Building justice: A social policy for Russia
Russia is a welfare state. We have a much higher level of social guarantees than other countries with similar productivity and per capita income levels. In recent years, more than a half of public expenditure has been going into the social sphere. Over the past four years, our social spending has grown by 50% in absolute numbers, or from 21% to 27% in relation to GDP. None of these social guarantees was shaken by the crisis of 2008-2009. In fact, the wages of public sector employees even grew during that period, together with pensions and other social benefits. But our people are definitely not satisfied with the current situation, and their dissatisfaction is well justified.
Social policy has several goals, several dimensions. It should support the weak, those who are objectively unable to make a living. It should provide upward social mobility, an equal “starting position” and promotion for each person based on their capabilities and gifts. The effectiveness of a social policy is determined by whether people think our society is just or not.
I don’t want to talk about our achievements, even though we have achieved something in many areas: in demographic policy, where we were able to seriously improve the situation with pensions, in fighting poverty, in education, in healthcare, in culture etc.
But today we need to talk about the problems we haven’t resolved and the challenges we should put on the agenda for the next stage in Russia’s development.
First, many people are unable to apply their professional knowledge to find a job that would offer a decent salary and provide opportunities for developing and building a career. Social mobility mechanisms, starting with the education system, are not working properly. This situation has seriously deteriorated over the past few years, when a large number of young people graduated from college and entered the labor market.
Second, income inequality is unacceptable, outrageous. One Russian citizen in every eight still lives below the poverty line.
Third, the understanding of what an average Russian family typically needs and can afford has radically changed in the 2000s. Ten to twelve years ago, people were concerned mainly about avoiding poverty, and some social categories, primarily pensioners, had to survive in poverty. But today most people have much higher expectations. The social sphere has failed to adapt to that. People, especially the middle class, well-educated and well-paid people, are generally dissatisfied with the level of social services. Even though public expenditure on education and healthcare has been growing, their quality remains low, and we have failed to stop the spreading of the practice when people are forced to use paid services in these areas. We are also far from achieving the goal of providing a comfortable living environment.
Fourth, since the working-age population has significantly decreased and the number of senior citizens has increased, we urgently need a radical improvement in the efficiency of social spending. If we want to preserve the current level and even to achieve a fundamentally new level, we simply don’t have any other option.
The social dimension of the economy
People of various occupations – businessmen, workers, specialists, public sector employees – must have an opportunity to fulfil their potential, to grow professionally and socially.
First, an engineer, an agronomist, an economist, a designer – every professional – must have an opportunity not only to work in the area they have been trained for but also to build a professional career, which means regularly improving their skills and learning new applied technologies. Also, the qualifications of each specialist should be visible and discernible for employers.
Back in 2006, we reached an understanding with some business associations that they would take care of developing a professional qualification system. Unfortunately, not much has been done. Only 69 standards were approved in five years. This is a hole in the bucket, to put it mildly. It seems like we have overestimated large corporations’ interest in developing a national qualification system that would also be open to small and medium-sized businesses. If this is the case, we should address this issue as a national challenge and employ government resources.
I suggest that before the end of 2012 the government, together with business and professional associations and Russia’s leading universities, should develop a national plan to develop professional standards and prepare an open database of members of professional associations.
Second, in every country teachers and doctors, scientists and artists are not just the core of the “creative class.” They also ensure the stable development of society and function as pillars of public morality.
Of course, we will increase the effectiveness of our education and healthcare systems. We will put an end to the situation where we continue financing an institution that is clearly ineffective. But this has been going on since the 1990s. We had administrative and economic reforms; we changed administrative systems; we introduced mechanisms for objective performance assessment. Yet this failed to bring about a noticeable improvement in the quality of education and healthcare. Possibly, this is because the most important element has been neglected all along. I am referring to the motivation of the people working in those areas.
I believe that any reform in healthcare or education should ensure decent wages for professionals working in the public sector. A doctor, a teacher, a professor, these people should make enough money where they work, so that they don’t have to look for a side job. Unless we take care of that, all our efforts to improve administrative and economic mechanisms and to upgrade the equipment in those areas will have little or no effect.
The only way to manage the quality of medical care, educational programs and scientific research is by relying on the reputation of the professional community. As society reviews its relationship with doctors, teachers and researchers, it can expect these communities to restore their professional ethics and that their professional institutions will be self-governing and self-purging.
