[World Bank] Poverty and Inequality Decline in Former Soviet Union, Study Finds

From The New York Times

By CELIA W. DUGGER

Despite the common perception that the gulf between rich and poor has widened in the former Soviet Union, a World Bank study released yesterday found that poverty has fallen sharply across the region and that inequality has lessened since the financial crisis in Russia in 1998 and 1999.

Forty million people moved out of poverty in Eastern Europe and the countries of the former Soviet Union from 1998 through 2003, leaving 61 million people still poor, the study found. The proportion of people living in poverty has fallen from one in five to about one in eight, household surveys of consumption on which the study is based show.

Economic growth and rising wages have been driving forces in the decline of poverty, with a strengthened social safety net playing a more modest role, the study found. It defined the poverty line as $2 or less a day, per person, double the usual global standard because of the added costs of heating and heavy clothing required for the cold climate in the countries involved.

Among families that remain poor, two-thirds work, in contrast to the rest of Europe, where poverty is concentrated among the unemployed.

What lies behind the statistics are the tumultuous changes unfolding in the transition from centrally planned socialism to market capitalism. Workers are moving from state-owned enterprises to private companies and migrating to cities from farms for construction and service jobs.

In Russia, where poverty doubled to 20 percent at the height of the financial crisis, it fell to 8.5 percent by 2002, the most recent year for which data are available, lower than before the crisis. Preliminary household survey data from 2003 and 2004 indicate poverty continued to decline, said Ruslan Yemtsov, a senior economist at the World Bank and the author of the study.

Progress in reducing poverty has been greatest in the region's economically dynamic capital cities and least in the countryside. In Uzbekistan, 4 percent of people in the capital, Tashkent, were in poverty, compared with 55 percent in rural areas. In Kazakhstan, it was 2 percent in the cities of Astana and Almaty and 31 percent in rural areas.

"In some places, growth is concentrated in and around the capital, and the rest of the country is excluded from growth opportunities," Mr. Yemtsov said.

While broad progress has been made in reducing poverty across the region, it has not been even and has bypassed some places entirely. Russia, Moldova, Romania, Hungary and Kazakhstan have been among the nations where the rate of poverty had declined most rapidly, while it increased in Georgia and Poland.

Inequality has lessened across the former Soviet Union because the growth in incomes was proportionately higher for the poor than for the rich, the study found.

But in one potentially troubling portent for the longer term, while countries of the former Soviet Union have so far created enough jobs to keep pace with those destroyed, Eastern Europe has not.

Poverty reduction may slow as poverty itself becomes more concentrated among those who lack the education, skills and mobility to take advantage of new opportunities.

"Will economic growth take care of poverty?" Mr. Yemtsov asked. "The answer is that if current growth rates continue it will take a very long time to reduce poverty. The effect of growth on poverty will fall because of the failure to create new jobs for those excluded."