SOCIETY
A Military Operation That Pays
August 14, 2024
Vladimir Zvonovsky
Professor at Samara State University of Economics
Alexander Khodykin
PhD, Samara Social Research Institute
Sociologists Vladimir Zvonovsky and Alexander Khodykin discuss how the Russia-Ukraine conflict has affected the financial situation of Russians – who has won and who has lost, who is saving and who is racking up debt.
According to official statistics, what had been strong household income growth in Russiacooled after 2008, while after 2014 household income generally declined, the exceptions being 2019, 2021 and 2023.
In 2022, Rosstat reported a 1% decline in household income, which turned to 5.4% growth in 2023. And though in dollar terms real disposable income decreased by more than a quarter – from $806 to $586 a month – the growth in ruble terms has allowed Russians generally to maintain their usual living standards and consumption levels.
In 2022, Rosstat reported a 1% decline in household income, which turned to 5.4% growth in 2023. And though in dollar terms real disposable income decreased by more than a quarter – from $806 to $586 a month – the growth in ruble terms has allowed Russians generally to maintain their usual living standards and consumption levels.
A mobilized man in Mari El, October 2022. Source: VK
Fiscal spending in the military sphere
The main drivers of the income growth have been fiscal spending in the military sphere, where wages for defense-industry workers were significantly increased, and the labor shortage in Russia.
The government has allocated big money to manufacture weapons and military equipment. To keep up, the defense sector and related industries (light industry, transport, communications) are sucking up workers. Against this backdrop, employers from other sectors of the economy have been forced to increase wages. This has led to higher and higher ruble incomes, both nominal and real, amid high volatility of the ruble exchange rate.
Journalist investigations have shown that it is typically men from provincial industrial cities and rural areas and with financial problems who go to fight in Ukraine.
The so-called “national republics” in the Caucasus, along with Tyva, Buryatia and other heavily subsidized regions, account for the highest number of men serving in Ukraine per capita, both those who signed contracts and those who were mobilized. Meanwhile, there are significantly fewer residents of Moscow and St Petersburg, along with other relatively well-off regions, like Yamalo-Nenets.
The main drivers of the income growth have been fiscal spending in the military sphere, where wages for defense-industry workers were significantly increased, and the labor shortage in Russia.
The government has allocated big money to manufacture weapons and military equipment. To keep up, the defense sector and related industries (light industry, transport, communications) are sucking up workers. Against this backdrop, employers from other sectors of the economy have been forced to increase wages. This has led to higher and higher ruble incomes, both nominal and real, amid high volatility of the ruble exchange rate.
Journalist investigations have shown that it is typically men from provincial industrial cities and rural areas and with financial problems who go to fight in Ukraine.
The so-called “national republics” in the Caucasus, along with Tyva, Buryatia and other heavily subsidized regions, account for the highest number of men serving in Ukraine per capita, both those who signed contracts and those who were mobilized. Meanwhile, there are significantly fewer residents of Moscow and St Petersburg, along with other relatively well-off regions, like Yamalo-Nenets.
“The huge fiscal spending on the defense sphere has been a boon to many Russians, especially in poor regions.”
To test this hypothesis, we looked at the relationship between the perceived improvement in personal well-being (lichnoye blagosostoyaniye) and the share of soldiers from different regions of the country. (Earlier phases of this study were published here.)
Dynamics of mortgage debt
Since data on how many residents of a particular region serving in Ukraine is not publicly available, we used death toll estimates (as of May 2024) from BBC and Mediazona, which have been collecting information about the number of deaths by region for a while. We assume that the more soldiers from a region, the more deaths there will be, and vice versa. The military mortality rate is calculated as the number of deaths in the conflict relative to the total number of men 18-49 years old in a region.
