The problem of excessive inequality as an obstacle to the realization of the functions of the social state (on the example of the Volga Federal District)

Ermakova Eka R. ORCID: 0000-0001-8464-9605 PhD in Economics Associate professor, Department of Theoretical Economics and Economic Security, Ogarev N.P. Mordovia National Research State University 430004, Russia, respublika Mordoviya, g. Saransk, ul. Mordovskaya, 35, 195, kv. 78 eka-tsulaya@yandex.ru Other publications by this author

introduction

Article 7 of the Constitution of the Russian Federation (adopted by popular vote on 12.12.1993 with amendments approved during the all-Russian vote on 01.07.2020) the essential understanding of the welfare state as an institution, whose policy is aimed at creating conditions that ensure a decent life and free human development, is fixed.

Often, the interpretation of the category of the welfare state is associated with the criterion of equality of opportunity as an integral element of justice. However, the ideological perception of equality as a parameter of the welfare state has different accents. From the position of conservatives, equality of opportunities (including material ones) for various segments of the population is important (which is achieved through a redistributive and sometimes equalizing mechanism); liberal doctrine focuses on equality of opportunities for access to educational, medical and other social benefits; social democracy positions equality of chances as an auxiliary means of achieving the main goal – social equality ^[1]. Therefore, the parameter of practical realization of equality of opportunities (which is essentially a target function of the welfare state) can be considered one of the markers of the functioning of the welfare state (in this paper we will define it as a blue marker).

Inequality, characteristic of the imperfect (distorted, deformed) state of the socio-economic system, also performs in some way the function of a (red) marker of the welfare state, determining the amount of society's distance from a given equality parameter. In this regard, this article will be devoted to determining the depth of income inequality of the population of the Volga Federal District regions, as the most obvious, statistically deterministic and generating inequality of social opportunities.

Let's make a reservation right away that the phenomenon of socio-economic inequality has a complex nature not only economic, but also legal, historical, political, ideological nature ^[2]. As already mentioned, we will focus on the economic manifestations of the chosen marker of the functioning of the welfare state.

The very nature of market relations, which form the basis of the modern economic system of Russia, presupposes the competitive beginning of any economic interaction, which results in objective "fair inequality" or normal (stimulating development) inequality, as defined by Russian scientists ^[3]. The market principles of economic development predetermined the rejection of the equalizing distribution of social services and the displacement of the volume of goods consumed into the group of the financially secure population ^[4]. In addition, the transition to market-based economic functioning in our country was forced, and the imperfection of the distributive mechanism of national welfare gave rise to excessive (or retarding development) socio-economic inequality ^[5], the basis of which was the distancing of the population with labor income from the population with income from capital ^[6].

The causes and manifestations of socio-economic inequality are many-sided. It is impossible to primitize the problem by reducing its study to the opposition of the poor and the rich, and the analysis to the study of individual strata of society. Each stratum has its own characteristics, capabilities and limitations, as well as markers of social stratification. Scientists identify several groups of markers of social stratification, one of which is directly related to the level of income that provides an appropriate level of consumption of status goods ^[7]. In this regard, consider income inequality as a starting point for stratification and social distancing.

METHODOLOGY AND SCIENTIFIC NOVELTY OF THE RESEARCH

          The purpose of the work is to determine the scale of regional differentiation in terms of living standards (based on the analysis of monetary indicators) within the Volga Federal District, as well as the determination of intraregional level of socio-economic inequality.

           The research methodology is based on an interdisciplinary approach to the study of the phenomenon of inequality as a limiter of the objective function of the welfare state. General scientific methods (analysis and synthesis, induction and deduction, unity of historical and logical), as well as special methods of economic science (functional analysis) are used in the process of work.

             The object of the study is the phenomenon of inequality as the antipode of the criterion of the welfare state.  The subject of the study is the parameters of socio–economic inequality by income of the population of the Volga Federal level regions.

              Scientific novelty of the study:

1. Equality and inequality (according to the monetary criterion) are determined as markers of the welfare state.

2. The place of the Volga Federal District regions in the integral rating of socio-economic development is determined.

3. The problem of excessive socio-economic inequality of the macroregion is assessed as complex and deep, the tools for its eradication are a coordinated and subordinated to common goals and objectives set of redistributive tools. social and structural policies of the state.

