The Russian Transition: Post-Soviet Labor Market and Increasing Body Weight Trends

As part of my studies in economics, I did a report on the Post-Soviet Labor Market and the country’s increasing body weight trends. I called it “The Russian Transition” because Russia is seemingly becoming more heavy, following the usual capitalist trend of fattening up.

I figured I’d leave it here for anyone that may be interested in it, and as an eye-opening insight into capitalist trends (obesity) and how they mess with the labor market.

• The Russian Transition Introduction

With the rise of capitalism in Russia, we have noticed a similar rise in body weight percentages across the population.

Russia has progressed greatly over the past twenty years in terms of economic freedom and development. However, with that development, we have noticed a strong corresponding rise in obesity and overweight adults within Russia.

Most modern developed countries understand the obesity problem very well, considering a significant portion of their respective populations are overweight.

Russia presents a curious example, as the country was formerly the Union of Soviet Socialist Republics (USSR), a communist country, and is currently classified as “developing” instead of developed. It is important to study these type of economies for two reasons: to compare them to our own, and to see the implications of certain policies and programs to determine the mistakes/benefits that apply to future developing countries.

With Russia slowly developing, they present many interesting questions. The question we ask in this review is how does the increase in obesity affect the entirety of the labor market in Russia?

First, we will investigate Russia’s history and a few key points of their transition that are applicable to obesity.

Secondly, we will take a look at why obesity is a problem for a society.

Third, we analyze the methods and limitations on the literature that have been done in Russia that will be used in this review. Finally, we will take a look at the labor market effects of obesity in Russia and summarize with a conclusion.

• Russian History, Transition, and Trends

After the fall of communism and socialism in the Soviet Union in 1991, their economy slowly began to adapt to a more capitalist approach. The newly formed Russian Federation suffered many problems in regard to public health and the rise of obesity during this time. This problem was exacerbated by the transition from a healthcare system that was fully through the state during communist years to a new capitalist privately funded system of healthcare (Rtveladze, 2012).

There are two transitions of importance here.

The first transition: communism to capitalism.

The second transition: low bodyweight to high bodyweight.

Both were noticed over this time period after 1991 in the Russian Federation. Are they unrelated? Or is it a causal effect?

To answer this question, we need to investigate many different economic agents and their trends following the fall of the USSR. We need to consider the population demographics, dietary style, living standards, and economic factors.

Population in the Soviet Union was declining since 1991 because of low birth rates and high death rates. This trend continued until relatively recently, and their population is just now beginning to stabilize. With an ageing population and non-active lifestyle, we can see a clear connection with rising obesity rates (Rtveladze, 2012).

The dietary style has changed along with the new capitalist transition; the Russian people have been enjoying a more “westernized diet” according to Rtveladze (2012). This diet is typically high in sugar, calories, and other unhealthy foods. Russia’s remote and severe climates explain why it is more expensive to acquire fruits and vegetables. Instead, they rely on cheaper foods, such as high fat meat.

Along with this change of diet, the general living standards are increasing in Russia (Rtveladze, 2012). This causes a greater number of individuals to have more money, and ups the consumption by individual households, which means they can eat more than what they did prior.

Price shocks hit Russia when the Soviet Union first began to dissolve. On top of this, we also noticed unemployment and poverty rising rapidly as the labor market was slow to adjust to the change (Rtveladze, 2012). People living in poverty tend to buy cheaper products and unhealthy options regarding foods (Earle, 2002).

During the early transition years, we also noticed sharp drops in production, which were not reallocated until the labor market adjusted and workers were more efficiently utilized (Huffman, 2014).

To summarize the economic factors, we can see an obvious connection between the economic mess that the initial transition caused and a rise in bodyweight percentages.

Putting all of these points together, we can see a clear picture that the transition did have a correlation effect that contributed to rising obesity rates in Russia (Earle, 2002). The transition from communist/socialist to capitalist put a huge strain on the public health within the Russian federation, causing a secondary transition from a low bodyweight country to a more “westernized” high bodyweight country.

• The Obesity Problem

Globally, over 1.3 billion people are overweight or obese (Huffman, 2014).

This shows us that obesity has nearly doubled since 1980, becoming an epidemic in developed countries (Averett, 2014).

But why is obesity a problem? We have medical treatments and specialized medicine to treat common obesity problems, such as daily high blood sugar pills. So why is it that many researchers call it “epidemic”, “global crisis”, and these other fancy buzzwords?

The answer is a multitude of reasons, from an individual standpoint and from a societal standpoint.

