RECENT TRENDS IN SOVIET PERSONAL INCOME AND CONSUMPTION

Created: 10/30/1962

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I.

II. Personal Income and

IH. Trends in Real Personal Disposable Income,

Earnings of Wage and Salary

Income of Collective

Taxes and Compulsory Bond

IV* Recent Trends In

of Foodstuff

of nonfood

Soft Goods.

Consumer

E- Communal

V. Tbe Problem of the Recent

Tables

Share of Various Types of Personal Income Received by

tbe Population5 (in

Annual Rates of Growth of Real Personal Disposable

lacoae (in

of Wages Received by Wage and Salary Workers as

Retirement

k. Time Schedule for tbe "Abolition" of Income Tax for Wage and

Salary Workers,

ftga

5- Average Annual Per Capita Rate8 of Growth of Coapooeots of

Consumption (in

Par Capita Consumption of Soft Goodc la the USSR and the US.

Stocks of Consumer Durablesamilies in the USSR

end the

Annual Rates of Growth of Urban and Rural Liring

Space (in

Recentn Soviet Pcrsoaal. Income and Conuugptloo

I. Introduction

As part of the examination of recent economic orowth in the Soviet economy, this paper concerns itself vith trends in real personal income and the several components of consumption. DuringsO'a consumption was awarded an extremely low priority. The primary concern of the Soviet planners was to train and maintain an effective labor force as cheaply as possible. Thus, only those resources essential for this purpose were allocated to consumption.

The low priority awarded consumption throughout this period stems only indirectly from Marxian ideology. Karl Marx, in his treatise Das Kapitol, setormula by which an economy which wishes to increase its rate of growth can best succeed. He explainedation, by Increasing the share of its national product allocated to producer goods, and reducing the share allocated to concuner goods, can increase its rate of growth. Hevertbeless, Marx did not indicate the criteria to be followedocialist economy in allocating its resources between producer and consumer goods, nor the appropriate speed and pattern foration's economic development. Instead it was necessary for the Soviet government, the first nation to adopt Marx's political philosophy, to adjust this formula to its goals.

Tbe formula adoptedhe year in which tbe Soviet Union'sear Plan was Initiated, placed primary emphasis on heavy industry as the most rapid road to economic development. Thereafter the needs of heavy industry were to assume highest priority. Tbe results of this policy were

forced cawing* Urtiversion ofto investment

channels. thea'.;, ne stera of national output going: tot wasowards tiio futon production of coobujufr gc-ods and sjrvicea. but rath-t- to ths output of aon imustaent goods. Thusbe aoai iflipartnnt aroiuction targets have DOM tools, steel, and chemicals, not textiles, shoes, and radios.

Illustrative of this policy vas the fall of consumption, which representedercent of GUPoerceatyaccording to computations aade by Professorj During World War II, the proportion of GfJP which vas devoted to consumption contioued to fall rapidly, reaching kO percent in ooKtVor, upon term!nation of the War, consumptionhare of GUP rose, reachingercent

* BothHP7 ruble factor costs.

** It should be DOtoC acvaveXjovan though no usbare of GNP sight decline brtveen tuo points in ttat, tho increase in GHP during the period itfjjM. ioto be greater in the second period'.n

Since the demise of Stalinonsumer veirare has beenigher priority. However, thisriority boa not token tbe formrowing share of tba national product, butelatively constant shareraving national proiuet. Per example, consumption hare of OIIP5 was ep^rccde-ialyoent, or only slightly higher than/ end while *li*ve iso published measure of consumptionhare oC GMP (valued la factor costs) foe tee periodn independent calculation reveals taut this share iwxs probably declined somewhat.

Tbe shift in allocs clonal policy probably did not represent signsenevolent dictatorship but rather an attempt by the Soviet leadership toolicy more conducive to maximizing growth. Increases in labor productivity were to be obtained partly through effective economic Incentives rather than through the harsh and oppressive measures used ine and

In discussing consumption in the OSSR, this paper will focus primarily on the period Kevcrtheless, since the great improvement in the welfare of the Soviet consumer dates fromhe events which occurred in theill frequently be compared with what has happened since.

Despite the significant gains in per capita consumption of goods and serviceB duringn, in recoct years agriculture and Industry have foiled to molutaln the earlier growth rates in tho output of food, fiber, and manufacture it consumer goods. esult, there haslowdown in the incremento in available goods and services for consumption. Meanwhile disposable income received by the Soviet population has continued to increaoo rapidly. The growing disparity between the rates of Increase in personal income and real goods and services has resulted in Inflationary pressures. The government attempted to alleviate thlo situation somewhat by suspending the scheduled abolition of Income taxes Ina. la addition, the increase in the prices of meat and butter in? has also helped to reduce inflationary pressures somewhat.

IX* Personal Incomen:;uoptlon

Tbe position or the consumer la the recent period of rapid Soviet growth can be evaluated by observing the trends in personal income and consumption. This paper, therefore, is devoted primarily to estimating these trends on the basis of the best available data.

