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SENTENTIA. European Journal of Humanities and Social Sciences
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Social wellness monitoring in Primorsky Krai under the conditions of economic crisis
Martyshenko Natal'ya Stepanovna

PhD in Economics

Professor, the department of International Marketing and Trade, Vladivostok State University of Economics and Service

690014, Russia, Vladivostok, Prospekt Krasnogo Znameni 96, Unit #17

natalya.martyshenko@vvsu.ru
Другие публикации этого автора
 

 
Gusev Evgeny Georgievich

PhD in Economics

Docent, the department of Mathematics and Modelling, Vladivostok State University of Economics and Service

690014, Russia, Vladivostok, Gogolya Street 41

archvitoc@yahoo.com

DOI:

10.7256/1339-3057.2015.4.17218

Review date:

07-12-2015


Publish date:

20-01-2016


Abstract.

This article presents the results of the monitoring of public opinion of the Primorsky Krai related to the ongoing economic crisis. The results reveal that the economic crisis affects the social wellness of the population, and majority of the population experience a drop in quality of life, translating into social tension. The article presents the findings of the research on the Krai’s reaction to the changes in the structure of the selection of goods and services in the local market. The authors identify the categories of goods and services that demonstrated the drop in demand as a result of the sanctions against Russia, and conduct the analysis of the data from the monitoring of the social wellness of the population of Primorsky Krai, as well as various assessments of the consumer reactions to the changes in the market that have been gathered from two polls conducted in October of 2014 and October of 2015. A distinguishing factor of the conducted polls consists in the use of a vast number of open questions. A special computer program was used to summarize and categorize the responses. The authors conclude that the social wellness of the population is the key component of the success or failure of the reforms conducted by the government and branches of local authority.

Keywords: economic crisis, economic sanctions, ruble’s exchange rate, social wellness, purchasing power, monitoring, social polling, data analysis, information processing, computer technology

The Russian Federation continues to experience an economic crisis. By the middle of 2015 majority of the population have lost hope for improvement in the economic situation within a near future. Today, the authorities also advise the people to prepare for a prolonged and deep economic crisis. The effect of the burden is most felt by the common people. An alarming symptom of the most recent crisis is the decrease of the portion of “middle class”. The very notion of middle class in Russia is quite relative at this time. Today, the Russian citizens considered to be middle class are those earning 16-50 thousand rubles per month ($250-$770). It is worth noting that approximately a quarter of the representative of the Russia’s middle class are members and officials of the defense and law enforcement agencies, in other words, people who are not working in the consumer goods or services industry. According to the research conducted by PricewaterhouseCoopers (PwC), over the last year every tenth middle class citizen has moved down to the category of poor [10].

The economic crisis in the country manifests in decline of the industrial production, devaluation of national currency, crisis in the banking industry, growth in the number of bankruptcies, capital outflow, and drop in investments.

The population experiences the economic crisis in their own way: depreciation of savings caused by the rapid decrease in ruble’s exchange rate, reduction in the actual income (salaries do not increase to compensate for the rate of inflation), drop in purchasing power, decline in quality of life, mass and systematic increase in debt, and the subsequent inability of people to pay them within the set terms. Over the las year the salaries of many Russians have decreased not only in realistic sense, but in the nominal sense as well. According to the assessments of PwC, the reduction in realistic income by 10% over the last year has taken place among 9% of the population, 11-20% among 11%, and 10% of the population lost 20% or more [10].

Since the beginning of the crisis, the disparity between the incomes of the richest and the poor social classes has become even greater, and continues to grow. The myth that the great wealth was accumulated by the virtue of the “talents” of its possessors does not convince anyone. As the crisis continued, majority of the population has increasingly grown weary, and so has their distrust towards the government. The economic crisis poses a threat for the social stability of the nation. If not for the successes in foreign policy, associated with the figure of President Vladimir Putin, the social tension could translate into acts of protest. At the same time, transition towards economic growth requires consolidation of the population and people’s assurance that the government acts in the interests of the majority of the population.

Thus, the research aimed at studying the socio-economic living conditions among various classes of the population, identification of social problems and need for social protection remains a relevant topic.

Over the recent years, the scientific theories, concepts, and social programs utilized the term “social wellness” to determine the perception of various social groups towards the socio-economic situation.

