Moldova : poverty assessment technical papers

Report No.: 19846 MD MOLDOVA: POVERTY ASSESSMENT TECHNICAL PAPERS October 1999 Poverty Reduction and Economic Management (ECSPE) Eastern Europe and Central Asia Region  CURRENCY EOUIVALENTS (as of July 30, 1997) Currency Unit = Leu (plural Lei) 1 Leu = US$0.22 US$1 = 4.60 Lei (as of May 13, 1999) Currency Unit = Leu (plural Lei) 1 Leu = US$ 0.09 US$1 = 10.85 Lei WEIGHTS AND MEASURES Metric System FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CIS - Commonwealth of Independent States ECA - Europe and Central Asia FSU - Former Soviet Union GDP - Gross Domestic Product GNP - Gross National Product IMF - in.ternational Monetary Fund OECD - Organization For Economic Cooperation and Development PPP - Purchasing Power Parity TACIS - Technical Assistance for Commonwealth of Independent States UNDP - United Nations Development Programme Vice President: Johannes Linn (ECAVP) Country Director: Roger Grawe (ECC07) Sector Director: Pradeep Mitra (ECSPE) Sector Manager: Hafez Ghanem (ECSPE) Task Team Leader: Arup Banerji (ECSPE) Team Members: Jeanine Braithwaite, Elena Nickulina, Doreen J. Duff (ECSPE); Nora Dudwick (ECSSD); Robert Ackland (consultant); Hermine de Soto (consultant); David L. Lindauer, (consultant)  Table of Contents Technical Paper I Poverty in Moldova: The Social Dimensions of Transition By Hermine G. De Soto and Nora Dudwick Technical Paper II Poverty in Moldova: Pilot Results For February 1997 By Jeanine Braithwaite Technical Paper III Poverty in the Republic of Moldova in May and August 1997 By Robert Ackland Technical Paper IV Labor and Poverty in the Republic of Moldova By David L. Lindauer Technical Paper V Human Capital and Poverty in the Republic of Moldova By Robert Ackland  I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~  PREFACE This is a companion volume to the Moldova Poverty Assessment (1999), and contains the technical papers that are the basis for the report. The report was written at the request of the Government of Moldova, which is its primary audience. It aims to provide a detailed analysis of the situation regarding living standards in the country, and provide a framework for policy for the Government's emerging social assistance program. The main report concentrates on analyzing the results for the Right Bank of Moldova. These technical papers also present evidence for Transnistria.   TECHNICAL PAPER I POVERTY IN MOLDOVA: THE SOCIAL DIMENSIONS OF TRANSITION June 1996 - May 1997 by Hernine G. De Soto The World Bank and Nora Dudwick The World Bank The views contained herein are those of the authors only, and do not represent the opinions of the World Bank nor of its Board of Directors, nor of any individual country member, nor federal, nor local government.   Poverty in Moldova: The Social Dimensions of Transition TABLE OF CONTENTS ACKNOWLEDGMENTS ......................................... iv EXECUTIVE SUMMARY ................................. ,. v INTRODUCTION .........................................................................................................................1I Research objectives ............................ Research methodology ............................ 2 Interview sites and choice of households ............................ 3 WHAT IS POVERTY? ................................. 5 Comparisons with the past ................................. 5 Insecurity and shame ................................. 6 Generational differences ................................. 6 Who became rich and who became poor? ................................... 7 Conclusions ................................. 8 THE MATERIAL DIMENSIONS OF POVERTY ................................. 9 Hunger ................................. 9 Comparing past and present ................................. 9 Cutting back ................................. 10 Food vulnerability: pensioners and children ................................. 11 Housing conditions ................................. 12 The problem of utilities ................................. 12 Heating and cooking ................................. 12 Paying for utilities and services ................................. 13 Water and waste ................................. 14 Poverty and ill health ................................. 15 Paying for hospitalization ................................. 15 Chronic or serious illness ................................. 16 Folk healers ................................. 16 Dentistry ................................. 17 Maternal and child health ................................. 17 Abortions ................................. 17 The cost of childbirth ................................. 17 Child health ................................. 18 Conclusions ................................. 18 EDUCATION ................................. 19 Education and poverty .................................. 9 Deteriorating infrastructure; inadequate teaching materials ............................................. 19 Rising school absenteeism .............................................. 20 Teaching: declining salaries and prestige; rising workloads ................................. 21 The role of bribes .......... 21 i  Technical Paper I How students see their future ................................................... 22 Education in Romania ................................................... 23 Conclusions ................................................... 23 THE AGRICULTURAL SECTOR ......................................................... 24 The impact of land reform ......................................................... 24 Restructuring the collective: Background ......................................................... 24 Working conditions on collective farms ......................................................... 25 Farm worker - farm management relations ......................................................... 27 Leaving the collective farm: fears and intimidation .............................................. 28 Farm reorganization ......................................................... 31 Attitudes toward American assistance: the experience of Maiak .......................... 31 Zavoieni Peasant Farmers Association, Manta village .......................................... 31 Private farming: risks ancl benefits ......................................................... 33 Changing attitudes and interests ......................................................... 35 Conclusions: Who privatizes? ......................................................... 36 SUBSISTENCE FARMING ......................................................... 37 Farming on household plots ......................................................... 37 The importance of husbandry ......................................................... 37 Marketing crops ......................................................... 38 Stealing ......................................................... 39 Urban gardening ......................................................... 39 Conclusions ......................................................... 40 CHANGING LIVELIHOOD STRATECLES .......................................................... 41 Introduction ......................................................... 41 Formal employment ......................................................... 41 Finding and keeping jobs ......................................................... 42 Youth unemployment ......................................................... 43 Employrnent, illness, and disability ......................................................... 43 Women: juggling jobs and child care responsibilities .......................................... 44 Informal employment ......................................................... 44 Buying and selling ......................................................... 45 Small-scale retail vending ......................................................... 46 Petty enterprises ......................................................... 47 Capitalizing on skills and hobbies ......................................................... 47 Renting out rooms .......................................................... 48 Selling vouchers ............. 49 Illicit formns of income-generation ..........................................................49 Prostitution ......................................................... 49 Bribes ......................................................... 49 Begging ......................................................... 49 Theft .......................................................... 50 ii  Poverty in Moldova: The Social Dimensions of Transition Labor migration ................................................... 50 Changing attitudes and risks ................................................... 52 Attitudes toward business ................................................... 52 The role of "connections" .................................................... 52 Borrowing and lending ................................................... 53 Conclusions ................................................... 54 SOCIAL ASSISTANCE ......................................................... 55 Introduction: Social assistance in the past ......................................................... 55 The state as provider: retention of old attitudes ......................................................... 55 Late and haphazard payments ......................................................... 56 Obstacles to qualifying for or obtaining assistance ......................................................... 56 Bankrupt local governments ......................................................... 57 Family and child benefits ......................................................... 58 Assistance from private, religious and humanitarian organizations .................................. 59 Attitudes toward social assistance and public authorities ................................................. 60 Conclusions ......................................................... 60 NEW FORMS OF SOCIAL INTEGRATION AND DISINTEGRATION .................................. 61 The family in transition ......................................................... 61 Kinship relations ......................................................... 61 Changing gender roles ......................................................... 61 Community relations ......................................................... 62 Social and ceremonial life ......................................................... 62 Children and youth during the transition ......................................................... 63 Crime and the breakdown of trust ......................................................... 64 Increasing social differentiation ......................................................... 66 Conclusions ......................................................... 67 ETHMC AND REGIONAL VARIATIONS IN THE STANDARD OF LIVING ....................... 68 Ethnic heterogeneity and separatism ......................................................... 68 Migration patterns ......................................................... 68 Linguistic issues ......................................................... 69 Levels of poverty ............................ 69 Education and employment opportunities ............................ 70 Ethnic stereotypes ............................ 71 Conclusions ............................ 71 SUMMARY AND RECOMMENDATIONS ................................. 72 Introduction ................................. 72 Findings and recommendations ................................. 73 ANNEX I: Definitions of farm types ................................. 79 iii  Technical Paper I ACKNOWLEDGMENTS This study was undertaken with the assistance of many organizations and individuals. We would like to thank Arup Banerji, the Task Manager of the project, for his support and feedback throughout the project, and Jacnes Parks, Resident Representative in Moldova, and his staff, for their assistance when we were in Moldova. Field research was coordinated with the assistance of Volunteers in Overseas Assistance (VOCA), in conjunction with its Moldovan partner, ADSISTO, an NGO providing technical consultation and training to agricultural o:rganizations and enterprises. Vasile Munteanu, Executive Director of Adsisto, was overall manager of our study, the results of which owe much to his responsible, serious and competent involvement. We would also like to thank Sean Carmody, Regional Representative of Agricultural Cooperative Development International as well as VOCA, for Belarus and Moldova, for his interest and support throughout this study. Adsisto staff members Elena Negru, Irna Mariciuc, and Sergei Miroshnikov also contributed in many informal ways to this project, not the least by creating a welcoming atmosphere in their office. We are most grateful to our Moldovan interviewers for patiently participating in our training and for conducting interviews in difficult physical and psychological field conditions. Their excellent ethnographic reports provide the basis for this report, and we extend our deepest thanks to each of them. In alphabetical order, they are: Oleg Bivol, Valeriu Burca, Nina Cainarean, Igor Cobilteanu, Victor Manolii, Maria Mamaliga, Sergiu Martinenco, Mihai Mereacre, Gheorghe Munteanu, Sergiu Munteanu, Tatiana Munteanu, Svetlana Ojog, Felicia Parasca, Lucia Pogor, Olga Savenco, Gheorghe Tofan, Irina Tretiacova, and Elena Triboi. In addition, we would like to thank Nina Cainarean for her role in the day-to-day coordination of the team, and to Gheorghe Tofan for meticulously editing the interview reports for content. Many government officials in Chliisinau and district offices provided time and information to us and our interviewing team. Likewise, many local and international organizations generously provided time and information on different aspects of Moldovan society. They include: Tamara Fornea, Administrator, Salvation Army; Stefan Toma, UNICEF; Save the Children, Amy Hastings and Irena Stavenski, UNDP; and Karl Theis, German Cultural Consul. Our deepest gratitude goes to all the people who consented to be interviewed, often at great length, and whose voices are represented in this study. We hope that the cultural as well as literal translation of their words has done justice to their thoughts and feelings. iv  Poverty in Moldova: The Social Dimensions of Transition EXECUTIVE SUMMARY INTRODUCTION Following Moldovan independence in 1991, collapse of the tightly integrated Soviet economy, disruption of trade links and payments, severe inflation, together with closure of enterprises, layoffs and furloughs, simultaneously reduced incomes and wiped out life savings of many Moldovans. During these years, Moldova's heavily agricultural economy suffered from severe droughts, early frosts, and torrential rains, and agricultural output and incomes also shrank. These economic disasters were compounded by separatist movements in Transnistria and in Gagauzia (comprised of several southern districts with a large Gagauz population), with an attendant loss of life and property and displacement of persons from Transnistria to other parts of Moldova. As elsewhere throughout the FSU, the population of Moldova has experienced marked economic and social differentiation and seen a small, wealthy class of entrepreneurs and a larger strata of newly poor emerge. In the countryside, the living standard of collective farm workers has deteriorated. At the same time, an estimated 200,000 persons have withdrawn their land from the collective farms, of whom many have successfully increased their incomes. These econornic changes, still poorly understood by those in the midst of the process, have altered family and community relations, altered the nature of ties among kin, neighbors, colleagues, and friends, while creating new horizontal and vertical links. To explore the implication of these economic and social changes and how the population is coping with them, a Moldovan research team carried out 200 household interviews in October and November 1996, using open-ended interviews. Their reports form the basis of this document, in addition to interviews carried out by the international consultants with officials, NGOs, and representatives of international donor organizations in Chisinau. The interviews explore the following issues: dimensions of poverty as poor people experience and define them; coping strategies; and implications for social and economic policies to address poverty and its consequences. FINDINGS Poverty is relative and multi-dimensional Urban and rural poor Moldovans define poverty in relative rather than absolute tenns, using the Soviet period as the standard of normnalcy. Poverty in Moldova and the FSU is unusual in that it now affects both people who were always economically "vulnerable," such as unskilled workers, or very large single-parent families, as well as highly educated persons who once enjoyed socially prestigious and well-remunerated positions as scientists, engineers, or university professors. Hence they define poverty in relative terms, depending on the positions they previously occupied in the socioeconomnic hierarchy. None of our respondents described v  Technical Paper I _ themselves as having been "rich"; a few said they had always been "poor"; most felt they had lived well by prevailing standards. Poor Moldovans blame unemployment, hyperinflation, loss of savings, and incompetent, disinterested government for their poverty. Despite the fact that salaries have drastically shrunk, most respondents attributed impoverishment to widespread unemployment, the loss of lifetime savings which occurred at the time of the currency conversion, and the inflation which has eroded the value of their salaries, pensions, and social assistance payments. Whatever their analysis, most blame "the government," although they continue to look to the government to reassume their traditional responsibilities and "fix" the economy. Poverty in Moldova means hunger, cold, bad living conditions, and bad health The poorest respondents prioritize hunger, cold, illness, and bad living conditions as the worst material aspects of poverty. Pensioners who depend primarily on their pensions survive on the most meager of diets, while children from poor families who are unemployed and lack sufficient land may also go hungry, even in rural areas. Poor households note that the rising cost of fuel is an acute problem in winter, and is compounded by neglected housing, with leaky roofs, rotting floors, and windows without glass. Poor nutrition and cold exacerbate health problems, which poor respondents described as the most frightening aspect of poverty. Poor health threatens their jobs, and drains limited resources if they treat their illness (although many ignore illness until it becomes acute). Even when checkups are free, rising costs for medicine, lab tests, surgery, and under-the-table payments are defacto privatizing health care. Pregnant women can no longer afford prenatal care; some prefer to give birth at home. Rising medical costs have hit large and/or single headed families, the elderly, and the disabled or chronically ill with particular severity. Poor people also link the lack of potable water and deterioration of garbage collection services to frequent infectious diseases. Moldova is developing a two-tier medical system consisting of low quality or no care for the very poor, adequate public care or better private care for those who can pay official and unofficial fees. The situation is particularly acute for rural Moldovans, who have much less access to specialized care than inhabitants of large cities. Infectious illnesses and general health have worsened in children with the deterioration in living conditions and health care. The elderly poor tend to ignore their own illness, which they interpret as an inevitable part of growing old, or simply of less importance given few resources and the competing needs of younger family members. vi  Poverty in Moldova: The Social Dimensions of Transition Poverty has important social and psychological dimensions Respondents described poverty as feeling defenseless; finding it impossible to obtain information orfind out the "truth"; exclusion from the cultural, social, and ceremonial life they once enjoyed but can no longer. They experience a pervasive sense of insecurity in the present, and fear for the future, as well as the sense that they do not know and cannot find out what is going on around them. Poor people experience poverty as deeply humiliating, often preferring to characterize themselves as "close to" but not completely "poor," since poverty was ascribed to personal failings during the Soviet period, and the appearance of prosperity was essential to maintain social standing and the "connections" important for securing access to deficit goods and services. For poor people, independence, "democracy, " and the transition to a market economy signify a lack of social justice. They link wealth with criminality, and condemn the new rich former Communist Party political elite, who simply "exchanged their Party cards for parliamentarians' mandates," bureaucrats, local officials, the "mafia," illegal privatization, rich gypsies, Russians, Romanians, and people who used Soviet era political and business connections to "grab material and start their own businesses." Poor respondents characterize these people as "dishonest," "swindlers," "speculators," and "thieves," and insist that "politicians don't care about the suffering population." The dangers of reproducing poverty: problems of access to education and jobs Poverty affects all ages, but small children, the elderly and disabled are particularly at risk. With closure of kindergartens, small children either remain at home unsupervised, accompany parents to the fields in agricultural areas, or remain in the care of older siblings who have dropped out of school, or who may be kept out of school to help at home. Children as young as ten now help parents farm during school hours; they also engage in wage labor for others. The deterioration of infrastructure, the outflow of qualified teachers, and cost of school supplies is reducing the access of poor children and youth to good education. With the inability of the state to fund education at previous levels, private schools, tutors, and private institutions of higher education have moved in to compensate for the disastrous fall in educational quality. Absenteeism is becoming endemic as children from poor families drop out to join the labor force, either to help parents farm, or as part-time agricultural wage labor. The school system is also more likely to stigmatize poor or disabled children as "backward" and recommend them for special residential schooling. In some cases, parents have responded by simply withdrawing their children from the school system entirely. Interest in schooling has diminished as parents and children note the current disconnection between level of education and employment. Gifted children from poor families have lost interest because they know they cannot afford higher education; many village students cannot even afford the basic expenses for education in the nearest town center. vii  Technical Paper I Although some rural youth have found work in cities in Moldova or abroad, others work part-time in agriculture, remaining idle for long winter months. In the past, collective farms sometimes paid students allowances for their five years of university education, with the promnise of a job when they returned to their villages. Today, collectives can no longer hire the young graduates who return; many of these educated young people are forced to return to the city. Subsistence farniing is a primary coping strategy for rural, small town, and even urban Moldovans Working conditions on the nominally restructured collective farm enterprises, which continue to dominate agriculture, have dleteriorated sharply. Most farm workers supplement in- kind salaries and the "dividends" the collective pays for "renting" their land quota by subsistence farming on their household plots, stealing produce and forage from the collective, raising animals, and by some marketing. They almost universally perceive farm management as exploiting them and using pretexts of bad weather, unforeseen expenditures, and farm indebtedness to cheat them of their actual earnings. Despite their negative evaluation of farm management, those that remain on collectives cite the complicated and expensive registration procedures, intimidation on the part of local and farm officials, and the high cost of inputs and taxes. For the very elderly, the ill, and the disabled, even household and/or private plots fail to improve the standard of living. Many elfderly are no longer capable of physically cultivating their land (including urban gardens) or transporting water and other supplies to fields far from home. In such cases, they often lease their land, formally or informally, to others, in exchange for what is sometimes a very meager portion of the harvest. Although many rural households supplement their income from collective farms by private husbandry, the poorest families cannot even afford to keep animals or poultry, because they have no access to forage. The very poorest collective farm workers are at a disadvantage if and when they become independent private farmers, because they are not able to afford the initial necessary investments. The most successful farmers are those who privatized with some capital available to invest in inputs or equipment. Many cof these new "peasant farmers" report better yields than they received on the collective. Former brigade leaders, technical specialists, vehicle drivers, and managers thus tend to be the more successful independent farmers. Those who were ordinary field workers show less initiative and/or success in exiting, because they lack the access to resources that money and "connections" provide; a knowledge of overall farm planning and functioning; and access to marketing information and transportation. Informal sector activities and labor-migration have become critical cash-generating survival strategies Both state and private sectorformal employment has become less secure, and school- leavers and women with child care responsibilities find it ever more difficult to findformal employment. The ill and disabled experience the greatest insecurity, since someone able bodied is always waiting to take their place. Despite low public sector salaries, older respondents, especially those near retirement age, saw state sector employment job as key to survival. For viii  Poverty in Moldova: The Social Dimensions of Transition some, it provided their only cash income; those near retirement know they are unlikely to find better work, and want to accrue "seniority" for their pensions. Petty