The economic indicators are based on the last pre-war statistics from the Central Bank (for 2021) and the most recent at the time of this writing (for 2023). We refer to what is outstanding on a mortgage loan as “mortgage debt.” This is not overdue debt, just the part of the debt to the bank that has yet to be repaid. It indicates the total volume of mortgage loans accumulated by the population of the region.
Neither for 2021 nor for 2023 was there any significant link between the military mortality rate and the volume of mortgage debt relative to the population of a region.
However, between the military mortality rate and the growth in mortgage debt per capita in 2021-23, there is a significant positive correlation (0.384).
Dynamics of mortgage debt
Since data on how many residents of a particular region serving in Ukraine is not publicly available, we used death toll estimates (as of May 2024) from BBC and Mediazona, which have been collecting information about the number of deaths by region for a while. We assume that the more soldiers from a region, the more deaths there will be, and vice versa. The military mortality rate is calculated as the number of deaths in the conflict relative to the total number of men 18-49 years old in a region.
The economic indicators are based on the last pre-war statistics from the Central Bank (for 2021) and the most recent at the time of this writing (for 2023). We refer to what is outstanding on a mortgage loan as “mortgage debt.” This is not overdue debt, just the part of the debt to the bank that has yet to be repaid. It indicates the total volume of mortgage loans accumulated by the population of the region.
Neither for 2021 nor for 2023 was there any significant link between the military mortality rate and the volume of mortgage debt relative to the population of a region.
However, between the military mortality rate and the growth in mortgage debt per capita in 2021-23, there is a significant positive correlation (0.384).
“In other words, the volume of mortgage loans taken out and yet to be repaid has increased the most in the regions whence men are more likely to be fighting in Ukraine.”
The administration building of Progress Aviation Plant, Arsenyev, Primorye. Source: Wiki Commons
Thus, in the regions where the share of soldiers in Ukraine is higher than the national average (what we call the “highest contributing” regions), mortgage debt has increased since the conflict started, while previously such a divergence was not observed.
This correlation could suggest that people are using payments received for fighting in Ukraine to improve their living conditions by taking out mortgages.
Note that mortgage debt reflects the total volume of debt from the date of receipt of the loan to the present day, and thus only to a certain extent does it reflects loan taken out in the last two years. More indicative is the total volume of mortgages taken out in a given period, i.e., not just the unpaid debt on them. According to 2021 data, the regions whence men would most actively go to fight in Ukraine did not stand out in terms of the volume of mortgages. For 2023, however, the correlation is already positive and statistically significant at 0.470.
The correlation between the military mortality rate and growth in the volume of mortgages is even higher (0.574). In other words, the mortgage debt burden on households grew faster in the “highest contributing” regions than in the rest of Russia.
More soldiers, more mortgages
The cost of a square meter of housing varies greatly across Russia depending on the living standards in a region. Where people live better, the cost of housing and mortgages is higher, and vice versa. This means that payments to soldiers go further in poorer regions, buying more housing than in richer regions.
To exclude the impact of housing costs, let’s look at how the number of mortgage loans has changed: whereas at the end of 2021 there was no link between the number of mortgage loans in a region and how likely men would be to go to fight in Ukraine, in 2023 a positive and significant correlation emerged, reaching 0.548. Thus, we get the same result.
At the same time, the number of mortgages in the regions with more men going to Ukraine per capita is growing faster than in the rest of Russia: the correlation between the military mortality rate and the growth in the number of mortgages from December 2021 to December 2023 was 0.572.
As we can see, all three indicators of mortgage activity by Russian households – the volume of mortgage debt, the volume of mortgage loans and the number of mortgage loans – show that it has increased the most in the regions whence men are more likely to go to fight in Ukraine.
This correlation could suggest that people are using payments received for fighting in Ukraine to improve their living conditions by taking out mortgages.
Note that mortgage debt reflects the total volume of debt from the date of receipt of the loan to the present day, and thus only to a certain extent does it reflects loan taken out in the last two years. More indicative is the total volume of mortgages taken out in a given period, i.e., not just the unpaid debt on them. According to 2021 data, the regions whence men would most actively go to fight in Ukraine did not stand out in terms of the volume of mortgages. For 2023, however, the correlation is already positive and statistically significant at 0.470.