Social wellness is the emotional aspect of the self-assessment of people’s social situation, level of satisfaction with the socio-economic and spiritual needs, and interests. The social wellness reflects the generalized assessment of the public mood on economic, political, ideological, national, and other aspects [2, p. 135-137].

There is no unambiguous definition of the term “social wellness” at this time; there are no unified indexes of social wellness [1, p. 79-82; 2, p. 135-137; 7, p. 146-155].

The Russian Public Opinion Research Center (VCIOM) conducts the monitoring of the social wellness of the population in Russia. To assess the social wellness they implement the following indexes:

- Index of satisfaction with life;

- Index of social optimism;

- Index of financial state;

- Index of economic situation in the country;

- Index of political situation;

- Index of general vector of development.

According to the poll results in August of 2015, VCIOM notes a 21 point drop in the satisfaction with life among Russians compared to the same period from previous year. On the background of the decrease in all indexes of social wellness, the most alarming is the drop in the index of social optimism [8]. The Russian citizens are losing hope that their life can improve in the nearest future. Most are holding a passive position, expecting that the government will correct the situation.

For the assessment of the social wellness of the population of the Primorsky Krai we organized the monitoring of the effects of the crisis upon the opinion about the financial state and demand for goods and services by the residents of the Krai.

Within the framework of this research two polls were conducted in October of 2014, and October of 2015. The process included approximately 500 respondents in 2014 and approximately 400 in 2015, representing various social classes. Among those polled – 71% have a full-time job, 7% of which are working seniors. The student audience constituted 22% of the respondents, among which approximately 40% have an additional income. Retirees comprise 5%, and 2% were homemakers.

The survey consists of five blocks of questions:

- Socio-demographical aspect;

- Assessment of financial state;

- Assessment of changes in goods and services consumption structure

- Assessment of changes in the food market due to implementation of sanctions towards the importation of farm products from the US and the EU;

- Assessment of the reaction of consumers upon the rapid changes in the foreign currency exchange rate.

It is evident that the answers, especially those that require a quantitative evaluation, may undoubtedly be affected by emotions. Regular consumers do not keep a precise account of the structure of their consumption. In this case, the importance falls on the relative values of the indexes. Thus we attempted to include as many open questions as possible into the questionnaire. In our opinion, an open question allows for more reliable information. The respondent has to think about the content of the problem, rather than just put a checkmark in the list of provided alternatives.

Majority of the respondents (22%) stated that their salary is ranging from 30,000 to 40,000 RUR. Representatives of this category of citizens assess their income differently. About 5% regard their pay as very good; 22% believe that it is good; 50% consider it normal; 17% feel it is low, and 4% feel that it is very low. Therefore, such salary dissatisfies 21% of the population of the Primorsky Krai.

Decrease in purchasing power of the population reflects on the structure of demand for goods and services. To assess these changes, the survey included this question: “Which goods and services did you have to limit as compared to the same period of last year (2013)?” This is an open question, to which a respondent can reply with several types of goods and services.

To process the open questions of the survey we used a specialized computer technology that allows to move from unstructured data to structured [4, p. 555-559; 5, p. 259-267].

A certain part of the population feels that they did not have to cut back on the use of any goods or services compared to previous year (17% of the respondents). This group consisted of not only those with higher salaries (above 40,000 rubles). A sizeable portion of this group consisted of students – approximately 30%. Some of the youth do not think about the living expenses as much, shifting that burden onto their parents.

After the processing of the responses of those who have reduced their consumption of goods or services, 18 groups of answers were identified. As can be seen in the diagram of Image 1, the structure of consumption over the crisis year has changed significantly. While 55% have indicated cutting spending on food products (meats, dairy products, fruits and vegetables, etc.) in 2014, in 2015 – only 39% have reported spending reduction on food products. This does not indicate that the demand in the food market has improved. It is quite the opposite. According to all official sources, consumption of all food products highlighted by the respondents has noticeably decreased. Same as in 2014, in 2015 the respondents indicated cutbacks in consumption of meats and dairy products. But now they have also started to pay more attention to other products of daily consumption (grains, sugar, baked goods, eggs, and other).

In 2015 the population began to save not only on food products, but also goods and services that are not part of the day-to-day needs. The respondents primarily point out the categories that concern them the most.

