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Working Paper Summaries (WP/93/1 - WP/93/54)
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Summary of WP/93/9: “Poverty, Demographic Characteristics, and Public Policy in CIS Countries”

Author(s):
International Monetary Fund
Published Date:
August 1993
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The demographic characteristics of different regions in the former Soviet Union influence the nature of poverty in the successor independent states. Despite a common policy inheritance, substantial adjustments are needed in the major social protection instruments to reflect differences in demographics as well as a changing resource base.

The states of the former Soviet Union represent two broad demographic archetypes. The first group of countries--which includes Belarus, Ukraine and the Russian Federation--is characterized by relatively low birth rates and a mature and aging population. Because of the extremely high loss of life, particularly among males in the European republics during the Second World War, many of the current retirees are single women. Countries in the second group, which includes, for example, the Central Asian republics of Turkmenistan and Uzbekistan, typically have lower per capita incomes, relatively high population growth rates, high youth-dependency ratios, and relatively few retirees. Although countries will base their policy choices on these key characteristics when adopting permanent social security instruments, they are likely to need similar policy interventions during the transition period, involving as it does major changes in relative prices.

The concentration of people at relatively low income levels is a feature common to all countries of the Commonwealth of Independent States (CIS) and, in some, the reforms have increased the concentration of “vulnerable” groups. As a result, their options for reforming the formal social security instruments--in particular, pensions and allowances--are limited. The differences in demographic characteristics will govern the emphasis to be paid to each instrument.

Although means-testing may be useful for restricting outlays, the distribution of incomes suggests that savings are likely to be small in the former Soviet Union. Moreover, administrative outlays may be substantial. It will take time to develop adequate local social assistance mechanisms in the CIS countries. One alternative is a combination of measures that includes targeted subsidies for essential goods, as discussed in Tanzi (1991).

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