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ARTICLES AND INFORMATION  / AN ELUSIVE MIDDLE CLASS
22.10.2004


Author’s Note: Russia’s middle class is still a very new entity, at least to serious academic study. As a new entity, it is still much debated. Perhaps not so much in terms of its existence anymore, but certainly in terms of its composition and functioning. Because of this “theoretical mist” that currently hazes the subject, this article should be read as the educated, personal view of its author and not necessarily as fact endorsed by SRAS. Alternate views and rebuttles are welcomed.
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Russia's Elusive Middle Class
By Josh Wilson

Marketers, retailers, and politicians alike are increasingly seeking the favor of Russia’s “new” middle class. However, historically the class has been hard to define and even harder to find.

In the Soviet Union, all wages were determined by the state, and everyone was, at least officially, “equal.” Western historians have generally accepted this, although they point out the obvious exception of the privileged elite. Russians themselves will often say, “back then we were all middle class.” However, when pressed with a more refined definition of “middle class,” one often used by western marketers and economists, Russians point to a larger level of social stratification. There was, it seems, lower and middle classes in Soviet Russia, with a distinct group of professionals with more disposable income, who were more likely to own appliances and cars, and who were more likely to aspire to some sort of social mobility, education, and financial independence. The presence of a middle class in Russia, however, was hotly debated until after the 1998 financial crisis, which some historians say nearly pushed the class from existence. This existence was finally proved only after the national census of 2002, which, followed by a series of studies and polls confirmed the existence of a social stratum with “bourgeois characteristics,” (see above) as one study perhaps ironically termed them.

Today, Russia’s middle class is estimated to encompass 7-20 percent of the population. They are also estimated to account for 30-60% of all consumer spending in Moscow. The majority of the middle class, according to most polls, are in their early thirties, are married or living with a partner, have few children (1.2!), often a pet, rent an apartment which they already have or plan to remodel soon, and have a family summer home. They most often do not own a car, but the number who do is growing and nearly all think about buying one. They value financial independence, hard work, and hope to “get ahead.”

Russia’s middle class is peculiar in that they are so small; in most developed economies they represent the majority of the population. Russia’s middle class is also unique in that they are reliant on a shadow economy, estimated to be worth half what the regular economy is. Many employees are paid, in whole or in part, under the table. Some small business owners sell merchandise that is less than genuine. Some do not claim earnings to avoid taxes, some because they fear the Mafia would want a piece of their business. That most Russians participate in this shadow economy was shown by a year 2000 street poll. Muscovites claimed monthly earnings of about $300-750 but also claimed expenditures of $450-1250 per month. In some countries, this might not be strange, but most Russian consumers carry no debt and no savings. The only other explanation is that these employees derive 30-40% of the earnings from unofficial, unclaimed sources.

Today, the average wage in Moscow is estimated at $600/mo, which isn’t much. The paycheck is stretched by government subsidies on utilities and some food products (such as bread and milk), but these subsidies may soon disappear in cost-cutting measures by the government. However, this is not to say that the middle class is not politically viable: the political party known as The Union of Right Forces aligned itself as a “middle class party” and garnered over 10% of the 2000 vote. In terms of this political power, however, it is also important to mention that most Russians consider themselves to be middle class, although their paychecks and life-style would class them elsewhere on the scale. One sociologist has noted: Russia may be the only country in the world where paycheck expectations go down when the paychecks do.

The Russian middle class regards quality as its number one criteria for deciding which product to purchase. In deciding which product is of the highest quality, they consider first, the price (higher is more trusted) second, the reputation of the brand name and third, the reputation of the store selling it. Hence, Russians make major purchases such as appliances and electronics less often their western counterparts, but they spend more when they do; price-cutting is not necessarily the way to win customers in Russia. This seems to be true for every product except fast food, where inexpensiveness wins out over quality.

There are many products and markets that the middle class considers to be “underdeveloped” in Russia. The first is healthcare. Despite Russia’s still-socialized healthcare, services are hard to come by, even for those willing to pay for them. Those seeking insurance face a similar dilemma: western insurance companies are still shy of the still unpredictable country and a domestic industry has not yet formed. But the demand is high. Beyond this, the entertainment and hospitality industries are currently growing (hotels, restaurants, vacations, pool halls, bowling alleys, movie theatres, etc.), as is the real estate market (particularly if the government goes through with its plans to privatize land ownership, this market could go through the roof). Magazines for intelligent working women are still scarce and in areas outside of Moscow, consumers still complain about low brand diversity for most consumer products.

Russia has an established middle class now, one that is helping to drive Russia’s economy forward and one that is making its political voice heard.

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