Image 1. The structure of decrease in consumption of goods and services under the new economic circumstances.

image1

In 2015, population of the Krai has paid the most attention to their spending on major purchases. Among others, this includes purchases of new automobiles, major appliances, computers, etc. People have also cut back on clothes, footwear, and took fewer trips. Majority of the population had to give up entertainment and leisure. Among the industries that suffered the most are cosmetics and beauty services. Women reduced their spending on cosmetics. Majority of the cutbacks in spending during 2015 are a direct result of the rapid growth in prices for imported products.

In the current economic circumstances, residents of the Primorsky Krai have even reduced the use of their automobiles. In the “automobile usage” category approximately 77% of the respondents have limited their use of personal transportation due to increase in the price of fuel.

Thus, majority of the population was forced to alter the structure of consumption they were accustomed to due to cost increase of various groups of goods and services.

To assess the public opinion pertaining to growth in prices for separate goods and services, we used the answers to the following questions: “Which goods and services do you believe have gone up in price the most over the last year?” This is also an open question, and was processed using the same system as with the previous question. The results of the answers to this question are presented in Image 2. In this case, 21 groups of answers have been identified.

The groups of answers associated with the category of answers “food products” demonstrated very similar percentile compared to the previous question: 54% in 2014; 36% in 2015. Groceries are considered products of daily consumption; thus, the reaction to the increase in their price is almost instantaneous. It is important to note that the second category most people indicated is the “automobile usage”. Therefore, this article of expenses significantly concerns a great number of the Primorsky Krai residents. Over the last year, there has been an increase in the number of respondents who reported growth in major appliances, electronics, and all major purchases in general.

Image 2. The structure of consumption of goods and services that have increased in price the most according to the respondents.

image2

Considering the importance of food products in the consumption structure of the population, we have researched the changes in the spending for groceries. For this purpose we used the question: “How would you estimate your change in spending on groceries over the last year (in %)?” The results in the surveys of both years are very similar. Allocation of respondents’ frequencies by spending intervals is presented on Image 3. According to the results, the average grocery bill for the year has gone up by 27.8%. The average was greatly influenced by respondents whose grocery spending has increased above 30%. The disruption in the smoothness of the frequency row is explained by the “round numbers” effect.

Image 3. Frequency plot of allocation of respondents by grocery expenses.

image3

The next question asked the respondents to assess the increase in prices for the four main types of foods, automobile fuel, and utilities: “How would you estimate the growth of prices in your sector of consumption by various categories?” The results demonstrate that the answers carry a significant “emotional” component. Compared to the previous year, the biggest price increase was observed in the fruits and vegetables category (Image 4). In the rest of the categories the results of both surveys were very similar.

Image 4. Estimate of the average growth in prices of goods and services within respondents’ consumption sector.

image4

Different groups of goods and services for various consumers have a different impact upon the structure of their expenses. To assess the impact of price increase on the dominant category of their consumption, residents of the Krai were asked the following question: “Price increase of which of the above stated products have affected your finances the most?” In answering this question the respondents were asked to pick only one of the consumables from the list. Approximately 70% of the respondents have selected two of the objects of consumption: “meat and meat products” and “fuel” (Image 5). Again, we can see a noticeable increase in the expenses on fruits and vegetables.

Image 5. Allocation of respondents by products according to their spending on these products.

image5

In the case of limited budget for groceries, the first item that people cut is delicacies. In Primorsky Krai delicatessen products have a price tag of over 700 rubles per kilo. The assessment of change in consumption of delicatessen food products was based on the answers to the following question: “How much did you change your consumption of delicatessen products priced 700 rubles per kilo or above?” The changes in consumption of delicatessen products are presented in Image 6. The low-income population did not consume delicacies even prior to the price increases (approximately 30%). The portion of the population that did not change or made insignificant changes to their consumption of delicatessens showed very slight variance between 2014 and 2015 – 48% and 45% respectively.

Image 6. Assessment of the changes in the structure of consumption of delicatessens.

image6

Now we will examine the results of the analysis of answers to the third block of the survey – “assessment of the change in the food market with introduction of limitations on import of goods from US and EU”. This block contained 7 questions.

Question 1. “In your opinion, do the economic sanctions from US and EU affect the current state of our economy?” Majority of the respondents (58%) feel that the US and EU sanctions “strongly affect” the economy of our country, while 38% believe that it has a “low effect”, and 4% believe that the sanctions have no impact at all. The numbers between the 2014 and 2015 surveys coincided down to 1%.