trade and small home-based enterprises have become an important support for many households. Marketing of goods andfarm produce takes place within Moldova, as well as across borders with Romania, Ukraine, and other FSU and East European countries. When possible, people trade in regions where they have relatives or close acquaintances, to avoid the problem of customs fees. Many use personal connections, access to resources, and skills or hobbies to start small home businesses, such as flower growing and arranging, carpentry, baking, knitting, and other crafts. As people innovate to find ways of earning money, attitudes toward "business" and "the free market" are undergoing a transition. Many middle-aged and elderly have been unable to adapt to this new climate; they still consider "business" -- especially buying and selling -- as "speculation," a criminal activity during the socialist era. Older respondents are often ashamed of selling goods on the street, while youth convey fewer misgivings. Poor people often lack the social capital essential for successful enterprises beyond the level of unregistered home businesses. Patronage ties have increased in importance in proportion to the declining role of the state as protector and provider, and "connections" with people who are well-placed, rich and/or powerful are critical for acquiring information, dealing with bureaucracy, and avoiding official harassment. Our respondents tend to lack such connections, and tend to remain in the "shadow economy." Especially in rural areas, such relations play a central role, and local officials can easily restrict access to both information and resources. Obtaining start-up capital constitutes one of the biggest problem for poor people who wish to start small enterprises or private farming. Our respondents displayed a profound distrust of banks. Moreover, few have the collateral to qualify for bank loans. While most small entrepreneurs borrow from neighbors, friends, and relatives whenever possible, they must borrow from professional money-lenders at very high interest rates when they need larger amounts, often with catastrophic consequences. A number of respondents reported losing their cars, homes, and possessions to moneylenders when their small businesses failed, and they and their families feel they have almost no legal recourse against harassment. As in other FSU countries, labor migration has become the quickest and often riskiest way to earn cash Migrants travel to Russia, Ukraine, Belarus, Hungary, Romania (for trade), Greece (for agricultural work, housework, and child care), Germany, Israel, and elsewhere. Rural inhabitants frequently leave their villages in autumn and winter, when there is less agricultural work to do. In Russia, the largest single destination, men work in heavy construction, or as builders and masons on private homes of the new rich, in agriculture on field brigades or as drivers and tractor operators. Women have broken into the formerly male domain of seasonal labor migration; both men and women travel to Russia, Ukraine, Romania, Greece, and Hungary to work in agriculture. Women also travel to Turkey, Russia, and elsewhere to market produce on the street or in produce markets. The diminishing significance of social assistance ix  Technical Paper I Many poor people still expect assistance from and appeal to "the authorities" -- which includes the Parliament, district executive committees, city, town and village mayoralties, and collective farm administrators -- during difficult periods. Despite the fact that social assistance payments are poorly targeted and spreacl thin, the very poor, including pensioners living alone or with other pensioners, and with no other source of income, felt that even a timely, predictable payment would improve their situation. Some pensioners reported receiving ration cards, but resented the requirement to redeem themnn at shops for goods which were priced higher than in the open market. Some localities deduct electricity fees and taxes from pensions, which recipients found a helpful alternative to paying cash when their pensions were eight months late. Social assistance is administerecd in a seemingly haphazard and inconsistent manner. In some cases, respondents found out about entitlements to certain payments and allowances by accident, after the deadline for applying had expired. Many poor Moldovans had received assistance from humanitarian and religious organizations, but, especially when they received it through local government offices, suspected that most had been diverted to the private use of politicians. Overall, the changing rules and procedures for obtaining assistance, the inability of the government to make payments on tirne, and depleted local budgets has diminished the value of such payments and left recipients feeling cynical, embittered, and betrayed by their govemment. Impoverishment in Moldova is part of a larger social change Poverty has threatened community solidarities, weakened extendedfamily ties, and created new social hierarchies with the new, wealthy elite at the top. Although poor Moldovans rely heavily on close family members, as well as friends and neighbors, poverty has also isolated people from each other, a process to which new international frontiers and rising communication costs has contributed. The elderly show the greatest tendency to isolation, when close relatives cannot afford to visit or help (although neighbors often help). The collapse of public sector employment and the emergence of new labor niches have affected men and women differently. In public sector work, both men and women have lost jobs in production, while lower paying jobs in the social sector, such as teaching and medicine, have become almost completely feminized. In the private sector, pregnant women and mothers have found themselves more vulnerable than men; some deal with childcare responsibilities by leaving small children in the care of siblings who are slightly older. The prolonged separation of spouses involved in labor migration has altered the division of labor and relations of authority in families, leading to considerable tension, spousal abuse, and divorce. Sometimes prolonged absence turns into abandonment of families in Moldova when men establish new families abroad. But necessity has also pushed women into enterprises, some involving travel, that have simultaneously given them an independent income and therefore, more autonomy. Increasing social differentiation has intensified resentment among the new poor toward the new rich. The old ideology of egalitarianism is disintegrating, while a sharp economic and social differentiation is dividing communities into distinct layers of rich and poor. This widening gap, which people attribute to the willingness of some to engage in corrupt practices, violates the x  Poverty in Moldova: The Social Dimensions of Transition standards by which people were raised and makes them feel further alienated in the new Moldova. While some people are striving to maintain a sense of social integration through work and maintenance of old social relations, others have withdrawn into isolation, a process reinforced by the curtailment of traditional social rituals which once maintained community ties. A perceived rise in violent crime has diminished socializing and decreased trust. Rural families link lack of opportunities for education, employment and entertainment to the dramatic increase in youth alcoholism and involvement in petty and violent crime. The increase in theft and violent crimes have frightened many people off the streets and reduced socializing. Rich and poor alike are vulnerable to crime, but poor people feel particularly vulnerable because they perceive the police as unwilling to take their complaints seriously. Our female respondents felt the number of sexual assaults had increased, both at work and on the streets, but felt that police were not interested in protecting them. Regional variations in patterns of poverty Poverty in Moldova appears to be linked more to regional variations and available opportunities than to particular patterns of ethnic exclusion. The South faces more frequent droughts, has a less developed infrastructure, and is traditionally considered to be the poorest region. Yet our findings do not demonstrate significant differences in the standard of living among poor households in the North and South. On the other hand, significant differences do exist within single districts, depending on proximity to major roads and international borders; presence or absence of administrative offices, schools, and other community facilities; the particular personalities and political affiliations of local officials; the presence or absence of functioning enterprises; the proximity to Romania or Ukraine, etc. Caution should be used before assuming that a given community will conform to regional social, political or economic stereotypes. Although this study did not reveal particular differences in the degree of poverty in relation to ethnicity, ethnicity does influence peoples' attitudes toward their own standard of living and the perceived standard of living of members of other ethnic groups. Language and ethnicity have catalyzed ethnic conflict and separatism in Moldova, and their significance should not be underestimated. Our respondents tended to play down the depth and seriousness of purely ethnic conflict, although older -- and some younger -- Russian speakers ascribed their unemployment to language discrimination. While linguistic competence in the dominant language of a region increasingly affects educational and job opportunities (Romanian in towns, Russian in Gagauzia and still, to some extent, in cities such as Chisinau and Balti) people often attribute their perceived disadvantages to their membership in an ethnic group, rather than to lack of competence in the dominant language. Because of tendencies to often employ ethnic stereotypes to reinforce group identity, and to ascribe social problems to particular ethnic groups (be they Gypsies, Slavs, or Gagauz) programs aimed at poverty alleviation in multi-ethnic Moldova must be careful to avoid even the appearance of favoring or excluding any particular ethnic group. xi   Poverty in Moldova: The Social Dimensions of Transition INTRODUCTION 1. A small, verdant country located between Ukraine and Romania, Moldova, after Armenia, is the smallest of the Soviet successor states. Annexed by the Russian Empire in 1812 from the Ottoman empire, Moldova enjoyed a few years of independence in 1918 before it joined Romania. During World War II, the Soviet Union annexed the area on the right bank of the Nistru River (now Transnistria); the area on the left bank was combined with part of the right bank, then an autonomous republic within Ukraine, to constitute the Soviet Republic of Moldavia. 2. Located at the geographic center of Europe and what is sometimes described as the "balancing point" between the historic Roman, Polish, Russian, Austro-Hungarian and Ottoman Empires, contemporary Moldova preserves many of these influences in an ethnically and linguistically rich culture. Today, ethnic Moldovans (the same people, ethnically, as Romanians) speak Romanian and with some exceptions, adhere, like most of Moldova's Slavic population, to Orthodox Christianity. 3. Ethnic Moldovans make up only two-thirds of the national population (as of the 1989 Soviet census), which also includes significant numbers of Russians, Ukrainians, Poles, Bulgarians, Jews, Gagauz, and Gypsies. Some regions have a particular ethnic mix. The Gagauz, ethnically Turkic, Orthodox Christian people, 3.5% of the population,1 and Bulgarians (2%) live mainly in the South; Russians and Ukrainians constitute the majority of Transnistria's population. Ukrainians (13.8% nationally) also live in northern Moldova; Russians (13.0% nationally) live in Chisinau; Byelorussians are scattered throughout; small numbers of Poles and Gypsies mainly reside in the north, the former mainly in cities; Jews (1.5%) are settled in major cities. 4. Following independence, a new language law making Romanian the state language triggered ethnic and political tensions, which led to separatist movements in Transnistria and southern districts with a large Gagauz population (Gagauzia). The conflicts resulted in loss of life and destruction of infrastructure, and concessions of certain autonomous rights to Gagauzia, and the establishment of a Transnistrian entity whose status remains unresolved. At the same time, Moldova's heavily agricultural economy suffered disasters from droughts, early frosts, and torrential rains. The collapse of the tightly-integrated Soviet economy disrupted trade links and payments, also depriving Moldova of its accustomed budgetary support from Moscow. Meanwhile, a 2,200% increase in prices and the introduction of the leu in late 1993 (combined with closure of enterprises, layoffs and furloughs) reduced incomes and wiped out life savings of many Moldovans. 5. As elsewhere throughout the FSU, many Moldovans have experienced a sharp decline in their standard of living. As poor Moldovans struggle to feed their families and cover basic educational and health costs, they have witnessed the appearance of a small wealthy class of business entrepreneurs. In the countryside, collective farm workers have become steadily more 1/ These figures are from the 1989 census, as reported in the National Human Development Report for the Republic of Moldova; UNDP; Chisinau, 1996, p. 8. Since 1989, of course, these figures have been altered by migration flows. 1  Technical Paper I impoverished, although some of the farmers who have succeeded in fully withdrawing their land have managed to raise household incomes. These economic shifts, still poorly understood by those in the midst of the process, have started to alter relations within and among families and communities, fragmenting former ties of solidarity between kin, neighbor, colleague and friend, and creating new horizontal and vertical ties and increasing socioeconomic differentiation. 6. These rapid economic and social changes have raised a host of questions: how is the population coping with unemployment and reduced access to social benefits, to what extent have they discovered or been able to exploit new opportunities, what kind of obstacles have they encountered, and, importantly, how do they perceive, experience, and evaluate the profound economic and social changes taking place? This study aims to provide a window on these processes, explore their interrelations, and examine implications for policy. RESEARCH OBJECTIVES 7. This study will examnine: * how rural and urban Moldovans experience, define and explain "poverty" * the relationship between poverty and material living conditions * coping strategies in rural and urban settings * the relationship between poverty and health * the relationship between poverty and education * regional and ethnic variations iin poverty * changing social relations and forms of community integration - changing family and gender relations * ethnic and regional variations in poverty and coping strategies RESEARCH M1ETHODOLOGY 8. This study was carried out in October and November 1996, in six districts of Moldova. It is based on qualitative research methodologies, primarily open-ended interviews and careful observation of 200 poor individuals and households. Although elucidation of native definitions of "poor" and "poverty" were one of the research aims, we necessarily began the study with a working definition of poverty as a guide to identifying a research sample. We defined poor households as those whose members described themselves, or were described by others, as having difficulties providing their families with the basic elements of food, shelter and clothing. Our interviewers' assessment regarding the level of household poverty did not always coincide with that held by members of the household being interviewed, but that discrepancy itself demonstrates the highly subjective and comparative nature of the concept. 9. The study was organized by Adsisto, a local NGO established by Volunteers in Overseas Cooperative Assistance (VOCA), with the overall guidance of the international consultants (the authors of this study). Adsisto recruited irnterviewers based on their previous experience in carrying out surveys and knowledge of different regions in the country. After an introduction to interviewing skills, interviewers produced several trial interview reports. On this basis, we chose 2  Poverty in Moldova: The Social Dimensions of Transition 18 interviewers to compose six 3-person teams. Because most Moldovans speak either Romanian or Russian, interviewers were asked to conduct interviews in the preferred language of the interviewees. When possible, interviewers were sent to regions with which they were familiar or where they had personal ties, since in rural communities, such ties facilitate the trust and rapport essential for good interviews and full, accurate information. 10. Choice of respondents was based on a combination of factors. We aimed to include a range of ages, occupations, and household types, and mainly "typical" (as well as some extreme or unusual) examples. Interviews were carried out with poor households. We aimed at including many household types in each district, rather than attempting random selection. A smaller group of interviews were also carried out with key community figures, such as teachers, doctors, and local officials, who could provide either an overview or an "expert" perspective on poverty in their communities. (Please refer to Annex II for a breakdown of households by age, gender, profession, and education.) Given the remarkable consistency among reports, we believe this report presents a valid picture of how large numbers of poor Moldovans experience, interpret, and cope with their difficult circumstances. INTERVIEW SITES AND CHOICE OF HOUSEHOLDS 11. Interviews were conducted in six raions of Moldova, and the city of Chisinau. These raions were chosen to include the range of agricultural, climatic, ethnic, economic and rural- urban differences between North, Center and South. Sites include: North * Edinit raion: 30 interviews * Balti raion: 20 interviews in Balti city; 10 in villages Center * Ulngheni raion: 15 interviews * Nisporeni raion: 15 interviews * Chisinau: 50 interviews, primarily in three poor sections -- Centru, Ciocana, and Buiucani South * Comrat district: 30 interviews * Cahul district: 30 interviews 12. In rural areas, interviews were distributed between raion centers and villages. One criteria for choosing villages was our desire to capture the different trajectories and degrees of progress in land privatization. Interviews were carried out with: * collective farm employees * independent farmers * public sector employees * the unemployed * pensioners 3  Technical Paper I _ 13. In urban areas, we chose households whose members represented different occupations, including: * intellectuals (defined as those with post-secondary professional or academic education) * skilled and unskilled workers * small entrepreneurs, office workers * state sector employees * unemployed 14. In both rural and urban areas, interviews were based on households rather than individuals, although these sometimes proved identical, as in the case of some elderly pensioners. Interviews were distributed among the following: * youth and young families with main breadwinners in their 20s and early 30s * families with the main breadwinners in their 30s and 40s and 1-3 children * large families with 4 or more children * single-parent families * older families with main breadwinners in their 50s * pensioners, alone or with farrilies * street people, beggars, and homeless (primarily in urban areas) 15. Each interviewer completed 10-15 interviews, at the rate of 2 per day, then submitted two reports. One report summarized the results of all 10-15 interviews, in sections covering the topics of this report. The second report summarized one of the interviews which the interviewer felt most tellingly and powerfully illustrated one or more aspects of poverty. In many cases, the completed interviews were resubmitted to the interviewers for further clarification. The final reports and interviews, along with the best of the trial interviews (conducted in Chisinau or nearby villages) form the basis of this report, along with several dozen interviews, formal and informal, that the authors conducted in Moldova with representatives from government, local and international NGOs, academia, and ordinary members of the population. 4  Poverty in Moldova: The Social Dimensions of Transition WHAT IS POVERTY? 16. This chapter discusses how Moldovans characterize poverty. We consider that understanding poverty from the position of the subject, rather than from objective indicators alone, is prerequisite to understanding the meaning of peoples' behavior. Certainly, middle-class Westerners would have described the living standard of many "average" residents of Soviet-era Moldova as relatively poor. But at least in hindsight, our respondents, with some exception, described their pre-independence living standards as adequate at the very least. 17. Most respondents described "poverty" in two ways: by relating it to concrete situations, and by comparing their current economic plight with their economic possibilities before independence. In speaking about poverty, they pulled together what they consider the reasons for and consequences of poverty, what it means and how it feels in material, cultural and social terms to be poor in Moldova, how they experience the growing gap between themselves and the new rich, and whom and what they hold responsible for their post-independence impoverishment. COMPARISONS WITH THE PAST 18. For most poor respondents, poverty is a very recent phenomenon, and they always describe it in relationship to the past. None of our respondents described themselves as having been "rich" before independence; most felt they had lived well by prevailing standards; a minority said they had always been "poor." Today, Moldovans compare the official minimum salaries with the minimum "food basket," and conclude that "now we are all poor." The following complaint by an elderly pensioner is typical: "[Before independence] I had two thousand rubles saved in the bank for a rainy day, for my funeral. It was quite enough during those times. Now I have 2 lei. What can I buy with them?" 19. Although salaries have lost their former value, many people nevertheless attribute impoverishment to widespread unemployment. Many people focus on the hyperinflation and loss of life savings which occurred about the time of the currency conversion. For this reason, in their view, salaries, pensions, and social assistance have become insignificant in comparison to the high prices. People built up sizable savings by having 5-20 rubles automatically transferred from their monthly salaries to savings accounts. Others took out insurance when a child was born, for 1,000-5,000 rubles, and received a lump sum when their child reached 18 years of age. They often presented this sum to their child at their wedding. 20. Most respondents told us that for them, the worst aspects of poverty were hunger, poor health, lack of adequate clothing, and poor housing conditions. One respondent cited the eminent Moldovan writer, Ion Cregna, who in her view had best grasped how poverty feels when he wrote "shame touches one's life indirectly, while hunger touches one's life directly." 5  Technical Paper I INSECURITY AND SHAME 21. Poverty has important social and psychological components. Respondents described poverty as feeling defenseless; finding it impossible to obtain information or find out the truth; exclusion from the cultural, social and ceremonial life they once enjoyed. They feel poverty is gradually destroying traditions of christernings, weddings, funerals, and other life cycle rituals that once brought people together on a regular basis. Respondents described their loss of hope for the future, and the pervasive sense that they do not know and cannot find out what is going on around them. For many poor people, independence, "democracy" and the transition to a market economy have come to signify the lack of social justice. 22. Despite widespread impoverishment, however, people still experience their own poverty as deeply humiliating. Even those respondents who appeared extremely poor to our interviewer often preferred to define themselves as "close to" but not completely "poor." For the very poorest, however, "not completely poor" means little more than "not dying of hunger." They preferred to characterize their positions as follows: "My living situation is very difficult, but I still have something to eat and something to wear. This morning., I saw two women who were eating food they had found in the garbage. This is poverty!" 23. The importance of this distinction derives, first, from the fact that Soviet ideologists analyzed the social phenomenon of povein:y as the product of capitalist political economy. To the extent it was acknowledged in socialist societies, in the absence of extenuating circumstances such as severe disability or age, it was ascribed to individual failings: "In the Soviet period, it was said that only lazy people were poor." Second, people were highly conscious of status and position, which more than money, could secure access to important goods and services. High status demanded, in turn, the ability of a household or individual to discharge its social obligations, and to maintain the appearance of prosperity. "Poverty is pain,; itfeels like a disease. It attacks a person not on llut also mr6ally. It eats away one's dlgnity aiqd drives one total espir. A person feelsD poverty everymonent withiouteven notic^ig it.j"d: GENERATIONAL DIFFERENCES 24. The experience and interpretation of "poverty" vary according to generation. Youth often prioritize the lack of decent clothing, humiliation in front of richer friends, inability to participate in a normal social life, and the inability to earn money. For young married couples, poverty signifies the inability to separate from parents, to start life on their own, to enjoy a modicum of privacy and independence. For families, the greatest anxiety revolves around feeding and clothing children; when this task is met, t]he next worry is securing an adequate education for them. 6  Poverty in Moldova: The Social Dimensions of Transition 25. At the same time, many youth welcome the changes. They feel that competent young people used to be held back by the emphasis on seniority and "status," and hemmed in by numerous rules. They already understand that the state will not help them and that they will have to fight to survive. More than older people, they are more prone to label the poor as people who lack initiative, are lazy, or lack entrepreneurial spirit and ability. Of course, the young also differ. Some young respondents, however, are not so adaptable; they prefer to remain at home rather than undergo the "humiliation" of accepting work outside the profession for which they An economist's view "Nobody succeeded in creating a classless society, neither the French philosophers nor the followers of Marxism-Leninism. Equality only existed in the pnmitive commune. People are different, thus they have to live differently. This gap exists, but it should not exist in such proportions, In our society, there are a few rich people but more and more poor ones; a middle class practically doesn't exist. This increasing gap could lead to a similar situation to that of 1917, when poor people organized a revolution to destroy the rich." trained. 