* The wages of wage nod salary workers come directly from state oources. In general the total wage of the individual worker is comprised of tbe basic wage, bonuses and prerda end is nearly independent of the production performance of the enterprise. The collective farm on the other band Isooperative form of enterprise. Persons participating In collective farm work earn "workdays" (trudodnl) and their earnings per workday are directly related to the current income of the farm. Thus, collective farm workers are reimbursed after the collective faro has paid its taxes, insurance, contribution to the capital fund, and productloo and administrative expenses fron the money revenue which it has corned fron the sale of faro products. After these expenses are net, the remainder In available for distribution to the peasants, along with the produce set aside for thla purpose. The cash and produce are paid to the participants in proportions determined by the number of "workdays" each earned during the year.

A detailed report on the data in this paper is being prepared for publication elsewhere.

Corresponding to US practice, personal income is defined in thlo paper to include both money income and income-in-kind. In contrast to the Soviet definition. It does not include the value of communal services provided by the State, for example, through its health and education systems. Money income in turn is comprised mostly of vnges received for labor performed in the State sector or on collectiveransfer payments, und proceeds from the sale byf consumer goods (mostly foodstuffs). Income-ln-kind an important share of personal income in the Soviet Union, is the value of commodities consumed by households for which no monetary payment is node. These products consist primarily of tbe unmarketed share of payments-ln-ltind received fron the collective farm for labor services and those agricultural commodities produced froa small private holdings in tbe form of gardens and livestock. ets forth the relative importance of tbe different types of compensation for the Soviet population

Table 1

Relative Share of Various Types of Personal Income

Received by tbe Population5 (in percent)

Honey

Wage Fund of Wage and Salary Workers in State

Money Income Received by Collective Formers from Wages and

Income from 3ole of Farm

Transfer

Other

Income-In-Kind

a.Includes cooperative artisans wages, income from tbe sale of farm products by workers and employees in the State sector, prisoners' wages, profits distributed to cooperative members, other urban labor income, and military pay (including subsistence).

b. Includes Imputed rent, prisoner subsistence, farm household incomo-ln-kind, and investment-In-kind.

Section III discusses the trends in real personal disposable Income in the Soviet Union0 For an exnal nation of trends In consumer welfare, personal income la converted to real personal disposable Income by deducting direct taxes and net bond purchases and then deflating the roBldualrice index of consumer goods and services. This price indexeighted index combining several individual price Indexesanner designed to approximate the changes in thof goods and services purchasedussian consumeraso year.

Total

Tbe trends In the conponents of real consumption are dincussed in Section IV. Peal consumption is defined as the quantity of consumer goods and services valued in bsso year prices that the economy supplies to ItB members. In tho Soviet Union real consumption consists of five basic categories (l) goods and services sold by the State retail tradeoods acquired by consumers in collective farm marketo,*urchases of Bervices from municipal enterprises or artels, co that part of personal production on private plots or collective farm cnraingB-ln-kini which is consumed rather than sold,he array of goods and services supplied to the population by the State free of direct charge. Section IV alsorief discussion of tho qualitative changes in Soviet consumption and the problems the planners face in selecting the correct assortment of consumer roods and services to be offered to the Russian people.

* Collective farm markets are local retail food markets where collective faros and individuals are able to sell any surpluses remaining at their disposal after they have met their legal obligations to the Government and satisfied their own requirements. Prices on the collective farm markets, in contrast to prices in State controlled stores, fluctuate in response to the conditions of supply and demand. ood sales on the collective farm markets end in State controlled storesercent andercent, respectively, of total sales of foodstuffs.

iocusses the problem of recent inflation Id the Soviet Union, and the steps which the government has taken to off act it.

m. Trends in Real Pergonal Disposablea-6l

Reel disposable lncoee Increasedapid rate0ut5 the rate of increase haa declined come what. In theeal personal, disposable Income (which represents disposable income deflated by an Index of consumer prices) Increased at the averageratesercentercent, respectively, orer capita basisercentercent, respectively. Since personal disposable income depends on tbe behavior of money earnings, income-in-kind, transfer payments, and the extent of deductions from money Income in the form of direct taxes and coopuleory purchase, tho varying trends in these coaponentn are discussed below.

Table 2

Average Annual Rates of Growth of Real Personal Disposable lncoee,

ihpercont)

Total a/

index of real personal disposable income was obtained by estimating

perscaal disposable Incomend deflating itrice index of goods and services. Estimates of the components of personal disposable income employed in the construction of the index were obtained or derived from official statements contained in tho Soviet proas or publications and from research performed by Western students of tbe Soviet economy. The weights for tbe index of tbe cost of goods and services to households were obtained by estimating purchases by households8 of (l) goods purchased in State and cooperativeervices, excludingousing, and (k) collective faro market sales. Tho price indexes to which these weights were assigned were estimated from official sources and from previous research on the Soviet economy performed in the

on unpublished estimates of population of the US Bureau of theManpower Office.

Per Capita b/

A. Gross Earnings of Wage and Salary Workers

Toe gross earnings of wage and salary workers In tbe State sector

increased at the average annual rateercent in the period

Workers' wages grew by an annual averageercent, while the labor force

increased at the average annual rate ofercent.**

It has often been Observed in modern industrial economies that over

time wage differentials tend to narrow. Under conditions of market confpetltlon

for labor, one wouldather continuous decrease in wage differentials

in the rapidly growing Soviet economy. But as Is characteristic of a

State directed economy such as that of the USSR, relative wages tend to be

rigid in the short run with large changes introduced from time to time.