The wages of public sector employees should be determined according to the specific situation in the regional labor market. After all, people don’t compare their salaries with abstract figures found in statistical reports. They compare their salaries to what their neighbors and friends make, or to what they themselves can make if they give up their job in the public sector and work for a private business.
Yet it is ineffective to raise wages across the board. Salaries should depend much more on the worker’s qualifications and professional achievements. This means that as a basic salary grows, incentivizing bonuses should grow even more quickly.
We have taken the first step in forming an effective contract with teachers – and we have a million of those. Starting this year, regional authorities, with the financial assistance of the federal government, must keep the average salary of a teacher at least at the same level as the average salary in their region’s economy.
Starting from September 1, we will raise the wages of the faculty at state-funded universities, also to match the average wages in the region. Then, from 2013-2018, we will gradually double the average salary of a university professor and bring it up to 200 per cent of the average salary in the economy. Also, professors who have scientific achievements and are popular with students and graduates should receive a higher salary immediately. Year after year, the share of these top professionals will grow. By rewarding the best, most competitive professors, we will help universities get new faces in their faculty.
The government will provide the resources to achieve this objective by regularly increasing financing standards for university programs. University rectors will be personally responsible for this work. Their contracts will be pegged to their performance indicators.
In a similar fashion, over the next few years we will gradually raise the wages of teachers working at technical colleges and vocational schools, vocational training instructors, other kinds of teachers, doctors, mid-level medical staff, researchers at the Russian Academy of Sciences and state-funded research centers, and artists. Our target for doctors and researchers is the same as for university professors: by 2018, their salaries should be twice the amount of the average salary in their region.
The implementation of this program will require significant resources, up to 1.5 per cent of GDP a year overall. It is important to use the significant latent resources of the industries – for example, by reorganizing ineffective organizations and programs. Such reorganization should provide at least a third of the required amount.
At the end of the day, people should not be paid simply because they belong to a certain institution. They should be paid for their real contribution to science, education, healthcare or culture, for offering specific services to society and the people. The decision we have made regarding government corporations – that their executive should be required to publish their income reports – should also apply to the heads of state-funded universities, medical institutions and research centers.
Third, another important issue is the qualification and social welfare of workers, i.e. the people who are the backbone of any economy.
The time when workers could have low living standards and poor education level is long gone. A modern-day worker is a responsible performer of complex and regularly changing technical instructions. In a situation where competitive businesses modernize their technology all the time and where poor quality goods quickly lose their standing in the market, a worker’s qualification, his intelligence, his professional pride and his ability to learn something new all the time have become key factors in competitiveness.
Yet some owners and executives continue to act as if we live in the early years of the 20th century, as if you can get a strong position in the market by saving on your workers. From 2004 to 2010, the share of workers who are employed in unsanitary conditions grew by 17per cent. The share of such jobs grew from 21per cent to 29 per cent.
Together with labor unions, we should consider what laws we can adopt in order to give workers more control over their companies. The practice of such involvement exists in other countries. For example, in Germany they have what they call “works councils.” Such councils in Russia could be responsible for organizing daily working processes, from preparing work schedules to developing a social plan in case the factory is shut down. They can also arrange training programs for workers.
The labor market for skilled workers needs serious reforms. We need to design social mobility mechanisms within worker professions. We need to recreate a worker aristocracy in Russia. By 2020, it should account for at least a third of skilled workers, i.e. about 10 million people (with their families, 25 million people).
Skilled workers should be included in the national professional qualification system. Assessment of their professional level and receipt of new qualifications should not be limited to the company they work for, as is common practice today. This will open new opportunities for workers on the labor market, make them more mobile and eventually help them to earn more.
Fourth, we do very little to take advantage of the opportunities that the labor market offers for people who are also gifted and who are also eager to work and make a living even though it is difficult for them to perform a standard job. I mean primarily people with disabilities (among others, people using a wheelchair, the visually impaired and the hearing-impaired).
In recent years, we have adopted a number of decisions on tax breaks for employers who hire people with disabilities. By the end of 2012, the government, together with appropriate non-governmental organizations, should assess how effective those measures have proved and, if necessary, take further steps in this regard.
Within the next few years, we need to create a system whereby every disabled person who is able and willing to study and work will be able to find an appropriate path for their education and professional life. It should include everything from a specialized educational program to a workplace adapted specifically to their special needs.
Fifth, business people still feel uncomfortable in our society. To a high degree, this is because of the 1990s. During that period, doing business often meant putting your life on the line because of gangs openly harassing business people. At the same time, doing business often meant embezzling government property. This is why many of our people don’t trust business people and many business people don’t trust society and the state.