The correlation between the military mortality rate and growth in the volume of mortgages is even higher (0.574). In other words, the mortgage debt burden on households grew faster in the “highest contributing” regions than in the rest of Russia.
More soldiers, more mortgages
The cost of a square meter of housing varies greatly across Russia depending on the living standards in a region. Where people live better, the cost of housing and mortgages is higher, and vice versa. This means that payments to soldiers go further in poorer regions, buying more housing than in richer regions.
To exclude the impact of housing costs, let’s look at how the number of mortgage loans has changed: whereas at the end of 2021 there was no link between the number of mortgage loans in a region and how likely men would be to go to fight in Ukraine, in 2023 a positive and significant correlation emerged, reaching 0.548. Thus, we get the same result.
At the same time, the number of mortgages in the regions with more men going to Ukraine per capita is growing faster than in the rest of Russia: the correlation between the military mortality rate and the growth in the number of mortgages from December 2021 to December 2023 was 0.572.
As we can see, all three indicators of mortgage activity by Russian households – the volume of mortgage debt, the volume of mortgage loans and the number of mortgage loans – show that it has increased the most in the regions whence men are more likely to go to fight in Ukraine.
“The data suggests that soldiers and their families often spent the money they earn for serving in Ukraine to improve their living standards.”
The Baikal–Amur Mainline railway, Buryatia. Source: Wiki Commons
The conflict and consumer loans
Despite the influx of cash into the “highest contributing” regions, people are now taking out consumer loans more often. In 2021, these regions did not stand out in terms of the consumer debt burden; however, in 2023, a significant positive correlation emerged between the volume of consumer loans in rubles per capita and the military mortality rate (0.380), meaning the “highest contributing” regions began to take out more consumer loans.
The connection between military mortality and growth in the consumer debt burden in rubles per capita is even more pronounced (0.581). Thus, in the regions whence men most actively go to fight in Ukraine, the consumer debt burden has grown more than the rest of the country.
Consumer loan debt in the “highest contributing” regions also increased in comparison with other regions in 2023: there is a significant correlation between the military mortality rate and the volume of consumer loan debt in rubles per capita (0.283).
For 2021, there is no link between the “highest contributing” regions and loan activity.
The correlation between military mortality and the growth in consumer loan debt is even more pronounced (0.402). This data also confirms our conclusion: in the regions whence men most actively go to fight in Ukraine, the consumer debt burden of households has increased significantly during the conflict.
The most likely reason for this is that the economic changes that have emerged because of the conflict and the international isolation of Russia have had a bigger impact in regions with relatively low living standards, whose residents are also more likely to go to fight in Ukraine.
In regions where, even before the acute phase of the Russia-Ukraine confrontation, income levels barely allowed people to meet their basic needs, a worsening economic situation has now forced them to take out more loans to maintain their usual living standards.
Whereas previously the loan activity of Russians in the “highest contributing” regions did not differ significantly from the rest of the country, now it does.
Such dynamics are playing out against the backdrop of a growing debt burden across the Russian population as a whole.According to the Central Bank and the Scoring Bureau (which tracks credit histories), during the Ukraine conflict Russians began to take out more loans, the number of Russians with four or more loans has increased and the number of mortgage borrowers and the average number of loans per borrower has also gone up.
The number of microloans issued to Russians has increased just as dramatically during the conflict. The dynamics are congruous with our data. During the conflict, the volume of microloans has expanded 53%, while debt is up 33%.
Overall, the volume of microloans taken out by Russians is growing at a faster pace than in 2021.
Meanwhile, there is a direct, significant link between military mortality in a region and the growth in the volume of loans there (0.581), as well as the growth in unpaid debt on them (0.402).