According to Soviet literature, it would appear thathange in the

structure of relative wages has recently been Initiated in the Soviet Union,

the first significant change sinces. For example.he

minimum wage ratesor all wage and salary workers in State enterpriceB

and budgetary organizations vere raised by about one-third tooubles

per An Independent calculation reveals that this adjustment

affected more thanercent of the workers employed in the state*

* Includes wages of cooperative artisans in5lthough cooperative artisans did not become port of tbe State labor force

**ortion of the expansion of the State labor force represents the transfer of workers from collective ferns to State enterprises.

uble values in this report are given in new rubles established by the Soviet currency reformominal rate of exchange based on the gold content of the respective currencies0 ruble to This rate, however, should not be interpreted as an estimate of the equivalent dollar value of slmiinr US goods and services.

In addition to the minimum wageorker would be able to earn, he might receive an additionaloercent in the form of bonuses and other types of Incentive pay. Thus although prior to the increase In the minimumorker's total earnings might be more thenoubles per month, if hia base pay (stavkiwas less than this amount, he would beupplement to bring his base pay (not total earnings) up tom amount.

inimum wago rates are scheduled to be increasedorubles per month, while, they are to Jump tooubles, kf However, research Indicates that the new minimum wage levels inn tailed2 represent little more than an institutionalization of the earnings levels of the lowest paid workers before the wage adjustment. 5/

ajor wage reform was to be accomplished. According to official sources, the average wages received by workers In the State sector were to Increase byoercent, while the wages of lower paid worker: were to Increase byoercent. 6/ This action wan to be accomplished portly by reducing the pay differential between the highest and lowest grades. Fortep pay scale for wage workers (instead oftep pay scale) was introduced in most industries. The ratio between the first and 6th step woo set at approximately , rather thanhich existed Just prior to the wage Together with the change in the Structure of workers' wages, the salaries of engineers and other technicians were also raised, but by less than the relative increase In the wages of workers. Nevertheless, Walter Calenson has demonstrated that those Soviet comparisons are spurious, and that no sharp reduction in differentials actually took place because there wore almost no wage workers In thorader of the wage scales. 8/ Thus, one should actually have compared the dispersion between the 3rd step and the 8th step in the old scale with the dispersion between the 1st step and the 6th step In the new wage scale. The new extreme ratios in the various industries correspond roughly to the extreme ratios which were in existence prior to the wage reform. Mot only were the "actual" extreme ratios relatively unchanged by the wage adjustment, but the distribution of workers by "actual" wage grades was also not altered significantly. 9/

One important result of tho wage reform was the increase In the portion or on employee's total earnings uhich be receives In the form of base pay. While base pey constitutedoercent of total earnings prior to the wage reform, it is presently believed to constituteo Because the higher and middle paid workers' compensation was often basediece rata scale and included proportionally greater amounts of bonuses and preola than did tho pay of certain lower paid (and less skilled) coworkers who paidtraight time basin, the change in the wage structure, which will make it more difficultorker to earn bonuses and premla, is expected to reduce the disparity in rates between the various classes of workers.* However, tho actual effect of this action on reducing the disparity between income groups is expected to be only slight because tbe number of lower paid workers who are paidtraight time basts is relatively small, probably constituting less thanercent of all industrial production pcmanned. It would thus appear that the recent Soviet attempt to Improve the system of wage payments and to reduce wage differentials has not changed earnings differentials significantly.

B. Money Income of Collective Farmers

* The wage reform not oolyorker's base pay, but also the amount of work it was neceosary to perform Id order to receive that base pay. In so doing, it became Increasingly more difficultorker to earn bonuses and preola by overfulfilling bis goals.

The peasant population in households attached to collective farms has two primary sources of money income: (l) the remuneration for labor services expended on the collective formoney income from the sale of farm

products. The total money Income of tbe collective farm population from farming activity increased by V* percent51 as the result0 percent increase In money Income received, from the collective form0 percent increase in earnings from the sale of farm products.

Much of the increase in money Income fron participating In collective form activity can be explained by the change in the manner in vhlch the collective farm labor force won compensated for ito work. Over the past decade official policy reccannonded that the compensation of the collective farmers bo, wherever possible, in the form of cash payments rather than payaents-in-kind- Tbe effect of the nev policy can be seen by the fact that3 the portion of the total income paid out by collective farms in the form of cash for services rendered waspercent, but0 had Increased toercent.*ll/ Thus theercent increase in the wages paid to farmers represents not only an Increase in the amount which these woriters receiveday's labor, but alsoayment In lieu of the portion of the payeenta-in-kind which they no longer received under the nev compensation arrangement.

Money income from the sale of farm products by the collective farm population comes from the sale of products either obtained from their "own enterprises"land allotment and livestock held by the householdr from tbe sale of products obtained from the collective farm as In-kind payments. These sales now provide aboutercent of the collective farmers' money income from farming activity.

hose shares are based on an official, calculation which values paymento-in-kind in State retail oricec.