Individually, obesity is a huge risk factor for so many variations of diseases. Things like heart problems, asthma, and stroke all increase exponentially as bodyweight goes up (Averett, 2014). These issues can cause individual economic insecurity, as noted by Sonya Huffman (2014).

Also noted by Huffman was the fact that obesity can cause not only acute, but chronic diseases as well. These diseases lead individuals to be less likely to be employed, and make lower wages compared to those with average weight because the weight decreases their productivity.

Besides that, Huffman mentioned that employers could actually discriminate against overweight workers because of these potential health implications, knowing that they may be unable to be as productive as someone else, or may require more time off due to obesity related problems.

There is also evidence supported by research done by Averett that obesity can impair the acquisition of human capital (2014).

When considering the obesity problem from the viewpoint of society, it is not a much better picture.

Obesity is one of the leading causes of death, rivaling smoking (Averett, 2014).

It also drains taxes from medical expenses tremendously (Norton, 2008).

Lower productivity and wages were touched on above in the individual category, however, this is also true for society as a whole. Lower productivity would drive down the macroeconomic gross domestic product of a country. Reduced wages would discourage workers or affect the labor market in adverse ways. Along with the reduced chances of being employed and the discriminating firms, this provides a huge labor supply/demand impact on countries where obesity is a problem (Averett, 2014).

Obesity and rising bodyweight is a global epidemic that have large impacts on not only the individual, but society as a whole.

With increased death rates, huge taxpayer spending on obesity related medical bills, and lower productivity we can see the true harm that epidemic obesity levels can cause.

These problems are evident within the Russian Federation, and have continued to get worse as the years have gone on. As Russians continue to get more acclimated to a “Westernized” lifestyle, the Motherland also sees her waistline increasing.

• Methods and Limitations of Studies

When considering obesity, most modern researchers use Body Mass Index (BMI) to gauge the general health of an individual.

BMI is generally a common measure that uses height and weight to calculate the BMI and to place individuals within a set of parameters to see if they are obese, overweight, normal weight, or underweight. BMI has limitations, however, in that it cannot distinguish between muscle and fat (Averett, 2014 and Huffman, 2014).

This means that it can skew the distribution of men. Consider a bodybuilder who has an upcoming competition. He may weigh 210 pounds but be completely devoid of any body fat.

If the bodybuilder is short, the BMI index may rate him as obese just because of his weight and height, even though he clearly would not be “out of shape”.

This means that the studies have a certain degree of standard errors when being reported, because we cannot distinguish between the BMI and muscle-exclusion problem.

Secondly, almost all the research material uses surveys to gather the data. There are few ways to determine the general weight of others without walking up to strangers and measuring them, which could cause confrontation. So in these studies they send questions out to a large number of people and measure it by the respondents’ answers.

Within the studies, they do not ask for BMI, as that would result in many individuals guessing or not knowing exactly what to respond with. Instead, they ask for height and weight to make sure there are no confusion errors. This method is not without problems. Many people still misrepresent their own weight or height, out of self-esteem issues or other anomalies (Averett, 2014).

While these testing methods are not perfect, they are reasonably accurate (Rtveladze, 2012 and Huffman, 2014). Which means they can be used for studies, but may have a slight standard error in the results that needs to be further tested by repetition of individual data collection and regression analysis. For the purposes of our review, they will serve as excellent sources of information on the obesity problem in developing countries.

• Labor Market Effects

To determine the overall effects on labor markets, we will be looking at three individual studies. The study done by Rtveladze, another by Huffman, and a “baseline” one by Averett.

Averett’s study was done based on averaged European results, which means she includes developed countries in her study. This will serve as a good base for us before we expand into the Russian specific reports.

The author found that there is strong evidence of discriminating firms in regard to obesity. Averett also found evidence of statistical discrimination, which means that employers use obesity as an indicator of low skillsets and problematic futures with the company (2014).

There is a statistically significant effect of obesity on earnings, employment, and prospects for employment.

All of these effects are even stronger in regard to women (Averett, 2014). All of these influence the supply side of the labor market negatively, by discouraging workers, lowering productivity, and rising taxation rates among individuals and firms.

Sonya Huffman did a study relating the labor market changes directly to the Russian transition (2014). Her results are consistent with results from past studies on developing countries, indicating that BMI and employment opportunities are inversely related.

The reasons why are not discussed, but we imagine they are similar to Averett’s findings, that is, statistical and taste based discrimination. There is also a positive relationship between BMI and number of workdays missed (2014).