In other words, the debt burden on residents of the regions with more men going to Ukraine per capita is growing faster than on other Russians.
Despite the influx of cash into the “highest contributing” regions, people are now taking out consumer loans more often. In 2021, these regions did not stand out in terms of the consumer debt burden; however, in 2023, a significant positive correlation emerged between the volume of consumer loans in rubles per capita and the military mortality rate (0.380), meaning the “highest contributing” regions began to take out more consumer loans.
The connection between military mortality and growth in the consumer debt burden in rubles per capita is even more pronounced (0.581). Thus, in the regions whence men most actively go to fight in Ukraine, the consumer debt burden has grown more than the rest of the country.
Consumer loan debt in the “highest contributing” regions also increased in comparison with other regions in 2023: there is a significant correlation between the military mortality rate and the volume of consumer loan debt in rubles per capita (0.283).
For 2021, there is no link between the “highest contributing” regions and loan activity.
The correlation between military mortality and the growth in consumer loan debt is even more pronounced (0.402). This data also confirms our conclusion: in the regions whence men most actively go to fight in Ukraine, the consumer debt burden of households has increased significantly during the conflict.
The most likely reason for this is that the economic changes that have emerged because of the conflict and the international isolation of Russia have had a bigger impact in regions with relatively low living standards, whose residents are also more likely to go to fight in Ukraine.
In regions where, even before the acute phase of the Russia-Ukraine confrontation, income levels barely allowed people to meet their basic needs, a worsening economic situation has now forced them to take out more loans to maintain their usual living standards.
Whereas previously the loan activity of Russians in the “highest contributing” regions did not differ significantly from the rest of the country, now it does.
Such dynamics are playing out against the backdrop of a growing debt burden across the Russian population as a whole.According to the Central Bank and the Scoring Bureau (which tracks credit histories), during the Ukraine conflict Russians began to take out more loans, the number of Russians with four or more loans has increased and the number of mortgage borrowers and the average number of loans per borrower has also gone up.
The number of microloans issued to Russians has increased just as dramatically during the conflict. The dynamics are congruous with our data. During the conflict, the volume of microloans has expanded 53%, while debt is up 33%.
Overall, the volume of microloans taken out by Russians is growing at a faster pace than in 2021.
Meanwhile, there is a direct, significant link between military mortality in a region and the growth in the volume of loans there (0.581), as well as the growth in unpaid debt on them (0.402).
In other words, the debt burden on residents of the regions with more men going to Ukraine per capita is growing faster than on other Russians.
“This means that, statistically speaking, the more men from a region who die in Ukraine, the faster the debt of the region’s residents is likely to grow.”
Kyzyl, the capital of Tyva Region. Source: Wiki Commons
At the same time, there is no significant link between military mortality for a region and the number and amount of deposits per capita. This may indicate that payments received by soldiers and/or their families are spent on consumption and not saved.
Perhaps the reason for this behavior is that the decision to go to Ukraine is driven by an inability to provide oneself and one’s family with the desired level of consumption, with payments for serving seen as a way to solve this problem.
It is also possible that amid rising inflation, people tend to spend the money they receive as quickly as possible.
Our hypothesis, which still requires validation, is that early in the conflict either idealistic patriots or those who felt “cornered” – for example, those who had serious debt problems – went to Ukraine. However, gradually the situation changed, with serving coming to be seen as an opportunity to make good money. According to preliminary, still-unpublished data collected by ExtremeScan in Belgorod Region, 22% believe that volunteers are chasing easy money, while 36% said they are fulfilling their duty. Among young people and civilians who have seen shelling, this ratio shifts toward the material.
On the other hand, according to the Central Bank, individual bank accounts rose 18% in 2023, while in several of the poorest regions (Tyva, Chechnya, Buryatia, Altai, Dagestan, North Ossetia, Adygea, Mari El and Transbaikal) the growth was 25%.