26. The "saddest and most desperate," according to one interviewer, are those over fifty and the disabled, for whom the worst aspect of poverty is uncertainty about the future. A 48 year old women who imports goods from Turkey and Poland to sell at the market sees it as follows: "When you are more or less healthy, you can still have some hope. I do not know for how many more years I will be able to travel abroad for merchandise. All these trips have damaged my health, and since I have no seniority at work, I cannot expect much from a pension. I am afraid to think about the future." WHO BECAME RICH AND WHO BECAME POOR? 27. Our respondents described Moldovan society before independence as consisting of a large middle class, a small wealthy class, and a small class of poor. As one respondent explained, the "former society provided equal opportunities to equal people." Today, middle-aged and elderly respondents contend that only honest people are poor, because they lack the ability to cultivate, manipulate, and bribe influential people, activities which are key to the success of the rich and powerful. Prominent among "honest people" are intellectuals (especially teachers, researchers, professors, and writers), the old and disabled. Likewise, families with many children, pensioners, and people who did not have savings or assets when Moldova became independent also joined the poor. 28. The new rich, in the eyes of our respondents, consist of the former Communist Party political elite, who simply "exchanged their Party cards for parliamentarians' mandates," bureaucrats, local officials, the "mafia," rich gypsies, Russians, Romanians, and people who used Soviet era political and business connections to "grab material and start their own businesses." Poor respondents characterize these people as "dishonest," "swindlers," "speculators," and 7  Technical Paper I "thieves," and insist that "politicians don't care about the suffering population." Yet respondents are not unanimous in their condemnation. Some consider the rich to include people who were energetic, intelligent -- and who already had some capital when the reforms started. They place their hopes in such people, whom they believe have the potential to improve the republic's economic situation and organize charitable associations to help the needy. CONCLUSIONS 29. Moldovans define poverty in relation to the past, when the majority of respondents enjoyed secure employment and were able to live on their salaries and pensions. Despite generational differences in how they interpret the new economic realities, most disapproved of the increasing economic stratification, and saw a causal link between wealth and corruption. Despite awareness that impoverishment is widespread, poor people feel humiliated by their poverty and try to minimize it in front of others. Few people had concrete ideas about what should be done, although most felt it was "the government's responsibility" to fix their situation. Although most people have lost hope that the state will restore lost savings, they nevertheless feel it is the government's obligation to do so. Only one respondent expressed a concrete recommendation on eradicating poverty: "Distribute long-term, low-interest-rate loans to all families, so they can invest in land and farming." 8  Poverty in Moldova: The Social Dimensions of Transition THE MATERIAL DIMENSIONS OF POVERTY 30. Poverty in Moldova and the FSU is unusual in that it now affects both people who were always economically "vulnerable," such as unskilled workers, or very large single-parent families, as well as highly educated persons who once enjoyed socially prestigious and well compensated positions (not only in money, but in privileges) as scientists, engineers, or university professors. Depending on the positions they once occupied in the socioeconomic hierarchy, they define poverty differently. Nevertheless, the poorest respondents, no matter what their previous occupation, tend to agree on the fundamental and basic aspects of poverty: hunger, ill health, and bad living conditions. Their inability to enjoy cultural and intellectual life or to provide a good education for their children are important, but take second place to the more directly life-threatening problems of hunger and cold. HUNGER Comparing past and present 31. Before independence, the majority of people in this agricultural country were able to feed their families adequately, if not sumptuously. Using heavily subsidized inputs, transportation, and other social goods, collective farm workers as well as urban residents with access to a garden were able to provide for their families' food needs, and had enough from incomes, pensions, and allowances to purchase what they did not raise. Bread, in particular, was heavily subsidized. 32. Today, poor urban families lack cash to buy food, as well as access to land and inputs. Even villagers say they do not eat as well as they used to. Households which do not have enough land relative to their size cannot cultivate what they have, have lost their crops because of bad weather and sometimes run out of food before summer. Many respondents said there were days they had gone to bed hungry. Certainly, food plays a very diminished role in the visiting and social life of poor Moldovans. As one destitute woman noted, "food in poor families is now solely for survival." 33. Poor people often expressed the sense that they had regressed from a modem standard of living to the poor peasant existence their parents and grandparents once led. For many respondents, their current reliance on mamaliga, a national dish consisting of corn flour boiled in water, rather than on purchased wheat bread, has become the an emblem of their poverty. They view mamaliga as less nutritious than wheat bread, and as a reminder of their personal and national humiliation. Meat, once a dietary staple, has a similar significance. Now that meat, fish and dairy products have become delicacies rather than part of the daily intake, they worry in particular about the lack of these food items in their children's diets. 9  Technical Paper I _ Fromnplenty to hunger "There was a time when I had two pigs and about 20 chickens, but now I have nothing. My money is hardly enough to buy bread every day. A few years ago my refrigerator was full of sausage. Now the refrigerator is empty. Perhaps God has punished us for our wastefulness in the past?' 34. Land plots and gardens form the rnost important food supplies for collective farm workers and some urban residents, the produce from these plots constituting the bulk of food reserves for many households. As a collective farmn worker insisted, "a family does not starve if at least one member works in the collective farm." In the past, however, families enjoyed not only fresh fruits and vegetables, but canned and preserved their own produce or that which they purchased cheaply in summer and fall. Poor households can no longer afford sugar, can lids, or in some cases, even the fuel for preserving the food. They can with salt rather than with sugar, and in far smaller quantities than before. Marina, for example, from the village of Razlog, had only canned two jars of pickles, four jars of cherry preserves, and four jars of fruit juice before winter. She was unable to preserve more, because she ran out of money for the sugar, jars, and lids. Cutting back 35. Villagers reported two distinct diets: summer diets and winter diets. The summer diet starts in late spring with the first vegetables and fruits, and lasts until early autumn. The winter diet contains potatoes, beans, mamaliga, pork fat -- but no pork -- and sometimes wheat bread. Households with a cow and some chickens can at least consume milk and eggs, but the poorest households don't keep animals because they are not in a position to either buy or steal forage. For families with at least one pig and/or cow, the livestock provide a cushion for emergencies, to be sold in case of emergencies, or slaughtered to provide for the winter. Sometimes, however, they have to slaughter and sell in order to purchase other staples. Families which had a couple of pigs, for example, tried to keep one as reserve for Christmas, and the younger one for spring, when they tend to run out of food. 36. Despite preserved fruits and vegetables, rural respondents complained that over winter, they run out of food stocks, and often feel. hungry and tired because of the lack of vitamins in their diets. Some rural families even starl: the winter without an adequate food reserve, maybe as little as a few jars of unsweetened fruit. The end of winter is when poor families often start rationing food. One poor family reported that during this season, they often eat only one meal a day. Vlad's family hopes to pickle autumn cabbage if the harvest is good. 37. This year, the peasants are upset because the collective farms did not pay them in grain. Nor did they receive their share of wheat from their own land quotas because the hot summer resulted in such a poor wheat harvest. A respondent complained, "Now there is no money to buy flour, and no flour to bake bread." 10  Poverty in Moldova: The Social Dimensions of Transition A collective farm worker 'Only God knows how we shall survive over winter. At night you wake up because of a stomach ache and because of hunger. This year even mamaliga is a problem because of the drought and the bad corn harvest. When grapes were ripe we had mamaliga mixed with grapes to fill our stomachs, My family only has milk if the collective farms pays us in milk instead of cash, or if someone from the village gives milk to my son for a share of his salary as a shepherd. But this is rare. We can't afford to spend our monthly salary only on milk. And if we agreed with the collective farm managers to get mnilk, we would only receive milk and no salary." 38. Families in Comrat and Cahul have suffered a combination of problems: delayed cash salaries, delayed in-kind payments of wheat, and on top of this, high prices for having their flour milled. They were forced either to purchase wheat, or to switch to mamaliga. Potatoes also form part of a families' staple diet. But for many households, last year's potato harvest was also poor, and the price rose to 1.2-1.5 lei per kg. Large families, which consume 400-500 kg of potatoes a year, would require 600-700 lei, an impossible sum for cash poor families. Food vulnerability: pensioners and children 39. Many pensioners assert that if they only received pensions on time they could manage. Most receive pensions anywhere from a few weeks (recorded in Balti) to nine months or more late. Thus, a mildly disabled pensioner who used to buy herself a loaf of bread and half a liter of milk before independence, can no longer afford even these basic foods. A retired school teacher surviving in Chisinau on her monthly pension of 107 lei reported that, after paying utility costs, she has only 65 lei left for monthly food and other expenses. Her breakfast and supper consist of tea without sugar and one piece of bread. Such pensioners now stave off hunger by surviving mainly on mamaliga. 40. Many urban pensioners grow fruit and vegetables on 500-600 m2 plots, but those who are very old or sick have greater difficulties. They cannot afford unsubsidized (and increasingly irregular) bus transportation to gardens located far from their homes; many lack gardening tools; when they do plant, they are unable to guard their crops, which are often stolen. 41. Moldovan households now have to think how to divide up food among family members when there is not enough to go around. Respondents were quite consistent about how they go about this: women, responsible for preparing and planning meals, first fed their husbands, then their children, and only after the others have finished, allow themselves to eat the leftovers. Ion, the father of small children, described their meals as follows: "All the children eat from one pot. Each child eats as much as he or she manages. My wife and I eat the leftovers. Sometimes there are no leftovers, then we only eat a loaf of bread or mamaliga with onions." 42. Despite the concern most parents exert to make sure their children are full, many children go hungry each day to school. Teachers report that by the third or fourth hour of class, they begin to notice which children have come to school without breakfast. Parents with many children 11  Technical Paper I point out they have to spend up to 10 lei a day just on bread, and eggs or meat are out of the question. HOUSING CONDITIONS 43. At least for rural Moldovans, buil(ding and owning a house remains an important measure of family well-being, and families traditionally spent any surplus income on their homes. Architectural styles differ regionally, but most contain large ovens, built into an inner wall, which can keep two rooms warm, thick, whitewashed walls, and brightly painted fences and gates. The appearance of a house was thought to reflect a family's self-respect and position in the community. Today, families can no longer afford the luxuries of paint, much less materials for repair. In rural areas, the houses people started before independence remain uncompleted. 44. Complaints about housing centered on leaking roofs (whether slate or thatch, they need regular maintenance); moldy, fungus-infested and smoke-blackened walls; rotten floors (from leaking roofs and walls); broken water pipes and taps; windows with broken glass. Families without money cope by cover leaking roofs with transparent oil cloth and broken windows with cardboard; those who have access to building materials at work sometimes simply "appropriate" them. 45. In urban areas, many respondents live in apartments (mostly privatized), rented rooms, or worker hostels, to which they moved after coming to the city to find work. Overcrowded housing is a problem for people who started families in a hostel many years ago, but never received a state apartment. Galina, for example, has lived with her husband and two children for the last 23 years in a single room. Another woman lives with her 9 children in an 18 m2 room, with stacked bunk beds. In other cases, couples who divorced because of alcoholism and domestic violence remain living together because neither former spouse can afford to move out. 46. Many poor households lack even such basic furniture as beds. Among very poor and or younger respondents, many had never purchased new or good quality furniture; others had worn out or sold what they had, so that their apartments were virtually devoid of furniture. Among this group were large families who had been unable to keep up with the birth of their children. With one bed and one couch, most family members sleep on the floor; they keep their food in the refrigerator of neighbors. Other interviewed households, while not quite so dismal, often had only the bare minimum of furniture; in several, children either slept on the tile stove, shared a single bed, or spent their nights directly on the floor. THE PROBLEM OF UTILITIES Heating and cooking 47. In urban and rural areas alike, many houses remain unconnected to gas and water systems. I n Cahul, in the South, many houses have never been connected with the gas mains. In cases where families could install a gas cylinder, they often prefer to go without. If they install it in the house, they risk explosion; if they install it outside, they risk theft. In Balti, people who are connected complain they have not received gas in two years. 12  Poverty in Moldova: The Social Dimensions of Transition 48. Likewise, municipally-supplied hot water is a thing of the past. In urban cooperatives which do receive hot water, wealthier tenants sometimes cover the bill of those who cannot pay so that the entire cooperative will not be disconnected from the hot water supply. Reflecting on these problems, a pensioner commented, "The mayor promised in the last elections that he was going to give us gas and hot water, but since the whole town has been privatized, we don't have anything. I cook on a single electric plate." 49. Coal used to be a common form of fuel, and is still supplied at discount to pensioners. Many families cannot spend 900-1,000 lei for two tons of coal required to heat a home for the winter. Those who do, however, complain about the quality. In Nisporeni, respondents claimed their coal had been mixed with gravel, and barely heated their homes. Pensioners, entitled to free or discounted coal, often lack the 30-40 lei needed to have their 500 kg entitlement transported to their apartment. 50. Some households have installed wood-burning stoves. Steadily burning fires in rooms or apartments without ventilation tend to impregnate household items with smoke. Furthermore, wood is costly; in Comrat and Cahul, a cubic meter costs 40 lei. People conserve by moving into one or two rooms in winter; if they live near forests, they sometimes cut their own wood; some families, including the elderly, ask neighbors for the small bits that are left over. In rural areas, in addition to collecting small branches, people burn sunflower stems, corn cobs, corn stalks remaining in the field after harvest, dried grape vines, nut shells (which sometimes explode and blacken the walls), or dung mixed with straw (kizyak), a foul-smelling alternative most people dislike. 51. Poor urban families gather wood from city streets after the town hall has cleaned the parks. Others gather cardboard every day from the town markets. A widow with five children burns wood she obtained from dismantling the small wooden shed in her garden. She hoped it would get her family through the coming winter, although she was not certain how hot the wood would burn. One young mother of four keeps her three school age children out of school so they can help scavenge cardboard. She explained, "We simply have to survive. If we had nothing to burn, we would die. My children can't go to school because without them, I wouldn't be able to gather enough cardboard every day." 52. In new Chisinau apartment buildings, heating is provided by hot water, which is pumped to the top of the building, then comes down through the radiators. Although it is heated to 50-60 Celsius, it is usually cold by the time it reaches the lower floors, although apartment dwellers still have to pay the full heating costs. Galina's family cannot afford to run an electric heater; their utility bills already come to 85 lei per month. Yet they are pleased they have an apartment at all - - they received it a few years ago after living in a hostel and remaining on a waiting list for 17 years. 13  Technical Paper I _ Paying for utilities and services 53. Despite the price of electricity, many families still resort to electric heaters and hot plates for cooking because they no longer receive natural gas. Most families try to pay their electricity bills; those unable to do so, including the very elderly or infirm who are surviving on tiny pensions, often have their service cut. Some cash poor families would like to make in-kind payments for electricity; not surprisingly, the state-operated electric company prefers cash. In other cases, people look for alternatives because of daily interruptions in electricity, which some communities receive only for 2 hours in t]e morning and 2 hours in the evening. Some people hire an electrician to illegally connect them directly to a power source, bypassing the meter. For the price of 10 lei a month to an electrician, they can receive free electricity. 54. Many people are unable to keep up with the many fees and expenses. In some cases, they are forced to pay for those services they should not be liable for. Recently, Nelli, whose daughter is paralyzed and whose arthritic mother virtually never leaves their 4th floor apartment, learned that people who do not use the apartment elevator do not have to pay the usual monthly fee (2.5 lei in her case). In order to get the fee waived, however, she had to go through a complicated bureaucratic procedure, and produce medical certificates confirming that both her daughter and her mother are immobile. She succeeded only with the assistance of an acquaintance who had faced a similar problem. Water and waste 55. Throughout the country, access to potable water is a problem. Apartment dwellers complain their pipes are rusty. The local housing offices (Zheks) that used to take care of such problems now demand payments for eve:ry service, and will not undertake capital repairs. Especially in southern regions such as C4onmrat, the people receive water in their apartments only a few hours a day, and get the rest of theiir water from wells, often lugging heavy containers to their apartments. In the city of Balti, many people also rely on well water. In many cases, well water is salty, and residents believe it is contaminated, although they still rely on it. In villages, water is supplied almost exclusively from wells, and sometimes villagers must wait hours in line to get their water. In villages such as Crihana Veche, in Cahul, wells are located 1-2 km outside the village, so villagers have to pay for water to be delivered to their homes. 56. Respondents linked contaminated wells to outbreaks of hepatitis and cholera, and parents blamed the lack of water for washing (and a warm room for bathing children) on virtual epidemics of scabies and lice. A family in Rotunda reported that they had been unable to wash themselves for three weeks. They didn't have soap, shampoo, or even enough fuel to heat water. 57. Respondents also complained about waste disposal. In urban areas, with the deterioration in collection services, garbage now piles up in apartment chutes, where it attracts rats. In villages and small towns, where people used to haul away garbage to at least dump far from their homes, today they dump it in nearby ravines, on roads, even near their homes, where it forms unsightly heaps around which stray cats and dogs collect. People also express concern that it seeps into the water supply and pollutes streams and wells. 14  Poverty in Moldova: The Social Dimensions of Trans ition POVERTY AND ILL HEALTH A blind woman from Tiraspol "For a poor person, everything is terrible -- illness, humiliation, shame. We are cripples; we are afraid of everything; we depend on everyone. No one needs us, we are like garbage which everyone wants to get rid of." 58. Poor families consider bad health one of the most frightening aspects of impoverishment. It threatens their ability to keep their jobs, and drains limited resources if they choose to treat their illness, rather than ignore it, as they often do. Although the state has officially continued to provide free or low fee medical services, serious shortages of hospital equipment and medicine, low salaries for medical personnel (130-220 lei for doctors), and a long tradition of doctors and nurses demanding and accepting small "gifts" for special attention, have created what is predominantly a defacto, if not de jlure, system of private medicine. Many qualified doctors have left their positions; in Balti alone, it was reported that 20 specialists had found jobs in Romania, Germany, and Israel. 59. The decline in access to health care has hit large and/or single headed families, the elderly, and the disabled or chronically ill with particular severity. For poor families, bad health and poverty are part of the same problem, for "we are ill because of poverty -- poverty is like an illness." Our respondents described the many illnesses that family members now suffer from. These included hypertension, heart diseases, nervous breakdowns and other stress-related disorders. Unheated houses and malnutrition have increased the prevalence of tuberculosis, bronchitis, and other lung infections; poor nutrition, irregular meals, and increased alcohol intake were blamed for the rise in gum diseases, gastritis, ulcers, and cirrhosis. People also expressed concern about diphtheria epidemics. Poverty also contributes to dangerous working conditions -- people are more likely to purchase cheap materials, even if they are toxic, and to ignore work related injuries. Paying for hospitalization 60. When patients enter the hospital, they must provide everything: bed linens, blankets, food, medicine, even syringes. Patients who enter a hospital in Chisinau for surgery must ask their relatives to bring blood; doctors claim the hospital supplies have been depleted. Alternatively, relatives look for donors whom they must pay to provide blood. Once hospitalized, patients have to bribe doctors and nurses just to look in on them. They give either food products, or cash, often borrowed for this purpose. 61. Rural families sometimes sell food surpluses, even farm animals, to cover such emergency expenses. Scutaru, from Milesti, sold the family's one horse for 1,500 lei to cover surgery (600 lei) and medicine, hopefully with something left over. Some families actually take out bank loans to pay for hospital treatment. Ivan and his wife, teachers in Gordinesti, are both seriously ill. The husband is partially disabled and suffers from arteriosclerosis. In 1995, he underwent leg surgery at the cost of 1,000 lei. He and his wife took out a bank loan at 50% 15  Technical Paper I interest to pay for the surgery. Their meager salaries have not allowed them to pay back the loan, or to pay for required post-surgical treatment. A hospital stay After receiving a heart operation, hemia surgery, and removal of gall stones in the course of two weeks, Valentina remaine:d in hospital for four more weeks. During that time, most of her elderly parents' money was spent on her treatment and medication. Each of the nurses had to be paid 1 0 lei wuhen she was in the emergency ward, otherwi se they wouldn't have bothered to bring her meals in time, and 10 lei so they would be -careful when they gave her injections. Similar amounts were distributed to the other hospital personnel on a regular basis. At" the end of the treatment, the doctors demanded that Valentina's mother organize a dinner for them. She acquiesced, selling some household items to purchase the food, since she feared that Valentina might have to enter hospital again and would depend on the doctors'good will, if not their skill, which her mother felt was inadequate. Chronic or serious illness 62. Families on the edge of indigence or already in debt, are often unable to treat chronic or serious illness. Maria, the wife of Ivan, above, recently discovered several lumps in her breast. The family already has such a large debit from Ivan's treatment that Maria has refused to even consult a doctor, although she realizes she might have cancer. A disabled man in the district of Balti reported similar behavior on the pErt of his wife: "She has a serious liver disease and even though I tell her to go to the doctor, she won't. She is afraid of paying money." Even when poor people do start treatment, they sometimes find they can't afford to complete it. A respondent reported she had come down with pneumonia. She borrowed enough money to buy ten doses of penicillin, but only had nine injections, since she could not afford a tenth syringe. 