On the Wages and “Decent” Life

How much money does a Kazakhstan family need to live decently? We are asking this question on purpose. According to some competent opinions, the gap between the earnings of the rich and the poor influences, among other things, the political stability in the country.

Not so long ago, billionaire and founder of successful hedge fund Bridgewater Ray Dalio said in his interview to Financial Times that it is pointless to talk about “economy” in the general terms basing your conclusions on what is going on in it. Dalio believes that the rapidly growing difference in the earnings creates many economies – the elites live in the growing economy whereas, for the 60-80% of the people “below”, it is a depressed economy with a slow growth. So, Dalio is building a model of the future on the basis of the other factors – he believes that the inequality creates so many collisions that, in 2018 and later, the markets will be moved not by the economy but by political conflicts.

The idea about different economies seems interesting. Perhaps it can explain the declarations of the Kazakhstan authorities that the people of the country live not such a bad life. Probably, they state it on the basis of “The Demigods”’ economic data since their economy is different from that of the rest of Kazakhstan.

To proof this hypothesis, we have gathered the information on how much money the standard Kazakhstan household needs to “live a decent life” and how the people are really living.

How Much Does a “Decent Life” Cost?

“On average, how much should one earn per month to live decently? Not luxuriously but, at the same time, not denying oneself much?” – asks Timur Chigirov, a Kazakhstani now living in London.

What does he mean by “decently”? “To eat well, to go to the cinema and a mid-level restaurant a couple of times per month, to go to bars a couple of times per month, visit resorts (albeit not the most luxurious ones) twice a year, to buy cloths from time to time, to save a little, etc”. Timur Chigirov believes this is how the middle class in Kazakhstan should live.

At the time his post was published on Facebook, it had 145 comments in which the Kazakhstanis mentioned very different numbers, from 500 to 3000 dollars a month per one person which, by the way, is very indicative in itself. So, we, using Chigirov’s description of a decent life as the basic point, will try to estimate expenditures per one family. As an example, we take a couple living in Almaty in their own apartment and having one school-attending child.

Groceries is the main expenditure item in any family budget. If we assume that our characters try to eat healthy (high-quality meat and fish, fruit and vegetables all year round and not seasonally, good cheese and meat delicacies, dairy products and sweets), then they will have to spend no less than 80-90 thousand tenge a month ($240-270).

To this amount, we should add purchasing of the drugs, household chemicals, and other small things. So, now we get $300.

To go to the cinema twice a month, to go to the theater or concert, café or restaurant once a month – $250.

The expenditure item should also include the school fee since many try to send their kids to private schools. But even if the child goes to a public school, the hole in the family budget will still be made by paying for tutors’ services, sport sections, etc. For this, we allocate $300.

There are also fitness, cosmetics, beauty salon, massage, spa, vitamins and supplements, medical check-ups expenditures – let us say $300 a month per two persons.

Gasoline and automotive services – another $120 a month.

Utilities (if the family does not rent) – $100 per month.

On the cloths, even providing that the winter cloths and shoes are bought on sale, the family is likely to spend about $2000 a year or approximately $170 per month.

As a minimum, twice a year, it is necessary to make a major purchase (household appliances, electronics). We are talking about $1200 a year and $100 a month.

The yearly home renovations will cost $240 a year or $20 a month as a minimum (to pay for renovations in a private house, the amount scales up massively).

Now, let us talk travel. Timur Chigirov suggests taking vacation twice a year. Let us say, a tour costs $1000 per person. So, the family will spend on travel $6000 a year or $500 per month.

Finally, let us assume that this family saves $200 per month.

Therefore, to live the “decent life”, the family must spend about $2400 per month and almost $30000 a year. And our estimation does not even include large-scale family celebrations that are such a big part of any Kazakhstani’s life.

How Much Does the “Indecent Life” Cost?

To learn how the regular family’s expenditures look like in reality, we talked to the family of two pensioners that receive a big (for Kazakhstan) pension (about 80000 tenge or $240) and one working person with a similar salary.

All of them give away a part of their earnings to the common budget that amounts to 160 thousand tenge or $480. Of this money, $100 are paid for the utilities. About 2.5 thousand tenge ($7.6) a day or $230 a month are spent on groceries. The food basket includes cereals, brinzen instead of cheese (it is twice as cheep), souse loaf and cured pork fat instead of sausage, chicken ends of cuts for $0.6 per kilo.

The meat is bought once a year (15 kilos). It is cut, put in the freezer and is eaten throughout the year. The hostess shares her recipe: “I sauté half a kilo of meat with a lot of gravy. One half is immediately put in the freezer. The three of us eat the other half in three days – with a vegetable side dish”. So, from 500 grams of beef or pork, she manages to squeeze out 18 portions.