Many of our people still think that all major businesses were acquired dishonestly. They view major businessmen as celebrities, not as creators whose work drives Russia on. (To some extent, certain businessmen behave in a way that supports such views.)
What we need is not just success stories. We need stories of success that would be recognized as just by others. We need stories of hard-won success achieved by taking risks and taking up responsibility for others.
Among Russian businessmen, there is a large group of people who want change, who want to live a new life. These are the owners of small and medium-sized businesses, executives and managers, people on the second and third tiers. These people are well aware of how ineffective the current business model is.
The young business elite will get an excellent opportunity in the coming decade. They can manage a new generation of private corporations that will pool the money of tens and hundreds of thousands of other people on the Russian stock market. These corporations are public. They don’t have an individual owner, which makes them resistant to corruption and linkage to officials’ interests.
While the average income is growing, the gap between rich and poor is closing too slowly. Income inequality in our country is similar to that in the United States but it is much higher than in Western Europe. A certain degree of income inequality is only natural for a mature market economy, but this excessive gap is perceived as unfair and gives rise to social tensions. That is why it is our crucial task to reduce this material inequality. We should do this by offering more specific and effective social support and especially by providing everyone with an opportunity to work and secure a sufficient level of income.
Oil and gas revenues trickle down into the economy unevenly. But we can’t possibly get the government even further involved in redistribution. I strongly believe that in order to perceive our country as a fairer one, where every person makes a living with his labor and talent, we need to develop new sectors, develop the processing industry, agriculture, modern transport and intellectual services.
As for those unable to make a living or those too young to work, the government will support them on an individual basis.
Pensions and welfare payments
About 60 per cent of Russian families are dependent on state-sponsored allowances and benefits. We have been able to achieve a significant increase in terms of pension payments and are determined to increase them further to compensate against inflation. However, our primary concern now should be the protection of families with children.
The government has launched a number of steps to support the wish of some families to have two or more children. Some of the measures, a special maternity capital in particular, have proven effective. We are happy to see the positive initial results of the program, namely that the birth rate is on the up. However, in large families mothers often have to give up employment to take care of their three or four children. It’s much harder for these parents to provide the same living standards for their children as parents with a single child can. Young families often face serious financial difficulties raising one child if the parents do not have a strong footing in their profession and are forced to rent housing.
It’s absolutely unacceptable when the birth of a child drives the family down to the poverty line. It will be our goal to eliminate such conditions on a nationwide basis within three to four years. Today, the rates of most of the allowances for families with children are defined by the regions, and in some parts of Russia they are embarrassingly low.
In 2006, I laid out a package of measures to motivate families to have a second child, including maternity capital, which is annually adjusted to the inflation rate. They have proven highly successful. I believe we can now take another step forward by introducing a special allowance following the birth of a third and consecutive children in those regions of Russia where the demographic trend is still negative. These families would be eligible for an additional 7,000 rubles a month until the child is three years old. In 2013, the federal government will provide 90 per cent of the funds necessary, aiming for a gradual decrease of its share to 50 per cent by 2018, with the rest paid out by the regions with downward demographic patterns. This is just the beginning. We will need to evaluate the efficiency of the program. If it yields positive results and if the economic situation is favorable, we will seek to expand the program to other regions of Russia. In this case we can draw on the experience of the Soviet Union, which employed a similar practice to support specific regions, for example, its territories in the Far East.
I expect the regions with a high budget balance to step in and contribute their share by providing the greater part of the expenses or increasing the level of the allowance.
Of course, families with a large income should be excluded for this program. It will only be available to families with an income no higher than the region’s average. It would not be granted automatically. If a family is entitled to the allowance, it should be the duty of parents to apply for it. They would be put on the eligible list without long paper checks. However, local tax agencies will have the right to examine the incomes of grantees at random, on the watch for luxurious items, like ownership of upscale real estate. I believe that over time we should extend the practice of checks to other groups receiving state support.
The pension insurance program is arguably our highest achievement and the biggest challenge for the country. Our expenses on the pension exceed 10 per cent of GDP, which is a quarter of the budget of the expanded government. But we cannot rest on our laurels and should seek to further streamline our pension system.
After the collapse of the economy in the 1990s we simply had no other choice – we had to lift our elderly out of poverty. If we look back at the first year of post-Communist reforms, 1992 saw pension payments dwindle by 50 per cent in real value. After weak attempts to increase them throughout the 90s, they were further devalued by the 1998 default, making the lives of the elderly unbearable.
