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CEP Discussion Paper
The Conditions of Life
A Illarionov, Richard Layard and P Orzag
August 1993
Paper No' CEPDP0165:

The Western media often depict the average Russian as starving and destitute. This is of course absurd. But hardship has increased since the reform for a substantial portion of the population. Average living standards have fallen and inequality has increased. How much? We begin by documenting the changes as possible, showing what is true and what is exaggerated. In Part 2, we ask why it has happened. Why have real wages fallen and why has wage dispersion increased? We find that economic forces explain much if the story. And how have pensions and family benefits adjusted? The social safety net, though well-organized, has left many large families poor. The problem of poor children is much more serious than the problem of poor pensioners. In Part 3, we look at unemployment - tomorrow's economic and social problem. We note how inflation has eroded the value of unemployment benefits and also outline an appropriate employment policy framework to cope with the unemployment problem as it unfolds. Finally, in Part 4, we look at the rise in regional inequality, which will be an increasingly important feature of Russian scene.