Modeling income inequality in Russia

Economic & mathematical methods and models

The labor market is constantly transforming under the influence of various economic factors, technological progress and demographic shifts. The assessment of income expressed in wages, as one of the key indicators of the labor market, makes it possible to determine its main trends, which can contribute to the development of effective human capital management strategies. In this paper, the authors evaluate the factors that have the greatest impact on the level of income in Russia. The study was performed using data from the Russia Longitudinal Monitoring Survey – Higher School of Economics (RLMS-HSE). Econometric modeling was performed to assess the income inequality of economic agents in Russia, depending on the level of education, region and sector of employment. The analysis used data on individuals for 2021. The sample consisted of 6325 respondents aged 18 to 97 years. A positive correlation was found between income and education level. The premium for master’s degree is 12% than the bonus paid to bachelor’s graduates who decided not to continue their studies, the premium for the degree of candidate of science is 36.3%, and Doctor of Science – 95.4%. Knowledge of a foreign language corresponds to extra 12.7% of income. The presence of regional differentiation was also confirmed. For all federal districts the bonus turned out to be negative in comparison with the federal cities: Moscow and St. Petersburg. On average, in the regions of the Far Eastern and North-Western federal districts, the wages of individuals are lower by 15 and 21%, the Urals – by 72%, the South and North Caucasian – by 70%. In addition, income significantly varies depending on employment sector. The level of income in the oil and gas, legal and chemical industries is 22, 27 and 28% higher than in the light industry. Employment in the sector of education, science and culture, social services is characterized by a negative bonus of 23, 26 and 42% relative to light industry.