Question 2. “What portion of your food purchases consisted of products that are now banned from import into Russia?” Majority of the respondents (57%) claim that the products that are now banned comprised an “insignificant portion” of their purchases; 17% don’t even know which products can no longer be imported into Russia. Another 17% of the respondents did not buy those products even before the sanctions, and only 8% stated that the now banned products comprised a “substantial part” of their purchases.

Question 3. “Did you happen to notice that lately the products you are used to seeing in stores are no longer on the shelves?” In 2014, it was 14% of the respondents who answered “yes, often”, while in 2015, that number grew to 20%. The number of people who answered “rarely” and “no, never” in 2014 consisted of 42% and 44% respectively. In 2015, the answers to the same questions were 40% and 40%. In other words, over the year the number of people who could not find the products they wanted has increased somewhat.

Question 4. “Based on your observation, how much did the assortment of food products changed in your regular stores?” In 2014, majority of the respondents (73%) believed that the “assortment did not change”, while 20% believe that the “assortment did change”, and 7% of the respondents saw an increase in the assortment of foods. In 2015, the answers spread in the following order: 66% – “assortment did not change”; 28% – “assortment did change”; 6% – “assortment increased”. Here we have to keep in mind that different consumers shop at different stores, and the goods they buy also vary. But overall, we can see a slight decrease in the assortment of food products.

Question 5. “Overall, how much change do you see in the quality of the products in the stores you shop?” With diminished ability for the stores to purchase products at previous prices, dishonest sellers and manufacturers of convenience food products go to the lengths of cutting cost at the expense of the quality of the products. Drop in the quality of products was noticed by 24% of the respondents; while increase in the quality of products was reported by 1%, it is lower than the margin of error.

Question 6. “What new food products have appeared in the stores you shop?” With replacement of a number of products we could expect addition of new types of products. In 2014, it was 55% of respondents who did not notice new products, while in 2015, that number increased to 66.5%. In the “fruits and vegetables” sector saw a decrease. Due to growing prices on fruits and vegetables, the sellers started placing fewer orders for this type of product, since they are considered part of the perishable products. A number of fruits and vegetables stores had to close. Consumers have noted an increase in assortment of apples in 2015. Lately, there have even been slight price drops on apples. In the rest of the sectors there are no noticeable changes (Table 1).

Question 7. “In your opinion, will we be able to replace the banned products with analogous domestic products or products from other countries?” Residents of the Primorsky Krai are fairly optimistic in this respect. More than 50% believe that “we will be able to partially solve the situation with minor losses in the market”. Over 27% of the respondents believed that “we will be able to successfully resolve the problems in the consumer market and situation will improve” (Image 7). The number of pessimists who believe that “we will not be successful, and the situation will worsen” has increased over the year from 15% to 20%. The portion of pessimists is close to the portion of the population that was unable to find products that they were purchasing in the past.

Table 1. Assessment of opinions of respondents who noticed changes in the assortment of food products (in % of respondents)

Type of food product

Portion of respondents who noticed changes in assortment of food products (in % of total respondents)

Survey of 2014

Survey of 2015

Meat products

8.7%

8%

Fruits and vegetables

13.5%

7%

Dairy products (excluding cheeses)

12%

12%

Cheeses

6%

4%

Sweets

6%

3%

Domestic products

8.7%

7.6%

Did not see any changes

55%

66.5%

Image 7. Assessment of people’s expectations with regards to replacement of food products that fall under the sanctions.

image7

Most of the Krai’s population ties the changes in their socio-economic circumstances in the period of economic crisis with the fall in value of the national currency. The consumer reaction to rapid growth of the value of foreign currency is assessed using the questions in block 4.

The general attitude towards the drop in the exchange rate of ruble we have assessed based on the answers to the question: “Are you concerned by the current growth in the value of the US dollar?” In 2014, the number of people who answered “yes, definitely” and “yes, somewhat” consisted of 75% of the residents of Primorsky Krai. In 2015, this number has increased slightly (78%).

How the changes in the exchange rate of US dollar have affected the consumption of goods and services we have analyzed from the answers to the question: “How did the growth in the US dollar to ruble exchange rate affect you?” This is an open question, to which the respondents could give several answers in a free form. To conduct the analysis, the data was systematized.