Wages and income levels had grown back to previous standards by the mid-2000s, while the revival of the pension system to the pre-crisis level of the 1990s took ten years of adjustments and the introduction of additional payments to minimum pensions to bring them up to the average subsistence pension level. The government considered that as its debt and has now repaid it.
We often hear voices that say that it was wrong to raise pensions in 2009, immediately after the presidential election. They say the government should do it today, ahead of the March 4 election, to secure its victory since pensioners are the most regular group of voters. I disagree. We took the decision as soon as we saw it was possible economically. Any other approach would have been, and would be, unethical.
Pensions will continue to rise. Again, I would like to mention that I am against the raising of the retirement age. Still, we need to take account of the interests of those who want to continue to work after they reach retirement age to increase the level of future payments. We need to take prompt steps to make it possible for people to postpone their official retirement.
The middle class needs a completely new pension policy. We need to give responsible people a broad choice of solutions to their problems – solutions that will rely not only on state support, but those that will work with the help of the state.
We need to work on better accumulation of savings in the pension account. For the time being, the accumulated part of savings does not grow fast enough. It doesn’t yield much profit and, as a result, is not an appealing option. However, without substantial accumulation of funds we are unlikely to close the embarrassing gap between the salaries of middle-class workers and the pensions they receive. The government can and must provide every citizen with sufficient means to buy food, medicine, clothing and other basic necessities. But if a person enjoys a high salary, spends as much as he wants and does not save for a rainy day, does he have a right to demand that the government helps him maintain the quality of life he was used to? If the accumulated part of the pension is empty, you can only rely on payments by all the active population. But we will soon see a decrease in the ratio between those who work and the retired.
It’s apparent that you cannot rely only on your usual savings. The government should ensure the safety of pension funds as well as sustainable profits on them. In some cases, it should provide additional funds.
Education and culture
The national education system must be able to meet modern challenges while remaining free for all people. There are, however, serious issues in terms of the quality of educational standards.
Here is what are our national priorities should be, in my opinion.
First, we must get rid of waiting lists for enrollment into public preschools, first of all, by expanding family-owned, private and corporate daycare centers. We should revise regulations that impede the development of such institutions. We should give children the opportunity to attend preschools as close to their home as possible. Teachers at non-public daycare centers should receive financial and training support from municipal budgets.
Second, we should ensure social equality in education. We are accustomed to the fact that selection of children for prestigious schools, as well as competition by their parents, begins as early as the first grade. Also, some of Russia’s big cities have schools that regularly demonstrate poor academic performance. They do not boast high achievers or competition winners. Instead, there are a lot of students with learning disabilities, deviant behavior, students with Russian as a second language. Schools no longer give people a chance to move to a higher social group. Instead, they reproduce and perpetuate social differentiation.
Children should not become hostage to social or cultural background of their families. If schools are run in difficult social conditions, they should be entitled to receive special support – just like lyceums and high schools working with problem-free children – in terms of learning techniques, staff and funds.
Third, for the past several decades, the system of extracurricular activities has lost the bulk of its staff and financing. Only half of schoolchildren attend hobby groups and additional classes, and only a quarter of which are free of charge. Such area as sports activities for children has been dealt a serious blow. The number of sports schools and clubs is growing, but most often they enroll junior athletes only for big-time sports, with tough selection taking place at a very early age.
Extracurricular activities must be returned within the realm of the state. They should be financed by the regional governments, with the necessary support from the federal budget. If the qualification of instructors working in this sector, including at sports schools and arts academies, is commensurate with that of school teachers, their salaries are to be gradually increased to the level of teachers working in comprehensive schools. This initiative will help us increase the share of students involved in extracurricular activities to 70-75 per cent by 2018, with no less than half of them studying free of charge.
Fourth, we will need to overhaul educational curricula and teaching techniques, an area where we are lagging behind. New curriculum for the high school should give students the opportunity to choose between five to six areas they want to major in, in accordance with their abilities and plans.
We need to build on our strong sides. Russian universities and the Russian Academy of Sciences have been famous for their mathematicians. We can set a goal to make our school education in math the best in the world in 10 years’ time. This will give Russia a serious competitive edge.
Fifth, it is high time to take tough decisions concerning student allowances. Those who cannot go on with their studies without it (and are high achievers at that), should get an amount equal to the students’ subsistence level, which will be around 5,000 rubles. That should be the case at least during the first couples of years when students have to focus on studies and not to get distracted by odd jobs. Student unions must keep an eye on the situation. Students are aware how their fellow classmates live. You cannot cheat them with forged papers. Of course, we will continue to issue scholarships and grants to those demonstrating outstanding academic and scientific performance.
