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CIA/ RR CB 65-27 
April 196 5 


, • o i 

Copy No. ► - * - 


INTELLIGENCE BRIEF 


WAGE AND PENSION INCREASES: 
THE SOVIET WAR ON POVERTY 


DIRECTORATE OF INTELLIGENCE 
Office of Research and Reports 


CONFIDENTIAL 


GROUP 1 

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WAGE AND PEN SION INCREASES: 
THE SOVIET WAR ON POVERTY 


Khrushchev’s successors have made haste to identify themselves as. 
Khrushchev s succ Khrushchev program to increase 

leaders in the Soviet war on poverty* The Khrushchev P S bles 

waee^ and pensions of low-income groups, which wi c 

Innlally has been continued end even speeded up in -me ms tances. The 
new leadership, however, has avoided reviving some of Kh'u he 
earlier promises that included a shorter workweek as well as an IP 
billion-ruble bonanza in general wage increases and tax reduction * 

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, 

referred tTin'the IsSRa^the nonproductive sectors); (2^ r aise ttxe iegal 

-=vx=::s"; 

BSS rsssss SK sss 

undet a new state-wide soctal insurance system similar to the existing one 

^“i: r *. - 

insurance system for workers and employees. 

Most of the measures in the current welfare * : 

hphtpd and partial fulfillment of earlier promises. The increase m 
wages^fer service workers and the increase tn the minimum wage rate 
are taking place 3 years later than originally promtsed Moreove^r^^ 
second round of increases in minimum wage rates origina YP 
for 1965 apparently has been shelved. As a result, workers and em- 
ulovee, wm recaive only three-fourths of the wage increases envtstoned 
in the Seven Year Plan (1959-65). Also, workers and " 

ently are to continue paying shorten the latter.' 

in spite of earlier promises to abolish the lormer , h . 

r- i-pniivp farmers too, may have reason to complain. Although thei 
lew penl on r 8 em jLiides some much-needed security, their average 
pension will 2 U Ibou. one-half the site of the minimum penston for 
workers 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 been 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 "chemicalization" 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 m 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. 2/ 

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 
25 percent, as follows 3/: 


Average Annual Money Earnings 
(Rubles) 



Before 

After 

Increase 


Wage Reform 

Wage Reform 

(Percent ) 

All service workers 

873 

1,056 

21 

Housing and communal economy 

667 

767 

15 

Health 

707 

8 69 

23 

Trade and restaurants 

728 

859 

18 

Education 

833 

1 , 

25 

Other 

1,499 

1,796 

20 


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The new earnings level for service workers - - 10 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 the start of the 
wage reform in 1959. The comparative position of service workers, 
however, is distorted by the relatively high-income workers included 
in the "other" category, which includes those in government adminis- 
tration and probably those in scientific research. 

The present round of wage increases for service workers was 
originally scheduled for introduction in 1962. Postponement of these 
increases until 1964-65 -- long after wage increases to other groups of 
workers and employees -- probably hampered recruitment in some of 
the higher skilled categories of service personnel, notably in education. 

The minimum monthly wage of all workers and employees is to be 
raised in 1965 from 27 rubles in rural areas and 35 rubles in urban 
areas to 40 and 45 rubles, respectively. 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 the Seven Year Plan. 
According to the original plan, the average wage of workers and em- 
ployees was 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 will have increased by 
only 20 percent 6/ --to 1, 136 rubles a year --by the end of 1965. 

In an apparent effort to curry favor with the rank-and-file popula- 
tion, Premier Kosygin announced in December 1964 that the wage in- 
creases originally scheduled for the la st half of 1965 would take place 
instead during the first half. 7/ This change will raise the wages of 
approximately 9 million service workers and will add 900 million 
rubles to the cost of the program in 1965. 


2, Pension Increases for Workers a nd Employ ee s 


The security status of workers and employees has been further in- 
creased by a decree of 31 December 1964, which raised the minimum 
levels of disability and survivor pensions by an average of 35 percent, 8_/ 
Under the new law the size of minimum disability pensions, depending 
on the degree of disablement and whether or not the disability is job- 
connected, will range between .16 and 50 rubles a month. The former 


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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 25 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 at 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 a month -- 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 and 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 tinder 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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in 1965, the first year of the program they are = «q rub les 

4 percent. 121 In i add , ed tQ meet the estimated cost of 

a year during d J re ct outlays o£ the state are kept low 

the program. 13 / Althoug relatively rich collective 

by these funding provisions, the reaction of th 7 e ‘oor« farms may 
farms to subsidising the pension programs of the poore. farm 

create some headaches for the leadership. 

