Poverty in the Transition: Social Expenditures and the Working-Age Poor

A combination of economic growth and committed revenue-raising should give most governments in Central and Eastern Europe and the former Soviet Union considerable scope to devote increased resources to tackling poverty. We review the extent and nature of poverty across the transition countries, emphasising the phenomenon of the working-age poor. We consider governments’ fiscal positions and revenue raising tools, including the issue of whether some countries now have levels of external debt servicing that are so high as to hamper social sector expenditures. We analyse whether the introduction of credible unemployment benefit schemes in the CIS would aid labour market reform and hence help solve the problem there of in-work poverty (we first review experience in Central and Eastern Europe). We focus on the case of Russia, and simulate a simple scheme with 2000 household survey data. The Paper concludes by considering the role of improved wages for public service workers and the targeting of categorical benefits.