The Well-Being of the Elderly and Wage Arrears in Russia

About one-third of households with elderly were not paid their wages during the mid-1990s in Russia. Applying matching estimations to a nationally representative survey, the study shows that wage arrears had detrimental effects on the well-being of the elderly in these families. Salaries in households with wage arrears dropped by almost two-thirds, income fell by more than one-third, and poverty doubled. Behavioral responses were only partly effective. The net revenue loss amounted to five-sixths of the wage shock for men, and nine-tenths of the wage shock for women. The elderly cut back on food expenses by reducing food purchases and adjusting their diet towards cheaper calories, economising on expenses equal to around one-quarter of the wage reduction. Caloric and protein intakes dropped, although less than income, and the nutritional content of food consumption with regard to vitamins and minerals deteriorated. Wage arrears worsened male health more than female health, even though the decline in income was comparable. Functional limitations rose by 8% for men and 3% for women, and self-rated health declined by 2.5% for men and 0.5% for women. Old-age men with arrears were almost twice as likely to die before the next survey round, and functional limitations of surviving men rose by more than 10%. By contrast, there was no impact on the next round's health status of old-age women. A rich data set is used to discount alternative explanations, including feedback from health to income, other economic factors, health service access, health behavior, and environmental conditions. (JEL: I12, I30, J14, J30) Copyright (c) 2006 by the European Economic Association.