Finally, we analyze the research by Ryveladze and his team on BMI in Russia (2012). He found that obesity will continue to grow until 2050, especially among men in Russia. We also see that the costs of healthcare will increase exponentially. Such as chronic heart disease and stroke costs will increase from “$6.5 to $17.4 billion in 2050”.

This means that if Russia could tackle its rising obesity rates, it could save billions of dollars in the future. His study shows that BMI related diseases are becoming more prevalent in Russia, and that public policies meant for tackling the epidemic would serve in Russia’s best interest (2012).

• Conclusion

The labor market is drastically affected by rising obesity rates. Through the studies and the problems of obesity, we can see clear implications within the transition economy of Russia.

The change from the socialist planned economy to a free market capitalist economy caused a huge shock to the labor market in Russia.

This led to a huge change in the trends and lifestyle aspects Russians became accustomed to. When they adopted a more “westernized” approach we see that Russia begins to develop the same BMI problems that most western countries do.

While the studies have their limitations because of survey gathering tools and BMI limitations, they provide a clear picture about the labor market in Russia.

The labor market receives supply shocks because of discouraged obese and overweight workers. The labor demand side can exhibit discriminatory policies against overweight individuals because of their increased disposition to requesting more days off due to illness and lower productivity. Wages can also be dropped, sometimes on a large magnitude, when high BMI is involved.

There is also extra evidence that the labor market takes a specifically negative toll for overweight women, as shown by the results from Rtveladze’s study discussed above. The labor market in Russia also loses productivity due to overweight individuals in the short run. In the long run, we note that many high BMI people die earlier than normal, have fewer children, and many times drop out of the labor market much earlier (Rtveladze, 2012). This reduces the number of workers in the labor market, further hampering supply.

The implications of these effects on the labor market from the rising obesity epidemic need to be considered. Rtveladze states that if various programs are implemented to fight obesity before it continues to spread, over 95,000 lives could be saved every year (2012).

Even more than that could be saved with highly technological or complex programs.

Health care costs should be enough to spark the fuel under the government into action, as the cost of taxpayer money being funded to support obesity related medical issues is exponentially growing.

Ways to tackle the problem in Russia start with resource allocation, taxation on unhealthy food, and businesses incentivizing employees to lose weight (Averett, 2014).

By changing the allocation of resources to the private sector, we allow the market to operate more efficiently, since it is in perfect competition. Putting a tax on unhealthy foods is generally an unpopular move, but considering that the individuals eating these types of foods typically are the ones driving up the medical costs, it seems fair from a top-down viewpoint to suggest that those increasing the costs should be the primary ones paying them through a “vice food” tax.

Individuals that stay healthy and eat well should not be stuck with the increased taxation for the bad decisions of a few, and it would also motivate more to pass by those foods (much like cigarette taxes), which would have beneficial aspects on reducing BMI and aiding the labor market.

Finally, Averett suggests pushing businesses to incentivize weight loss by educating businessmen on the harmful effects of obesity within the workplace. Such examples of incentives would include building workplace gyms, financial incentives, and “self-funded commitment contracts”. All of these tactics have had varying types of success, according to Averett (2014).

Further research needs to find ways to circumvent the self-reporting bias in surveys. We also need better ways of capturing the information, such as physical appearance, and how it relates to labor market success (Huffman, 2014).

Russia making its data available is also a significant problem in overcoming the data-scarcity problems. Russia has data that they do not provide to researchers, such as other Western nations do. This unreported data could change certain studies outcomes (Rtveladze, 2012). Finally, future studies should look into ways that obesity can be handled in developing countries.

• References

Averett, S. (2014). Obesity and Labor Market Outcomes. IZA World of Labor. 2014(32). 1-10.

Earle, J. and Lehmann, H. (2002). Microeconometric studies of Russian labour markets in

transition: introduction to a symposium. Journal of Comparative Economics. 30(1). 91-95.

Huffman, Sonya K., & Rizov, Marian. (2014). Body Weight and Labour Market Outcomes in  Post-Soviet Russia. International Journal of Manpower. 35(5). 671-687.

Norton, E. and Han, E. (2008). Genetic information, obesity, and labour market outcomes.

Health Economics. 17(9). 1089-1104.

Rtveladze, K., Marsh, T., Webber, L., Kilpi, F., Goryakin, Y., Kontsevaya, A., Starodubova, A.,         McPherson, K., and Brown, M. (2012). Obesity trends in Russia. The impact on health and healthcare costs. Health. 1(4). 1471-84.