RESEARCH RESULTS

The studied set of subjects of the Federation is represented by the regions of the Volga Federal District, whose socio-economic situation is extremely heterogeneous, as evidenced by the spread of places in the ranking of regions of Russia (Figure 1).

Figure 1 – The place of the regions of the Volga Federal District in the integral rating of socio-economic development for 2022 (according to RIA-rating)

Among the subjects of the studied population there is both a leading region (the Republic of Tatarstan), which is in the top 5 regions of Russia in terms of socio-economic development, and outsider regions (the Republic of Mordovia and the Republic of Mari El - 61 and 68 places out of 85 possible). Orenburg and Saratov regions occupy the middle positions in the rating.  Samara and Nizhny Novgorod regions are close to the top ten (12th and 13th places, respectively). The Republic of Bashkortostan and Perm Krai have a relatively good rating relative to such regions of the Volga Federal District as the Kirov, Ulyanovsk, and Penza regions.

Thus, it can be stated that according to the integral indicator of socio-economic development, there is a polarization of the regions of the Volga Federal District into leading regions (the Republic of Tatarstan, Samara and Nizhny Novgorod regions) and regions located in the second half of the rating among all subjects of the federation (the Republic of Mordovia and the Republic of Mari El, the Chuvash and Udmurt Republics, Kirov, Ulyanovsk, Penza region). It should be noted that the number of outsider regions within the Volga Federal District is 2.5 times higher than the number of regions leading the socio-economic development rating. It is quite obvious that the latter are the center of attraction of labor resources and are significantly ahead of outsider regions both in terms of population and monetary income (Figure 2).

Figure 2 shows that 9 out of 14 subjects of the Volga Federal District are located at the tail of the rating of regions of Russia in terms of monetary income per capita (the Udmurt Republic is in 62nd place, the Ulyanovsk Region is in 64th place, the Kirov, Orenburg, Penza regions are in 66, 67, 68 positions, respectively, the Saratov region is in 71st place). The regions with the lowest monetary incomes per capita in the Volga Federal District were the republics of Chuvashia, Mari El, Mordovia (79, 80, 81 places, respectively, out of 85 possible). This situation does not contribute to solving the problem of securing young specialists in the listed regions of the Volga Federal District and causes a negative migration balance among them. In turn, low cash incomes limit consumer demand of the population of these regions, which negatively affects business activity in these subjects of the federation.

Figure 2 - The place of the PFD region in the list of subjects of the Russian Federation by monetary income per capita (according to RIA-rating)

Figure 3 shows the values of per capita, modal, median income, as well as the poverty boundaries in the regions of the Volga Federal District in comparison with the average Russian values.

Figure 3 – Incomes of the population of the subjects of the Volga Federal District in 2022

We see that only in the Republic of Tatarstan the actual values of all types of income exceed the average Russian values. In other regions of the Volga Federal District, the average per capita monetary income is 20-35% lower than the national average, the modal income is 5-20% lower than the average in Russia, and the negative gap in median income reaches 37%. 

Thus, we can say that there is a polarization of regions within the Volga Federal District according to the criterion of monetary income of the population – one region (the Republic of Tatarstan) is pronounced, the situation in which is more prosperous than the average in Russia. There are four regions with incomes close to the average Russian values, although slightly below this threshold - Samara, Nizhny Novgorod Region, Perm Krai and the Republic of Bashkortostan. In most regions of the Volga Federal District (nine), incomes are a quarter to a third lower than the national average.

Interestingly, according to the indicator "the share of the population with incomes below the average per capita in the region", the Republic of Tatarstan is in the lead (63.6%). Given the fact that this region ranks first in the Volga Federal District in terms of per capita monetary income, such a position on the above indicator indicates a deep polarization of the population in terms of income within the region. At the same time, the state of extreme poverty (poverty) in this region is characteristic of only 5% of the population, which is almost 2 times better than in Russia as a whole (where the share of the population with incomes below the subsistence minimum was 9.8% in 2022, Figure 4).

Figure 4 – The share of the population with incomes below the subsistence minimum in the subjects of the Volga Federal District in 2022, %

The Nizhny Novgorod Region also has an acceptable poverty level of 8% (which is below the scientifically justified threshold of 10%). In other regions, the poverty level exceeds both the national average and the threshold. The maximum value of the poverty level in the Republic of Mari El is 16.3% of the population have incomes below the subsistence minimum. That is, in Mari El, the poverty level is 3.3 times higher than in the Republic of Tatarstan. This situation does not favor harmonious spatial development: within the federal district, a center of attraction for the workforce and young professionals is being formed, while other regions suffer from personnel hunger due to low wages and, as a result, a low standard of living.

