WAGE AND PENSION INCREASES: THE SOVIET WAR ON POVERTY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A002200270001-7
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 18
• Document Creation Date: December 9, 2016
• Document Release Date: February 27, 2001
• Sequence Number: 1
• Publication Date: April 1, 1965
• Content Type: BRIEF

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INTELLIGENCE BRIEF
WAGE AND PENSION INCREASES:
THE SOVIET WAR ON PO VER T Y
CIA/RR CB 65-27
April 196 5
Copy No.
DIRECTORATE OF INTELLIGENCE
Office of Research and Reports
CONFIDENTIAL
GROUP 1
Excluded from automatic
downgrading and
declassification
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WAGE AND PENSION INCREASES:
TFiE SOVIET WAR ON POVERTY
Khrushchev's successors have made haste to identify themselves as.
leaders in the Soviet war on poverty The Khrushchev pr. ograrn to increase
waged and pensions of low-income groups, which will cost 5 billion rubles
annually, has been continued and even speeded up in some instances. The
new leadership, however, has avoided reviving some of Khrushchev` s
earlier promises that included a shorter workweek as well as an 11-
billion-ruble bonanza in general wage increases and tax reductions.
The present program will (1) provide wage increases averaging 21
percent for 18 million of the 22 million workers in the service sectors of
the economy (trade, restaurant, health, education, housing maintenance,
personal. service, government administration, and scientific research -
referred to in the t.JSS1Z as the nonproductive sectors); (2) raise the legal
minimum wage rate of urban workers by more than one-third and of rural
workers by about one-half, (3) boost by more than one-third the minimum
pensions of disabled workers and the minimum benefits to survivors,
(4) place the 25 million to 30 million collective farmers and their families
under a new state-wide social insurance system similar to the existing one
for workers and employees, and (5) increase the number of technical
workers on collective farms who are eligible for benefits under the social
insurance system for workers and employees,
Most of the measures in the current welfare program represent ~~.
belated a.nd partial. ft~.lfillment of earlier promises. The increase in
wages for service worl~ers and the increase in the minimum wage rate
are taking place 3 years later than originally promised, Moreover, a
second round of increases in minimum wage rates originally promised
for 1965 apparently has been shelved. As a result, workers and em-
ployees will, receive only three-fourths of the wage increases envisioned
in the Seven Year Plan (1959-65). Also, workers and employees appar-
ently are to continue paying income taxes and working a 41-hour week,
i.n spite of earlier promises to abolish the former and shorten the latter,.
(,O11eCtlve farmers, too, may have reason to complain. Although their
new pension system provides some much-needed security, their average
pension will be only about one-half the size of the minimum pension for
work.e:rs and employees.
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The attitude of the new leaders in approving these increases in wages
and pensions and at the same time rejecting Khrushchev's more ebullient
welfare measures illustrates their general style of political and economic
leadership. They have beers trying to restrain, to trim, to get under con-
trol the various programs that have been pressing against Soviet resources.
Thus the large investment program for agriculture, announced by Brezhnev
on 24 March, apparently is to be accompanied by some cutback in Khru-
shchev's "chernicalization" program, In addition, on 19 April, Kosygin
announced that wage increases during the forthcoming Five Year Plan
period (1966 -70) will be tied to increases in the productivity of labor. 1 /
Yet, because commitments continue to multiply while rates of growth
continue to decline, Khrushchev's legatees will continue to experience
frustrations similar to those that bedeviled his decade of power.
1. Wage Increases for Workers and Employees
On 15 July 1964 the Supreme Soviet approved legislation to put into
effect the final phase of the wage reform recommended by the 21st Party
Congress in January 1959. The new law provides wage increases during
1964-65 for 18 million service workers and a rise in the minimum annual
wage to 480 to 540 rubles (40 to 45 rubles a month) for all workers and
employees. Z/
The wage increase, amounting to 3. 3 billion rubles on an annual basis,
will raise the average annual money earnings of service workers by 21 per-
cent -- from 873 rubles to 1, 056 rubles. The average percentage increase
for the various groups of service workers, however, will range from 15 to
Z5 percent, as follows 3/:
Average Annual Money Earnings
(Rubles)
Before
Wage Reform
After
Wage Reform
l ncx~ease
(Percent)
A11 service workers
873
1,056
21
Housing and communal economy
667
767
15
Health
r
'
707
86y
~3
f
rade and restaurants
728
859
18
Education
833
1,02
25
Other
1, i+99
1, 796
20
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The new earnings level for service workers ?-- l0 percent: below the
average annual earnings of workers and employees in industry, con-
struction, and other "productive" branches 4/ - -will restore them
roughly to the relative income position they held at t~:e start of the
wage reform in 1959? The comparative position of service workers,
however, is distorted by the relatively high-income wo:r~kers included
in the "other" category, which includes those in government adminis-
tration and probably those in scientific rPse.a,rc:h.