Great disparities exist in ineooe distributed not only within each collective form, but also among the various collective farms. It boo been estimated that farm Beehanixere (tractor drivers, combine operators,ho comprise aboutercent of the labor force on collective farms, receive aboutoercent of the income distributed from the Workoro on model farms and on those farms which produce high priced crops, primarily industrial crops, are alsoavored status In relation to other farms. According to the calculations performed by Arcadlus Kaban, "aboutercent of the collective fern population absorbsercent of the total labor remuneration distributed by the collective Since tbe lower paid workers on tbe majority of collective faroselatively small portion of the collective fares' total income, the output from their small private holdings of land and livestock represents an important supplement to their income." Recently the Government has attempted to reduce the size of these "own enterprises" attached to tho households of collective farmers. Thus, by reducing the importance of the private sector, the Government Is, in effect, tending to widen the differences In income within the collective farm labor force.

5 Although all households attached to collective farms maintain "ownthe lBportance of these plots in the total income of higher paid workers

and cultural specialists is much less than for the lover paid workers.

Tocom--In-kind represents tho ioputed value of agricultural produce constated directlyonetary transaction. This value ie comprised of the unmarketed portion of cormeoditloo (l) recoived hy collective farners as paynent for the oervlcea which they render on the collective ferns,roduced by noaseholds (both urban and rural) on their email holdings of land andpstock. Since this production is consumed by households without passing through the normal trade channels, it is not Included in data on sales Income-in-kindignificant proportion of the total Income In the Soviet Union. This is especially true of lover and middle income groups. Ac mentioned above, there are significant variations in the money income received by collective farmers. esult, persons in tbe lower paid categories such as milkmaids, shepherds,ely heavily on the production from their private plots to compensate for their lower money earnings.

In the, income-la-kind increased at the average annual rateercent, or somewhat leso than tho average annual increase ofpercent registered in the- However,ncome-la-klnd has declined byercent.

The relatively snail increase in Income-in-kind compared to the Increase in the other components of personal income, duringo,esult of two official policies: (l) the form of remuneration to collective farmers for work on the collective farm was steadily changed from that of in-kind payments (grain, potatoes,o cosh payments;eriod of relaxation in theo in policy towards the private sector, measures were takeno restrict the sixe of the agricultural holdings of households.

touring the, transfer payments Increased atannual rate3 perceat. This sharp rise is6 revision in the pension lnvs and tbe Increase In thepersons receiving such pensions. Priorhe maximum oldwasubles perjf/ However, with the revision oflaws, the minimum rate was set atubles per

ew scale of payments benefiting lover paid workers was Instituted. (See Persons earning up toubles per month would receive pensions aasountlngercent of their earnings, withsmaller percentages granted to those with high earnings.esult of these revisions, the average pension1 wasines the average

Other transfer payments received by individuals from tbe State include sickneBB benefits, maternity leave, and grant0 and stipends. Althoughecent changes have been made in rates of payment, overall expenditures for these purposes have Increasedesult of Increases in the total numbers of persons receiving such payments and in the increase in the average wage.

Persons la certain favored occupationsexempt from this requirement.

05 Further increases in minimum old age pension payments are to be mode3

Share of Wages Received by Wage and Salary Workers as Retirement Benefits a/

Monthly Wage

of Wages Received as Pension royaents b/

Up to

nd core

<TUSSR. GIPL. Sachnst'e Haroda: Sbornlk COkuncntov (For tbe Welfare and Happiness of tbe People: Collection ofl,.

by oil wage and salary workers except those engagedwork, and in harmful, dangerous or arduous occupations.

Sick pay and maternity leave payments are maderaduated scale of payments which is based on length of service. Persons who are injured at work or suffer from diseases incurred on their Jobs are entitledercent of their eaxningn regardless of the length of service. orker who voluntarily leaves bla Job for another, is entitled to sick pay for ordinary illneoo on his new Job if he finds work within 1Although maternity benefits in the past several years have not been changed, tbe period of paid maternity leave was extended6 fromaysays. * Certain people are exempt from this provision.

certain exceptions, the Boxlmum rate was setubles

E. Direct Taxes and Compulsory Bond Purchases

Disposable income was also Increased51 by tbe reduction or elimination of direct taxes on certain Income groups and tbe suspension of conpuloory bond purchases. . persons earningubles per month or less were relieved of tbelr tax obligations, while the burden of taxation on those earning1 and h5 rubles per month wasesult,illion rubles uus added to the purchasing power of the More significant wao tho announcement by the Supreme Soviet0 of tbe gradual abolition of the Income tax, whichas expected tootalillion rubles to tbe population'b disposable (See Table U)

Bovever, in Septemberthe Government decided to postpone further tax cuts. While not affecting these persons in the lover income groups whose taxes bad already been eliminated or reduced, the September announcement curtailed the growth in disposable incomes and the inflationary pressures which this growth was exerting.

*ercent of an Individual's gross Income was expended for taxes.

An additional factor in the explanation of the rise in dispooable income was the suspension or compuloory bond purchases esult, bond purchases droppedillion rubles5illion rublesnd thereafter declined to an insignificant level.

U

line schedule tar the ol .tion" of ineosa Tax for Hfge and salary/

Oc;. Oct. Oct. Oct.

