.46 28.90 24.62 22.27

pears 1.0 0.79 0.69 0.85 0.72 0.66

dried fruit 0.5 0.40 0.35 0.43 0.36 0.33

MEAT,MEAT PRODUCTS 64.0 50.75 44.16 54.40 46.34 41.92

beef 19.0 15.07 13.11 16.15 13.76 12.45

pork 16.0 12.69 11.04 13.60 11.58 10.48

mutton 7.0 5.55 4.89 5.95 5.07 4.59

sausage,

smoked meat 10.0 7.93 6.90 8.50 7.24 6.55

smoked fat 3.0 2.38 2.07 2.55 2.17 1.97

by-products and

other meat 5.0 3.97 3.45 4.25 3.62 3.28

MILK,DAIRY PROD. 312.4 247.73 215.56 265.54 226.18 204.62

whole milk 120.0 95.16 82.80 102.00 86.88 78.60

skimmed milk 16.4 13.01 11.32 13.94 11.87 10.74

butter 4.5 3.57 3.11 3.83 3.26 2.95

cottage cheese 10.0 7.93 6.90 8.50 7.24 6.55

sour cream 4.0 3.17 2.76 3.40 2.90 2.62

cheese 4.0 3.17 2.76 3.40 2.90 2.62

EGGS 250.0 198.25 172.50 212.50 181.00 163.75

FISH, FISH PROD. 22.0 17.45 15.18 17.70 15.93 14.41

fish, fresh 16.0 12.69 11.04 13.60 11.58 10.48

fish, salted 3.0 2.38 2.07 2.55 2.17 1.97

herring 3.0 2.38 2.07 2.55 2.17 1.97

SUGAR 26.0 20.62 17.94 22.10 18.82 17.03

MARGARINE 9.0 7.14 6.21 7.65 6.52 5.90

VEGETABLE OIL 5.0 3.97 3.45 4.25 3.62 3.28

------------------------------------------------------------

Now the intra-group structure of foodstuffs in the main commodity groups can be borrowed from this table to calculate the MCB.

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