The present round o_f wage increases for service workers was
originally scheduled for introduction in 19620 Postponement of these
increases until 1964-65 -- long after v~age increases to other groups of
workers and employees -- probably hampered recruitment in s ome of
the higher skilled categories of service personnel, notably in education.>
The minimum monthly wage of all urc~rkers and employees i.s to be
raised in 1965 from 27 rubles in rural areas and 35 rubles in urban
areas to 40 and 45 rubles, respectivelye This increase originally was
scheduled for 1962, and a further increase to 50 to 60 rubles was to be
made in 1965- Failure to increase the minimum monthly wage to 50 to
60 rubles in 1965 precludes fulfillment of the promised increase in the
average wage of workers and. employees during th.e Seven Year Plan.
According t.o th.e original plan, the average wage of workers and em-
ployees wa.s to rise 26 percent 5/ -- from 943 rubles to 1, 188 rubles>
Even with the 21 -percent increase in the pay to service workers, the
average earnings of all workers and employees wi1?_ have increased by
only 20 percent. b/ -- to 1, 136 rubles ayear -- by tl~;.e end of 1965.
In an apparent effort to curry favor with the rank.-u.r~d--file popula-
tion, Premier Kosygin announced in December 1964 that t:kxe wage in-
creases originally scheduled for th.e last half of 1965 would take place
instead during the first halfo 7/ This change twill raise the wages of
approximately 9 million service workers and will ads' 9Q0 million
rubles to the cost of the program in 1965?
2. Pension Increases for Workers and E~mpl.oyees
The security status of workers and employee~~ h~:s been farther in-
creased by a decree of 31 December 1.964, which ra.is ed the minimum
levels of disability anal survivor pensions by an average of 35 percent,. 8/
Under the new law the size of minimum disability pensions, dep+ending
on the degree of disablement and whether or not the disa.bil.ity is job-
connected, will range between .16 and 50 rubles a. rnontha The former
- 3 -
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minimum levels were 16 and 36 rubles. Failure to increase the mini-
mum level of pensions for partial disability (16 rubles a month} is
consistent with recent efforts to keep invalids in the labor force.
Minimum survivor pensions have been raised from a range of 16 to
30 rubles a month, depending on the number of dependents, to a range
of 21 to 50 rubles.
3. Pension Program for Collective Farmers
The second major welfare program, approved by the Supreme Soviet
on 15 July 1964, will bring 2.5 million to 30 million collective farmers and
their families under a state social insurance system beginning in 1965. =~~
Until this program the establishment of pension programs a.t collective
farms has been optional and entirely at the expense of the individual
farm. As a result, many farms had no program at all, and those with a
program usually failed to match the benefits received by workers at state
enterprises.
Under the new program for collective farmers, benefits are smaller
and eligibility requirements more stringent than those under the program
for workers and employees. The minimum old age pension for collective
farmers is 12 rubles amonth -- for workers and employees, 30 rubles
a month. Both the collective farmer and the worker and employee must
work 25 years to be eligible for a full pension, but the worker a.nd em-
ployee of retirement age can qualify for a partial pension after only 5
years whereas there is no provision for partial pensions for collective
farmers, The retirement age for male collective farmers is 65 but for
male workers and employees only 60 years. Nevertheless, collective
farmers will benefit significantly from the new program. The new pen-
sion law will increase the number of collective farm pensioners from
3 million to between 6. 5 million and 6. 8 million, 9/ and the average size
of pensions will increase from approximately 6 rubles a month to about
17 rubles a month, 10/ Thus more than 1 billion rubles will be added to
the money incomes of collective farmers during 1965.