If in 2014 significant portion of the respondents (41%) felt that the increase in the exchange rate of the US dollar “had no effect” on them, in 2015 that number has dropped down to 24%. The rest of the answers were combined into 13 groups (Image 8).

In answering this question, the respondents gave either a brief generalized answer (“had a negative effect”, “had a positive effect”, etc.), or gave an expanded answer. In the survey of 2015 the respondents started giving more of the expanded answers, being more specific in their evaluation. This is explained by the allocation of the number of answers between the groups of four most common answers: “expenses increased”, “had negative effect”, “had to limit purchases”, and “quality of life has decreased”. The number of answers attributed to the first most popular groups of answers grown from 56% to 73%. In 2015, the respondents demonstrated a more frequent indication of decrease in the quality of life. The answers such as “the purchasing power has significantly decreased”, “quality of life has dropped substantially”, etc., have become more common.

An insignificant portion of the respondents stated that the increase in the value of the US dollar has positively affected their situation. Respondents have explained that positive effect by either having salary payed in US dollars, or having savings in USD.

Many people plan their New Year’s vacation ahead of time, especially if it involves travelling. The impact of the US dollar exchange rate upon the vacation planning for the holidays we assessed by the answers to the question: “Did the increase in the value of the US dollar affect your vacation plans for the New Year?” The number of respondents that answered “yes” increased from 34% in 2014 to 41% in 2015. In their answers the respondents mainly associated their plans with travelling abroad. More than 20% of those who answered “yes” decided to cancel the planned trip abroad due to the growth of USD value.

Image 8. Answers of the respondents by assessment of the influence of the change in the value of the US dollar upon their lives.

image8

In our surveys we researched possible actions that people would take under the new economic circumstances. For this purpose we used the following question: “Are you planning to take any measures with regards to the increase of the US dollar to ruble exchange rate?” By the results of the analysis, we have determined that the number of people who take a passive stance has increased by 10%. In 2014, it was 75% that either answered “planning to take no action” or “will wait for the situation to stabilize”, while in 2015, that number grew to 85%. The structure of the variation of actions that the people of Primorsky Krai could undertake with regards to the US dollar exchange rate is presented in Image 9. In 2015, fewer people are planning to conduct foreign currency transactions, but there is an increase in the number of people who are planning to “tighten the belt” under the new economic conditions. The number of people that plan to search for ways to earn additional income has increased by 10%.

Image 9. Structure of the various actions undertaken by the residents of the Primorsky Krai in response to the increase of the US dollar.

image9

Conclusion

The new sanction have certainly impacted Russia’s economy, but at the same time forced it to search for ways of ensuring technological independence from the countries of the West. Russia’s countermeasures to the sanctions activated domestic farming and agriculture industry in import substitution. Alternative foreign suppliers of food products have also already been found. These measures have yet to fully stabilize the consumer market within the country, but have already demonstrated a positive trend.

The reaction of the Krai’s consumer market also has its own peculiarities. The dependency on import of food products from the West is not as high in this area. But separate local manufacturers of food products have inadequately raised prices for their products. For example, the increase in the price of poultry from local producers has been much greater than the increase in prices on other types of meat products that come from outside of the Primorsky Krai. This year also marked an absolutely unsubstantiated hike in fish products from local manufacturers.

Primorsky Krai has a high monopolization of the market that is above the national average. Currently, many of the brokers include all types of risk protection from further increase of foreign currency into the prices of the products.

The general conclusion is that the Primorsky Krai consumer market is currently in unstable state. Majority of the population of the Krai are very understanding of the economic difficulties that the country is going through. The level of confidence in the president is at the all-time high. But we can see the disappointment of people in the local government that is unable to counteract the monopolization of provision of the consumer market with food products. For now, this dissatisfaction carries a latent character, but the tensions in the society are growing.

The stability of the state and society depends on the wellness of its citizens [7, p. 146-155]. The social wellness of the population is the key to success or failure of the reforms undertaken by the state. Positive and optimistic feelings – a strong base for fruitful activity and effective self-organization of the society; doubt, disappointment, and powerlessness create the grounds for destructive thinking and behavior. Society with a large number of unhappy, hopeless, and bitter people builds up a negative energy and risks finding itself on the path of social turmoil.

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