Sixth, we will further modernize the standardized state exam. It has been often criticized lately, and with a reason. There have been serious concerns over its transparency in some of the regions and to its extent the exam results reflect the students’ abilities and knowledge. We should work to modernize this procedure in a systematic way, employ independent public observers to monitor the conduct of the exam, safeguard it against abuse and misrepresentation, and keep its essence and apparent benefits. By that I mean the principle of independency in assessing the quality of children’s education and work by schoolteachers, and the opportunity for children from rural areas and remote territories, from different kinds of financial backgrounds, to continue their studies in Russia’s best regional and federal universities.
Seventh, I cannot agree with those who advocate lowering the number of enrolled students so that the majority of young people would only have a chance to attend a secondary school or get vocational training. These proposals are not in line with the sentiment prevalent among the youth, a sentiment which is valuable and constructive for our society. But even with that, we cannot continue to tolerate a situation when university graduates are not able to find (often, they do not even look for) a job they were trained for and get employment at a place where they have to acquire knew knowledge and skills.
This happens due to the discrepancy between the distribution of state-funded spots and real needs of the labor market. Applicants are aware of this gap. This is these excessive state-funded spots are filled in by those who never plan, or do not have the basic training, to do the job they study for. When the majority of students, starting from their third year, work at a full-time job not connected to their future profession and fail to give their studies due attention, it means the government spends up to a quarter of the funds allocated for higher education – that is more than 100 billion rubles a year – inefficiently.
We need to restore the prestige and quality of our higher education. It is unacceptable when we enroll for state-funded spots (including at serious engineering institutes) applicants who do not have the knowledge and skills to study for the profession chosen. We need to build a system in which budget-funded spots will be filled only by those who have excellent and good marks in key disciplines or those who won dedicated competitions or contests.
Curriculum guidelines must be worked out with the help of employers’ unions. Together with other developed nations, we have identified the best way of training professionals for different practical competences. These are applied degree programs, combining fundamental education with job-ready skills. We need to promote this kind of education. By 2018, the share of graduates holding an applied bachelor’s degree should be not less than 30 to 40 per cent.
Eighth, we must get our system of higher education into order. There are a lot of institutions, including state-run, that violate the people’s right to get a proper education. The official agency supervising educational institutions has not been efficient in this regard. I suggest engaging members of our leading universities, in cooperation with scientists from the Russian Academy of Sciences and partnering with international experts, to conduct an audit of all educational curricula of higher learning, with primary focus on economics, law, management and sociology.
Those institutions that have lost the market for their graduates and do not conduct any serious research will lose independence and become part of more vibrant universities, with long-standing faculty and traditions. This process is underway. The government will allocate additional funds to restore scientific schools and extra training for students of institutes that will be embedded into bigger ones.
Ninth, we need to restore the prestige of applied professions and gear them to specific technology used on the market. Training will be done on the basis of high-quality secondary education completed in school. It will not take three to four years, as is the case now. It will take 12 or even six months. This will be hard work indeed, with students learning the ropes and honing their skills at real workstations, under the guidance of the best professionals. Such training will be available not once in a lifetime, but whenever necessary. The government and employers must set up such training centers through joint efforts. Professional vocational schools and colleges will be turned into multi-competence centers with training available on a broad range of programs. Of course, we will act with caution, without disruption existing patterns that have proven effective and are popular with people.
Investment in education will become our key budget priority. This is not only about training workers for the economy, it is also a vital factor of our social development, helping to foster the values that unite all of us. In this aspect, the role education is closely linked with that of culture.
We have to admit that in the past decade we did not pay enough attention to promoting culture. We were lulled by growing demand for concert halls and theater performances and the spread of the internet, where cultural heritage is amply presented. Of course, the government sought to spur creative impulses and supported museums, libraries and other cultural institutions. But the scale of these kinds of activities did not match the commercial part of the people’s leisure. Programs on Russian federal television stations has become too commercialized, or, as some put it bluntly, simply vulgar.
As a result, we see a growing disparity between the level of support and consumption of culture – compared to 1990, the number of museums and theaters has grown while the number of visits has dropped.
It would improper to use administrative leverage to suppress commercial projects. In a free market, people vote with their money. However, the mission of culture and art is not limited to this, so the government, together with private sponsors, should create an environment for this mission to be realized.