. -1 pp nf 20 July 1964 by the Council of Ministers provided further 

A decree of 20 July J collective farm chairmen, deputy chairmen, 

social insurance coverag and other technical workers on 

chief accountants, machine opera or , benefits under the social in- 

collective farms by making them eligible for =<^ chair . 

surance system for workers and education 

men and specialists with a higher or henefits since 1950, 15/ 

have been eligible for a portion o sta e members following the 

and MTS personnel who became ^/f^^^^^igibUity for state 
abolition of the MTS network m 1958 retained tneir e g 

social insurance benefits. 

The additional cost resulting from f XfcS mWmL 
collective farm chairmen and specialists and from The 
rates for disability and survivor pensions has insuranc(! payments 

1965 plan figures indicate, .^fse by 8 7 pe-ent, 16 / or 

for the current year are expec annual rate of 6. 8 percent 

about 200 million rubles, above the ave ag 

during the preceding 4 years, !]_/ 


4, Implications of the Welfa re Program 


The wage and pension increases w^ ^d 4 5 billion to ^ 

5.0 billion rubles to ^annual -ome of consumer s.^ ^ ^ price 

consumers income, plus . W U1 raise per capita 

reductions and increased procuremen P ri ’ n the aver age annual 

income by a substantially g ^_ t ®^ P ®g/ 6 The reg ime thus is faced with 

increase achieved during 9 * — ririnrl =! in order to match 

the task of increasing the supply of consumer goods in order 

increased money incomes. 


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5. Unfulfilled Promises 

f -...J 116 cur J ent ^creases in welfare benefits represent only a partial 
ulfillrnent of promises made to people on the lower rungs of the eco- 
nomic ladder Still unfulfilled are pledges originally mfde for imple- 
mentation by 1965 that would have added approximately 11 billion 
rubles more to consumers' annual income and would have cut the work- 
;°“ a 41 t0 3 * hOUrS - If and employees had been given 

Ttead of 20 , PerC6nt 1959 " 65 aS ori g ina ily Planned in- 

° f f, P , e ^ Cent as 18 now indicated, they would have received an 

from th * TUbleS ^ 1965 ’ Much ° f this — would have come 

m 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 
ini%f y A S , ' they would have received another 7 billion rubles 

m 195 8 ‘ the C i° r g fl° P ro S ra ™ announced at the 21st Party Congress 

steps Lt 1 the 7 taX " eXem P t income to be raised in a series of 
steps until the tax was eliminated in 1965. The program proceeded on 

s cheduie m I960 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, W and to date no move has 

been made to reinstate the program. Unlike the recent welfare pro- 

hL a hTv r ° f thS inC ° me taX W ° Uld haVe benefited the more 

cress taX6d middle - income workers and would have done little to in- 
ease the disposable incomes of the low-income groups. 

Another stalled program is the planned reduction in the length of 
the workweek The Ssv en Year Plan specified that the workweel would 

week ,T K ° 40 h °“ rs in 1962 and that a to a 35-hour work- 

egm ln £ 964 and would be completed in 1968. The reduc- 
Uon 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 

be e^eTdT Pa f ° f ^“t™! payroll, because workers would 

The s t d a T ‘ he Same e£fort in 35 hour s that they did in 41 

h. 1962 T shortening of the workweek by 1 hour did not take place 

the leli Sp a comment b V Khrushchev that it would be part of 

are program announced at the Supreme Soviet in July 1964 it 

at the last moment. 20/ No official^plaialn 
i g ailure to carry out the reduction, but failure to achieve 

LToTlr f 7 g ° alS dUring the Seven Year Plan undoubtedly was an 
of the 3 5 - hou^workweek, ^ l6aderS ^ ^ brOUght U * the S ^ eCt 

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Sources : 

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. Ibid , ,10 Dec 64. U. 

7. Ibid. At/ t T 

8. Vedomosti verkhovnogo soveta SSSR , no 1, 1965, p. 4-6. U 

9 . Sotsial'noye obe specheniye , 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. USSR, State Committee on Labor and Wages. Byulleten_, 

no 10, 1964, p. 40-45. U. 

15. USSR. Direktivy KPSS 1 sovetskogo pravitel 1 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 
the USSR in 1962), Moscow, 1963, p. 637. U. 

18. Ibid. 

19. Izvestiya , 25 Sep 62. U. 

20. State, Moscow. T11085, 15 Jul 64. C. 



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I Excluded from automatic I 
downgrading and declassification |