Occasionally, the family buys fresh-water fish. On New Year’s Eve, they splurged and bought salmon as big as two match boxes. As for the sweets, from time to time, they eat halavah, chocolate, or honey.

The vegetables – vegetable marrows, eggplants, Bulgarian pepper, cauliflower, and broccoli – are bought during the summer and frozen (mixed together). This is the only major purchase of the year that costs $200 or $17 per month. Two bags of potatoes and one bag of onions are prepared during the fall. In the winter, they only buy green cabbage, carrots, and beets. Once a week, they buy six apples and six pears (an apple and a pear a day per person).

Chicken eggs are a major component of the diet. To buy larger ones (one egg per one breakfast) for lower price ($1.2), they travel through half the town to a farmers’ market.

The public transportation expenditures ($22 per month) and mobile service ($6) are paid separately by the family members. Not one of them goes to the cinema or restaurants. Their leisure activities include newspapers ($4) and, very rarely, the theater or an exhibition that costs less than a dollar per month. Only once a year, they may indulge in visiting a café – to attend a traditional meeting with their classmates.

The working member of the family allows himself a little more. His has a hobby – bus excursions around Almaty outskirts that cost him $60. One of the pensioners spends the same amount on cigarettes. Out of the “beauty services”, the family has access only to haircuts – $12 per month for all of them. With that, the head of the family tries to save $15 per month for home renovations, the yearly meat purchase, and the unbudgeted expenses.

Thus, per month, this family spends $677 ($266 per person). This is 3.6 times less than the family from the “decent life” scenario spends. Hence, we call the described way of life “indecent”.

What Does the Statistics Say?

So, according to our estimates, the regular family in Kazakhstan needs almost $2500 per month to live “decently”. These lucky ones, undoubtedly, exist but how many of them are out there? Unfortunately, the official statistics does not help to clarify this matter. On the official website of the statistics agency, we have only been able to find the data on the average household earnings (a little higher than 80000 tenge ($240) per month in the third quarter of 2017). The average salary in the fourth quarter of 2017 amounted to 168220 tenge or $509, the minimal wage – to 24459 ($74).

On the other hand, economist Aydarkhan Kusainov estimated that “96% of the country population earns less than 100 thousand tenge per person. With that, 95% of the rural population receives less than 80 thousand tenge, in the city, the earnings are a little higher – 95% of the population receives less than 110 thousand tenge. To make it to the 1% of the richest people (income-wise), it is enough to receive more than 120 thousand tenge per person ($360)”.

Considering that our imaginary family has $813 a month per one member, in other words, 2.2 times more than the economist estimates, we can say with certainty that the share of such households in Kazakhstan amounts to much less than one percent.

But let us go back to the family from the “indecent life” scenario. If you think they are poor, you are mistaken. At least, no one would acknowledge them as such since the poverty line in Kazakhstan, starting from January 1, 2018, is defined as 50% of the living wage (previously, it was 40%). And the living wage, starting from the same date, amounts to 28 284 tenge ($85). Therefore, the poverty line income amounts to 14142 tenge ($42.5). Thus, the second family is 5.3 times richer than the poor people as defined by law.

By the way, 55% of the living wage in Kazakhstan is spent on groceries and 45% is spent on non-foods. Therefore, spending 15500 tenge ($47) a month on food should be enough for the person living on the minimal wage. Minister of Labor and Social Protection Svetlana Zhakupova explains such low sums citing the fight with parasitism: “The level of the meat consumption in France and in Kazakhstan is practically the same. It can also be said about fruits and vegetables. And this, we say, is the minimal level. Do you see? And the basic wages… should always remain at the minimal level not to beget, shall we say, parasitism”.

In the $47 food basket of the Kazakhstani, there are 43 groceries and about 20 non-foods and services. For example, the Kazakhstani is prescribed 114 grams of meat, 5 grams of buckwheat, half an apple, one third of an egg a day; 260 grams of sour cream, 190 grams of cheese, 250 grams of sausage a month.

So, it all adds up to a rather simple conclusion. The society has an understanding of what the “decent life” should be like and that it is rather expensive by the Kazakhstan standards. There is the real life of those who, by the state standards, can be described as the middle class but whose life is nowhere near the “decent” one. And there is the official statistics that cannot really tell us how many rich and how many poor people there are in Kazakhstan and what the difference in their incomes is.

Where could it lead us? If billionaire Dalio is correct (note that once he not only predicted the future world financial crisis but managed, during the hard times, to make his hedge fund profitable), then the size of the gap between the rich and the poor directly influences the probability of political conflicts. But who in Kazakhstan can tell what the size of this gap is?


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