RUSSIA’S MIDDLE CLASS–DOING WELL AND GROWING

By Elena Chinyaeva

August 19 of this year marked the tenth anniversary of the failed 1991 putsch, which brought an end to the Communist-dominated Soviet era. Ten years later, Russia still finds itself halfway through the transition process to a market-oriented economy and open society. The best present it has made to itself on this remarkable anniversary is the emergence of a middle class. Small in numbers, unlooked after, and battered by the financial 1998 crisis, the Russian middle class has demonstrated significant resilience and a sustained tendency to grow, giving Russia a new center of gravity.

A HAPPILY FOUND ENTITY

Just a couple years ago any mention of a Russian middle class was accompanied by lamentations that nothing like this respected social stratum, the beauty and pride of any developed society, really exists in Russia. Today, nobody any longer doubts its existence. The debate has moved to another level, on which the middle class’s qualitative features, prospects for development and implications for Russia’s consumer markets are discussed.

Yet there are still notable difficulties in establishing the middle class criteria. This concept has been shifting even in the developed countries. Having emerged originally in medieval Britain to describe a social stratum between the clergy and the landed gentry, the term “middle class” grew in content to include professionals and, later, well-paid workers. But even in countries with comparable socio-economic systems, the percentages of those falling under the “middle class” category differ. About 95 percent of the people of the United States would consider themselves as belonging to the middle class, while in Europe the figure is 60-70 percent. In Russia, the usual criteria of income, values and social status are not easily applied. There has been no census done in Russia during the last ten years, while the social changes resulting from the post-communist economic and political transition have been tremendous. A higher education and professional status do not necessarily correlate with high income and social status. Information about income is not readily available due to tax evasion. Even more important is a factor that is not easily defined–people’s compatibility with the times. The Russian middle class started being mentioned in the mid-1990s, when the number of people adjusting to new economic conditions grew considerably and was no longer restricted to the few nouveaux riches notorious for their red sport jackets and flashy cars. But with the economic crisis of August 1998 the new middled class seemed to without ever having properly established itself. Its public burial, however, was premature.

THE MIDDLE RUSSIAN: A PROFILE

In the autumn of 1999, the weekly business magazine Expert, in association with the Komkon marketing research company, launched a project aimed at discovering the lifestyle and consumption tendencies of the middle class. The project’s researchers polled 1,120 people in twenty large Russian cities– including Moscow, St. Petersburg and another nine cities with populations over 1 million people. The respondents were asked to answer twelve items, which included questions about whether they possessed an apartment, a car, a washing machine, a cellular phone and a bank account; what were their vacation preferences, etcetera. A year later the researchers announced their findings, concluding that the middle class in Russia, while not numerous, forms a distinct stratum of people with comparable incomes, outlooks and values, who consciously identify themselves as belonging to this particular social group.

On average, the middle class constitutes 7 percent of the population of Russia’s cities–10 percent of cities of over 1 million inhabitants and 6 percent of cities with over 250,000 people. Twenty percent of Moscow’s population belongs to the middle class. In total, about 4 million people in Russia belong to the middle class (if dependents are included, there are twice that number). Members of this class have an income varying from at least US$450 per month in the provinces to at least US$800 in Moscow (US$150 per family member in the provinces and $300 in Moscow). The number of women in the middle class is equal to the number of men. A typical “middle Russian” is about 33 years old, usually has a higher education, works mostly in the private sector as a middle-level manager or a qualified specialist, or runs a private business (about a quarter of all respondents). Such a person lives in a privatized apartment, has a car, is married, but does not strive to reproduce (the Russian middle class averages 1.2 children per person). As a class they have a system of values in which personal freedom and independence matter most. They prefer to make their own decisions, are success-oriented and not afraid to take risks to achieve it. Interestingly enough, they don’t consider the law the absolute value, believing that in modern Russia it is difficult not to break it. They are politically active and democratic in social behavior, and don’t want to emigrate. A majority–64percent–are optimistic about Russia’s future.

As to their consumption habits, the middle Russians with a relatively high living standard spend just about 14 percent of their income on food–as does an average American or Canadian–and show consistent preference for branded products. However, while the number of the “rich middle” is around 10 percent in both Moscow and the provinces, the level of material well-being among the rest differ considerably as salaries of specialists and middle-level managers in the provinces are lower than in Moscow. About 80 percent of the respondents had jobs (against 60 percent of the general population), about 70 percent liked their work (against 38 percent of the rest of the population), and 72 percent would work even of they had material security (against 42 of the general population).

The researchers concluded there are several subgroups within the middle class. There are business people–entrepreneurs, top managers, and well-paid “white collars,” who together with a subgroup of young yuppies amount to 50 percent of the total middle class. Professionals constitute about 23 percent of the total; dependents, 18 percent; the beginners–the low-level managers and specialists–4 percent; people living independently but without a constant source of income–about 5 percent.