It is also advisable to consider the structure of income of the population (on average for the Volga Federal District it is shown in Figure 5).

Figure 5 – Income structure of the population of the Volga Federal District in 2022, %

In the context of the regions of the Volga Federal District, the population of such subjects as the Ulyanovsk and Kirov regions, the Republic of Mari El, Chuvashia, Mordovia receive over 30% of income as social benefits, which indicates an extremely low standard of living and insufficient labor income. Social payments in the incomes of residents of the Republic of Tatarstan occupy only 18.2%; they have high other non–labor (income from property, capital, entrepreneurship) and labor (shadow) incomes - 34.2%. While residents of the Penza Region, Udmurt, Chuvash Republics and the Republic of Mordovia have a share of similar incomes that does not exceed 15-17% of total income.

The analysis of the income of the population in the regions of the Volga Federal District confirms the thesis about the uneven development of historically and geographically connected regions and the lack of equal opportunities for the realization of labor potential in the regions (income gaps are large, so we can talk about the limitations of the realization of labor potential in outsider regions). It is noteworthy that only one region (the Republic of Tatarstan) has a pronounced leadership in the studied parameters. Four regions (the Republics of Udmurtia and Bashkortostan, Nizhny Novgorod and Samara regions) have an acceptable position, they are reaching for the leader. Unfortunately, the number of regions with significant negative deviations of indicators from the comparison base is significantly higher (5-9 depending on the parameter).

Let us now turn to the traditional indicators of inequality, which characterize the uneven distribution of income within the regions themselves.

Figure 6 shows that the greatest value of income distribution inequality indicators is recorded in the "rich" regions, those that looked the most prosperous at the previous stage of the analysis.

Thus, the gap between 10% of the richest and 10% of the poorest population (fund ratio) in the Nizhny Novgorod region is 12.7 times, in the Republic of Tatarstan 12.3 times, in the Republic of Bashkortostan 11.9 times. In the same regions, the maximum values of the decile coefficient (the ratio of the minimum incomes of 10% of the most affluent population and the maximum incomes of 10% of the least affluent population) and the Gini coefficient (income concentration coefficient). The question arises about the fairness of income distribution within the "prosperous" regions. Most likely, the same non-labor incomes (income from property, capital), the share of which is significant in the listed subjects of the federation, form the basis for the property and income differentiation of society within the region itself.

Figure 6 - Indicators of income inequality in the regions of the Volga Federal District, 2022

In regions with a low standard of living (according to the monetary criterion) and a high level of poverty – the Chuvash and Udmurt Republics, the Republic of Mordovia, Penza, Kirov, Ulyanovsk regions, inequality indicators are not so high. The Gini index varies in the range of 0.322-0.346, the decile coefficient does not exceed 5, and the maximum value of the funds coefficient in these regions is 9.8.

If our analysis had not started with a comparative analysis of the absolute values of income in the regions and an integral rating of their socio-economic development, relatively low indicators of inequality could lead to a false conclusion about social well-being in these regions. However, taking into account all the studied regional parameters, the conclusion suggests that the super-rich in these regions are not as rich as in the "prosperous" regions, and the high level of poverty in them emphasizes that inequality here has its extreme form of manifestation – poverty.

The distribution of income between the quintile groups of the population in the Volga Federal District as a whole, as well as in the Kirov and Nizhny Novgorod regions (as in the regions with the most and least uniform distribution of income, respectively, is shown in Figure 7.

It is obvious that regions that are prosperous in terms of absolute indicators of income and economic performance face no fewer problems than depressed regions and outsider regions. The fact is that the problems of development within these two groups of regions are of a different nature – the first is to reduce excessive, excessive income inequality of the population (which can lead to social and political crises), and the second is to raise the standard of living and create favorable conditions for economic activity. Both regions are far from the blue marker of equality of opportunities (realization, income, access to social benefits, etc.) in a social state: some – due to polarization and deep stratification of society, others – due to lack of financial resources.