63. In the past, people with chronic illnesses were assured a steady and affordable supply of at least the most essential medications. Diabetics, for example, could buy special sugarless foods at special shops. Such shops no longer exist, nor does the special bread that they used to purchase. Worse, many diabetics can nc, longer afford their daily insulin, which, according to one respondent, amounts to 54 lei every three weeks. Folk healers 64. People have increasingly resorted to folk healers and folk medicine. They are particularly sought out for what would otherwise be considered psychological or emotional problems. Folk healers, mostly older women, have lower, more affordable fees. They call on their patients, accept in-kind payments, and scale their demands to the actual possibilities of their clients to pay. Marina, from Crihana Veche, is a typical patient. She complained of an illness which causes hearing loss, a swollen chest, and such weakness she cannot even stand. She now pays a folk healer to "exorcise" her for 3 weeks, twice a year, for 5 lei and 1 liter of vegetable oil per 16  Poverty in Moldova: The Social Dimensions of Transition treatment. In some cases, however, respondents reported that folk healers did real harm, as in performing incomplete abortions. Dentistry 65. Poor nutrition has worsened dental problems, while visits to the dentist have become less affordable. Typical prices include 5 lei to have a tooth removed, 10 lei for a filling, and 25 lei for a new tooth. Parents try to get emergency dental service for their children and delay their own treatment as long as possible. Ecaterina, who has a host of medical problems, complained she doesn't have any teeth left, but then noted philosophically, "I don't need them anyway, because I don't have anything to eat." 66. In a village in Edinit district, two dentists opened a dental clinic. They invested 6,000 lei to purchase the equipment and some of the materials, while the mayoralty had allotted 1,000 lei, the premises, and some equipment. The dentists had offered to treat children, the elderly and disabled free of charge, if the mayoralty paid their monthly wages of 134 lei and allowed them to keep payment from their other patients. In fact, the mayoralty refused to pay their salaries, claiming it did not have money, so the dentists charge all their patients. Indeed, this is how most "free" medicine works at this point in Moldova; medical personnel receive such low salaries they feel justified in demanding payment from patients. MATERNAL AND CHILD HEALTH CARE Abortions 67. During the Soviet period, abortions were legal, and often served as the principal means of birth control. According to an interviewed doctor, the number has increased, especially among women from 18 to 20. One such woman, Tatiana, explained why she chose to have an abortion. Unable to afford an apartment, she moved into a hostel. Her neighbor has been forced to move out after the birth of her baby, because its crying disturbed the other residents. When Tatiana became pregnant, she therefore elected to have an abortion rather than risk eviction. When women cannot find enough money to pay, they sometimes consult folk healers. Elena, 16 years old, after receiving an abortion from the hands of a local folk healer, realized a few months later that she was five months pregnant. The cost of childbirth 68. Pregnancy inaugurates an endless series of expenses and debts. Irina, for example, could not afford the 100 lei fee for an abortion. She consequently gave birth in November 1996. Before the birth, her hemoglobin level dropped, but she could not afford the medicine her doctor prescribed. After giving birth, she had to borrow 200 lei for some urgently required injections. She soon developed a high fever, but the medical staff had no medicine with which to treat her. Since the baby's birth, most of the family income has been spent on medicines for the baby. 69. Decreased access to prenatal and postnatal care has had a marked impact on the health of babies. A recent UNICEF report relates these findings to the "extragenital diseases, abortions, 17  Technical Paper I _ hemorrhages and complications during pregnancy."2 Pregnant farm women often work up to the seventh month of pregnancy doing such physically demanding jobs as hoeing, picking fruit and loading vegetables. Some women have had miscarriages as a result. 70. In many cases, women refuse to cleliver in a hospital, to avoid fees which usually come to hundreds of lei. Women who do enter the maternity hospital report they must provide: surgical gloves, novocaine, iodine, cotton wool, bandages, several meters of gauze, sterile solution, food, bed linens and even electric heaters. Child health 71. Children's health reflects the poOr housing conditions in which many live: cold, unheated homes alternating with smoky interiors, and poor nutrition. Chisinau parents noted the increase in chronic bronchitis and other cold related illnesses, as well as stomach problems, such as gastritis, that they link to the fact that their children often skip meals or go to bed hungry. 72. Children in rural and urban Moldova still receive some basic health examinations and vaccinations in school or in kindergartens, free of charge. At the same time, village parents complain that most attention during the checkups is paid to children's hygiene -- whether they have scabies or lice -- and less attention is given to vaccinations against diphtheria and polio, or to monitoring their growth. In addition, most examinations for children at the clinic level are also free, although parents must pay for extra expenses or dental treatment. CONCLUSIONS 73. As detailed above, the material diimensions of poverty are interconnected, and affect all aspects of life. Lack of cash to buy food and/or lack of access to land, along with sufficient resources and physical ability to cultivate it, make the difference between adequate nutrition and hunger. For the poorest respondents, poverty signifies nothing less than a literal struggle to feed themselves and maintain their health. Even in rural areas, adults and children suffer not only from poor nutrition, but from literal hunger. Poor nutrition interacts with deteriorating housing conditions in which people can no longer protect themselves from cold, damp weather, or be assured of enough fuel to heat their houses or prepare hot meals. The continuing anxiety of trying to obtain food and fuel is matched by the constant fear of falling ill. Poor people can no longer afford to pay for examinations, medicines, hospital procedures, or for the bribes necessary for ensuring "free" treatment. Many respondents no longer consult doctors for anything but acute or life-threatening illness. Elderly persons consider that by the time they reach retirement age, they no longer deserve to spend valuable household resources on their own health. 2/ UNICEF. National Report: The Situation of the Mother and Child in the Republic of Moldova--Realities and Tendencies. Government of Republic of Moldova: Chisinau. Page 65. Draft of November 22, 1996. 18  Poverty in Moldova: The Social Dimensions of Transition EDUCATION EDUCATION AND POVERTY 74. Public education has received a double blow in Moldova. The educational system no longer pays adequate, on-time salaries, maintains infrastructure, or purchases new equipment. Private schools, tutors and institutions of higher education have moved in to compensate for the disastrous fall in quality. Few parents in our sample are among those who can afford fees of 1,500 lei for these private schools. But even those activities and subjects that public schools once provided for free now cost money. Thus, parents who want their children to study an instrument or take part in clubs, pay anywhere from 40-65 lei a month. Teachers and parents are particularly distressed by the deterioration in a system which they once took pride in, and which once provided an avenue of social mobility even for children from remote rural villages. Deteriorating infrastructure; inadequate teaching materials 75. With neither municipalities nor collective farms taking responsibility to maintain, repair, or heat school buildings, schools themselves have become unwelcoming, even unhealthy places for children. Children come down with cold-related illnesses, so many parents keep them at home during the winter. Because of such problems, Pirlita and Milesti villages have considered transferring the summer break to winter. Elsewhere, schools have reduced class times from 45 to 30 minutes. In Avdarma, the school closed down for two months during the winter. Few schools can offer children a snack or hot meal to compensate for these uncomfortable circumstances. In villages, collective farms used to supply food for breakfasts and lunches; the supplies have stopped and pupils must pay for even modest snacks. 76. In many communities, parents have become the main sources of upkeep, through their labor and/or frequent monetary donations. In Gordinesti, parents painted school walls and furniture. In other schools, they contributed sums such as 20 lei to the school fund, 100 lei for repairs, and 12 lei a month for a school watchman. Parents also provide fuel; in Comrat, they brought electric heaters to school, although frequent electricity cuts often made these useless. 77. Teaching materials and textbooks have become more expensive and less available. The switch from Cyrillic to Latin orthography for Romanian, as well as the increased emphasis on Romanian rather than Russian have aggravated this problem, because few new textbooks using the new orthography have been printed. In Cahul and Comrat, many schools rely largely on the old textbooks. Poor families also have difficulties finding enough money to buy their children notebooks, pens and paper. Before independence, school supplies were very inexpensive; now a 12-page notebook costs 0.50 lei. The new textbooks are also expensive: a math textbook costs 7 lei, and a French grammar, 8 lei. Outfitting a first grader with clothes and supplies can come to 200 - 250 lei. Parents complain that a single monthly salary does not even cover books, notebooks, pencils, and clothes for one child. 19  Technical Paper I _ Rising school absenteeism 78. In the present school system, students are expected to complete nine years of basic education, after which they enter vocational or technical "colleges" or continue to "high schools" or "lycee" as a preparation for university. Today, teachers say that up to 15% of pupils regularly absent themselves from school; there are also cases of complete absenteeism, when parents fail to enroll young children and older children leaving school before completing their nine years. 79. Increasing use of child labor competes with their education. Especially in rural areas, parents take children out of school to help with farmwork, where their labor is especially valuable during the busy agricultural months of spring and fall. Children help prepare fields for planting, look after younger siblings whi.le parents work, and help harvest corn, sunflowers, and other crops, tasks some parents say they could not complete without their children's assistance. Although some children just miss school for a few weeks to help with planting or harvest, some leave to work full-time, such as boys who find full-time work as herders to provide valuable cash or in-kind income for their families. In some areas, children as young as 10 work as wage laborers on other peoples' farms. 80. Children also stay at home because they don't have warm clothes or footwear. Soviet schools used to have "school funds" for buying such items for children from "socially vulnerable families," but the amounts in current school funds are too small to cope with the growing need. Sometimes siblings share a single warm outfit and alternate going out. Others refuse to attend school because they are afraid other children will make fun of their unstylish or ragged clothing. 81. The new system of private classes in public schools singles out "elite" children and demotivates the other children. In some poor households, children have nowhere to do their homework; they do not even have their own beds. These are often the children that fall behind or leave school early. They are also more likely to be labeled "backward" and further stigmatized. In some cases, medical commissions have labeled such children from particularly poor households "mentally handicapped" and assigned them to special boarding schools. Some parents refuse to surrender them to these schools, but then keep them at home entirely. 82. Children also miss school because inter-village buses no longer run regularly, and not every village has a middle or secondary school. In Antonovka, in the north, children must take a bus 8 km to the village of Prazhila. In recent years, the bus is frequently out of commission, sometimes because of fuel shortages. Elsewhere, children walk several kilometers on roads which turn into mud during the winter. In Mihailovca and Marculesti, in Balti district, children of military personnel are driven to school in the military van, but the collective farm provides no transportation. 83. While many parents make considerable sacrifices to keep their children in school and buy the necessary school supplies, some parents, especially those with less education themselves, no longer see much value in education, espiecially when they see their children's teachers supporting themselves by manual labor. Collective farm parents feel that since their children will most likely be farm workers as well, education is expendable. Ghenadie, for example, is a collective 20  Poverty in Moldova: The Social Dimensions of Transition farm worker whose eldest son just finished 9th grade and whose next son works as a shepherd. As far as this father is concerned, nine grades will suffice for his children, since working and contributing money to the family budget have become more urgent tasks. Teaching: Declining salaries and prestige; rising workloads 84. Teaching used to be a prestigious profession for men and women. While it was a largely feminine profession, men who entered the field were considered to have a special love of children or a gift for teaching. Village teachers belonged to the rural "intelligentsia," and parents and children respected their moral and intellectual authority. Today, this prestige has practically vanished. 85. Those teachers who have remained at schools receive salaries of 100-150 lei with months' delay. In the countryside, they supplement their salaries by extensive subsistence gardening. Teachers, however, as state employees rather than collective farm workers, are not entitled to full land shares under the agricultural privatization laws; at best they receive half a land share, which also reduces their subsistence base. In cities, teachers complain that the loss of staff has forced them to work several shifts and teach subjects outside their specialty. A teacher of computer science, for example, has doubled a teaching load of 18 hours in order to increase her salary from 147 to 294 lei. She finds this exhausting, but has no choice -- she has two children and her husband is unemployed. There has also been an increase in unqualified teaching staff, with older pupils often teaching the younger children. 86. Teachers -- especially men -- have left their positions in large numbers. Many have found work locally or abroad in construction; female teachers, especially those with older children, have become involved in the shuttle trade. In the village of Rotunda, only one man has remained at the school. Most village teachers reported that they would leave their positions if better paying opportunities were available elsewhere, and young teachers entering the market are often unwilling to work in villages, with their bad working conditions, isolation, and lack of cultural life. 87. Some teachers have found new opportunities to make money by tutoring, for fees averaging $2 per hour in languages, math, and science. The new emphasis on Romanian as the state language means that Romanian language teachers are in demand, as are those who can tutor in English, French, and German. In villages, teachers accept payments of food or labor. In Prazhila, for example, some parents weed the land of teachers in exchange for private lessons. In Ungheni, some teachers sell textbooks; elsewhere, teachers buy manuals from printing houses and resell to pupils for a small profit. The role of bribes 88. Bribery was hardly unknown in the Soviet educational system, but it was less pervasive. Today, parents find that some teachers expect gifts and bribes of several hundred lei at every stage if they want their children to pass. In some cases, teachers pressure their pupils by hinting they will not pass into the next class unless they pay for extra coaching. In such cases, teachers demand advance payments of up to 200 lei. Other teachers are said to give children extremely 21  Technical Paper I difficult lessons in order to force their parents to pay for extra coaching to help them pass their exams. Parents who don't pay risk seeing their child fail their class. After exams, some teachers expect gifts, which range from in-kind payments of produce to jewelry. 89. Many parents hire tutors to ensure their children's success in university entrance exams, paying hundreds of dollars a year to hire tutors in language, math, and science during the last year of secondary school. Parents often go into debt in the process. One mother borrowed $700 to pay for private tutoring to help her daughter pass the entrance examination for university, and hopes to pay off the debt by offering her services in knitting and sewing. 90. Guaranteeing a place in university frequently requires further bribes of several thousand lei or even dollars. Amounts depend on the "prestige" of the department, prestige, which in this case depends on expectations that the profession will be lucrative. Economy, law, and medicine are among the most "prestigious" fields. A place in a humanities department costs $2,000 - $5,000, while a place in economy, law or medicine cost $5,000 to $7,000. After admission, students must frequently pay 50 lei to $100 a year for each academic subject. 91. These high prices often prove insurmountable to even highly motivated, bright youth. We heard many accounts of village youth with excellent grades who tried to enter university. In several cases, they were forced to return to their villages, because their parents could not pay the large bribes professors demanded to guarantee their admission. One such discouraged mother reported, "My oldest son graduated as a locksmith from a technical college but could not find a job. He had very good grades and decided to reeducate himself in the Academy of Economic Studies. I was asked to give a bribe of 2,000 lei, but I had no money. As a result, my son failed the entrance examination."' How students see their future 92. In these circumstances, many children have lost hope, interest, motivation, and ambition. In their view, "only those in high positioIns are rich today, while teachers and other intelligent people are not rich." School children express skepticism regarding the rewards of education, since every day, they see teachers and other educated people falling into poverty, while only the new businessmen become rich. Many children say they go to school only because their parents force them to. Gifted children from pooI families have lost interest because they know their parents cannot help them, while those from prosperous or rich families strive less because their parents can virtually buy their diplomas. Sometimes village students cannot even afford the basic expenses for education in the town center. 93. For example, the daughter of a village respondent dropped out of the lyceum in Cahul where she hoped to prepare for medical school -- her parents could not even cover her basic food, lodging, and clothes. A student from Pirlita who hoped to study accountancy at a vocational school in Chisinau also gave up because her family couldn't afford the school fees, transportation costs, or living expenses. Only one girl from Pirlita has been successful in pursuing her education. She passed the entrance exam to the medical college in Ungheni and 22  Poverty in Moldova: The Social Dimensions of Transition receives a monthly stipend of 35 lei, which covers rent at 20 lei a month. Her parents provide her with food. Once in a while, however, poor youth succeed in obtaining vocational training away from their villages with free room and board. This was reported of a school in the district of Donduseni in the north, and for Chisinau. receiving free room and board. University students also expressed numerous concerns about sub-standard university facilities; new legislation concerning education requirements which they felt did not reflect the opinions of teachers of needs of students. Education in Romania 94. For some students from modest backgrounds, the exchange program established between Moldova and Romania offers more possibilities. Some families start their grade-school children there; university students also attend. Moldovan students receive small stipends (supplemented by money from their parents), but claim they receive a better education than in Moldova. Young people, especially, find Bucharest a much livelier city with more cultural offerings and activities. Russian-speaking students are not as lucky. Once they might have gone to Moscow or St. Petersburg for their university education; these universities are now financially inaccessible to most of them. CONCLUSIONS 95. Aside from pervasive problems of decaying, uninhabitable and poorly equipped schools, education is deteriorating because of the outflow of qualified and experienced teachers. Increased demand for their labor, especially in rural areas, inability to buy essential school supplies and clothing, and breakdown in intervillage transportation are keeping increasing numbers of children out of school. The number of bright, motivated school graduates who can continue their education has sharply decreased among the families we interviewed. They cannot afford the tutoring fees or bribes demanded at every stage; village students have the additional burden of paying for board and lodging away from home. 23  Technical Paper I _ THE AGRICULTURAL SECTOR 96. For rural, small-town, and even some urban residents, subsistence farming has become the mainstay of household economies, whether they work on the nominally-restructured collective farms, on their own household plots, or on their own privatized "peasant farms." Over a million rural households now have title to household plots, averaging .30 ha per household (with an additional. 10 ha per person for households consisting of more than three persons). These plots were distributed free of charge during the first phase of land reform which began in 1991, and most households now have title to them. 97. Many Moldovans also have additional gardens. These include: land around their houses, land rented from others; land received from urban enterprises; unclaimed land taken over for small-scale husbandry and vegetable cultivation. This chapter will discuss farming on collectives and privatized family farms (referred to officially as "peasant farms") in the first section, and subsistence gardening on urban plots and gardens in the separate section. In practice, these forms overlap, especially since the .30 ha household plots most households have also play a critical role in rural and sometimes urban subsistence. THE IMPACT OF LAND REFORM Restructuring the collective: Backgroujnd 98. Restructuring of collective and state farms began after independence and made headway in 1992, but has proceeded slowly. Farmers faced many obstacles, including incomplete and inaccurate information; time-consuming and arcane procedures for withdrawing land shares from collectives and registering them; passive and active hindrance from farm managers and local officials; and fears about risks entailed by independent farming.3 This section will briefly introduce the main aspects of land reform of state and collective farms, then discusses land reform from the point of view of our respondents -- how they perceive their experiences as collective farm workers, and how they evaluate the opportunities and risks of becoming independent farmers. 99. After the distribution of .30 ha household plots doubled the size of household plots, a second phase began in 1992, with the adoption of the Land Code and the Law on Peasant Farms. This phase involved distribution of land and other collective and state farm assets as paper shares or certificates of entitlement. By November 1994, some 14,000 families had withdrawn their land from collective farms to establish individual farms, and an additional 40,000-50,000 had submitted applications to do so. The large number of households wishing to privatize their land stirred conservative opposition to land reform and led to the November 1994 Law on Suspension of Some Articles of the Land Code, which "effectively stopped the process of privatization." After considerable opposition to this restrictive law, the Constitutional Court of Moldova 3/ Please see also "With Farmer's Eyes: A Grassrcots Perspective on Land Privatization in Moldova;" EC4NR Agriculture Policy Note #7; October 17, 1996; and "Land Reform and Private Farming in Moldova EC4NR Agriculture Policy Note #9; January 29, 1996, detailed surveys of the rural sector. 4/ "Land Reform and Private Farming in Moldova," p. 2. 24  Poverty in Moldova: The Social Dimensions of Transition declared limitations on exit unconstitutional, and the process again accelerated, this time with more government support. 