The government of Kazakhstan has admitted that there are much more poor people in the country than is shown in the official statistics. Specialists of the relevant ministry tried to count all those in need of help, according to European standards. Almost half of registered households of Kazakhstan turned out to be at the bad, crisis, emergency social levels.
To help all those in need, a long-term strategy, i.e. the social code, was developed. Some deputies of the seventh convocation reviewed the draft and rated it as a disappointing document.
The pensioner of Altai town, East Kazakhstan region, Svetlana Krasnova (the surname was changed upon her request – author’s note) have been receiving benefits for the loss of the breadwinner for her granddaughter and the so-called ‘guardian salary for many years. Her daughter has died and the woman applied for the guardianship over her orphan granddaughter. The girl has grown up and won the scholarship at the university. According to the laws of Kazakhstan, if an orphan is enrolled to the university, the benefit will be payable until the age of 21, instead of 18.
The old woman continues to work even after her retirement; Svetlana is an accountant. She said it is very difficult to live together with the student on the pension and the benefit.
What is wrong about the statistics?
According to the Bureau of National Statistics of Kazakhstan, the percentage of people with income below the subsistence level (SL) in the third quarter of 2022 was 5.3 per cent. This is the highest indicator since the start of the year. However, the official poverty level is lower in towns (4 per cent) and higher in villages (7.3 per cent).
The situations in the regions is not very different. The percentage of the poor is lower in more economically developed towns and regions – Astana (2.2 per cent), Ulytau (2 per cent), Atyrau (3.5 per cent) regions. There are more low income people in the south – in Turkestan region 9.1 per cent, in Shymkent 7.2 per cent.
In absolute terms, 1 million 34 thousand people are officially poor in the country. This is 17 per cent more than at the beginning of 2022.
But poverty differs. In various countries, poverty line differs much and usually depends on the level of the country’s economic development. For example, in the USA the poor are those who spend up to 24.6 dollars a day (10 times more than in Kazakhstan), in Türkiye up to 7.6 dollars (3 times more than in Kazakhstan).
In 2022, the World Bank determined the international extreme poverty line as 2.15 dollars per day per person. Kazakhstan with its 2.36 dollars ranks between Ethiopia and Bangladesh (data of OurWorldinData.org).
The amount of 2.36 dollars is calculated as follows. According to the formula, the poverty line in Kazakhstan amounts to 70 per cent of the regional subsistence level. In the third quarter of last year, the average SL was 46.7 thousand tenge (101,2 dollars), while the poverty line was 32.7 thousand tenge (70.8 dollars or 2.36 dollars per day), accordingly.
The editorial office of CABAR.asia asked Arman Beisembayev, Kazakhstan-based economist, financial analyst, to comment this official statistical data. According to him, there is no proper statistics showing the full picture of poverty in Kazakhstan, while official data are underreported.
“There are several indirect signs, which can tell approximately what happens with poverty in Kazakhstan. First, it’s high level of food spending. Kazakhstanis spend over 50-55 per cent of income on food. [...] Second, the poverty level is tied to minimum social standards – SL indicators, which, in turn, affect the minimum salary (MS). Last year, MS was as low as 60 thousand tenge (130 dollars). Logically, if you earn low salary, you are considered a poor man. But this is a deception. If your salary is 70 thousand tenge (152 dollars), can you be considered a wealthy man?” the expert said.
So, in terms of the government statistics, a person with the salary just over the minimum salary is not poor. The state considers him/her a citizen with average income. A solid middle class. But it is very hard for a family to live on this money.
Besides, according to statistical data, many Kazakhstanis have income just above the minimum salary. This salary is called modal, i.e. most frequent. In 2022, it amounted to 68.6 thousand tenge (149 dollars). As the chart shows, the modal salary is far behind the average monthly nominal salary. This significant difference proves high inequality of incomes in the society.
Other reasons why the official poverty statistics does not meet the reality, according to economist Arman Beisembayev, is a large proportion of “grey” economy and distrust of citizens to state bodies. This hypothesis was checked during the pandemic. Back then, the government decided to introduce payments to those who temporarily lost jobs. A person could state that he/she lost income and receive 42.5 thousand tenge (103 dollars). Then, applications for payments were filed by over 6 million people.
“It turned out that the country had so many people who lived at subsistence level, were taxi drivers, pushed carts at bazaars. But the state fails to see them as they are not registered or pay minimum taxes,” the analyst said.
As to the annual increase in benefits without revising the formula, such approach, according to Beisembayev, does not change the poverty situation significantly.
“If we look at the dynamics of growth of social indicators, on which benefits depend – i.e. subsistence level and minimum salary in dollars, we’ll see that this is a downward trend. The economy of Kazakhstan in terms of dollars has been in decline for eight years, and it grows only in terms of tenge. This is just a monetary pumping via the nominal growth of income. There is the concept of a real disposable income, and this indicator does not grow, and the purchasing power of people is declining. Based on the standard of living, we live like we did in 2003-2005,” the speaker said.