First, we should ensure unlimited access to national and world cultural treasures. The government will support in the setting up of public e-libraries, museum and theater internet-resources, it will purchase rights for a free internet show of outstanding movies and theatrical performances.
Second, culture should re-claim its key position in people’s leisure. We will promote amateur and folk arts, beginning at school, where the position of an instructor will be introduced – it could be a director, an artist, choreographer or musician. Other necessary resources will be allocated. It is crucial that children get acquainted with the national culture of the different ethnicities residing in Russia as early as in school.
Bigger and medium-sized cities will develop a practice when museums stay open until late in the evening. “Museum nights” are popular in Moscow and some other cities.
The government will pay special attention to museums, theaters, libraries and clubs in small towns. That is where people suffer the most from the lack of cultural events. The Ministry of Culture, together with regional authorities, should prepare a government program for developing culture in small towns – and organize a wide discussion of it with the intelligentsia.
Since museums have a large number of exhibits that are not on display, we should create a national museums’ mobile collection that would go to the galleries of small and medium-sized cities of Russia, affording many people an opportunity to come in contact with high culture.
Third, we will allocate more funds for the system of grants provided through tenders to individual artists and artistic groups, including youth groups. We should pick up the practice of inviting young artists from abroad by offering them scholarships and conditions for working and communicating with each other. Such international centers exist in many European cities. They not only improve the quality of cultural environment but also help to spread national culture around the world. We will also offer more scholarship for young Russian artists, offering them an opportunity to work in a new city or in a new region.
Fourth, digital television offers an opportunity to create specialized national channels. We should have special channels for classical music, theater, visual arts, architecture, literature and history. Of course, we should also have a few channels of “children’s classics” for every age group.
A fundamentally new legal framework for developing healthcare was introduced in Russia in 2011. It will make the distribution of funding for medical institutions fairer and more transparent, and patients will have considerable rights with regard to choosing a clinic or a physician. Employing the opportunities provided by the legal framework to their full capacity will take a few years. In the meantime, we need to deal with a number of remaining issues as regards healthcare.
First, patients are not content with the quality of medical services. This primarily concerns the qualification of physicians and nurses. Along with ensuring competitive incomes for healthcare professionals, we need to carry out an appraisal of the professional qualifications of physicians within the next four years, combining it with an upgrade concerning professional development programs. Professional associations of healthcare workers must play an instrumental role in such an assessment.
Second, better quality healthcare can largely be attained by an improvement in its organization. In most cases, outpatient treatment is indeed more comfortable for patients and cheaper for the government. Notably, the healthcare systems in economically advanced countries assign a much greater role to outpatient care than we do in Russia.
However, while promoting and improving outpatient treatment, we need to bear in mind that its efficiency depends upon the quality of medication. We need an elaborate roadmap for developing the supply of pharmaceuticals otherwise we will simply spend money on financing foreign pharmaceutical industries. We have already adopted a program for developing Russia’s pharmaceutical industry and production of medical equipment, assigning upwards of 120 billion rubles to these purposes. Now we need to take care of regulating the market for such products and to provide customer notification. The latter function should be left to medics themselves and their professional community rather than production companies.
Third, no money will be sufficient for funding the national healthcare system unless we make sure that each individual feels greater responsibility for their own physical condition. Today, some 80 per cent of people in Russia fail to do sports or physical exercises, 65 per cent regularly smoke or consume strong alcoholic beverages, and 60 per cent tend to apply for a medical examination only in the event of an ailment. At the same time, most people participating in the polls would state with confidence that they do look after their health!
Fourth, healthcare is primarily about preventive medicine, and promoting a healthy lifestyle should play a key role in this regard. We will be providing opportunities for citizens to be able to do physical exercises free of charge in their neighborhoods or in the office. We will be determined and persistent in combating drug addiction, and we will be taking measures aimed at discouraging the consumption of alcohol and tobacco.
Average housing supply in Russia has increased by 40 per cent compared to the Soviet era, currently amounting to 22 square meters per citizen. The proportion of shared multi-family apartments in the overall housing supply has decreased four times. However, if we compare our present capacities to those in European countries or in the United States, our standards will appear quite humble. Housing prices have increased exorbitantly and disproportionately. Today, only one in four Russian citizens can afford to buy a new apartment or have a new house constructed. According to market experts, buying an apartment of 54 square meters in area in 1989 would have taken 2.5 years of saving an entire average monthly salary; nowadays it would take 4.5 years. (Despite the fact that most products in the market have become much more affordable in terms of relative prices in the meantime.)