I960 Igil a 3 >

earning tbe following or

less per month are notrubles)*

to pay income tax oc of

the following 6) 70

of monthly earnings on which tax to be adjusted downward on on average of liO percent

0

-

7(>

1 80 90 IOC

come ts>:

annual Increase so aggregate disposable income durine the year

360

(in Billions of rublesj 0 2h0 SUC

/

aktT (USSR-US. I: Figures and.

ersons earning up to ICO rubles per month would have beenof taxation, while those earningubles perhave had their base pay adjusted downwardortion of theimposed on their iocoiaee. Workers "ho earned moreubles

a month would have bad their pay sdjusted down-mrd by the complete amount of the tax that had been collected oc theiror to the "abolition" of the tax

between total lacree&so in disposable iacase fromof 7j1 billion rublesai of rodue'eiona fora.

Tba previous section vhhth real personal loccce In tbe Soviet Union in thef-6l. In Wis sactico attention will be foci-noil on how the disposable Income (excluding it-kind payments) received during this period has been spent on consumer goods tnd services. The discussion of trends in personal consumption expenditures Is supplementediscussion of trends in coBBsunal consumption. Ccaounxl consumption includes the value of health, education, and other social cervices supplied by government institutions to tho population free of direct charge. Viewed as on aggregate of total consumption, personal consumption expenditures comprise aboutercent, and cousins! consumption aboutercent of the total. The rates of growth of the several components of consuBptlon0 ore shown in Table 5-

Table 5

a. The Indux of growth in tot conxvmptloa of fecdstuffe was estlma^d" -ui foil ova:

Estimates were made of Soviet output ofepresentative food products In three categoriesbuaie foods (flour, potatoes, vegctt.oleo', animal products, and processed fjooa.

Thota were adjusted to exclude waste, losses, settd, and, andurther adjusted to reflect net imports and Inventory changes when toreercent of total production was Involved

3- In order to elintoat- dojtdfc-countlng of products at differ*f production, scsse of the basic foods anddueta eerr.es v. re Nodlfl-si occorelngly. Por cxnnplo, theequired to produce canned ailk, buttsr, and cheeae was subtract*'! from th* fluid mlIX series.

Average Annual Por Capita Bates of Growth of Components of Consumption (la percent)

goods

goods b/

goods ef

a

durables d/

to households kJ

services tj

These physical estimates of human consumption of various food products over time vere then combined Into one aggregate series. The weight of each individual series la the aggregate index for the consumption of foodstuffs is the proportion of5 value (physical consumption priced5 state store prices) to the total value of the sample.

index of consumption of non-food goods is obtained byfficially reported state and cooperative retail sales of non-foodof household purchases on non-food goods forhousehold purchases of peroonal and repair services andliterature, and retail purchases by institutions, enterprises,farms;dding estimates of purchases on the non-foodsubsistence by military and internal securityy the official index of state and cooperativefor non-food goods.

index for growth in consumption of soft goods is booed on theetail sales5 are obtained for four categoriesand for sevn garments, knitted wear, hosiery, end5 values are moved over time by production indexes baseddata. Since tbe production data have not been adjusted forchanges in composition, or for inventory changes, the valuenot precise indications of the trends In consumption of thesehe summation of the individual value series provides

the basis for the over-all index for the consumption of soft goods.

constructing on index for the consumption of durable goods theto calculate an index for soft goods (c, above) was adopted. 5 serve as base year weights. The sample of durable goodsbicycles and mo tor cycleadio and television sets, watcheselectrical appliances, eculog machines, cameras, and kerosene burners.

reflected in tho index of purchases of services byhousehold utilities, transportattoo, recreation and sports,and repair services, and housing services. The majority ofvalued by multiplying estlmatas of the physical quantity purchasedprices. In aom? casee, they were estimated partly or entirelydata on sales of these services in current prices and thenprice Indexes based The over-all index la computed fromvalue of these services8 prices. The index of housingsimply an index of total housing stock measured inof living space.

f - The index of communal services is based oc the trend In the total value of health and educational servicesstimated from state budget data and collective farm and state enterprise expenditures. Expeoditurea on capital lnvestaeut were deducted so was alao the wage component. The residual series, or the expenditures on goods and aarvlcas by tbe health and education sector, was converted7 fUCles by th* use of an index of state store prices, excluding alcoholic beverages. wage bill >res ftstimated by movingV value through tine by an index of tte number of workers and employeea engaged in health care and education. The sum of tbe deflated expenditures on goods andnd tbe wage bill serlss serves fcs the index of the state's provision of cobkuOhI service!).

