SOCIETY
Russians' perceived prosperity in the "special operation" context
November 15, 2022
  • Vladimir Zvonovsky 

    PhD in sociology, Professor at Samara State University of Economics

Vladimir Zvonovsky on how Russians’ perceived economic situation has evolved during the military conflict in Ukraine and which factors influence their perceptions
During armed conflicts, existential concerns largely replace economic ones, though individuals and society as a whole continue to function in certain socio-economic conditions, the perception of which remains the most important factor in terms of adapting to changing everyday life. A stable economic system allows the same social groups to attain economic success like in peacetime. However, a rapidly changing economy can change the balance between the winning and losing groups.

Recent years have been a time of economic prosperity for Russians. According to Rosstat, from 2019 to the middle of 2022, real wages remained virtually unchanged.

What are Russians saying about their financial situation?

To understand the social situation in which the main social groups find themselves, it isn’t formal statistics that are important but people’s sense of changes and where they are leading. Even unwealthy people, if their prosperity is increasing, look to the future with optimism and are ready to invest in professional development and support political forces that created the conditions for growth.

Conversely, if well-to-do people sense that their financial situation is deteriorating, they are more likely to negatively view the economic situation in the country and the political figures associated with it. Meanwhile, their motivation to be active economically will decrease due to fears that this will further worsen their prosperity. Overall, the perception of personal prosperity has a greater influence on public opinion and social behavior than statics and even actual prosperity.

In the second half of August, the Social Research Foundation conducted a telephone survey of a representative sample of Russian adults (1,600 people). Approximately a third (35%) noted that over the past year their financial situation had worsened. More than half (53%) didn’t report major changes, and only approximately one in seven to eight (13%) saw an improvement.

In other words,
“For every Russian who saw his financial situation improve, there are nearly three who reported it getting worse."

Figure 1. Perception of changes in personal well-being across age groups (N = 1,600, August 2022)

The survey was conducted about six months into the Ukraine conflict, but the questions didn’t mention the events in Ukraine. However, from the standpoint of Russians’ personal prosperity, the changes that have taken place against the backdrop of the conflict are mainly perceived negatively.

Our study showed that the age of respondents has a profound effect on their perception of the changes. While every fifth young Russian (20%) reported an improvement in their personal prosperity, only 8% said so among the pre-retirement cohort (45-59 years old). The older generation stood somewhere in the middle.

We have noted previously that amid the course toward autarky taken by the Russian government, the oldest Russians, who are guaranteed a minimum income in the form of state pensions, feel more secure and confident in the future. However, as far as Russians of working age are concerned, the older the individual, the more likely that he has become worse off in recent months.

Residents of cities of various kinds and sizes don’t differ much in how they view their financial situation changing in recent months, though there are differences between cities versus villages. While more than a third of city dwellers (34-38%) reported a deterioration in their financial situation, the figure for village dwellers was only 28%. This seems to indirectly support the conclusion of economic geography experts that the economic consequences of the Ukraine conflict are especially acute for service-sector workers and residents of big cities.

An integrated assessment of changes in prosperity can be considered the share of people whose financial situation has improved over the past year versus the share of people whose financial situation has deteriorated. If the ratio is less than 1, this means that negative assessments prevail over positive ones; if it is greater than 1, then positive assessments prevail. 

Figure 2. Backward-looking index of personal prosperity across various social groups in Russia (N = 1,600, August 2022)

The poor getting poorer faster, the rich slower

On average for the country, this indicator – let's call it the backward-looking index of personal prosperity – came in at 0.38, meaning people who saw a deterioration in their financial situation outnumber people who saw an improvement by a ratio of 3:1. Meanwhile, it was 0.63 among young people and 0.21 among pre-retirees.

The figures for people employed in the public and private sectors significantly differ (0.44 and 0.29, respectively). The changes that have taken place in various markets have of course hit people working in these markets. Yet they have affected state employees to a much lesser extent: their incomes don’t depend on the volume of products sold, while the state compensates them for rising expenses by indexing wages. Non-working pensioners (0.50) felt the economic pain even less. They have a low but stable income, which is least affected by shockwaves from the crisis.

The industry in which a person works is a significant factor. Workers at metallurgical companies, some of the hardest hit by sanctions, registered only 0.14 in the index, while among those employed in oil and gas extraction and processing – where sanctions are due to come into effect only on December 1 – the figure was 2.40. Thus, arguably sanctions significantly impact perceptions of changes in people’s financial situation.

Though of greater importance here is not the level of prosperity expressed in some monetary or nonmonetary units (e.g. living area or brand of car) but rather one’s perception of the dynamics, income does affect that perception. As can be seen in Figure 4, among those whose average monthly income over the past three months was no more than RUB 12,000, the prosperity index was only 0.18; meanwhile, among those whose income was over RUB60,000, it jumps to 0.69.

Thus,
“In the current environment, higher income groups seem better able to maintain their level of prosperity, or to paraphrase a well-known phrase: 'the poor are getting poorer faster, and the rich slower'."
Attitude toward government and perception of prosperity

How people perceive the changes in their prosperity significantly depends on their political views and the information they consume about socially significant events. Among those who access only “traditional” media (primarily state TV channels), the personal prosperity index was 0.62, versus 0.25 among people who make efforts to obtain independent information using VPNs.

VPNs are predominantly used by respondents who are critical of the government’s current policies and who have escaped the influence of official narratives. It seems that people with a negative attitude toward the government tend to see negative changes in their prosperity. This conclusion is also supported by the correlation of the index with views toward the special operation: the more diverse the sources of data on how other social groups are faring, the worse the perception of one's own prosperity.