A decrease in the affordability of housing is exactly what many of our fellow citizens regard as a sign of deteriorating living standards in Russia compared to the days of the USSR. A lack of foreseeable improvement in this area distorts the day-to-day priorities of many people.
Today, we assist in providing housing for war veterans, military officers and young families. We relocate the residents of decrepit buildings that no longer provide decent living conditions. We have assessed our financial capacity and we have decided to assign an additional 30 billion rubles before the end of 2012 to finance the construction of housing for war veterans. We will continue such assistance, and we will seek to promote and expand it, primarily to include young families with children.
However, that is not enough. The middle class should be able to purchase new housing using mortgage frameworks. So far, a mortgage is unaffordable for most middle-class citizens, especially in Russia’s major cities, where housing is overpriced.
What is our proposal?
First, we need to decrease the cost of construction. Importantly, it should not be done by cutting wages or compensation rates, but by checking the prices of construction materials and by preventing corruption, which contributes greatly to the inflated housing prices. Even today, housing construction often gets stalled in authorization procedures. I estimate that construction companies and their staff spend up to two-thirds of their time getting their businesses through the intricate bureaucratic procedures rather than performing construction as such.
We will introduce competitive selection and examination for prospective construction projects: as it is, many projects spend years waiting to be examined. Developers will be able to apply for private as well as state-organized feasibility studies. We will reform certain authorization and supervision procedures into notification procedures, which will enable developers to save considerable resources.
At the regional level, we need to ensure the prevention of artificial monopolies on the part of both developers and the suppliers of basic construction materials. In some regions, for example, even certain sand- or gravel-pits enjoy monopoly status. For some reason, such sandpits are in most cases owned by friends or relatives of the region’s former senior officials.
In total, we are capable of deflating the prices for comfortable state-of-the-art housing by no less than 20 per cent, and even by up to 30 per cent in some regions.
Second, we need to introduce large quantities of real estate plots into the market through the enlargement of suburban areas around big cities, through the construction of traffic networks and infrastructure, and through the privatization of unused land plots presently owned by government institutions. There can be no sacred cows in this regard. In the process, real estate should be provided free of charge to developers specializing in affordable or municipal housing or other social facilities in return for them capping their selling prices. The government will introduce a special roadmap to that end no later than autumn this year.
Third, mortgage rates should be brought down along with inflation rates. We should develop and promote savings instruments similar to the German building-and-loan associations. We have launched a number of regional pilot projects in this area, and we are planning to expand them. Finally, we will advance our program for the provision of interest rate subsidies on mortgages to young families and public sector employees. The money to finance the program may become available once we have completed the construction of Olympic facilities in Sochi, the construction of APEC premises in the Far East, and the implementation of the housing provision program for military officers.
Fourth, along with improving the availability of housing for sale, we need to establish a civilized market for rented housing. In most European countries, for example, from one-third to one-half of all families live in rented houses and apartments all their lives, and do not feel deprived in any way. To that end, we should encourage the establishment of specialized companies set up by developers as well as independent entities. Their operation will be based on standardized contracts that will secure the rights of long-term tenants, as opposed to the current situation where people who rent apartments get used to living out of a suitcase.
There is one more reason I regard this as a key area. Affordable housing is an important prerequisite for increasing our citizens’ geographic mobility, and for enhancing the competitive advantages of Russia’s regions and cities.
For low-income households, we will be developing the segment of non-profit lease.
In summary, the aforementioned measures will enable us to provide affordable housing for 60 per cent of Russia’s families by 2020, as opposed to the current ratio of one-quarter of families. And by 2030, we should be able to solve the housing issue altogether.
Housing utilities and services are a particularly troubled sector in our country. Public utility fees constitute a significant and ever-increasing share of the average Russian family’s living expenses. Today, Russian consumers already pay 90 per cent of the so-called “economically justified” tariffs, yet public utility companies are perpetually inflating their prices. At the same time, the quality of services rendered, from house-cleaning to yard-keeping to capital repairs, fails to match their prices by a long shot.
Statistical data from many regions of Russia show that local monopolies and the lack of control over service suppliers are at the root of the problem. Also to blame are local authorities, who are either unable or reluctant to ensure fair competition in the public utilities market. Regular individuals are often left to deal single-handedly with monopolies, and low-income senior citizens are often the ones who suffer most.