Funding provisions for the program, which is officially estimated to
cost 1. 3 billion to 1.4 billion rubles in 1965, 11/ limit the cost to the
~= Excluded from coverage under this program are collective farm mem-
bers who work only on private plots as well as chairmen and certain tech-
nical workers who qualify for benefits under the program for workers
and employees.
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state by requiring mandatory deductions from the gross revenues of the
farms. In 196.4, collective farms were required to contribute 2. 5 per-
cent of their gross revenues to a centralized social insurance fund, and
in 1965, the first year of the program, they are required to contribute
4 percent. 12/ In addition, besret u red toymeet th g e s 4mat dlco t o~bles
a year during 1965-67, will q
the program. 13/ Although the direct outlays of the :state are kept low
by these funding provisions, the reaction of the relatively rich collective
farms to subsidizing the pension programs of the poorer farms may
create some headaches for the leadership.
A decree of 20 July 1964 by the Council oc a'lrmen~sdeputydchairmenr
social insurance coverage to collective farm
chief accountants, machine operators, and other technical workers on
collective farms by making them eligible for benefits under the social in-
surance system for workers and employees.. 14/ Collective farm chair-
men. and specialists with a higher or secondary specialized education
have been eligible for a portion of state pension benefits since 1950, 15/
and MTS personnel who became collective farm members following the
abolition of the MTS network in 1958 retained their eligibility for state
social insurance benefits.
The additional cost resulting from the improved pension program of
collective farm chairmen and specialists and from the increased minimum
rates for disability and sur hovw~ ernsthat state soc alrinsurancedpayments
1965 plan figures indicate,
for the current year are expected to increase by 8. 7 percent, 16/ or
about 200 million rubles, above the average annual rate of 6. 8 percent
during the preceding 4 years. 17 /
4< Implications of the Welfare Program
The wage and pension increases ultimately will add 4. 5 billion to
5. 0 billion rubles to the annual income of consumers. This addition to
consumers' income, plus other sources of new income such as price
reductions and increased procurement prices, will raise per capita
income by a substantially greater percentage than the average annual
increase achieved during 1959-64. 18/ The regime thus is faced with
the task of increasing the supply of consumer goods in order to match
increased money incomes.
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5. Unfulfilled Promises
The current increases i.n welfare benefits represent only a partial
fulfillment of promises made to people on the lower rungs of the eco-
nomic ladder. Still unfulfilled are pledges originally made for imple-
mentation by 1965 that would have added approximately 11 billion
rubles more to consumers' annual income and would have cut the work-
week from 41 to 35 hours. If workers and employees had been given
wage increases of 26 percent during 1959-65 as originally planned in-
stead of 20 percent as is now indicated, they would have received an
additional 4 billion rubles in 1965. Much of this sum would have come
from the promised increase in the minimum wage rate to 50 to 60
rubles per month. If the program to abolish the income tax on earn-
ings of workers and employees had been pursued to completion as
originally scheduled, they would have received another 7 billion rubles
in 1965. According to the program announced at the 21st Party Congress
in 1958, the level of tax-exempt income was to be raised in a series of
steps until the tax was eliminated in 1965. The program proceeded on
schedule in 1960 and 1961 when the exemption was raised to 60 rubles
monthly. In September 1962 the tax reduction program was suspended
because of other budgetary requirements, 19/ and to date no move has
been made to reinstate the program. Unlike the recent welfare pro-
grams, elimination of the income tax would have benefited the more
highly taxed middle-income workers and would have done little to in-
crease the disposable incomes of the low-income groups.
Another stalled program is the planned reduction in the length of
the workweek. The Seven Year Plan specified that the workweek would
be cut from 4.1 to 40 hours in 1962 and that a shift to a 35-hou.r work-
week would begin in 1964 and would be completed in 1968. The reduc-
tion of the workweek was to take place without a reduction in average
weekly wages and would provide increased "pay" in the form of leisure.
The equivalent value of this leisure in rubles, however, would not be
the proportional part of the industrial payroll, because workers would
be expected to put forth the same effort in 35 hours that they did in 41.