A. Consumption of Foorir.tuffs

In the, the value of per capita consumption of foodstuffs Increased at the average annual rateercent, or substantially less than the average annual per capita rate5 percent in the-

There hasubstantial improvement in the Soviet diet since the death of Stalin. One Indication of this improvement is .the decline In the "starchy-staple. the percentage of total calories Ingested that are derived from grains and potatoes. The "starchy-staple ratio" generally reflects the relative level of real personal Incomeountry's population. The presenceov ratio usually Indicates that the population's income lo high enough to allow the substitution of relatively expensive foods such as meat and dairy products for the cheaper starchy staples. For example, traditionally as conouners' real disposable incomes rise, animal products, oils, fats, sugar and other "Quality" foods tend to be substituted for tbe basic staples. At the same time tbe total quantity of food ingestedboth in physical weight and caloriesmay remain relatively stable. The substitution of higher quality foods for the basic foods causes this ratio to fall.

pproximatelyercent of tbe calories consumed in the USSR vare derived from lov quality starchy foods, while onlyercent were derived from animalairy products and eggs. he proportion of per capita caloric intake from starchy foods had dropped toercent,he proportion contributed by animalncreased toerewnt. lo the esse of the Soviet Uelon, where reel consumer disposable

ao

nssirg steadily, fut vould expect tbetio"nue to dacllne. 'iiiiic.i,0ea beaneneral levelinghe laprovenent of the Soviet diet. This has been due sot to tbe Butisfactlaa of the Soviet consumer with bis diet, but rather to the inability of the agricultural sector to keep pace vlth the increase In the demand for higher quality foodstuffs. Evidence of the population* unsatisfied daaand for high quality foods tuffs, particularly for anlaal products, has been the rise in collective farm aarket prices, reports of civil disturbances due tj shortages, and the State store price increases on meat and butter ofndercent, respectively, in nevertheless, Khrushchev, atd Party Congrean Implied that0 tbe "starchy-staple ratio" would decline to aboutercent, or to the level vhlch prevailed in the US As indicated la the paper in this series concerned with agricultural production, such claims ere viewed by Western students of the Soviet economy with considerable skepticism, if not outright disbelief.

While improvirg the quality of their diet, th* Soviet coajuaere have Uso te-tn aole totbe sb<ure of their total Income spf.nd 00 per example, inapproximatelyercent of total dlsposabli lneom? was spent on foodstuffs. his figure had declined to approximatelyercent. In addition, during this period the proportion cf foodstuff* purchased in St*ted increased fronto Approximatelypercent, wbtle theerived from DOUacttn feTBk*tste prodaetlOBproportion* ely This tr-too is axptetsdetlnji- tbrr^anbeut th* eex*ynvt

o. Consumption of Nopfooo Joods

lo, per capita consumption of nonfood goods Increased at tbe average annual rateercent, which was substantially leso than the average annual per capita rate of growth registered in tho While the average annual per capita rates of growth of both soft goods and consnaer durables la theas approximate ly half of the increase achieved* tbe more rapid growth of consumer durables throughout the period tended toontinuing shift in tho composition of nonfood consuaptlon. For example, pproximately one-fourth of consumer uxpendltureeonfood goods were for consumer durables, ut, this figure had increased to approximately one-third.

herebeen growing indications of consumer resistance to the nonfood goods which were being manufaetu,-ed in State enterprises. In recent years the most graphic evidence has come from the size of unsold inventories in the bands of the retail and wholesale networks. otal Inventories of nonfood goods werekX) percenthile retail oales were onlyercent above. That this Increase in inventories is Attribute'! partially to unsaleable, goods (at present prices) Is suggested by the heavy prone commenUry concerning tbe poor quality of soft goods and comumer durables ncd tbe lackore suitable assortment.

In response to the growing signs of consumer dissatisfaction, the State orderedpvoductlor. msnsgers 'o manufacture better and nor': attractive goods *ndtin position of trade officiwls in deciding whether

tov reject o :Qts of iojom-.i- gocda. Tat increased -iwinority gran-xd to -tbe trade officialsotDulted in anymprovement in the consumers' position.

Tbe difficulties of bringing consumption and production into equilibrium are nuaerous. "in the Soviet Union both production and prices react only sluggishly, if at all, to the ^forces of demand, so that the conflict between consumers' and planners' preferences results in tbe piling up of sceae goods on the shelves at the same time as there are long vaiting lists for certain other products. Since most of the trade officlaic have received their training and experience In en economy In which buyers were willing to purchase any goods available, they have had little experience or training in estimating or anticipating consumers demands.

To reduce inventories, credit purcheses vert Introducedor goods In relatively maple supply. The terms for such purchases were relatively liberal: ercent of the purchase price was requiredown payment, with six mouths to one year in which to pay the balance. Tbe effective rate of interest on tbe credit receivedercent per Butuch sales constituted slightly moreercent of Kretail uales.

1. Soft Goods

In tbe, the peravailability of soft goods,d bynxiut-tioaIncreased at tie average annual rateercesv.'* Hovever, in 'ihe periodas ir.?retspd

* olume incex of soft goods and conaunferf- our^&bles was constructed for the USS* in.ll sales used us value weight*.

Table 6

apparent consumption based on production estimates in USSR.

'" (Tbo *tional Economycov, nd USSR. TSU. (soviet.

V. "Sovetskayaeriod Rasvertnutovo (Sovat Trade in the Period of the Development ofKhosyaystvo,,l, p. Uk.

figures rounded to two significant digits.

btchiqgutstripping: An Appraisal," ProbieasVol X, No. IV,I,

' "Uro,en' ZtdsAiSnA" nd the USA) Hlrovaya Ekonoaflka 1p. The figure Is for

f- Erro, op. clt. p. XJ. Sstiaete0 per capita production.