Figure 7 – Lorentz curves of the Volga Federal District, Kirov and Nizhny Novgorod regions as of 2022

       CONCLUSIONS AND SUGGESTIONS

       Among the permanent markers of the welfare state, it is necessary to highlight the equality of social opportunities provided by effective management tools in the country (redistributive policy, employment policy, income policy, active social policy, working social elevators). The obstacle to ensuring equality of social opportunities is the deep stratification of society, excessive inequality of the population in terms of income and wealth, uneven spatial development.

       The analysis highlighted the pronounced polarization of the subjects of the federation within the Volga Federal District: thus, 9 out of 14 administrative units of the macroregion in the second part of the rating of regions of Russia in terms of monetary income per capita, only 1 region (the Republic of Tatarstan) is among the top five. It is noteworthy that a similar situation is observed for other studied monetary indicators (monetary incomes of the population, the level of poverty, indicators of income inequality of the population).

            In the macroregion, one subject of the Federation (the Republic of Tatarstan) represents the most favorable living conditions in terms of working conditions, income level, and provides ample opportunities for the realization of human potential. It is logical that the Republic of Tatarstan has become a center of attraction for both labor and financial resources in the Volga Federal District.

        The largest number of subjects of the federation in the macroregion are unattractive in terms of wage conditions, living standards of the population, ensuring equality of opportunities for self-realization (Republic of Mordovia, Republic of Mari El, Republic of Chuvashia, Penza region, Ulyanovsk region, etc.). Only a few regions (Nizhny Novgorod region, Republic of Bashkortostan and partly Samara region) have strong positions in the ratings considered, but at the same time they differ in the maximum indicators of income inequality of the population within themselves.

            Such regional heterogeneity contributes to the strengthening of further stratification of society and territory (the poor get poorer, the rich get richer), which, in turn, carries social and political risks.

Scientists propose various mechanisms for smoothing socio-economic inequality and eliminating the uneven development of regions. There is an opinion that the polarization of regions will increase in the future and that the importance of small non-resource non-innovative regions of Russia will be reduced to the role of satellites of the leading regions (poles of growth) ^[8]. In this case, infrastructure service industries will become the basis for the growth of satellite regions. According to this theory, along with the growth of the leading region, there will also be an improvement in the conditions and indicators of development in the satellite region. This strategy is realistic, but, in our opinion, removes the region from approaching the blue marker of the welfare state.

The problem of differentiation of the population by income has traditionally been solved through a redistributive mechanism ^[9] and/or an active social policy ^[10]. There is an opinion of scientists with whom we agree that the problem of socio-economic inequality and territorial differentiation is difficult to solve using only the tools of redistributive and social policy ^[11]. The first one can demotivate labor and entrepreneurial activity in the long term, and direct financial flows aimed at material support of citizens can set a "poverty trap".  We are by no means arguing that it is necessary to abandon these tools, but only talk about their insufficiency to solve a deep, protracted problem.

The solution to the problem of regional development imbalances, in our opinion, lies in the development and implementation of a fundamentally new structural policy aimed at diversification and demonopolization of the economy ^[13]. The impetus from the change in the structure of the economy in the long term will affect both the income level of the population and the social sphere.

 Among the tools for solving the problem of socio-economic inequality (in addition to the aforementioned redistributive mechanism), we will highlight the triggers of social elevators that work even with the continued stratification of society by income.

It is the social elevators that ensure fairness and equality of access to social benefits and the labor market, while continuing injustice in the distribution of income. The starting mechanisms of social elevators can be high-quality free education (in terms of advanced training or professional retraining), high-tech jobs, social contracts, small business development, etc. The function of creating these triggers and the institutional environment for the operation of social elevators is assigned to the state.

It is with regret that we have to state that the fashionable trend of Lifelong learning (lifelong learning) puts a financial burden on the employee himself: employers practically do not finance the training and retraining of their employees (which negatively affects both labor productivity and its payment). This is evidenced by the cost structure of Russian organizations for their employees. Thus, the share of organizations' expenditures on vocational training of their employees is only 0.2% in the structure of labor costs in 2021. The state, as a social institution, guarantees universal access to free general education, but there is no systematic policy to provide opportunities for vocational training or retraining in accordance with the new requirements of the modern labor market. In our opinion, it is important to involve not only the administrative and financial mechanisms of the state, but also the institute of social responsibility of business in solving this problem.