The scheduled shortening of the workweek by 1 hour did not take place
in 1962. In spite of a comment by Khrushchev that it would be part of
the welfare program announced at the Supreme Soviet in July 1964, it
apparently was dropped at the last moment. 20/ No official explanation
has been given for failure to carry out the reduction, but failure to achieve
planned productivity goals during the Seven Year Plan undoubtedly was an
important consideration. The new leaders have not brought up the subject
of the 35-hour workweek.
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1.
New York Times, 20 Apr 65, p. I. U.
2~
Pravda, 14 Jul 64. U.
3.
Ibid.
4.
Sotsialisticheskiy trud, no 8, 1964, p. 6. U.
5.
Pravda, 25 Nov 59. U.
6.
Ibi.~l, ,10 Dec 64. U.
7.
Ibid.
8.
Vedomosti verkhovnogo soveta SSSR, no 1, 1965, p. 4~6.
U.
9.
Sotsial'noye obespecheniye, no 10, 1964, p. 58. U.
Pravda, 10 Dec 64. U.
10.
Sotsial'noye obespecheniye, no 12, 1964, p. 2. U?
11.
Pravda, 14 Jul 64. U. -
12.
Sotsial'noye obespecheniye, no 12, 1964, p. 2. U.
13.
Ibid.
'
14
,
State Committee on Labor and Wages. Byulleten
USSR
.
,
no 10, 1964, p. 40-45. U.
15.
USSR. Direktivy KPSS i sovetskogo pravitel'stva po
khozyaystvennym voprosam (Directives of the CPSU and
the Soviet Government on Economic Problems), Moscow,
1958, vol 3, p. 521-28. U.
16.
Pravda, 10 Dec 64. U.
17.
USSR, Central Statistical Administration. Narodnoye
khozyaystvo SSSR v 1962 godu (The National Economy of
18.
the USSR in 1962), Moscow, 1963, p, 637. U.
Ibid.
19.
Tzvestiya, 25 Sep 62. U.
20.
State, Moscow. T11085, 15 Jul 64, C.
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A+~+IC3RANI3tZM FQR; Chief,. i7ssemination Cont~l Braxich, AD/CR
~I Acting Chief, Fubli:cationa t~taff, t~R
~'[~+~~ ~X'8,Y18111~tt81 O#' Material
It is requested that the attached copies t~f CIA/RR CB ~5-27, Wa
p~enaion Zncreeu~es:_.'i4?e Soviet War. an kbye~"tr, April. 19~5s Confidentia ,
Copy No.
Recipient
department of Mate,- INR Communice,tions
Winter, Rohn X527, Mate pegt. Bldg,
Attu; Ivan Y. A3atusek, Chief, RSB~EA
1~epartment of State, Room '~ 26
Mate Buildiz7g
i~r. ~.ul F. A4yers, Bureau of the Census,
Foreign Deznographie Az~a~.yeia Y?ivision,
Room ~1o2A., Dept. of Ccs~nerce
Federal f3ffice B1d.g.
Attnt Conrad '~a.euberi Assistant Director,,
Bureau. of the Census, ~Jept ? of Gonunerce
Rom ~U07, Federal Off'ice Building 3
Suit3.and, i~rylax~d
22c~3 80 2F7~+ Mr. ~,ul ~? A~yer~a, Bureau ~-f the Census,
Foreign Bemographic Ansiyais Bivision~
Races 31~02A, Dept? of Cs~merce,
Federal (?i'fice Bldg.
8uitland, Msryland
Isepextment of ;~.bor, Mr. P?~u1 FaeGhke, Chief,
.vision of Admini~-tration 8t" .nagement,
Boazn 7122,. 1~th & Constitution Avenue,.. N.W.
Attn: '6tii.].ic~ C? Bheltan} Chiefs ~3ivieion of
Foreign I.~bor Conditiansf Bureau of Labor
~tiat~.es' Dept.. of Labar, Room ~7,
Gblumbian Bu'~.lding;, ~C16~_,,5.~ Bt., N.W 25X1A
~ Attachments
Approved F r ~ ~1~~~~~~.'p
1h1; ~.'
~xa A.., ~
h;s menwtdn+Jurn nas been comA~etad~
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2~~9270001-7
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