Perceptions are closely related to attitudes toward key political events, such as the conflict in Ukraine. As can be seen in Figure 3, Russians who support the special operation say much less frequently that their financial situation has deteriorated than those who don’t support it (0.50 versus 0.13, respectively). Thus, we might say that a further deterioration in people’s financial situation will weaken support for the special operation, while conversely support could rise if people’s perceived prosperity improves. 

On the other hand, the data could indicate that opponents of the special operation are more acutely aware of its negative consequences, in particular with regard to their own financial situation. 
“At the same time, supporters prefer not to focus on its negative consequences."

Figure 3. Backward-looking index of personal prosperity across various social groups in Russia

(N = 1,600, September 2022)

The data from the backward-looking index of personal prosperity support the following conclusions:

1) Most Russians have taken a hit from the ongoing crisis: for the entire population, the index comes to 0.38, meaning the number of people who witnessed a deterioration in their financial situation is triple that of people who saw it improve.

2) Across all age groups, people of pre-retirement age – some of the most vulnerable in the labor market – have suffered the most from the crisis. Meanwhile, Russians of retirement age feel least affected, as they have small but stable pensions, along with lower consumption, which serves to color their perception of the crisis.

3) The perception of crisis effects is directly related to state guarantees of income stability. Pensioners and state employees, whose income is guaranteed by the state regardless of market changes, feel the crisis the least, while people whose income depends on market conditions, like business owners and employees at private firms, have borne the brunt of the crisis.

4) Whether sanctions have already gone into effect or are only expected in the segment where one is employed is a factor for perceived prosperity. In industries where sanctions have yet to come (e.g. the production and processing of hydrocarbons), the index reading is very high, with the opposite true for industries that have been operating under sanctions for many months.

5) Prosperity perceptions are influenced by people’s ability to escape the influence of state media, as well as their political views. Respondents who use VPNs to access independent information and don’t support the special operation report being more affected by the crisis. One interpretation of this is that people who have been hit hardest by the crisis are showing an increasingly critical attitude toward the government. Thus, a deepening of the economic situation could dampen public support for a military solution to the conflict in Ukraine. Another interpretation is that Russians who are dissatisfied with government policies may be more attuned to the economic consequences of those policies. 

Figure 4. Perceived prosperity dynamics in 2022 (N = 1,600, February and August 2022)

Index dynamics

The researchers asked Russians the same question about perceived changes in their financial situation at the end of February, on the third and fourth days of the hostilities: 17% reported that their financial situation had improved, 31% that it had worsened and 53% that there were no major changes. Traditionally, at the end of winter/early spring, Russians give the lowest assessments of their prosperity. Nevertheless, as you can see below, prosperity perceptions were higher in February than in August. In February, the backward-looking index of personal prosperity was 0.54 before dropping to 0.38 in August.

The index dynamics show the unevenness and asynchrony of the impact of the crisis on different social groups. Take the economic situation of people of different ages: people of pre-retirement age felt the crisis the most, with the index reading halving from 0.44 in February to 0.21 in August; meanwhile, for young people, the index actually rose, from 0.53 to 0.63. It seems Russian youth have adapted to the prevailing conditions (before the mobilization) faster and more fully than their older compatriots.

At the beginning of the conflict, the differences in prosperity perceptions between city and rural dwellers were more significant than in August. In February, Muscovites viewed the dynamics of their prosperity most negatively (0.36), while six months later their assessments remained basically unchanged (0.36), though those of rural dwellers significantly worsened (from 0.77 to 0.50). As we can see, immediately after the outbreak of hostilities, it was mostly residents of the capital who were reporting a deteriorating financial situation, but now rural areas have also begun to do so.

Figure 5. Perceived prosperity dynamics in 2022 (N = 1,600, February and August 2022)

During the active phase of the conflict, the perceptions of Russians with and without higher education also converged. In February, the prosperity index was 0.42 and 0.63, respectively, while in August it was 0.31 and 0.43. The recent events were first felt by more educated groups before spreading to everyone else.

State employees reported basically no changes in their perceived prosperity, the index inching lower from 0.46 to 0.44. During that time, the circle of private-sector workers affected by the crisis almost doubled: 0.49 in February versus 0.29 in August. The rapid decline of the domestic market – driven by foreign sanctions and exacerbated by restrictions introduced by the Russian authorities – particularly affected the actors in the market and then their employees as they were either laid off or had their wages cut.

The index for the lowest income group remained practically unchanged over six months (0.11 in February versus 0.15 in August), while among high-income Russians it dropped significantly from 2.32 at the end of winter to 1.77 at the end of summer. 
“Thus, the first months of the wartime economy and life under sanctions dealt the biggest blow to the highest income Russians."
This was previously noted by economists, who pointed out that the Russian banking system, when faced with a difficult situation, essentially confiscated the foreign-currency deposits of Russians – clearly belonging to wealthier groups. This is probably what is being reflected in the downward dynamics of the prosperity index for these groups.

An important clarification needs to be made here. It was shown above that with rising incomes, Russians’ assessments of the recent past seem to be more positive. At the beginning of the special operation, the correlation was even stronger, though the past months have significantly leveled the assessments across income groups.

Since the beginning of the conflict, the prosperity index has significantly dropped for those who support the special military operation, from 0.77 to 0.50. Early on, they might have seen a link between their personal prosperity and the outbreak of hostilities – perhaps they saw the “special operation” as the beginning of the transformation of both Russia’s military-political system and the foundations of the country’s economy. In particular, some expected that the operation would entail a rejection of the market: in the mass consciousness, it is often considered imposed by the West, while the standoff with the West in fact created the conditions that led to the invasion of Ukraine. Now such hopes are likely to have faded.
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