Study Shows Over Half Armenia's Population in Need of Government Assistance

A recently published economic report in Armenia indicates that over half the country's population is in need of government assistance, and that many others rely on cash transfers from relatives working abroad. In addition, the statistics point to a widening of the gap between rich and poor in Armenia, a trend that complicates government efforts to promote economic recovery.

The report, titled "The Social Pattern and Poverty in the Republic of Armenia," was published by the National Statistical Commission. According to the survey, which was sponsored by the World Bank, about 55 percent of the individual population can be categorized as "poor" or "impoverished" (very poor). The share of households falling into these two categories is somewhat lower than 50 percent, indicating that those Armenians in large families are more apt to be poor or impoverished.

Meanwhile, those with incomes above the poverty line were classified as "well-provided," accounting for about 45 percent of the individual population. However, according to the report, about 13 percent of those in the "well-provided" group are regarded as "potentially poor" with incomes (12,000-12,500 drams per month, or about USD $25) just above the poverty line. In all, the survey warned that over two-thirds of Armenia's population could become dependent on government assistance.

Additional data indicated that the formation of a middle class, the backbone of a stable market economy, is lagging in Armenia. The incomes of the top 20 percent of wage earners are over 32 times greater than the incomes of the bottom 20 percent. According to the Gini index, a popular method for measuring income inequality, Armenia has an income inequality ratio of 0.593, indicating that the country has one of the highest income polarizations of all former Soviet republics. The Gini index is 0.22 in Belarussia; 0.34 in Lithuania; 0.40 in Estonia; 0.44 in Russia; and 0.59 in Kyrgyzstan. Under the Gini index system, a number closer to 0 indicates relative income equality. The higher the number, the greater the disparity between rich and poor.

The survey also suggested that living standards are declining. The percentage of Armenians in the "well provided" group fell from 45.3 percent in 1996 to 44.95 percent in 1999. At the same time, the percentage of "impoverished" decreased from 27.7 percent to 22.91 percent, providing evidence that government and international assistance programs were having a desired impact in combating poverty. The share of poor is twice as high both in the zone of the 1988 earthquake, and in border regions that suffered during the armed conflict over Karabakh.

The real level of unemployment is 27.3 percent, according to the survey, well above the previously reported official estimates. About 17 percent of those employed can be classified as working poor, who do not earn sufficient money to fall into the "well provided" category. The average salary is 20,157 drams (about USD $40) a month.

Overall, the data indicated that between 620,000 and 1 million of the country's official 3.8 million population had gone abroad in search of work. Most of those abroad are of working age, and two- thirds of them are men. Other sociological indicators do not bode well for the future. The birth rate fell two-fold in 1999 compared to the level of 1990, and the average growth rate of the population during the same period was 0.7 percent annually, down from 1.2 percent per year during the preceding nine-year period.

The survey found that wages and salaries comprised only 24.6 percent of individuals' monetary incomes. Sales of the agricultural produce made up 32.1 percent; money generated from self-employment stood at 10.6 percent; state pensions and allowances were 9.3 percent; and up to 19.3 percent of incomes came from transfers from friends relatives. Almost 13 percent of incomes came from remunerations from friends and relatives living abroad.

In addition, only 0.1 percent of incomes was generated by investment activity, including leases, interest and dividends. This indicates that the market reforms, privatization in particular, has thus far had a minimal impact on the money-earning behavior of the population.

The survey data was compiled from a systematic study of 3,600 households from across the country. The study was performed from July 1 1998 to June 30 1999. Subsequent developments in Armenia indicate that the survey's findings continue to present a representative picture of current economic and social conditions in Armenia.

The criteria for classification as "poor," "impoverished" and "well-provided" were based on income size relative to a typical consumer basket for essential food and durable goods. A household is considered "poor" if its per capita consumption was lower than the cost of typical household expenses, including food, clothing and housing. Households whose per capita consumption was below the cost of the minimal food basket were classified as impoverished. For the period of the study, the "poverty line" and "food line" in Armenia were estimated at 11,735 Armenian drams (USD $22.50) per month, and 7,194 drams (USD $13.7) a month, respectively.

Food is the major item of household expenditures, comprising 60 percent of total expenditures. In "impoverished" households the percentage of income devoted to food purchases reached 73 percent. In "well-provided" households the percentage was 31 percent.

According to the report, Armenia's GDP level in 1999 was 60 percent of that of the 1989 level, and was comparable to that of 1977. This was mostly due to a large drop in industrial production (41 percent over the 1987 level). The share of agriculture in the GDP rose to 26.2 percent in 1999, as compared to 17.2 percent in 1990.

The government of Armenia has elaborated a Strategic Program of Poverty Reduction, which has gained the preliminary support of the International Monetary Fund and the World Bank. These institutions are likely to provide funding when the program is formally approved, perhaps as early as late March. The main goal of the program is to stimulate economic activity and create jobs. It also allocates additional funds to help for vulnerable people, with the aim of preventing widespread poverty from developing into a long-term, self-reproducing phenomenon in Armenia.

Haroutiun Khachatrian is a Yerevan-based writer specializing in economic and political affairs.

Study Shows Over Half Armenia's Population in Need of Government Assistance

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