100. As of mid-1996, 91.4% of agricultural land was declared to be in private ownership, and 983,000 households had rights to a land share. Most households had received certificates of entitlement, but only 10% of them had actually been assigned a specific plot of land. By October 1996, there were 90,000 independent private farmers, farming alone or in groups, farming on 130,000 ha, 5% of the total arable land. Today, organizations working with agricultural reform in Moldova estimate the number of private farmersS anywhere from 117,000 to over 200,000.6 The remaining farm population has continued to work on collective farms that have been nominally restructured, or on "new" farm associations and cooperatives that have split from the collective farms but essentially replicated their structure. Except for the enterprising few who successfully insisted on withdrawing their land from collectives, the majority have left their land in the collective ("renting" back their land shares) in return for dividends, or a share of farm profits. 101. Definitions and understandings as to what distinguishes one farm from the other prove to be very confused in the field. Thus, most collective farms have formally restructured themselves, but in fact made little change in their actual organization. Now they pay "dividends" as well as salaries to collective farm workers to use the latters' land shares. However, the farm managers, to retain their positions, treat "members" as wage workers rather than participants with a say in decision-making, and prevent households from withdrawing land and non-land assets without great difficulty. (Please refer to Annex I for definitions of new farm types.) 102. The function of the true associations of peasant farms is frequently just to allow independent farmers to acquire their "value-shares" in the form of a tractor, combine, and/or other heavy equipment and non-land assets, which they can do as a group, but not as individuals. Working conditions on collective farms 103. For the majority of farmers who have remained on collectives, working conditions have deteriorated since independence. Before independence, of course, people worked in cold, damp and often unsafe conditions, with toxic materials which damaged their health, but with the assurance they would receive commensurate pensions, medical treatment, and periodic holidays at health resorts. These benefits no longer exist; moreover, labor is increasingly performed manually because farm equipment is falling apart and farms cannot buy spare parts. In many collectives, people continue to work in specialized teams of several dozen farm workers, on vineyard, vegetable, field crop, tractor, and other "brigades." Plowing, sowing, cultivating, and harvesting are mechanized, but farm workers prune, harvest fruit and grapes, and hoe manually, I/ Independent or private farmers refers to individuals, whether or not they farm alone or in groups, who have not only received land shares (entitlements to plots of land, which average 1.4 he) but who have already been assigned and taken over a specific, identifiable plot of land. 6/ In part, this difference depends on the extent to which the private farmers have completed the bureaucratic procedures for receiving formal title to their land. 25  Technical Paper I each on a separate plot to which they have been assigned. On one such farm in Cahul, farm workers must walk to plots located 4-8 krn from their homes in the village. Most of the work on the farm is manual, with tools which are 1]0-15 years old. Machinery is rarely used because it so frequently breaks down. 104. Farm workers throughout Moldova express deep dissatisfaction with these working conditions and with their pay. They should receive monthly salaries of 30-100 lei. Instead, land and house taxes and electricity fees are subtracted from this amount, and they take home only 50- 200 lei a year in cash, along with milk, meat, wheat, sunflower seeds, sugar, wine, and other products. Some farn workers complain that their in-kind payments are based on higher-than- market-rates (1 leu per kg of potatoes, which could be purchased at the market for .80-90 lei, or sugar valued at 2.70 lei, but priced at 2.30 lei in the market), effectively overvaluing the goods and paying members less than they were entitled to. Respondents in Cahul were also angry that the food they received was valued at higher than market rates, and that in many cases it was old, such as corn and flour already contaminated with ground beetles. 105. Conditions are similar in many collective farms in the north. Respondents on a collective farm in Balti district say they work 12-17 hours a day during the heavy seasons, only resting on Sunday. In addition, some undertake work on a norm of sugar beet or tobacco, a plot the family works on in exchange for a portion of the profits, which they receive once or twice, after the crop has been sold. For example, a family wi]Ll receive 30 lei plus 5 kg of sugar, for each ton of cleaned sugar beets that they load on a truck. In most cases, whole families work on the norm, taking even their small children with them. 106. In Gordinesti, Rotunda, and Blesteni in Edinit district, families were assigned a land share when their collective farms changed into "joint stock companies," and now "rent" these land shares to the collective farms. Like f.arm workers elsewhere, they feel their payments, which A, Cahul farmer Radu works on a specialized collecti ve farm team responsible for taking care of the vineyards. Like all such brigades, it concentrates on the same task for the whole year, although it may pitch in with other jobs during harvest time. Radu's team has to walk 3-5 km, to the field every day. This is alright during good weather, but during rain or snow, "you're tired before you've even gotten to work."' Although the team works together, each member is responsible for a separate share, including 4 ha of vineyard and I ha of cornfield to hoe. Radu would prefer to become a private farmer., "but the local authorities won't even hear this." Radu subnitted a request to withdraw his land, but "the official tore it into pieces." Radu is also angry because the collective farm leaders are never to be found in their offices. Moreover, they use the collective farm assets as their own, driving home to lunch on the collective farm tractor or truck, or using the vehicles to drive their children to school. But when the farmers request use of the vehicles, they claim they donl have enough gas. they receive in the form of sunflower seeds, wheat, cucumbers, cabbage and onions, are much too low. They are also angry that, except in 13lesteni) they had to buy wheat, an important staple, rather than receiving it as part of their payment. One worker received a carpet in lieu of the 340 lei he expected. None of the workers had received cash, but few understood the reasons for this. Yet most of these respondents expressed reluctance to withdraw their land: they worry about lack 26  Poverty in Moldova: The Social Dimensions of Transition of access to transportation and equipment, fear expenses will be higher than profits, especially since they cannot afford inputs; and comfort themselves with the fact that they bring home something every day from the collective farm fields to feed their families. 107. In Comrat, when collective farms registered as "joint stock companies," farm workers received land shares of 1.5-2 ha, depending on their years of employment. But workers report that both working methods and the way profits are distributed have remained unchanged. Payment is made in-kind, depending also on the number of days an individual worked. Members can also receive agricultural goods (wheat, beef, oil, beans, etc.) at below-market rates. Although pensioners who have adequate "seniority" (25 years of work experience) are supposed to receive a share of the profits in "joint stock companies," pensioners who never completed seniority receive nothing at all. 108. Workers cultivating profitable crops were more satisfied. For example, farm workers specializing in tobacco expect higher earnings, paid as cash. A Gordinesti worker reported that he expected to receive 1,400 lei for having picked 1.2 tons of tobacco leaves. The farm was to sell the tobacco for 4 lei per kg, 30% of which had been promised to the workers. In Balti, some young farm workers agreed to receive their salary in the form of building materials for repairing their homes. In Mihailovca, an extremely poor and relatively isolated village in Balti district, farm workers realized that apples were very profitable. Some insisted on being paid in apples, and in some cases, the collective farm had provided transport from the fields and allowed them to use farm buildings to store apples. 109. For the most part, both farm workers and pensioners receive payments with considerable delay, anywhere from a few months to a year. When they do finally get their meager salaries, they must often pay their taxes immediately, which leaves them almost cashless. Mihailovca farmworkers complained that when they come to the farm office for payment, they would find the tax collector waiting there for them to collect taxes on their homes and livestock. Farm worker - farm management relations 110. For the most part, relations between farm workers and farm managers follow a pattern of "state patriarchy" established during the Soviet period, when decisions were made centrally, implemented by farm managers, and simply presented to farm workers. Today, however, the benevolent aspect of the old paternalism has vanished, since lack of funds, growing farm indebtedness, and unsettling transitions have turned management and farm worker against each other. 111. Farm workers perceive farm management as exploiting them, lying to them, and cheating them of their rightful earnings. Although as "members" of the new restructured collectives they should receive dividends from profits after sale of crops, they claim that the farm management uses pretexts such as the drought, bankruptcy, unforeseen expenditures, and farm indebtedness to cheat them of their actual earnings. Farm workers have little knowledge of the actual finances of the farm, however, since management never shares information on earnings or expenditures. The 27  Technical Paper I _ farm workers accuse them of siphoning off profits through devious ploys which has enabled them to buy luxury cars and large houses.7 112. Farm workers often feel they have no recourse or appeal. A young mother told our interviewer, "When I go to the director, 1 don't know why, but I am afraid of him, I am afraid to talk to him. He never looks at you when you talk to him. He looks through the window, and then suddenly he screams What do you Want?!! Go and work!! I don't have any money! !" Several neighbors, listening to this report, confirmed the impression -- "Animals also die from overwork, when they are hungry." 113. The administrators of the collective farms and joint stock companies claim that their hands are tied, because when payments are made to the farm account, the banks block them from withdrawing money and force them to pay back old loans rather than distribute salaries. These debts include the profit tax, value added tax, as well as payments to the social funds. These debts can come to several million lei. As a result, many of these farms conduct many transactions through barter. One such farm near Balti worked out a trade agreement with farms in Belarus and commercial agents from the Baltic countries, where they receive much better prices for their apples than in Moldova. In Belarus, they found it profitable to trade apples for spare parts and fertilizers. They are also obliged to sell wheat and other grains to state enterprises at the fixed price of 1 lei per kg. But even when they have supplied the wheat, they do not receive payment, or a smaller payment is offered, such as 50 bani rather than 1 lei. Leaving the collective farm: fears and intimidation 114. Attitudes toward land reform differ. Not only do farm workers feel there is no framework or support to cushion the risks, some people are deeply disturbed by the increasing gap which now separates rich and poor, even in the formerly egalitarian village communities. The collectives, they assert, guaranteed some form of equality between people -- "If the collectives are dissolved and land distributed to individuals, 5 or 6 people will buy most of the land, while the rest of the people will end up working for them, as in the past when we worked for the Romanian boyars." People who have more resources, strength, and/or confidence, dismiss such nostalgia, claiming that only the lazy and envious oppose privatization: "Our people are hard- working, but if everyone is in a heap, nobody can see what anyone is doing." 115. The degree of privatization differs regionally, but it also varies significantly within regions and districts. In Comrat, only a f ew farming households had applied to withdraw their land shares, but they had been waiting months without any response. The majority express the fear that poorer soil and frequent droughts in the south would require extra fertilizer, intensive irrigation, and guaranteed access to farm machinery, all of which they felt would be a problem to obtain. Even collective farms are now plagued by lack of spare parts and lack of cash to replace them. In Sadova, Balti district, tractors hlave been breaking down, and the manager finally replaced two truck engines from tractors, and then pulled parts from three tractors to make one tractor which functioned. Such problems provide more reason for workers on the Sadova and 7/ See Sorin Radilescu's interviews with farmers for their account of how management manages to embezzle farm profits. 28  Poverty in Moldova: The Social Dimensions of Transition other collective farms to hesitate to privatize. Independence is seen as a burden rather than an opportunity especially for those who are able to earn supplementary income, for example, through private construction work. 116. In some cases, farm workers have been stymied by the fact that they simply don't have adequate information, or even the channels to obtain accurate information. For example, farm workers in the agricultural village of Crihana Veche, near the southern town of Cahul, wish to privatize their land. Some of it belongs to the Technical Agricultural College of Cahul, under the Ministry of Education, some belongs to a state collective farm. Many have submitted applications to the farm administration, but with no success -- "the reason is simple -- they [farn management] will lose their chairs." Some respondents, however, had learned from the farm management that privatization had been stopped because the college was owned by the state, and did not have the right to privatize its land; they did not understand why this should be the case. In fact, the law does exempt some collective farming enterprises from privatization, because they grow seeds, conduct research, or have some other highly specialized function. Farm workers, however, have become suspicious, and frequently do not know when they can trust the accuracy of information. 117. Those farm workers who strongly feel they would be better off farning their own land have persisted. Even when they have organized protests, their protests often fail to have the required effect, because they simply lack access to the critical channels of power. For farm workers who live far from the capital, even the cost of going to offices there is prohibitive, especially if they must make repeated visits. In the case of Crihana Veche, in November 1995, farmers organized several protests. Once they blocked the Chisinau-Giurgiulesti road, another time they organized a meeting in front of the building of the district executive committee to protest the decision to transfer 800 ha of village land to the Agricultural College (thereby reducing every household's land quota by one hectare). Ultimately, 700 hectares were transferred to the college, and the farm workers remain unreconciled to this decision. 118. In Pirlita village (Ungheni) and Milesti village (Nisporeni), quite a few households had exited from collective farms as of this study: 93 out of 1,600 households in Pirlita; 200 out of 1,100 households in Milesti. In these cases as well, many fanners reported that they had been forced to assemble many documents, acquire signatures from officials who often delayed them, and get approval from the leadership at village, district, and national level. Many feared that by the time they had assembled them, a new law would be passed and they would have to start over again. Others worried about what taxes would be expected of them. In many cases, they had to travel to the district center, and then to Chisinau, as many as five times to find the official who was to sign a given document, often only to be told to return another time, or to go first to another office. 119. Some farm managers had prevented farm workers from withdrawing their land shares by threatening not to allow them to rent the farm equipment. Mihai, for example, had submitted a request to the mayoralty to withdraw his land quota, but withdrew it when the head of the collective farm warned him that the collective would not give him any assistance. In many cases, farm managers succeeded in completely preventing distribution or even access to farm assets. According to regulations, tractor drivers working on collective farms were not to rent out their 29  Technical Paper I services to private farms without permissi on of the mayoralty, to whom farmers were to submit a formal request and pay in advance. Several respondents alleged that their requests were refused on the grounds that the collective can't spare the tractor driver. In fact, they felt the real reason for refusal was the desire to force them back into the collective and prevent others from trying to withdraw. 120. Some farm workers could not produce all the appropriate documents. A widow in Cahul had been unable to privatize because she could not find her "work book" (a document listing one's past jobs). This book should have been in the collective farm offices, or in the district office archives. Officials at this office refused to surrender the book to her; she then applied to the collective farm officials, but they did not help either. 121. Many would-be independent farms said that they were told both officially, and through meetings and rumors, that they would lose money if they tried to farm privately. Because of the lack of information about land reform, most people remain ignorant about relevant legislation and regulations. They rarely protest their meager in-kind salaries from the collective farms for fear the farm manager will respond, "If you don't like it, take your land and leave the collective. Then see what you will do!" Although many people in the villages of Mihailovca, Prajila, and Marculesti in Balti district, for example, expressed a hypothetical interest in independent fanning, for the most part, they have remrained within collective and state farms. 122. Many farm workers perceive the task of privatizing land as consisting of: - Wandering among district and national offices for weeks and months at a time; - Collecting numerous poorly u.nderstood documents, which they fear the farm managers will only sign if the farmer has already established a "special relationship" with them; - Continued opposition from farm management, and exclusion from jobs and access to common assets; * Fear that the Communists will return to power and they will be deported to Siberia as were kulaks (rich peasants) several decades earlier; * Total isolation from workmates; * Numerous tax obligations to the state. 123. Many local people did not receive land shares. This includes people who worked for state (so-called "budget") organizations, as well as many young people who have moved back to their parents' village in recent years. In E,dinit, this includes many people from the village of Gordinesti who had worked as miners in Lhe Cupcini mines, which have now completely closed down. They had banded together to write to Parliament, but had not received an answer as of this study. 30  Poverty in Moldova: The Social Dimensions of Transition FARM REORGANIZATION Attitudes toward American assistance: the experience of Maiak 124. Deep distrust in their own farm managers have contributed to the hope of a respondent of Milesti, a village in Nisporeni district, that the "American Project," the break-up of the Maiak Collective Farm in the town of Nisporeni, will be implemented in his village. Funded by USAID, this program was piloted in Nisporeni, and is currently being carried out in 70 farms throughout the country. According to him, this hope has kept some farm workers from pushing to exit on their own. Villagers had heard that a commission to inventory farm assets had been organized, and hoped they could also receive American technology and assistance to make their work more efficient and their lives easier. Despite some questions about the program, most respondents felt that supervision by "the Americans" had guaranteed fair distribution of land and assets. 125. According to members of Maiak, the reorganization was undertaken in five phases: an inventorying of farm assets; calculation of each household's land and value quota; election of group leaders; distribution of the land quota and non-land assets; and the selection of the kind of enterprise each household wanted to register as. Individuals could choose to run for leadership positions; others were nominated by the households. In addition to the approximately 600 persons who had left Maiak before the Soros-aided breakup, an additional 90 became independent farmers as part of the program. 126. Farm workers did, however, express concerns: they did not know how individual financial responsibility for repairing or replacing expensive, jointly-owned farm equipment would be allocated; they worried it might be difficult to change the leaders of the new farming enterprises, since their positions would give them power, money, and connections; they did not know what would happen if someone whose land was in the middle of a larger field wanted to withdraw and start farming independently. Zavoieni Peasant Farmers Association, Manta village 127. Although villagers in Crihana Veche in Cahul remained working on the collective farm, farm workers living in the nearby village of Manta successfully withdrew their land despite the resistance of the collective farm management. As of this study, almost 50% had been withdrawn, and one association of peasant farms (consisting of 234 members) and two separate family farms existed alongside the collective farm. Several respondents described their struggle to exit from the collective, hindered by farm management who wanted "to be able to steal in the future as well." Their story suggests the kinds of obstacles farm workers contend with, and the importance of finding a leader with status in the collective farm hierarchy. 128. In 1995, 400 members submitted applications to withdraw to the village mayoralty. The farm administration tried to discourage applicants by forecasting famine if they tried to farm alone. Finally, the mayor held a meeting with the applicants, who decided to elect a leader who would be in charge of getting the applications processed. They selected Mr. Tudor, an 31  Technical Paper I _ agronomist by education,8 to organize the plowing, sowing, seed buying, and other collective tasks, in return for a payment of 1 leu per member (234 lei total) per month, as well as a share of farm income. The farm association would be structured on the basis of individually-owned farms. 129. The Registration Court in Cahul directed the association to the survey office in the Ministry of Agriculture in Chisinau, which was to form a commission to estimate soil quality. This request was not accepted until the Land Committee in Manta village had allocated specific plots, and decided what should be grown on them. The collective farm leadership also created numerous difficulties; at one point, the district public prosecutor even seized the documents to do with the establishment of the association. After two days, however, the documents were released to them. Members of the Agrarian Democratic Party (an offshoot of the Communist Party), the head of the collective farm, and the chairman of the district executive committee also tried to halt privatization. Finally, the deputy head responsible for distributing land gave way, although association members received their land parcels in a different place than the one they had requested. 130. The association, named "Zavoieni," drew up a business plan which involved 5,000 lei for use of equipment, plowing and sowing, part of which was to be gathered from members, the other part which was to be paid from earnings. The 234 member households ended up with 203 ha of arable land, 116 ha of vineyards, 15 ,a of orchard, and 20 ha of pasture. The land was distributed by lottery, each member receiving land in each category, sometimes in lots separated by 8-10 km. Members received the opportunity to use their value shares to acquire the association's share of livestock (including cows, pigs, sheep, two horses and a bull), as well as other non-land assets. Most of the farm buildings, however, were in such a state of disrepair they could hardly be used; members intended to use the construction materials to build a church. Members also collected money among themselves to repair four tractors (4,100 lei), to buy seed, and to pay for hiring equipment. They harvest manually, because the combines are so old that 30-40% of the harvest remains in the field when they are used. 131. The members experienced a number of problems: they couldn't afford enough diesel fuel to finish their plowing; the collective farnm's winery owed them 30,000 lei, but in lieu of cash had proposed to pay them with wine, which w ould force them to sell it or barter it for oil. More active farmers expressed resentment at members whom they perceived as indifferent, or lazy, but still claiming part of the harvest. They wculd like to get rid of these members, especially since other farmers are eager to join the association. Overall, they are pleased with the results of their efforts, especially given the drought of April-October 1996. Average yields per member were: 740 kg of wheat; 110-140 kg of sunflower seeds, 1,400 kg of corn, and 2,300 - 3,700 kg of grapes; this far exceeded the 300 kg of wheat and 40 kg of sunflower seeds received by households who had remained in the collective farm. Out of money earned from sales, members paid for taxes, transportation, and electricity. In the future, they hope they can obtain a low interest loan to purchase technical equipment, pesticide, fertilizer, and seeds to improve future harvests. 3/ It should be noted that agronomists were not siimply technical specialists, but had positions of some power in Soviet collective farms. 