Per Capita Consumption of Soft Goods In tbe USSR and the US

of

b/

total

e/

c/

which:

and artificial fabrics

veer

d/

hose

e/

f/

shoes

tJ

atercent per year. Investigationhorter time period reveals tbat tbe growth of 6oft goods production has continued to decline- For example, in thehe average annual Increase in the production of soft goods droppedercent.

Despite its slowdown, there have been important structural changes In the consumption of soft goods since tbes. For example, of total sales of textilesboutercent were of cotton, endercent of silklike fabrics (mostly rayonhile, bythe proportion of cotton to tho total had dropped toercent end the proportion of silkllkc fabrics had climbed toercent.lthoughhift would seem toharp Improvement in the quality of the fabriec consumed by the Soviet people, tho paper in this aeries dealing with consumer goods' production tends to diecxedit suchonclusion.

In addition to the change in tbe structure of textile consumption, the proportion going directly Into ready-made garments Increased, while the shore of textiles which was purchased by consumers in State stores, and custom processed into garments either st home, by seamstresses, or artels, declined.

Tbe increased demand for higher quality merchandise also affected the consumption pattern for footwear. Whereasnly aboutercent of tbe total sales of footwear represented the sale of leatherurchases of leather shoes comprised approximately percent of total sales of footwear, gg/ 2. Constaer IXu-abl'i s

Although during the dncade ofa, production of consumer durablestextreosly rapid rate, the stock of consumer durables in the USSR0 was sMll extremely low. Data have been published on the

stocks in households of certs in durable goodsnd these are reproduced Inogether with the available estimates0 US stocks of the sane goods. It should be noted, however, that Soviet and US stocks of ccosuner durables are not strictly cootparable due to tbe poorer quality of Soviet goods and to the fact that the Soviet models differ substantially from their American counterpart. iscussion of tbe quality of Soviet durable goods, see the paper In this series by Erro.

Table 1

Stocks of Consianer Durablesamilies in the USSR and the US

Nane of Product

/

equipment

and photographic equipment

and clocks

0/

machines

nachincB

modes of transportation

a! Tyukov, V. "sovetskaya!eriod Rarvernutovo Stroltel'atva Koaauniena" (Soviet Trade In the Ptrlod of the Development oflanovoye Khoryayetvo, Bo. U,. kk. These figures exclude rental equipment, b. Cosonerce, Bureau of the Censun, Statistical Abstract of tho unitedl,SS". otential uscra except for radios where potential users. Electric refrigerators only.

d. lokahln, R. "flarodnoyaorgovly* Dvedsatilatken (Rutional Consumption and Trade Inovetskoye Torgovlya.

G. Services

Uousehold expenditures Tor utilities ^heat, gas, electricity, telephone, etc-), ran ation, recreation tod sports, rellgloo, personal care and repair services, and bousing are estimated to have increased at tbe average annual per capita rateercent during the, which was slightly more than the average annual increaseercent registered in the.

The notable laggard in the service sector has been in housing. Although the urban housing stock (nessured in terms of livingncreased byercent0here has beenercent Increase in the rural housing stock. Adjusting the urban housing stock for population changes, the per capita increase in living space

Table 8

* In the Soviet Union, living space is defined -co include dining rooms, living rooms, bedrooms, *'U1ot includeitchens, hallways,

and corridora- Approximatelyerceut of the total urban bousing stockstimated as liviaji snece.

Average Annual Rates of Growth of Urban and Rural Living Space (percent)

housing

housing

housing.

capit*.

housing.

capitt

during this aaae period of timeonlypercent. The decline In the rural population coupled villiercent increase in bousing stock resulted inercent lucreaso in per capita rural bousing.

The big sport in urban housing (increasing the stock byercent) occurred in the. he government pledged tothe housing shortage" iooears, and took the necessary steps to increase bousing construction7 In addition to allocating additional funds for State housing, the goals for private urban housing were Increased byercent.

To facilitate the fulfillment of the goals for private housing construction, the government nude building lots available and encouraged local enterprises to help private builders obtain materials and even urged them to provide trucks for the purpose of hauling tbe materials. esult of the regime's attitude substantial increases in the construction of private housing took place. Since then, however, tbe Increase In State investment lu bousing has slowed and private borne construction has begur to falter becauseeversal9he government's policyprivate home building. Hot only has credit been tightened in certain reelect, but tinf building lots and supplies of building rater ials made available for that purpose have been roa trie ted.

Although then baaapid spuvt in how ouildiog in tbeseveral veers, the Soviet housing stock is still woefully inadequate. For saamsple,apita Living spoor loonlyquare feet, stills in rurs" ar^a* It waa even6 square feet.

Tola comparts with an wstinatequire feet per capita in the USanx? period. In addition, after years of neglect and under-malntcnance, the condition of the Soviet housing stock is extremely poor.

D. Communal Connusrotton

Communal consumption includes the value of health, education, and other social services supplied by tbe government, collective farms, and other enterprises to the population free of direct charge. Included are the conventional services associated with health care such as doctor's servicea; the upxeep of clinics, boapitale, rest hcees and sanitorla; public health nsaaures; etc.

