The Paradox of Decreasing Absolute Poverty Despite Growing Income Inequality in Russian Regions: An Evaluation of the Efficiency of Financial-Investment Models for Social Security

The paper’s subject is the financial-­investment model of state and non-state social security (FIMSS) in the constituent entities of the Russian Federation and its efficiency in macroeconomic instability in 2022–2025. The research aims to identify systemic limitations of the current regional FIMSSs caused by the methodology for measuring the absolute poverty line, the structure of budgetary resource redistribution, and high regional differentiation of socio-­economic conditions. The study’s significance hinges on the socio-­economic inequality growth in Russia from 2022 to 2025, which, despite a stated drop in absolute poverty, reveals issues in the Russian social protection system. Given the economy’s reliance on raw materials, the concentration of high incomes, and significant interregional differences, improving the FIMSS is now a key goal of state financial policy, which intends to eliminate poverty and promote social justice, along with fostering sustainable economic growth. The empirical basis of the study was official statistical data for 2022–2023, provided by Rosstat and the Unified State Information System of Social Security. Methods of correlation and regression analysis were the author’s tools for identifying links between poverty indicators, inequality, and social spending. The paper focuses on evaluating the Gini income coefficient and poverty rates (both absolute and relative) relate, both linearly and non-linearly. It also examines per capita social protection spending and the macroeconomic characteristics of the regions. The study revealed that as the proportion of the population with incomes below the subsistence level decreased, income inequality grew. Under specific conditions of high inflation and fast nominal income growth, many people with incomes above the subsistence level are excluded from social support, resulting in “hidden poverty,” which is especially clear in places like Moscow. The author suggests a better approach to evaluating FIMSS’s efficiency by analyzing the ratio of actual per capita social policy spending for every 1% of the impoverished, adjusted by the regional subsistence minimum. The results lead to the conclusion that the current FIMSS fails systemically to curb socioeconomic inequality growth and ensure social stability in times of macroeconomic shocks. Restructuring the FIMSS should be based on a relative poverty line to increase social policy’s sustainability and targeting.