32  Poverty in Moldova: The Social Dimensions of Transition Tarifero Peasant Farmers Association in Manta, Cahul district In Pirlita, farm workers wanting to privatize were frustrated by the many obstacles placed in their way. As a result, 79 households, composed of teachers, kolkhoz workers, and pensioners choose a schoolteacher to help them push for privatization. They named their group "Tarifero" ("strong as iron"). During the first meeting between their leader and the manager of the collective farm, the latter promised to implement land reform. But in fact, he only distributed a small portion of the promised area -- the oldest and least productive orchards -- and began to oppose them. Members tried to register Tarifero as a forrnal Peasant Farmers Association. But although they had submitted all the necessary documents for registration, in 1995 the land law changed, and such associations could only register after they had received their share of non-land assets. Although they remained unregistered, tax authorities demanded they pay taxes as if they had already received their value quota. The collective farm management continued to actively hinder them. It refused to allow them use of the equipment on the grounds that it couldnl spare the equipment, forcing them to purchase used equipment for cash. Tarifero's leader declared, "The leader of the collective farm was and remains a king; he does not obey any law; he does what he wants, when he wants." 132. As the experiences of Zavoieni and Tarifero suggest, farm workers are not completely defenseless when it comes to struggling to establish themselves as independent farmers. Yet it is clear that when they do make up their minds, they confront an array of hostile individuals and authorities, who often appear determined to thwart change and sabotage the success of farmers who succeed in withdrawing their land. It is not surprising that those households least able to withstand this kind of opposition, and who, for one reason or another, feel dependent on the goodwill of farm management, often prefer not to antagonize authorities whose help they think they might call on in the future. Private farming: risks and benefits 133. Many farmers who managed to withdraw land shares received parcels 6-10 km from their homes, and claim they received poor soil. Some complain that when they received different kinds of land -- vineyards, orchards, and arable land -- many different kinds of tools and equipment, as well as too many different specializations, were required of a single land owner. The high price of inputs has been daunting, and some farmers regret their move. In Comrat, for example, the few households which succeeded in exiting confronted lack of cash to pay for seeds, fuel and rental of heavy equipment. Services for plowing land may come to as much as 200-300 lei for 1 ha of land; taxes can come to 110 per ha. Pensioners are exempt from this tax; others simply incur debts and refuse to pay. 134. The collective farms did not provide any assistance. Independent farming has pushed some new farmers into debt. An independent farmer who cultivated 2 ha of beans and 3 ha of corn, promised her crop and a cow as collateral for short-term credits at the local bank, at a rate of 28%. The drought resulted in a poor crop of 500 kg of corn and 10 kg of beans. She was 33  Technical Paper I _ forced to sell her cow and borrow money from relatives to repay the principal on her loan. She still owes 850 lei in interest and 900 lei for her land tax. 135. Farm families which have resources such as a car, and/or possibilities to earn off-farm income, have more chance of success. One such couple in the Ungheni district, Ghenadie and Lena, withdrew their 2.6 ha of land in 1993. Ghenadie, 46, periodically goes to Russia to earn cash. Although their land is located 8 km from their house, he and Lena depend on their old car to get them there, at least when it's dry and the unasphalted road has not turned to mud. They purchase seeds, but use animal manure rather than chemical fertilizer. Last year, some of their fees included the following: * land taxes - 260 lei * road repair fees to the local government - 300 lei * plowing fees (to the collective farm) - 548 lei * cultivating fees - 192 lei * sowing fees - 260 lei * transporting manure to the fields - 40 lei 136. Last year, the couple harvested 1.5 tons of corn, with which they planned to feed their two cows and their poultry; to consume themselves; and to sell. They also sell milk for 1.50 lei per liter, and onions for .40 lei per kg. In addition, they grow alfalfa as forage. The family has six children. They don't receive allowances for them, but at least the amount they should receive has been deducted from their land taxes. On the whole, they are satisfied with independent farming. Their harvest of corn, beans, pumpkins, and cucumbers, far exceeded the 100 kg of wheat, 150 kg of corn kernels, 5 kg of sunflower seed oil, 22 kg of cucumbers, and 22 kg of sugar that local collective farm workers receive. 137. In many cases, peasants complained that they received orchards and vineyards that had been neglected for years and were unprodLuctive. Even farmers who have received what they consider inferior land, sometimes report success. Farmers in Ungheni had worked diligently on the vineyards and reported a better harvest than the collective farm, concluding, "The way you work is the way you eat." Unfortunately, abundant autumn rain had destroyed some of the harvest and impeded gathering the rest. Farmers had managed to salvage part of the crop and sell it to local wineries (although several months had passed and they had yet to receive payment). Independent farmers have devised innovative ways to work in difficult conditions. An experienced machine operator modifies a sowing machine each time he uses it to sow different crops. He also adjusted a plow intended for a draft animal, so he could hook it up to his own tractor. Others have compensated by usinig horses in their work. 138. In the village of Marandeni, Balti district, about 20 households had exited from the collective farm. The director of the collective forbid the tractor drivers to assist them, on pain of dismissal. The farmers had to rent tractors from neighboring villages at a higher cost. Moreover, they were concerned about the lack of markets, and the fact that the state bought first from the collective farms at a higher price, and private owners were forced to sell for much lower prices. 34  Poverty in Moldova: The Social Dimensions of Transition Despite these hindrances, however, the farmers received much better yields than those in the collective. 139. In Edinit district, households had faced different levels of opposition and expense. In Blesteni, some families had apparently managed to withdraw their land after a simple application. A family of pensioners in Blesteni had managed to get back land they had owned before collectivization in 1949. In Gordinesti, the agronomist reported that about 20 documents were required, and the price came to about 600 lei. In another village, management used all possible means to hinder farmers, for example, waiting until the beginning of May, when it was too late to sow, to distribute the land. 140. Despite these obstacles, some private farmers reported they were satisfied with their results. One couple began with a land share of 1.58 ha; the wife, a teacher, was not eligible for land. They rented three more quotas from elderly relatives, and paid for the services of the collective farm's tractor. The couple, with their daughter and son-in-law, did most of the work, occasionally hiring people for in-kind payments. They used their own car to transport their crop of watermelons to market. If it were not for such high local interest rates -- 45-50% -- they would purchase their own equipment. Changing attitudes and interests 141. The most conservative express negative attitudes toward land privatization: "Moldova has become a farm without a master, without a fence, where any thief can come to rob or even kill you. And nobody will care. It was better in the Soviet Union, and better with the Russians than the Americans." 142. But others, as the result of experience of farming their household plots, have changed their thinking about independent farms: "The more you put in, the more you get out; one cannot blame the drought for all the problems." Farmers, however, feel the following measures could ease their burdens: * Access to farm machinery * A 5-year moratorium on state taxes, and removal of export taxes * Access to longer-term (5-7 years), low interest loans to invest in advanced technologies for food processing * Better information about soil cultivation, chemical use, crop rotation * Instruction, through extension services, about new methods, technological advances; how to farm more efficiently; how to protect their legal rights * Information and advice about export regulations and procedures, local and foreign markets * Distribution of land to all interested potential farmers * Reduced interest rates on loans for buying machinery with low fuel consumption * Establishment of the same purchase prices for crops from collective and private farms * A state policy which actively supports and assists private farmers 35  Technical Paper I CONCLUSIONS: WHO PRIVATIZES? 143. The most interesting question to ask may be: what constitutes the difference between households that manage to privatize, and those that remain on the collective farm? Our interviews suggest a tentative answer to this question. In one northern village, the only families which had succeeded in privatizing were those who had special resources, and access to powerful people. One family was related to the manager of the local fuel supply, a connection which gave them access to technology and fuel at a nominal price, as well as the opportunity to acquire "startup capital" by illegally selling the fuel. Another extended family drew on personal farming experience from the interwar period. After privatizing, two relatives and their families formed a joint enterprise. Yet other families which successfully privatized had managed to purchase vehicles during the Soviet period; in addition, one of them had earned money from his work in Russia. The report, From Farmers 'Eyes, notes that people who occupied leadership positions in collective farms -- foremen, brigade leaders, agronomists, veterinary specialists, and so forth -- tended to be among the more successful independent farmers, an observations consistent with this study's findings. 144. Thus far, farm management and local officials in the mayoralty, as well as at the district level, have considerable power to prevent households from privatizing. They do so by threatening to withdraw even paid access to heavy equipment, such as tractors; by seizing, destroying, or failing to act on applications; by trying to convince households with inadequate resources and knowledge that they risk certain failure. Family composition also matters; the presence of at least two able-bodied adults in the family makes it easier to farm. Families more able to withstand these pressures are often those with greater access to information, strategic ties to those with political or economic power, and/or specialized skills, all of which make it easier to cope with risk. 36  Poverty in Moldova: The Social Dimensions of Transition SUBSISTENCE FARMING FARMING ON HOUSEHOLD PLOTS 145. Many rural households which have not yet withdrawn their land from the collective farm, rely for subsistence on the.30 hectare lots distributed in 1992. Married couples who lived with their parents received their own .30 hectares. Doctors and teachers, however, only received .15 hectares. Families use the lots for subsistence, selling or bartering their surpluses, if they produce any. Sometimes, the collective farm provides the services of tractors for plowing, cultivating, sowing and harvesting. Most rural households also have gardens near their houses of .10-.15 hectares, which they work manually. Workers responsible for taking care of the collective farm's horse sometimes keep it on this land and use it for their own transport. Because it is easier to regularly cultivate and water this land, as well as guard the harvest, these gardens often produce better crops than more distant plots. 146. In Balti, some farmers received their lots already sown with corn. But for harvesting, farmers who cannot afford the services of a tractor driver have to call on every family member, including small children, to perform the labor manually, bringing in the harvest in small carts they pull themselves. In Comrat, local prices are much lower than those in Chisinau, but families only travel to the capital if they have large quantities of goods. 147. In many cases, these lots are redistributed to households each year. Peasants in Balti complain that they tend to receive poor quality lots, where the soil has often been exhausted by years of sunflower cultivation. Moreover, they cannot plant fruit trees or vineyards on these lands, and have little incentive to make long-term investments of labor or capital. A number of plots, located on the banks of the Raut River, however, were flooded during the heavy rains, and crops were destroyed. Others complained their crops were stolen. In Comrat, people complain that the harvest only suffices to supply seed for the following year. 148. For the very elderly or disabled, a land lot does not necessarily improve their standard of living. Many are not physically able to cultivate their land, especially since cultivation also requires walking to distant fields, transporting water, and other heavy labor. A female pensioner from Congaz village has not cultivated her lot for 3 years. She complains that a liter of diesel costs 4 lei, and one has to "give a bottle" to the tractor operator to plow it. Like many pensioners, she had given her land lot to relatives, who she says occasionally "throw her some potatoes." Pensioners with children, even if the latter live in town, often give their land to them in return for a share of the harvest. THE IMPORTANCE OF HUSBANDRY 149. Rural households also supplement their income from collective farms by private husbandry. In Balti, people raise turkeys and chickens, selling them on the market, or cows and pigs, some of which are purchased by local merchants who have trade relations in Bulgaria and Turkey. Several young families said that raising pigs was relatively profitable if one could afford the initial 125 lei per piglet. Middlemen came to the villages to purchase the pigs, at a rate of 4-5 37  Technical Paper I lei per kg of live weight. Many families have a few cows; in a Milesti village, Nisporeni, several families put their cows into a single herd, which each family took turns guarding. 150. Sometimes livestock breeding provides a seasonal income to youth who herd cows for a number of families. Stefan, in Cahul, earns 7 lei for each cow. He herds 80 cows, although he has gotten another boy to help him. He pockets 300 lei, the other boy 260. Some people pay them in cash, others in food. Some people find work as watchmen in collective farm fields. Bee- keeping also provides some households a stable source of income; 1 kg of honey can be sold for 7 lei. 151. In Comrat, families with their own cow are considered relatively well off. They use milk and cheese for family consumption, marketing surplus several times a week in the town market, earning 15-20 lei each time. The Gagauz government, however, now taxes animals at 10 lei a head, and pasture land at 40 lei a month; they explain this is to control overgrazing and rapid deterioration during droughts. 152. The poorest families cannot even afford animals. In Cahul, a cow costs 1,000 lei; forage is an additional expense. Some families in this district do not even own poultry. Those that do complain about the lack of veterinary services and the high price of vaccines and medicines. Poultry and rabbits are particularly vulnerable to disease, and often die for lack of appropriate medicine. MARKETING CROPS 153. Marketing crops from individual plots or gardens is an important way of generating income. In the north, apple selling can be profitable. Starting in November, people from Balti go by train to Odessa, taking 150-200 apples, packed in cardboard boxes or in sacks. There, they sell them wholesale or at the market over 2-3 days. Some have been swindled and returned empty handed. Alternatively, villagers may hire a bus and go to Ukraine or Russia, paying bribes up to $100 to customs officials. Another potentially more profitable way is to sell directly to middlemen from Moscow or St. Petersburg who drive their trucks directly to the villages and pay $25 per 25 kg container. This can also entail risks. In some reported cases, a police detained the loaded truck and driver. When they failed to reappear, the farmers realized that the police and middlemen had conspired to cheat them out of their payment. 154. In many villages, collective farm workers lack cash to buy even such elementary items as soap or detergents. Instead, they exchange agricultural produce with middlemen (who work with the mayor's permission) who drive to the village. The farmers complain about the extortionate rates: * 8 kg of wheat for a bar of soap * 10 kg wheat for a package of detergent * 200 kg of wheat for a pair of children's boots 38  Poverty in Moldova: The Social Dimensions of Transition STEALING 155. Illegal gathering of crops for marketing as well as subsistence is an important survival strategy in most regions. People steal corn from nearby collective farms to sell at the market or to neighbors raising poultry. Unemployed youth, town residents, or people who live in villages but don't have much land sometimes ride their bicycles at night to apple orchards, give a bottle of spirits to the guards, and spend several hours gathering apples. They risk beatings, fines, or even confiscation of their bicycles. Near Gordinesti, several families regularly steal apples in fall and winter, vegetables in summer. They canned these for the winter; in some cases, sold the vegetables in Ukraine. Some private farmers reported purchasing sacks of fertilizer from farm employees who had stolen them. URBAN GARDENING 156. Between 1987 and 1996, state enterprises established "partnerships" for gardeners under their management, whereby employees could receive .06 ha of land near the city. When land privatization began, people could privatize these plots at a low price; today they have to pay the full price. Few respondents in our sample had managed to privatize the plots they had obtained. In cities such as Balti and Chisinau, land plots, whatever their source, play an important subsistence role. Families who own a car often raise enough vegetables to get their families through the winter. One Balti respondent had raised 150 kg of potatoes, 20 kg of carrots, 35 kg of onions, 10 kg of beets, a pail of beans, and managed to pickle 50 kgs of cucumbers and tomatoes. 157. Some people build small shelters where they live during the summer, to prevent crop theft. Others find this too dangerous, fearing they may be beaten by thieves. Many lack sufficient money to pay a guard and make a profit on their small crops. In 1966, crops were particularly small because of early rains, which destroyed a significant part of the harvest. 158. Some people received land plots allocated for housing, in lieu of apartments, and those who didn't build on them now grow vegetables there. Others cultivate unclaimed patches of urban land, which they fence when disputes arise. There they grow potatoes, tomatoes, onions, cucumbers, carrots, cabbage, and herbs, using animal manure and manual labor. A few have fruit trees. On the outskirts of Chisinau, people have larger lots, where they can even grow cash crops. For example, with .25 ha received from her parents, one young woman spent 500 lei on 250 kg of onion seeds, which produced 1,200 kg of onions, sold for 1,200 lei. A lecturer from the Agricultural Institute borrowed 1,500 lei to build a 25Gm2 greenhouse on his parents' land, invested a further 300 lei for seeds, chemicals and pesticides, and earned 3,500 lei from selling the seedlings and tomatoes. 159. Urban families often buy animals, including poultry, which they keep with their elderly parents, who live in the country. Others raise them in the city. One respondent living in a highrise on the city outskirts raises 6 cows and 3 heifers in the small woods near his apartment, where he built them a small shed, and grazes them. He sells not only dairy products, but even the manure. Still others raise poultry on high-rise apartment balconies. Some urban residents breed 39  Technical Paper I livestock and poultry in basements and garages, or near the first-story apartments, to the dissatisfaction of neighbors, who object to the smell. 160. Some urban families go to the countryside to work seasonally as wage laborers, going for a season to pick apples on the collective farms, receiving in pay 200-300 kg for every ton they pick, and selling this at local markets. Others go to collective farms to pick over the fields after the harvest, managing to gather 20-30 kg at a time. CONCLUSIONS 161. Although many subsistence farmers ostensibly are members of a restructured collective farm, it is their .30 hectare land plots that provide their basic subsistence. For some who contemplate farming as a way of life, this experience has provided a transition to independent farming; for others it is a stopgap which only supplements their income. For still others, it has suggested a way to not only provide basic subsistence, but even earn a predictable income, through the establishment of greenhouses, for example. 40  Poverty in Moldova: The Social Dimensions of Transition CHANGING LIVELIHOOD STRATEGIES INTRODUCTION 162. Since independence, many enterprises have closed or sent their workers home on extended "leave without pay"; salaries have drastically shrunk; benefits, subsidies, pensions and allowances, if received at all, are late or in small amounts. Although some people have found it difficult to adapt, others have actively sought new niches and found many strategies to survive and even prosper during the transition. 163. This chapter focuses on those who have been less able to adapt for any one of many reasons: lack of skills, opportunities, access to people and resources, or because of illness, disability, and heavy family responsibilities. For most Moldovans in rural and small town settings, of course, agriculture (dealt with in another chapter) provides a significant if not necessarily the major source of income; it is also important for many urban residents. This chapter will focus on: * Formal employment (public and private sector) * Labor migration * Cash-generating informal- and self-employment, including small-scale enterprise * Small-scale barter activities * Illicit sources of income FORMAL EMPLOYM1ENT 164. Formal employment includes both public sector employment (which formerly included work in industries, agriculture, and the service sector) and private sector employment for the new private or privatizing factories, firms, and enterprises now emerging. Although the majority of our rural respondents now work full-time in agriculture, many had worked in local administrative structures; some continue to work for the state as teachers and medical personnel. Among urban respondents, many still cling to state sector jobs, often holding several jobs at once, or working overtime. 165. Although current public sector salaries are very low, many respondents saw getting and keeping a permanent job as key to survival. For some, it is the only source of cash to supplement subsistence gardening and other items acquired through barter. Many people therefore fear total unemployment. Those near retirement age are especially afraid to leave even poorly paid employment, and feel psychologically protected by having a job. They know it is unlikely they will find other work, and want to accrue "seniority" for pensions, which they hope might someday regain their former value. 166. In other cases, jobs are linked to housing, although state-funded construction has stopped, people remain on job-linked waiting lists for housing, still hoping to acquire an apartment in this way. Many people continue to live in crowded worker hostels, continuing to hold jobs where they may not even receive a salary, sustained only by the hope that they might receive an 41  Technical Paper I apartment after their many years on waiting lists. Some have taken on the job they presently occupy, simply in order to obtain space in a hostel. Tatiana, a dressmaker, took on a job as a lab assistant so she and her husband could move into a 12m2 room in the Medical Institute's hostel, where they share the toilet, shower, and kitchen with five other families. 167. Many large enterprises have managed to change their production lines, and now work at quarter or less capacity. One such example is the former Lenin munitions plant in Balti, which employed 8,000 workers. Employment there was considered "prestigious," and it attracted many workers. Now it employs 2,000 workers to produce consumer items such as umbrellas, electric irons, toasters, and chandeliers, many of which remain in warehouses for lack of customers. Salaries have decreased from the once comfortable amount of 200-300 rubles to 100-150 lei, paid with a 2-3 month delay. In many cases, employees are forced to receive goods in kind, and must sell their supply of electric irons or toasters to local shops, or the market. 168. Those who do work cannot predict their salaries from month to month. A worker at the Bucuria Candy Factory reported that her salary depended on the number of orders received: "When we receive more orders, 1 make 300-400 a month; sometimes I get nothing at all for several months in a row. I intended to search for another job, but I was promised that next year I will receive an apartment. Now I live in a two room apartment with my three children, my mother, and my husband, who is paralyzed. Where can I go?" Finding and keeping Jobs 169. The ability of individuals and households to rebound and find alternatives varies, according to both predictable and contingent factors. A few Soviet era industrial enterprises have recently found new markets and started hiring workers. Some have even invited ex-workers to return, for salaries of 200-300 lei. But judging from our respondents, finding formal employment has been particularly difficult for young people, who lack job experience; for the ill and/or disabled; and for women with child care responsibilities. 