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. Last Updated: 07/27/2016

Siberia, Top of the Cost Charts

Move over, Moscow and St. Petersburg -- here comes Magadan.


Though Moscow was recently rated the third most expensive city in the world after Tokyo and Osaka by a Swiss-based consultancy company, the Russian Far East seaport is almost three times as costly to live in as the capital, according to the Labor Ministry.


The former administrative center of Stalin's Gulag Archipelago also offers its residents incomes that are on average 50 percent higher than those in Moscow, according to the State Statistics Committee.


While cost-of-living studies by foreign companies often concentrate on the expenses encountered by expatriates trying to maintain Western living standards in the pricey stores and restaurants of Moscow and St. Petersburg, ordinary Russians are finding Far Eastern and Siberian cities more expensive when it comes to plain food and clothes.


Alexei Novikov, head of the Labor Ministry's Consumer


Budgets Department, said that the remote regions were traditionally costly places to live.


"Nothing grows there, and they have to fly in all the food by plane," he said. "As a result, food costs as much as if it was made of gold."


Novikov said that the relatively high salaries and bonuses workers enjoy in Siberia and the Far East, where many are employed in the well-paid mining, energy and fishing industries, also tend to drive up prices.


"If the prices weren't high, people would sweep up all the goods with the salaries they get," he said.


While in July, the minimum amount of money necessary to survive in Moscow was 100,700 rubles a month per person (about $48), in Magadan the minimum subsistence level was calculated at 287,000 rubles, according to Labor Ministry statistics.


The figure is arrived at by calculating the price of a basket of goods and services. A World Health Organization-approved breakdown of basic food products such as bread, meat and vegetables comprises 68 percent of the minimum subsistence level. A further 19 percent is accounted for by consumer goods -- "maybe just enough for socks and panties," Novikov said.


Nevertheless, some 25 percent of Russians are currently living below the minimum subsistence level.


"People somehow manage to live on less," Novikov said.


Residents of costly Magadan also have Russia's highest incomes, averaging 552,627 rubles ($261) a month in June, according to the State Statistics Committee. By comparison, Moscow lags far behind with average per capita income languishing at 387,731 rubles ($190).


Where Muscovites can draw some cheer, however, is that their purchasing power is among the highest in the country, with incomes that are 3.85 times above the city's minimum subsistence level.


The only Russian city with more spending power is the Western Siberian oil-industry capital Tyumen, with incomes 4.57 times higher than minimum living costs.


The Statistics Committee calculates average income statistics using information on salaries, interest earned from bank accounts, as well as money spent at stores, restaurants and other outlets, said Nadezhda Suchkova, deputy head of the committee's living standard statistics department. This way the statistic is able to include incomes derived from the shadow economy.


"Say, if an official receives a bribe, he may buy hard currency or a color TV with it," she said. "We'll catch that through the spendings statistics, so it's taken into account as income, anyway."


An increasing proportion of people's incomes is now derived from sources other than wages, Suchkova said. While 10 years ago, salaries accounted for 75 percent of Russians' incomes, the proportion has fallen to between 50 and 60 percent. Slightly less than one-third of incomes now comes from commercial activities, like trading on street markets and investing in securities, that were impossible a decade ago.


According to Suchkova, it is Moscow's size and bustling economic activity that make Russians from the provinces say that life is better in the capital.


"In a provincial town, if a factory closes, half the population is out of work," she said. "In Moscow, one can always find a job, even a highly paid one."


Though large Moscow factories such as the automaker ZiL pay salaries of about $60 a month, the Russian capital, unlike other cities, is home to numerous foreign companies that offer salaries undreamed of in Soviet times.


According to Pratap Nambiar, director of marketing for the consulting company Ernst and Young, which publishes guidelines for Western employers in Moscow on how much they should pay their Russian staff, Russians working for foreign firms can make from $190 a month for secretarial work to over $5,000 a month in top management positions.


Besides, compared to the bleak Siberian and Far Eastern cities, Moscow is a consumer's paradise, Suchkova said.


"The standard of living is not just about how much money you make," she said. "It's about how many different things there are on which you can spend the money.


"The market in Moscow is so full of all kinds of things that of course Moscow seems easier to live in than other cities."