Geography as a Factor of Living Costs in Russia

CEIC Russia Data Talk: The average subsistence cost of living in Russia has steadily risen from RUB5,083 per capita, per month in the first quarter of 2009, to RUB5,902 during the fourth quarter of 2010, before hovering within the RUB6,200-6,700 range throughout 2011 and 2012. As of the fourth quarter of 2012, the average living cost amounted to RUB6,705. The average subsistence cost is essentially the minimum amount of money required to meet a person’s basic necessities. The indicator is based on a basket of government-calculated products and services deemed necessary for the subsistence of a single person (different contents of the basket are calculated for an average citizen, a working adult, a pensioner and a child). The cost of living differs from the minimum wage in that it serves as a social rather than an economic measure for monitoring the social situation in the country. The minimum wage, on the other hand, is an enforcement tool used to protect the lowest-paid workers’ rights and is used as a calculation base for tariffs, fines and various other payments. For reference, the minimum wage in Russia, as of January 1st, 2013, equals RUB5,205. However, there are wide disparities in living costs between the different geographical regions, as well as sharp changes over time that may differ from changes in the country at large. For example, the cost of living in the Republic of Altay skyrocketed during the first quarter of 2009 to the RUB6,600-6,700 range from a range of RUB5,100-RUB5,600 during 2008 before turning back down into the RUB5,400-5,500 range by mid-2010, after which its growth trend closely resembled that of the country’s average. The northern regions of Russia colloquially referred to as “The Far North Regions” have the highest cost of living in the country. Living costs in the area exceed RUB10,000 per capita; the Kamchatka region, in particular, saw its cost of living topping out at RUB13,395 during the fourth quarter of 2012. At the other end of the spectrum, the Tambov region has the lowest cost of living, having never once passed the RUB5,000 mark in recent history; as of the fourth quarter of 2012, the average living cost stood at RUB4,870. These discrepancies are largely attributable to the differences in climate and the disproportionate infrastructural development and subsequent disparity in weathering economic and seasonal obstacles, ranging from economic crises to droughts. The cold harsh climate in the Far North, as opposed to the warm climates of the Caucasus, acts a natural inhibitor of economic activity, imposing restrictions on the possibilities for agriculture and transportation of goods, among others, which raises the expenditures associated with their products. Higher transportation costs increase the everyday prices of goods transactions by inflating producer input costs. One such example is electricity and heating: the increased dependence on these two crucial services of every business in the Far North drives the local suppliers of goods to increase their prices in order to compensate for their larger (as opposed to North Caucasus) expenditures for energy, which in turn increases the overall cost of living. Such details are easily overlooked when looking at country averages, but should never be forgotten. In a territory as large as Russia, the discrepancy between regions located at opposite ends of the country can be staggering, and should be accounted for at every step of the business planning process. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. By I. Kostin - CEIC Analyst Back to Blog
22nd May 2013 Geography as a Factor of Living Costs in Russia