Regional and local administrations must ensure that quality public utility services are available to residents in their area, and they must be specifically liable for such performance. You can either ensure the provision of utility services by supporting a single pet company out of the state budget, or can you do it by making you local utility market attractive to many companies who will compete with one another.
We need to introduce order and better regulation to the housing and public utilities sector through joint effort.
First, we need to educate our citizens en masse in public utility economics and the relevant legal framework. We need to promote the creation of a network of non-profit organizations that would assist consumers in aligning themselves, securing their interests, and supervising service quality by utility companies.
Second, we will introduce a social standard rate of consumption for public utilities, which will help us make their pricing more adequate. It is important to develop compensating mechanisms to ensure that senior citizens do not get overcharged in case they remain the sole tenants of a large apartment, provided that they have resided there for no less than 10 years.
Third, it will be impossible to modernize Russia’s public utilities sector funding it with consumer fees and budget allocations alone. A key prerequisite for such an upgrade is the attraction of private investors, to which end a favorable competitive environment must be ensured. The task of private utility businesses is to carry out large-scale projects for infrastructure development rather than raise money through tariffs. For this purpose, utility fees will be determined in advance for a period of at least three years, and tariffs for this period will be calculated based on a simple pricing formula, which should be coherent for both the customer and the investor. The principal requirement is that utility tariffs shall depend upon the reliability and the quality of services rendered.
Preservation for Russia
About 40 per cent of global mineral resources are located in Russia, whereas Russia’s population makes up a mere 2 per cent of the global population. The implications of this disparity are obvious. Unless Russia implements a long-term comprehensive agenda for demographic development to build up its human potential and develop its territories, it risks turning into a geopolitical “void,” whose fate would be decided by other powers.
Today, Russia’s population is 143 million. Experts forecast that in case of an “inertia scenario” – that is, with no old measures introduced, and with all the present trends still in place – by 2050 Russia will only be some 107-million strong. But if we manage to formulate and implement an efficient, comprehensive policy for population saving, then Russia’s population may increase up to 154 million. The historic cost at stake in choosing between action and inertia is therefore some 50 million lives within the next 40 years.
First, we must support families with multiple children. I have already addressed the measures for mitigating the temporary financial strain that affects many families with thee or more children.
In addition to that, we must implement a special preference policy in the area of housing supply for families with three or more children.
We will propose additional solutions for facilitating employment for women with children. Such jobs will enable a successful combination of parenthood and professional application, allowing a flexible schedule, out-of-office activities, available kindergartens and preschools. A woman returning to business after maternity leave should have the opportunity to receive some occupational training. And her employer should be able to count on support from the government.
Secondly, we will definitely need a smart migration policy based on clear-cut standards and criteria, which would prevent the risks of ethnic or cultural clashes. We will need to maintain the inflow of migrants at 300,000 persons a year. We will primarily aim to extend the invitation for permanent residence in Russia to our compatriots living in other countries, as well as skilled professionals and promising young people.
We have already implemented a relocation program for compatriots who wish to move to Russia. It needs to be said straight out that it was inefficient. Entering a new stage of development as a nation, we need to revisit this issue and develop a much more efficient and far-reaching set of measures to support our fellow Russians who wish to move to their land of origin.
I have already noted in my article on inter-ethnic policy that the primary criterion for admitting anyone for residence and employment in Russia is the applicant’s ability to embrace our culture and our values. I suggest that we remove any legal restrictions for foreign citizens who wish to enroll in Russian vocational schools under the same conditions as Russian citizens (that is, passing exams and attending classes in Russian). We must also significantly facilitate the issuance of a residence permit and subsequently Russian citizenship for graduates of Russian universities who have found employment in line with their profession in Russia.
We must arrange our social, economic, migration, humanitarian, cultural, educational, environmental and law-making policies to address the task of boosting Russia’s human potential. It must serve a long-term strategy with historic implications, not merely a campaign agenda.
The key factor of social policies in Russia is not even the scale of resources that we commit to address our social challenges. It is the efficiency of measures we undertake. We need to change the trend in the next couple of years, sorting out all of the inefficiencies in our social policies that lead to the pointless squandering of resources, when the latter are denied to the most disenfranchised and instead provided to the better-off, when we keep on supporting certain institutions without evaluating their efficiency in working for the people, when we put the interests of public servants before the interests the people they are supposed to serve.
In the next decade we must change the situation. Every ruble allocated for social support must produce value and bring about justice. A fair society and a fair economy will be the key conditions for Russia’s consistent development for years to come.