170. Moreover, not everyone can benefit from the new regulations concerning unemployment assistance. Some people, such as a young woman in Cahul, have been dismayed to learn they cannot register at the unemployment office to find work if they have privatized their land. In Comrat, few people are aware of the existence of an unemployment service, and even fewer make use of it. For one thing, it takes 5-6 months to accumulate the necessary documents to register, the meager 18 lei per month compensation is paid with a delay of 3-4 months, and few jobs are offered in any case. 171. People frequently obtain their jobs or contracts through sizable bribes. An electrician, for example, worked for an association which had contracted with a collective farm to maintain its agricultural equipment. When the collective farm became bankrupt, it terminated the contract. He then began to conclude his own arrangements with the collective farm. In one case, he received his payment in-kind, in the forrn of a ton of wheat, 600 kg of which he paid to the agronomist who had facilitated this arrangement. In the second case, he was to receive 50 cubic meters of stone, but was ultimately cheated and paid only 20. 42  Poverty in Moldova: The Social Dimensions of Transition Youth unemployment 172. Many rural respondents were particularly concemed about the lack of prospects for young people. Although some youth have left their villages to seek work in cities in Moldova or abroad, others work part-time in agriculture, remaining idle for long winter months. Rural families note a dramatic increase in youth alcoholism and involvement in both petty and violent crime. In the past, collective farms sometimes paid students allowances for their five years of university education, with the promise of a job when they returned to their villages. Today, collectives can no longer hire the young graduates who retum; many of these educated young people are forced to return to the city. 173. Educated youth find their paths blocked, because they are entering the labor market at a time when the few jobs are given to those with more work experience. Roman is a typical example. He recently graduated as an engineer, and registered at the employment office. He has been receiving 25 lei a month in unemployment payments, but has yet to receive a single job offer, or even the possibility of requalifying. Instead, he was told that his profession is not needed, and that far more experienced engineers than he remain unemployed. 174. Well-educated and enterprising youth, sometimes find new work after taking re-training courses. The daughter of one respondent took a course in waitressing; this, plus her youth, helped her find a well-paid job. Others have finished courses in accounting and been hired by new businesses. Especially lucky are young people who speak English or other languages in demand. Many have found well-paid work with the foreign organizations and private businesses in Chisinau, and may end up as the economic mainstay of their families. Employment, illness, and disability 175. The ill and disabled also have few chances to compete in the new job market. The employee of a candy factory reported that she does everything she can to avoid becoming ill. Twice a year, employees must pass a medical examination; anyone found ill is fired. As for those with a permanent disability, many were employed in special factories during the Soviet period, and took pride in their ability to work and earn a salary. Others were able to hold down ordinary jobs, which they are now terrified of losing. A disabled teacher: "Despite my low salary of 160 lei, a month, I am not looking for another job; everyone is letting employees go. I don't dare think of leaving this school. Who needs me with my crutches?" 176. Irna, 49, lives with a companion, Rosa, and Rosa's husband, Ion, in a small, privatized two room apartment in Chisinau. Until the 1970s, Irina lived in a hospital for the disabled, briefly with her sister, and then with Rosa, who had worked as a nurse in the hospital. After being rejected by the Moldovan authorities, Irna had appealed to V. Tereshkova, the first female 43  Technical Paper I astronaut and president of the Soviet Wornen's Committee, thanks to whom they had received their present apartment. 177. As a child, hina could not attend school because there was no adequate transportation; her siblings taught her to read and write; she also sewed and knitted when her eyesight allowed. Before 1991, Irna participated in a sports club for the disabled, and even took part in competitions in Kiev, Riga and Vilnius. The club no longer exists. Although Irina has a wheelchair, it does not allow her to go to bookshops, stores, public toilets, or on public transport. Up until 1992, Irmna worked in a sheltered clothing factory which hired the disabled. In 1992, the factory closed, "and a lot of cripples were thrown into the street." Irina registered at the local employment office, "but what's the use? Healthy people cannotfind a job; what should I hope for?" Women: juggling jobs and child care responsibilities 178. Women with many and/or small children have particular trouble finding work because employers know they will often be absent. Thus, Elena, a young economist, reported that although she had graduated with a brilliant record from the Academy of Economic Studies, she was constantly passed over for jobs because she has two small children, while her male colleagues have found jobs in private firrms for salaries of 500-600 lei. For women with higher education or those already accustomed to working, job loss and unemployment are psychologically devastating; they feel completely excluded from social life. 179. Sometimes women leave their jobs because they find they must leave small children unsupervised. Tatiana, a single mother of three, found a part-time evening job washing dishes at a restaurant through the unemployment office, for 80 lei a month. She worked in the evenings after her 9th grade son returned home to 'look after his younger siblings, but quit when she realized the children were often by themselves until 11 p.m. Like many women from poor households, her employment possibilities are limited by the fact that she cannot start a day-time job because she cannot afford clothing and fees for her children to attend kindergarten. 180. Women are no longer protected by laws which formerly allowed them to enjoy up to three years of maternity leave before returning to their job. Svetlana, a collective farm employee, encountered this problem when she went on leave to give birth to her fourth child. While she was on leave, the collective farm started shedding workers, and she lost her job. Svetlana protested her firing to the district authorities and to the prosecutor's office and was rehired. She refused to return to her previous job as milkmaid, and was placed on the brigade in charge of the vegetable fields. But she is fearful that any small mistake will provide grounds for her boss to fire her: "There is no one without faults. But if the leaders look for a needle in a bottle, then theyll find one." INFORMAL EMPLOYMENT 181. Most of our respondents tried to combine several strategies at once: formal employment, especially if they could take some time cff to pursue other ends; subsistence agriculture, and finally, part- or full-time income generating activities such as buying and selling, street vending, 44  Poverty in Moldova: The Social Dimensions of Transition small-scale production and sales, and services. For some families, the latter category of activities have developed into full-scale, profitable enterprises; such households, however, did not fall into our sample, most members of which succeeded at best in just making ends meet. 182. The new labor market has confronted people with paradoxes. On the one hand, people are accustomed to and feel better with permanent, full-time jobs and salaries. On the other hand, salaries are now received with great delay, while short-term intermittent work generally produces an immediate return, although people experience it as very insecure. Raisa, a mother of three from the town of Edinit, described this dilemma as follows. She had no formal employment between 1993 to 1996, before which she had worked as a cook in a kindergarten until 1993, when she was fired in the context of general down-sizing. Although she registered for unemployment compensation, she found out she was ineligible because she had registered too late. In 1996, she found a job as a cleaner at the local House of Culture, eaming 58 lei a month, a salary she received with 2-3 months' delay. She became pregnant, and in September 1996, went on maternity leave. 183. As part of the privatization process, many of our respondents had received "patrimonial bonds," which some had invested in companies or collective farms, sometimes with high hopes of receiving dividends. None had ever received any return, however. Another respondent had decided not to invest, because she did not want someone benefiting at the expense of her family - - she did not think the company's profits would ever benefit its investors. 184. Comparing her present situation with the time when she was unemployed, she reflected, "while I was unemployed I was very depressed. I tried to find any job to earn money; I began to repair apartments and whitewash walls in houses. For a house with three rooms, I could earn 15 lei. Although I was terribly underpaid, I was glad to have at least some money. But such work is insecure and difficult to find. Yet now that I have a permanent job again, I have even more hardships. My salary is very low and often delayed, my maternity leave isn't paid, and I have no money for baby clothes." Buying and selling 185. As elsewhere in the former Soviet Union, trading in consumer items and food across the new international borders has become a lucrative source of income for the lucky few, a helpful supplement for many people, and a financial catastrophe for people who find they cannot repay money borrowed to start the business. People use kinship and other personal ties to find work or establish trading relations throughout the FSU, in Romania, Hungary, Greece, Turkey, and other countries in western Europe. Several respondents had been eaming profits of $250-$300 per car, importing cars from Germany, but found this dangerous because "rackets" started demanding money from them. 186. Whenever possible, people study customs regulations so as to best exploit them. For example, Romania does not tax Moldovans who bring goods through their country. Romanian merchants use this fact to work with Moldovans, whom they hire to declare as their own the goods purchased by Romanians in Turkey. Once in Romania, the goods are sold on the spot. Marcu, a Moldovan, makes money in this way. He teams up with a Romanian partner, with 45  Technical Paper I _ whom he travels to Turkey. There they buy goods which they resell in Romania. This earned him $200 a month. In both rural and urban areas, both serious farmers and gardeners barter or trade surplus produce in town, city, and sometimes foreign markets. Where people live near national frontiers, such as in the district of Cahul, they often take produce across the nearby frontier to Romania; in other cases, they travel to Ukraine. Women frequently travel to Moscow to sell herbs and vegetables. 187. Alternatively, people trade in regions where they have relatives or close acquaintances, to avoid the problem of customs fees. Thus, people profit from the higher prices in Transnistria. They buy agricultural products in Chisinau and resell them in Transnistria, using the pretext of relatives there to avoid the customs taxes. Likewise, people who have relatives in Ukraine buy goods manufactured by the Zorile shoe enterprise or the Steaua textile enterprise to take to their relatives there, and their relatives barter these goods locally. Some trades bring second-hand clothes from abroad and sell them in villages for 0.50 lei for a T shirt, 2 lei for a shirt, or 15 lei for a jacket. In Comrat, many villagers can be seen wearing such clothing. Others take their own second-hand clothing to villages to barter for food. 188. Ira used to work as a secretary in the Ministry of Agriculture. She finally left the job because the salary was so low, and even then, paid with delays. On the advice of her sister, she borrowed $1,000 (without interest) from several relatives, and started importing goods from Poland. A typical trip involves the following expenses: * $160 for bus transport and $20 in customs fees (these are paid to the bus driver, who assumes all risks related to "rackets." * 240 lei/month to rent a space in the market * 100 lei/month for warehouse space In the market itself, Ira said that police protect the sellers from rackets. The best seasons are spring, and fall, just before school starts. In a good month, she makes 400-500 lei; in a bad month, she only breaks even. Small-scale retail vending 189. Some people acquire their goods wholesale from merchants, selling everything from sweets, pastries, soap, shampoo, underwear, even alcoholic drinks, which they hide under the counter when the police come. In many cases, unemployed female teachers and engineers have started to bake at home, and give their pastries to their husbands to sell in the market. 190. In villages, people with a small amount of capital have opened small booths, where they sell sweets, cigarettes, liquor, food items such as sugar, flour and pasta, soap and shampoo. Despite the high prices, however, their profits are small, since few villagers have the cash to buy such goods. Booth traders sometimes offer credit to customers they trust to pay them when they receive their salaries. 46  Poverty in Moldova: The Social Dimensions of Transition A disabled entrepreneur Irna, already described above, is an enterprising woman who loves to read. After losing her factory job, she tired to start a modest bookselling business in 1994. It took 7 months to fill in the necessary documents, including 2 months to obtain one of the required stamps. The whole process cost 100 lei, although Irina, as a pensioner, will not have to pay taxes on her business. After a few months, however, Irina gave up; the books were not in demand, and they were too heavy for her to easily lift. She began to sell chewing gum, cigarette lighters and cigarettes. The police began to harass her since the cigarettes had been smuggled in to the country, but she solved this problem by giving them a carton. Now she is thinking of selling sunflower seeds, since she disapproves of smoking. Street children often harass her, begging for cigarettes and gum. She is frightened that if she refused them, they would overtum her counter and steal her money. She makes 10-15 lei a day, but feels it could be higher if she had fewer competitors. The other sellers do not even have licenses, but bribe the police when they come to check. Irna sells on the street from May until October, unless it is raining. Vasile brings her at 8 in the morning and picks her up at 9 or 10 in the evening. During this time, Iina is stuck on the street. She admitted shamefacedly that she could not even go to the public toilet, which cannot accommodate her wheelchair. As a result, she has her first "meal" -- a roll -- at 2, but waits until evening to have a meal. PETTY ENTERPRISES Capitalizing on skills and hobbies 191. A host of small enterprises have sprung up; some operate without licenses from peoples' homes, others involve private arrangements with buyers. These services often serve the smaller class of newly wealthy or prosperous in both town and countryside. For example, men and women with skills in painting and renovating houses often work privately. Dimitru quit his job, and now repairs apartments painting walls and doors, and putting up wall paper. With two others, he makes 1,000 lei from an apartment. Over summer, his team renovated three apartments, and Dimitru thinks he could find more work if he only had a telephone at home. 192. People often use their connection or access to resources to start their own business. Two brothers in Chisinau cleaned out their basement, installed a stronger door, and set up a carpentry shop. One of the brothers is a student, and works part-time at a lumber factory, where he can buy lumber. The brothers produce metal doors, which they cover with wood; they hire a welder to help them, and produce one door a week, earning about 200 lei per door. Hobbies sometime become businesses. Natalia had beautiful flowers in her home, and sold some of them when she needed money. She discovered the market was good, and began to 47  Technical Paper I grow seedlings. She sells seedlings for 2-6 lei, depending on the species, and markets them 4-6 times a month, on the street to avoid the 6 lei market fee. The police often drive her away, but she just returns. An elderly woman knits 2-3 pairs of socks each day, and sells them on the street every Sunday for 5-8 lei each. Another woman sews dresses on order, making 100-150 lei per month. Breeding dogs is particularly lucrative; those who sell puppies are quite satisfied with their earnings of $20 -$200 for a puppy, depending on the kind. Since Moldovans like live music at weddings, christenings, and other ceremonial functions, people who play instruments well can earn occasional money this way. Ion, 14, has played the accordion for five years, and plays at such parties occasionally, making about 20 lei for such a function. 193. Many people manufacture goods to sell on the street, from home-made pastries to clothing they have knitted or sewn. Whien she became unemployed, for example, Rodica traveled from Chisinau to nearby villages, where she would sew clothing or men's fur caps in return for food or money. A dress earned her the equivalent of a hen or goose; a cap either 120 lei or the equivalent in food. In summer and autumn, elderly people travel by train to nearby forests, where they pick berries, medicinal herbs, mushrooms, and nuts for their own use and to sell to acquaintances. One such family of Chisinau pensioners earned 2,000 lei in this manner. 194. Knowledge of foreign languages has become an important and lucrative skill. During the Soviet period, the overwhelming majority of language students at the university level were girls, aiming to use their diplomas for the typically "female" job of school teaching. Today, many are working as interpreters for the growing foreign community, especially in Chisinau, and have become important contributors to the farnily budgets. Renting out rooms 195. Given the lack of available, low-cost housing, renting out even modest apartments, rooms -- or sometimes, just a bed -- forms an important source of income in urban settings. The luckiest are those whose apartment happens to be in the higher priced, more fashionable center of the city, where they can demand higher rents. People often sell their bigger apartments and buy smaller ones, using the profit to support themselves. Parents sometimes exchange a large apartment to acquire separate apartments, for themselves and for a married child, especially if they lack the cash to simply buy an apartment. Sales are complicated by the fact that apartment owners can only sell after all housing bills have been paid. The sale has become even more difficult now that the number of apartments for sale has increased. 196. Alternatively, people double up to free their apartments; others move into a single room to free their other room up, often to students. A pensioner who had been selling clothing, dishes, and books just to survive, posted an announcement and found a student willing to pay 50 lei or the equivalent in food, per month. Graduates of urban technical institutes unable to find work in their own villages often return to the city to search for jobs; they are among the families forced to rent apartments. 197. Often, families move elsewhere to free up their own apartment for rent in order to pay off outstanding debts. One family accrued such a large electricity debt that the entire family, consisting of Maria, a 61year old pensioner, her daughter, son-in-law, and nephew, moved from 48  Poverty in Moldova: The Social Dimensions of Transition their two room apartment into the two-room apartment of another family (already occupied by a couple and their 16 year old son). Maria's family used the rent from their own apartment to clear their debts, although the pressure of seven people in two rooms forced them to leave before they had intended. Another family moved into the balcony kitchen of another family in order to rent out their own apartment. Sometimes renting one's apartment is risky. One couple discovered their lodger was bottling bootleg whisky to sell in the market. Similar experiences make many apartment owners reluctant to rent to anyone but personal acquaintances of themselves or their friends. Selling vouchers 198. As part of the privatization process, many of our respondents had received "patrimonial bonds," which some had invested into companies or collective farms, sometimes with high hopes of receiving dividends. None had ever received any return, however. Another respondent had decided not to invest, because she did not want someone benefiting at the expense of her family - - she did not think the company's profits would ever benefit its investors. ILLICIT FORMS OF INCOME-GENERATION Prostitution 199. According to figures from the Ministry of Internal Affairs, 1,517 women are registered as conducting an "immoral way of life." In reality, respondents alluded indirectly to increased prostitution, at home and abroad. Although only a few speculated about people they knew, a few suggested that young women, including some of their acquaintances, working abroad in Turkey and elsewhere, who returned after long absences with large amounts of cash, were working as prostitutes. Many newspapers now carry job offers for "nice girls who are not self-conscious;" invitations for weekends or longer vacations accompanied by a list of young women and their photographs. Streetwalkers openly work in front of many hotels, and some women stop cars on the outskirts of the city to offer their services. Bribes 200. Poor people are usually not in the position to demand or receive bribes of any size. But the small gifts they receive in their capacity to expedite services or solve someone's problem may nevertheless play a role in their household economy. This includes people who remain in public sector employment, receiving very small salaries, simply because they periodically receive a bottle of champagne, a box of chocolate, or a package of coffee. One such person was happy to receive such gifts, which she could then use as a gift on an important family occasion. Begging 201. Elderly beggars are increasingly seen in towns and cities. In Cahul, a pensioner spent the summer begging in front of the market, using the money to buy bread. When it gets cold, she plans to go to a sanatorium or pension and ask if she can consume the food remaining after meals have been served. Beggars, including children, sometimes accompanied by their mothers, as 49  Technical Paper I well as the elderly, are also to be seen in Chisinau, often occupying regular places in front of food shops or bread stores. A widow of '74 had lost her home in the catastrophic flooding of 1991. She had long since buried her only son, and had no relatives to help her. A farm worker her whole life, she had come to Chisinaui to beg, to supplement her 60 lei pension. She asked for very small amounts in the Chisinau produce market to buy some rolls, living in cellars during the summer, returning to the countryside in winter, where she asks people to house her for a night. Asked why she only begs for 5 bani a time, she replied, "Others live difficult lives too." Theft 202. Theft is a complicated issue in Moldova, given the long history of "appropriating" goods from state-owned enterprise for personal use or resale. This practice has continued, with some respondents declaring that they consider it a legitimate practice since these enterprises haven't paid their salaries in many months. People also steal up to hundreds of kilos of crop from collective farm fields to resell. A :miigrant labrer Ion borrowed 200 lei two years aLgo, and traveled with a friend to Moscow. They received work in the suburbs but after being promised 2,000 lei for a months work, they received only 500, with the threat that if they did not accept it, they would receive nothing at all. Vlad had earned a lot of mn from 2 months work in Krasnodar. The evening of his departure, several men with stockings over their heads, armed with machine guns, threatened to kill him if he didnt surrender his money. He remained three more weeks just to earn enough money to return to Moldova. LABOR MIGRATION 203. As in other FSU countries, labor migration has become one of the most significant ways to make money. Rural inhabitants very frequently leave their villages in autumn and winter, when there is less agricultural work to do. A number of new companies have undertaken to arrange documents and ease relations with customs officials, police and rackets. Sometimes they are unable to follow through on promises, however. A company which offered to arrange work in Saudi Arabia, in exchange for 120 lei, and a $70 bribe to expedite departure, resulted in applications from 40,000 people. According to respondents, the Department of Labor had delayed their departure, ostensibly because they object to this number of people leaving. Finding jobs carries other risks. On several occasions, special firms have offered to find people work abroad. Applicants found that after they paid their fee of 12-20 lei and filled out forms, the office had disappeared. But complaining to the police had proved useless. 204. Migrants travel to Russia, mainly for construction; to Ukraine, Belarus, Hungary, Romania (for trade rather than jobs), Greece (for harvesting fruit, housework, and babysitting), Germany, Israel and elsewhere. Some lsraeli organizations have sent recruiters to Moldova to find workers for the construction industry, where they can earn $1,000 a month; local companies whose members have ties to Israel also recruit workers. In Russia, the largest single destination, men work in heavy construction, or as builders and masons on private homes of the new rich; in 50  Poverty in Moldova: The Social Dimensions of Transition agricultural brigades in orchards or in vineyards; as drivers and tractor operators. One respondent had found temporary work on a ship in Murrnansk, Russia, using his pay to purchase a used car which he now uses to transport and sell agricultural produce. In Comrat, a local private enterprise hires people to work as foresters for the companies from which they import wood. Payment is made to the employees' close relatives in Comrat. People with special skills may leave temporarily, then emnigrate permanently to Western countries where they have relatives. 