On new code
The need for reformatting the social welfare system in Kazakhstan was voiced at the government level before the January events of 2022. And afterwards, the social issue has become one of the most discussable. And by the end of the year the draft of the new social code was developed and submitted to the lower house of parliament.
The code concerns many aspects – starting from social welfare and migration, and ending in the labour market liberalisation. Here we review only one of its aspects – social welfare.
The most important thing done by the code drafters – Ministry of Labour and Social Protection of Population (MLSPP) – is that they again began to gather information on the standard of living of Kazakhstanis and assessed the social status of families in a new light. They created the digital family card. It was based on the multidimensional method of poverty assessment of western scholars Alkire and Foster, recommended by the UNDP. According to this method, each family was assessed by 80 different parameters. So far, information about 19.4 million citizens (out of 19.7 million) and 6.2 million households was digitalised.
Eventually, all families were distributed by five social levels. Based on the results of this rating, 3.17 million families or 10.3 million people fell into the good and satisfactory categories. It amounts to 53 per cent of the total number of assessed citizens. The remaining 47 per cent of families or 9.1 million Kazakhstanis were referred to the vulnerable, crisis or emergency levels. It is nine times more than the official poverty statistics.
The second important change is that the government shifted from the declarative to the proactive format of social welfare. Previously, payments were assigned to a person only upon his/her application, now the state on its own offers to him/her to apply for a benefit. The format of this communication is via short messages.
The pilot DFC system came into operation in the country on September 1, 2022. According to minister of labour and social protection of population, Tamara Duisenova, 57 thousand short messages were sent in the first three months of the ‘pilot’ to the families who, according to digital data, were entitled to welfare, but had not applied for it previously. 27 thousand people replied. Among them 11 thousand applied immediately for welfare, just over 15 thousand came to public service centres to check if they were really entitled to welfare. As to others, three notices are sent to them. If no one replies after three short messages were sent (SIM card is inactive, no internet access, etc.), information is sent to the rural akimat, local social security department.
The new DFC system has many shortcomings, which were revealed at the start of the work. It was reported during the project presentation. For example, the general database did not contain information about children born before 2008, which means “minus” one child for families with four children. In turn, it means that the system does not assign them the status of large family and, respectively, does not offer assistance to them. The DFC system also does not take into account the families of migrants from the regions, who live in summerhouses near big cities, in the so-called suburban ‘ghettos’ without registration. There is no information about them in the databases.
Essentials overlooked?
During the project review, some deputies and international experts criticised the code for missing the essential thing – the prompt revision of the mechanism of assignment of benefits for the poor. How the target social assistance is paid as the difference between the per capita income in the family and the poverty line. The government helps to make it reach the level (70.8 dollars per month). If the per capita income is 100 tenge (0.2 dollars) above the line, there will be no payments assigned. If the person lacks 100 tenge to reach the line, the government will pay 100 tenge to him/her.
Besides, if the family has an able-bodied family member, the target social assistance will be appointed for a short term only. The person will be given some time to find a job or retrain for the new profession. If the person does not want to be employed, the whole family will lose the welfare. This is called the tied social assistance, and it was introduced to eliminate dependency. The unconditional social welfare is paid unconditionally when no family member can work for objective reasons.
“The target social assistance is one of the key government social programmes, which has a critical importance for the reduction of the poverty level. In the meantime, we can see that the poverty situation in Kazakhstan remains difficult, especially now amid inflation. However, provisions on the target social assistance remained without significant changes. It means that the existing problems in target social assistance system are not solved in the draft code,” said Arthur van Diesen, representative of UNICEF (UN) Kazakhstan, according to the minutes of the meeting of the lower house of parliament.
The expert of the UN Children’s Fund recommended to increase the poverty line to 100 per cent of the subsistence level. It will allow to cover more low income families. Also, according to Arthur van Diesen, the norm of compulsory employment when applying for the target social assistance for pregnant women, mothers of children under 7, and single parents must be removed. According to the representative of the country office of UNICEF, the volume of target social assistance must not be limited to a particular amount for a period. It poses a risk that people who need assistance will be left ‘out of the system’ just because the allocated amount ran out.
According to the MLSPP, Kazakhstan is planning to apply new approaches to determine the poverty line. But it will be done only in 2025. They suggest to change the calculation mechanism. The poverty line will be calculated on the basis of the median income instead of the subsistence level in two years.
According to the deputy of the faction of the People’s Party of the seventh convocation, Yerlan Smailov, the draft caused dubious impression. On the one hand, the big volume of work done can be seen; on the other hand, the code did not meet the expectations. So many serious social problems remained beyond the document.
“The issues of progressive inequality and poverty are not covered in any way. We should know what poverty is in Kazakhstan, how many poor people we have, how real those assessments are. If it’s 4.8 per cent (data for the second quarter of 2022 – author’s note), it’s one thing, if it’s quarter or more, it’s another thing. It is rather different picture of the country, different level of problems that need to be resolved,” the public figure said. “The document does not contain risks and opportunities of implementation of the social code, and management of those risks. Given the scope and value of the code, its nature, we need a different quality and vision, and implementation of the document.”