According to our data, during the conflict the increase in the average deposit in these regions was 89%, while in other regions it was 53%. These nine regions send the most people to fight in Ukraine per capita (according to the abovementioned BBC and Mediazona research, in these regions there are an average of 358 killed at the front per 100,000 men, while in other regions the average is 201 killed), with the increase in savings there likely driven by military payments.
There was no link between the military mortality rate and growth of deposits in Russian regions overall, but in the poorest regions there is such a correlation.
Perhaps the reason for this behavior is that the decision to go to Ukraine is driven by an inability to provide oneself and one’s family with the desired level of consumption, with payments for serving seen as a way to solve this problem.
It is also possible that amid rising inflation, people tend to spend the money they receive as quickly as possible.
Our hypothesis, which still requires validation, is that early in the conflict either idealistic patriots or those who felt “cornered” – for example, those who had serious debt problems – went to Ukraine. However, gradually the situation changed, with serving coming to be seen as an opportunity to make good money. According to preliminary, still-unpublished data collected by ExtremeScan in Belgorod Region, 22% believe that volunteers are chasing easy money, while 36% said they are fulfilling their duty. Among young people and civilians who have seen shelling, this ratio shifts toward the material.
On the other hand, according to the Central Bank, individual bank accounts rose 18% in 2023, while in several of the poorest regions (Tyva, Chechnya, Buryatia, Altai, Dagestan, North Ossetia, Adygea, Mari El and Transbaikal) the growth was 25%.
According to our data, during the conflict the increase in the average deposit in these regions was 89%, while in other regions it was 53%. These nine regions send the most people to fight in Ukraine per capita (according to the abovementioned BBC and Mediazona research, in these regions there are an average of 358 killed at the front per 100,000 men, while in other regions the average is 201 killed), with the increase in savings there likely driven by military payments.
There was no link between the military mortality rate and growth of deposits in Russian regions overall, but in the poorest regions there is such a correlation.
“Military payments have spurred growth in Russians’ savings, but only in the poorest regions, whence soldiers are more likely to come, is the impact on the financial situation of residents noticeable.”
Residents of the “highest contributing” regions have more debt but do not stand out either on the number or the size of deposits per capita – with the exception of the nine regions mentioned above, where military payments have become a significant part of the economy.
Amid low housing availability, fighting in Ukraine is often one of the few ways for men in relatively depressed regions to improve their material well-being.
They likely seek to use their higher bank savings to fund long-term projects (getting education, having children, investing, etc.) and minimize the damage to their lives from negative economic circumstances.
On the one hand, military payments (both to soldiers and workers close to the military sphere) have become a significant source of capital growth (including housing), especially in the poorest regions. On the other hand, these payments have changed the system of economic incentives and the distribution of capital in Russia, driving a new type of economic stratification, with the amount of money on bank accounts and the debt burden simultaneously growing.
Some Russians have benefited from the war, while others have lost a lot. The closer one’s work is to the defense sector, the more likely one is to have benefited. This trend is especially pronounced in economically depressed regions, where for many, going to Ukraine has become almost the only way to escape poverty.
Amid low housing availability, fighting in Ukraine is often one of the few ways for men in relatively depressed regions to improve their material well-being.
They likely seek to use their higher bank savings to fund long-term projects (getting education, having children, investing, etc.) and minimize the damage to their lives from negative economic circumstances.
On the one hand, military payments (both to soldiers and workers close to the military sphere) have become a significant source of capital growth (including housing), especially in the poorest regions. On the other hand, these payments have changed the system of economic incentives and the distribution of capital in Russia, driving a new type of economic stratification, with the amount of money on bank accounts and the debt burden simultaneously growing.
Some Russians have benefited from the war, while others have lost a lot. The closer one’s work is to the defense sector, the more likely one is to have benefited. This trend is especially pronounced in economically depressed regions, where for many, going to Ukraine has become almost the only way to escape poverty.
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