DEBATES

This research provoked controversy. Sceptics questioned the credibility of criteria selected and the results produced. The most frequent argument was directed against defining the middle class by income and consumption habits. Critics also questioned using the system of values and the character of political and social behavior as a determining criterion. According to one view, the stratum defined in the Komkon study as the middle class–well-off and politically active people–in fact corresponds better to the thin layer of the upper middle class in the West, the top management and professionals who constitute the political and business elite. The main body of the middle class in the West is apolitical, the argument went, and its Russian analogue can be found in the broad segment of politically passive population with the incomes between US$70 and US$200–civil servants, small business people, and better-paid workers. Unconcerned with anything beyond their immediate interests, these people are in fact responsible for Russia’s current social stability and the growth of mass production.

Other research, carried out by the Bureau of Economic Analysis on the basis of standard Western criteria–education level, professional status, material well-being and the quality of self-identification–put the size of the Russian middle class at 20-25 percent. A quite different ‘middle Russian’ emerged from this study–older, with a higher education, living in a privatized apartment and most of all wanting stability.

While the debate over the middle class has confirmed its existence, it has also shown that the concept of the middle class in Russia is not well developed, and so the study of the Russian middle class has been continued. This summer (2001), Expert magazine published a report on a second study showing the changing tendencies in the consumption preferences of the middle class. The research involved 3,000 people in sixteen Russian cities with populations over 850,000. The study found that the consequences of the financial crisis of August 1998 have been fully overcome, and that the middle class has regained its role as the main driving force behind the markets’ revival. Although the core middle class–people with incomes over US$250 per month per a family member–has not grown considerably for the last two years and still amounts to 7 percent of the population, the study identified a “lower middle class”–people with incomes of US$150-$250 per month per family member per month–who constitute another 7 percent of the population. The higher the income, the more interested people are in new services, including insurance, and new technology products. The study found that the higher the respondents’ incomes, the greater their will to succeed, independence and self-confidence. About 70 percent of the respondents consider themselves to be intellectuals. Members of the Russian ‘lower middle class’ are less confident about themselves and their future, and thus tend to seek the consolation in the social net of family, relatives, and friends. Members of the lower middle class are also less inclined to have their own businesses and are more paternalism-oriented, longing for stability.

WHAT THE PRODUCERS NEEDED TO KNOW BUT WERE AFRAID TO ASK

Whatever its deficiencies, the first Komkon research was eagerly welcomed by producers. This was not surprising, given that the 7 percent of the population called the middle class accounts for around 30 percent of the money spent in Russia. Companies working in consumer markets were interested in analyzing the results, which could help them to adjust the marketing policy for their goods, ranging from beer to watches and cars. In the first Komkon study, the respondents identified a number of markets as being underdeveloped, including those involving medical, insurance and banking services, education, real estate, local holiday facilities and quality press for women. Respondents in the provinces identified the markets for footwear and clothes as being underdeveloped.

The second Expert study showed that the growth of the middle class’s well-being had caused a number of markets to boom, with the lower middle class being the most active buyers. In the first quarter of 2001, the sales of new imported cars grew 30 percent. Real estate sales have been escalating, underscoring the acute lack of affordable mortgage schemes. If mortgages were widely available, they would attract considerable funds and correspondingly boost the house-building industry and other interconnected markets. The study discovered a tendency: the middle Russian buys seldom but expensively. That is one of the reasons for the relative stagnation of such markets as home electronics, appliances and furniture. Russians tend to hold on to such products for six to eight years.

On the whole, the research has shown a growing demand for more sophisticated and expensive products. This should be a warning sign to the domestic producers: the effects of the ruble devaluation are waning and the share of imports in all markets has been rising rapidly. Domestic consumer goods industries have to find a better way to develop their products than simply copying yesterday’s foreign models.

NO WAY BACK

So it has been established beyond a reasonable doubt that the Russian middle class is a sizeable social stratum in which material well-being and a values system are connected and whose members demonstrate energy, self-discipline and independence of mind in improving their private lives. Interestingly enough, these results correlate nicely with those of the 1999 parliamentary elections, in which the Union of the Right Forces (SPS) positioned itself as the party of the middle class and won over 8.7 percent of the vote–an unexpectedly high result. Another 6.1 percent of the electorate voted for Yabloko, the oldest democratic party in Russia, whose social base has largely included the traditional Soviet intelligentsia rather than the new active generation. The SPS’s success confirmed that the process of social differentiation in Russian society has been very rapid, and has accompanied by a swift social and political maturation of the middle class–and not simply because of its lifestyle and consumption habits, but also due to conscious and informed choices by its members.

To use Expert’s quotation from Serbian writer Milorad Pavic, the Russian middle class is like a young generation whose fathers suffered a severe defeat in a war: with no feeling of guilt and no victorious fathers to boss them around, the children of defeat see no obstacles before them. Ten years ago the Communist putsch failed in Russia and the fathers lost their battle for what they called socialism. Their children, the children of this ultimate defeat, have become Russia’s middle class–the prosperous, responsible and stabilizing core of a society on its way to completing its transition.

Elena Chinyaeva, who holds a doctorate in modern history from Oxford University, is a writer with the leading Russian political weekly Kommersant-Vlast.