The expendlturea for education, vhlch are Included in the definition of communal services, consist not only of expenditures for schools, but also expenditures for libraries, museums, parks, and other culturalecreational activities. Although the Soviet concept of communal services includes expendlturea on scientific research, these costs have been excluded in the concept of cosnunal services as defined in this paper.

ineriodcRdi&ptiOa through comauial services increased at the averse ennuaJ. per capita rat*ercent, with an increaseercent in the period Thin compares favorably with the average annual per capita increaseercent-

i'iacesirr^ne! lures for health cfcjc have increasedons&dei-ably faster nive than expenditures for education. Expenditures in healthc ire:"casedthe- average acauaJ.apita -ateercent.

V. Tb?flzrJV"

As iadicntsd above,cin'wir diBpoasole Ja-row- has

increassdapid rat--, Until recently, ton Stale has provided (at givenufficient quantity of goods and services to absorl. the growth in purchasing power, however, evidence has recently becoae availablerowing disparity betveeu tbe rates of increase in nosey income and of real consumption of goods and services. The imbalance between the supply of goods and services and consumer purchasing power, which Khrushchev has called". .itua^ior fraught with dangerous consequencess the basis of bis inccdista problem with the consumer.

Because the regime hatonsistent policy of not raising pricesstores, the resulting Inflationary pressures took the form oflist* for consular durables, growing queues for certain noafoodState outlets, rising prices In the collective fart: aarkets, and aunplanned savings on the part of the consumers. In the fncu ofgup and the dim prospects for future acceleration ofconsumer0 percent increase in the average price ofmeatercentn the price of bvtter waseffect :State Tbe purjx.se of thesewas to bring supply andn State controllei Mtletatwo cories doe** to equilibrium ood at th- 3anfe tlsevld bj tu Vitttoc.. ASa

to Cubanun lalo difficulties

cause* by tin rtct that m* yepl v-e acoey ican then ore goodsy our irfitstry *rd asnrlan]$ / Apparently the

reaction of the urban population 'o thesee price increases vas mther violent labau centers. rrtes of protein, rallitfu and riots caused dozens and possibly buncreus of lea the, necessitating the use of Soviet amy units to qutll the dioturbences. In an attempt to increase tbe supply of those products which were in greatest demand, and thus reduce Inflationary pressures, the government also announced in2 an average increase ofercent in the price it would pay to Individuals and collective farms for the meat it purchases.

Apparently the steps taken ino reduce or prevent the expansion of Inflationary pressures on tbe economy were insufficient, for on September 2kth the government announced the postponement of the schedulud abolition of the income tax. Bovever whether the recent prlcr. adjustment and the postponement of tlie tax cut will successfully curtail its growth remains to be seen. At the time of this writing, it appears highly unlikely that substantial resources win be allocated to the consumer sector In an effort to ease tbe Inflationary pressure.

Sources

l- Bergson, A. The Seal national Income of Soviet Russia; SincePress,.

2 Ibid.

3- Kfipusiln, E. I. Zarabotoayaromyshlannostleye

Soverahenstvovanlyc fWages in Industry In the USSR and their

U. USSR. Raucbno-Iasledovatel'skii Instltut Truda. Metodologlcheaklye

Voprosy Izucheniya Urovnya Zhlznl Trudyashcfalkhsya (Methodological Probieas Studying the Standard of Living of.

5- CIA/ORR. An Evaluation of the Wage Adjustment. (To be published).

6. Hstodologicbesklye Voprosy,a, above)-

7- Aganbegian, A. G. Dlya Blaga Sovetekovo Cheloveka (For the WelfareSoviet

8. Oalenson, Water. Soviet Wage Reform (Reprint fron Proceedings of the

13th Annual Meeting of the Industrial Relations Research Association in.

9- CIA/OHR,bove).

Aganbegian, A. G. og. clt.,bove)

Akademiyo Sauk SSSK. Obahchestvennyy Foodyaspredeleniya

Kolkhoznykh Dokbodov (Public Funds of Collective Farms and the Distribution of Collective Farml,.

A. Recent Trends in Soviet Farm Incomea, Problems of Communism,

vol X, no.

1u. Ho*e, A. Coinmunist Welfareroblems ofXX, no. a.

15- Kapustic, E. I. Obshcheatveonyyoat Blagosoetoyanlys Haroda v

The Social Pund and the Growth of the Welfare of the Soviet People of the USflBO,, p.

16. Aganbegian,bove)

Ibid.

.

. Tbe World'a Food: tudy of the Ipterrelntlona of World

Populations, National Diets, and Food Potentials, Harper-

TSU. Korodnoye Khozyayatvo6 Godu (The National Economy

of the USSR Bereartcr referred to as) .

TSU. dnoye Kboayayetvol Godu (The National Economy

of tho USSR In lS&H Ho rear tor referred to aa)

pp.3 op. clt.,, above),

-

above).

above).

above)

above)-

.

trumllln, S. O. Ekoaoalcheakaya Zhlsn' SSSR: KhronlkaEconomic Life of the USSR: Chronical of Events and)-

op_.

op_.

op_.

og.

og.

Rev York. 1

Ik

Original document.

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