205. Women have increasingly broken into the fonnerly male domain of seasonal labor migration. Both men and women travel to Russia, Ukraine or Hungary to work in agriculture. Especially people living in border communities often find casual work. In districts such as Cahul, people may take a few days leave from working on the collective farm to go to Romania, by themselves or with a family member, to pick cherries for a few weeks. Some people steal grapes from their collective farm, which they market in Romania. Others work as intermediaries, buying goods wholesale directly from the train station to sell retail. Women work as small-scale street produce vendors in Turkey and Russia. Women in the Balti district travel in winter by train to Moscow to sell beans, nuts, garlic, and carrots in small quantities. Others buy goods at train stations and markets to resell at higher prices, making as much as $100 to $300 a month. Greece has become a significant destination for young women, who work as maids and nannies for $400-600 a month. "Rather than suffering from poverty, we should better go sweep up the garbage in other peoples' houses," explained one respondent. Elena also wishes to go, but still lacks the $600 to pay for a passport, visa and transportation. 206. Although one should be registered to work in Moscow, many people avoid paying the 80,000 Russian ruble fee for a 45-day visa, risking a 300,000 ruble fine, or even a beating by police. Some go abroad in groups, ranging from a pair of friends or relatives, to a whole team. People often suffer from the many rackets operating in Russia. Many reported that their documents and money had been stolen. Sometimes they were forced to remain in Moscow, wasting money on hotels, while replacing the documents. In most cases, the work is done unofficially, without working agreements, contracts, or visas. Work in Europe is less dangerous and quite lucrative, although people generally rely on others to help them. A young engineer had found work through a friend of his godfather. After 3 and 1/2 months, he was able to afford a Mercedes car. Encountering "rackets' Sergiu, from Ungheni, worked as a railway fitter in Kemerovo, Russia, 5,000 km from Moldova, in a team of 20 people from Ungheni. He received 1.5 million rubles a month, and worked alternate months, returning in between to his family. The workers were provided money for housing and their trips back and forth. Sergiu had worked in this way for two years and always received his salary on time. In 1996, however, a racket preached them to collect a promised one time only unofficial tax of 6 million rubles to "protect" them from future harassment. The racket violated its word, however, and came back three months later to demandlO million rubles. The Moldovans refused to pay. They returned without incident to their homes in Moldova, but in November were not called back for work. Probably the racket has taken care of that. 51  Technical Paper I _ CHANGING ATTITUDES AND RISKS Attitudes toward "business" 207. Middle-aged and older respondents in particular still consider "business" -- especially buying and selling -- to be a form of "speculation," a dirty word during the socialist era. For this reason, some of our respondents admitted that they were initially ashamed of being seen selling goods on the street. Nelli, a leather worker employed for many years at a local shoe factory, explained her shame as follows. When she recently began selling roasted sunflower seeds on the street, she worried colleagues, acquaintances, or even the friends of her son, might see her. She explained that when such activities started, administrators at enterprises and unions, along with the police, tried to prevent the selling of seeds on the street, and to reinforce the perception that this was socially inappropriate and shameful behavior. School teachers reinforced this unofficial policy and attitude toward private commerce. 208. Young people, who were only children during the socialist period, convey fewer misgivings or self-consciousness about practicing street trade. Radu, a student, for example, was very matter-of-fact about his own street vending business. Like many other students, he was unable to find any job in his field after gr-aduating from the Technical University. At the suggestion of a friend, he started his ownr business. He borrowed money from his parents to buy a tape recorder, 15 new audio tapes, and 3 recorded tapes. He tapes from these recordings, and sells them for 15 lei. He now has his own stand, for which he pays. The role of "connections" 209. In commerce, as in other fields of endeavor, "connections" with people who are well- placed, rich and/or powerful, remain important for acquiring access to information, dealing with bureaucracy, and avoiding official harassment. Almost by definition, the individuals and households falling into our sample exclude those with connections to the rich and powerful. They are virtually forced by the daunting requirements of taxes, bribes, official and unofficial fees, to work in the "shadow economy," where they are vulnerable to both organized crime ("rackets") and to the police as well. 210. For the poorer entrepreneurs, problems begin with obtaining-a license. Several respondents focused on the difficulties cf this process. Nina, who makes funeral and wedding wreaths, for example, had obtained her first license through her mother, who had "connections" in the licensing department; since then the license has expired. Nina does not know who can help her "expedite" her application, and says she doesn't have enough money in any case to pay. Svetlana, who borrowed money to start a business selling her goods in the central market in Chisinau, which has the greatest turnover, submitted a formal application to the city mayoralty for a license to get a place in the market. Six months had passed, but she had still not received a reply, although she has written a letter of inquiry to the deputy mayor. "I've heard you can only get a place in this market if you have relatives in the mayoralty," she explained resignedly. 211. Because of the problems and the expense of licenses, many market or street vendors prefer to work without them, but as a result, suffer constant harassment by police. In many cases 52  Poverty in Moldova: The Social Dimensions of Transition they pay a bribe, and are then left in peace. Alexandr, an unemployed locksmith in Chisinau who worked at a state enterprise until 1992, now makes a subsistence living working on the family plot, and selling wine for his neighbor, who pays him 15-20 lei a week. People come to Alexandr's and buy a couple liters at a time. Alexandr doesn't have a license, however, and believes that his neighbor hired him so that if trouble arises, he, rather than the neighbor, will get in trouble. But Alexandr is prepared: if a policeman comes to his home, he plans to buy him a bottle of cognac and slip him a bribe. Alexandr's wife, Anya, bakes her own pastries and walks to the nearby market several times a week to sell them. She has the same problem -- sometimes the police drive her and other unlicensed sellers away; some buy her pastries and leave her alone. 212. Working in the large city markets carries many risks, even for those who just work for larger traders. They are the ones on the frontline, who get harassed by gang members, or cheated by customers. Nineteen year old Petre, for example, was cheated when a customer paid him witk a "doll" -- a bank-sealed wad of 400 lei, in which only the top and bottom turned out to consist of banknotes. Petre's mother was forced to borrow 395 lei to pay back her son's employer, so that Petre would not be beaten by him. Other cases were reported of sellers whose goods were stolen or who were cheated, and then brutally beaten by "friends" of their employers. Borrowing and lending 213. Obtaining capital for any kind of business venture is a risky business. While people regularly borrow small sums from neighbors, friends, and relatives, they try to obtain money for their business ventures, or to travel abroad, only from relatives. Some reported obtaining bank loans at high interest rates, others borrowed from wealthy acquaintances, who charged interest ranging from 2-10%; still others use professional moneylenders, often with catastrophic consequences. 214. Professional moneylenders have acquired a reputation for being extremely ruthless in order to get their money back. They return on a weekly basis, in some cases threatening to beat the debtor or blow up his home. In some cases, respondents had lost their homes, which they put up as collateral for loans. Some people have lost their homes to moneylenders and banks after using it as collateral. One such couple lost their village house after borrowing 5,000 lei from the Bucuria Bank, thinking they would soon pay the money back. Unfortunately, the wife became very ill, and her husband was forced to leave his job in order to look after her. The bank extended the repayment date for one month to find the 8,000 lei (principle and interest) that they owed. This did help, and the couple was forced to auction their home, receiving only $100 after the loan had been repaid. 215. Failure to repay large loans obtained from kin may be less life-threatening, but it can rupture family relationships. Vladimir and his wife couple borrowed $500 from Vladimir's uncle to cover their rent, and to start a small business importing and selling goods. Due to their inexperience, the business failed. In response to pressure from the uncle to repay the loan, however, they moved to another apartment so that he would not be able to find them. Now, because he fears running into his uncle, Vladimir says he is afraid to visit his sick mother until he has paid off the debt to her brother. 53  Technical Paper I _ CONCLUSIONS 216. The labor market in Moldova is in a state of transition today, and respondents reflect the distress and confusion at the radical changes in the rules of the game. Although most people cope with non-payment of salaries and pensions by looking for other sources of income, some are paralyzed by the fact that skills they mastered after years of study are not in demand; still others have turned to alcohol or crime. Success at coping with the transformations depends on: having occupied key positions in previous state enterprises or having close kinship or friendship relations to people in power, including people in government offices, the police force, and customs; having entered the transition with money which wasn't tied up in the Savings Bank and devalued during currency reform; possessing assets such as large apartments in "good" sections of town, working vehicles; having skills important to serve the new rich, as in construction and house renovation; and having good mechanical skills, computer literacy, or foreign language competence. Contingent factors such as personal enterprise and good luck also play an important role. 217. People without the kind of resources noted above but with an enterprising spirit often find themselves in the nether world of quasi-legal business, unable or unwilling to deal with the complications and expense of obtaining registrations, licenses, and protection, and therefore, very vulnerable to harassment at every step. Others are unable to re-enter the labor market, because they cannot afford child care, or have disabilities which make them less competitive. For these categories of respondents, more effective labor legislation, wider dissemination of information regarding employment opportunities, lirited though they are, and fairer implementation of current legislation would improve their present situation. 54  Poverty in Moldova: The Social Dimensions of Transition SOCIAL ASSISTANCE INTRODUCTION: SOCIAL ASSISTANCE IN THE PAST 218. Many Moldovans consider that "it was easier to live several years ago," because the state bore more responsibility for vulnerable persons. Assistance included sick leave, maternity leave, money at the birth of a child as well as regular child allowances; discounts for kindergarten and additional lessons; cash assistance during family crises; free trips to summer camp for children and trips to sanatoria for adults. Depending on the enterprise one worked for, one might be granted a free stay at a resort for a honeymoon. In addition, people often paid officials under the table to produce false certificates underestimating family income, exaggerating the seriousness of an illness or disability, and so forth, so they could receive unearned discounts or disability allowances and privileges. Indeed the very presence of a disabled family member (or a certificate attesting to disability) often gave families access to discounted "deficit" goods, electricity, even cars. 219. For pensioners (who now make up a sizable part of the Moldovan population) who live alone, with an elderly spouse, or with a dependent child or grandchild, as a number of our respondents did, the decline in the real value of pensions has forced many into actions they never contemplated during their working life, such as raiding garbage cans for bottles to redeem, or for other useful or edible items, or begging outside shops and on the street. It should be stressed that even during the Soviet period, many pensioners had a rather modest conception of what constituted a dignified old age. Many pensioners (not just in Moldova, but in other Soviet and post-soviet countries), seem obsessed by the need to provide for their own funeral. In former times, they were able to put away a few thousand rubles of "funeral money" in the savings bank. For those who have lost their savings, anxiety about their own funeral matches their distress at day-to-day discomforts of hunger and poor health The state as provider: retention of old attitudes 220. Many people retain the expectation, or at least the hope, of receiving assistance from "the authorities" -- which includes the Parliament, district executive committees, city, town and village mayoralties, and collective farm administrators -- to whom they still appeal during periods of difficulty such as serious illness or death of a family member. Others had appealed to the "Women's League," a recently formed NGO, but had been put off. People appeal to employers and trade unions for assistance. Respondents find the process very humiliating, especially when they receive amounts such as 15 lei after repeated appeals to organizations that were once generous benefactors. 221. Some appeals may result in sums of up to 100 lei (reported by the paralyzed father of 3) from the district departments of social assistance, although it is considered pointless to apply too often for such help. Sometimes collective farms aid poor families with food. In all such exchanges, however, personal relations "have a strong word to say." Thus, the former chairman of a collective farm in the Comrat district receives free supplies of fire wood, coal, and 200 kg of straw as forage for their animals. 55  Technical Paper I Late and haphazard payments 222. Pensions average about 70-80 lei; despite their small size, many pensioners claim they could manage on them if they only received them on time. Many people felt it would be helpful if their monthly payments for electricity were simply deducted from their pensions; at least they would not be asked to pay out cash they didn't have. Some localities have already put this measure into practice. Elsewhere, pensio:ners organized a protest: after waiting many months, fifty pensioners in Ungheni blocked railway traffic between Chisinau and Balti. Although pensions should depend on years of service and amount of salary, those still working have further uncertainty: no one is sure whether their pensions will be based on their old ruble salaiies, or their current salaries in lei. 223. While many of the government pensions and allowances still exist on the books, most enterprise benefits no longer function. Moreover, state assistance is itself administered in a seemingly haphazard and inconsistent manner. In many cases, respondents found out about their rights to certain pensions and allowances by accident, often only after the deadline for obtaining the aid had already expired. This is frequently the case with family and child allowances. For example, women should receive 72 lei on the birth of a child. One young mother who gave birth to twins only learned of this entitlement after the six-month deadline had passed. A mother in Cahul district was equally unaware of her entitlements, both for payment at the child's birth, or the monthly entitlements she should have received for her children. 224. Distribution and access to both state and humanitarian assistance differs a great deal between city and village. In Balti, for exiample, pensioners receive their pension with delays of one or two weeks, while in nearby villages such as Prazhila or Antonovka, villagers have not received their pensions in 10 months. In southern districts, pensions are received with several months delay. Few large families in these villages have received assistance; those that did received amounts of 18 lei. In the villages of Edinit, pensioners receive their money 4-8 months late. On the other hand, villagers sometimes received aid in kind when their urban fellows did not. Villagers in Prajila and Antonovka received their 500 kg of free coal, but in Balti, pensioners were unable to pay the appro.ximately 50 lei for its transport. Villagers who did receive free coal, however, frequently complained that it was of such poor quality it barely burned. In Cahul, pensioners were to receive both firewood and coal, but asserted this happened only once every several years. Obstacles to qualifying for or obtaining assistance 225. For some recipients of assistance and discounts, the price of obtaining the discount sometimes makes the discount itself inaccessible. Pensioners in Chisinau, for example are to receive 500 kg of coal, but many never actually obtain the coal because they do not have the 30- 40 lei required to transport it to their homes. Marina, an elderly pensioner living with her mentally handicapped adult son, has turned off the two refrigerators they use -- "We don't need them anymore; there's nothing to put in them" to reduce their electricity expenditures to a minimum. Because of her son's disability, the family was entitled to receive 500 kg of free coal, but they couldn't afford the money to bring the coal home. Last year, she cut down all the trees in 56  Poverty in Moldova: The Social Dimensions of Transition their courtyard; this year, she and her son intend to endure the cold. Teachers used to receive free coal, but have lost this-entitlement. Collective farm worker, Cahul district If assistance for people from different social groups ever comes at all, no one ever knows what happens to it -- there is anarchy in our village, and I wouldn't even like to talk about this. Village authorities often act in defiance of the law. The mayor does not even observe his daily schedule. Villagers need these meetings to have the opportunity to submit their applications or proposals. Every day one can see people waiting for the mayor, and often, when he is in his office, they are kept waiting in the cold. The president of the collective is the mayor's cousin, and they take care of their relatives. 226. Unfortunately, not every disabled person can afford the procedures to qualify for disability payments; the medical examination alone is 170 lei, and families outside Chisinau must also reckon in transportation costs for the disabled person as well as the accompanying person. Radu, a 60 year old watchmen at a boarding school can barely walk. He does not receive any disability payments because he cannot walk to the local town (Cahul), nor can he afford car fare. But he is not interested in this or any medical treatment that would prolong his life: "I will live as much as God allows; I don't want to bother anyone." 227. People who are disabled, or were exposed to fallout from Chernobyl receive pensions, should also benefit from a 50% discount on apartment fees, land and house taxes, and electricity bills. Even this is administered inconsistently; a disabled man in Cahul claimed he has received only a 25% discount in taxes. They should also receive a 50% discount on medications, but most pharmacies now refuse to honor this discount. As a result, their families are often forced to borrow money to buy medicine. World War 11 veterans, as well as veterans of the recent conflict in Transnistria also receive this discount. Some villages and collective farms also allow the disabled to buy foods such as oil, sugar, meat and cheese in modest amounts at a 50% discount. In Chisinau, veterans received butter. In 1995, only those with pensions of less than 86 lei received several kgs. Veterans also received land after the war, although for some, it may be as far as 40 km from the city and virtually inaccessible. 228. Veterans from the conflict in Transnistria should benefit from 50% discounts in the price of gas and electricity, and urban transportation. A respondent who was still constructing his house, however, was unable to benefit from the discount because he was not permanently registered in a house. Another benefit for veterans were loans of several hundred dollars, to finance house construction, although even in such cases, it helps to have personal contacts in a bank to actually get the loan. Bankrupt local governments 229. Mayoralties often refuse to make payments on the grounds that they have not received any funds from the district budget. The mayors themselves claim their offices have not received financial support for years, and they regret their inability to help the population. Several mothers from Edinit, in both villages and district center, report that a lack of cash was claimed by the 57  Technical Paper I local social assistance office when they applied for their childbirth payment. Some localities deal with this problem by giving out a form oif "scrip." In both Blesteni and Gordinesti, the Mayoralty distributes coupons which represent a cert.ain sum; the families can redeem these coupons for food at local shops. Sometimes people monetize the scrip, losing in the process. Ivan, from Edinit, received a certificate worth 125 lei, which could be redeemed at a particular shop designated by the mayoralty. He bought a sack of sugar for the full 125 lei, then sold it at the market for 100 lei in cash, with which he purchased wheat flour, which had not been listed as one of the products which could be obtained by the certificate. Such methods are practiced in other localities, although respondents were puzzled by the practice, ascribing it only to the fact that "there is no money." Family and child benefits 230. Many discounts and allowances still exist for large families and children, sometimes augmented by humanitarian assistance, although they are much smaller than before independence. If before independence women received payments for 3 years after the birth of a child, today they would receive 28 lei per month for only 1.5 years after the child's birth. Mothers also complain they receive these payments so late they have already lost their value. Galina, for example, had a baby in June 1996, but by the end of 1996 she had still not received any maternity allowances. Her workplace should be paying her 500 lei for the two months before and the two months after childbirth, but each time she inquires, she is told that they have no money. 231. Families with children still receive a variety of payments. In many cases, primary school children receive free breakfasts and a snack at school, although the poorest parents sometimes use this fact to send their children to school without any morning meal. 232. Another benefit that is in the process of disappearing is the kindergarten subsidy. Some villages allow poor families to send their children to kindergarten free of charge; others must pay 25-30 lei per month. Urban kindergartens charge 40-50 lei per child per month. Poor rural parents who work on farms often take their children into the fields with them; urban parents prefer to leave their children with older siblings or grandparents. Since reading is taught at kindergarten, respondents expressed the iFear their children would be at a disadvantage when they entered elementary school. State assistance to a single mother Anna, a single mother of 10 children, no longer receives any help with medical or dental fees, the opportunity to buy food at disccunt from special shops or assistance toward summer camp for her children. But she does receive the following from the state: - 9.25 lei per month for each chi ..d (families with fathers receive only 5 lei) - 15 lei per child quarterly - 27 lei "bread money" per child - a pension of 45 lei for one of her children who has an "underdeveloped" kidney - 3 free places at kindergarten ____ _ __ ____ ___ 58  Poverty in Moldova: The Social Dimensions of Transition - free school lunches for 3 children - a 50% discount in monthly fees on their apartment In humanitarian aid in the past year, Salvation Army gave her: - 100 kgof pasta - 50 liters of vegetable oil - 20 kg of beans - 20 kg of wheat She also received foods distributed through her children's school by the Moldovan-American organization, Samarteanca: - IO kg of sugar - canned vegetables - biscuits - chocolates 233. Many of the kindergartens that still function are unheated, in bad repair, and unable to provide meals. Few poor families can afford the fees even for such kindergartens, and increasingly keep their children at home, either with older relatives, or unsupervised. Since kindergartens used to teach reading and writing, these children enter school with a built-in disadvantage. Assistance from private, religious, and humanitarian organizations 234. Some enterprises take on the sponsorship of poor or orphaned children, sometimes paying up to 500 lei, purchasing warm clothing, or food. For example, the Cupcini Tobacco enterprise sponsors children, while a meat processing plant in Edinit supplies food products to a family. The district offices of education sometimes offer small sums to the very poorest families. In the past, schools had funds of 1,000-2,000 rubles to purchase shoes or clothing for children from indigent families; now such children receive only 20-30 lei. Salvation Army now operates in Balti and Chisinau, where they feed 100 people a day in a free kitchen. 235. For some respondents, religion, and involvement with some of the religious groups now proselytizing in Moldova, has become their solace when other sources have failed. In some cases, visiting members of the new evangelical religions which have become established in Moldova have provided psychological as well as material assistance to indigent families. The help comes in the form of secondhand clothing, sometimes food and medicine from church organizations headquartered abroad, or, as relationships are established, items a particular family needs. Some of the churches mentioned included the Baptist and the Jehovah's Witnesses, adherents of which had received clothes and food products from Germany, Finland, and Poland. 236. A number of respondents in Chisinau, including large families and pensioners, reported considerable assistance from the Salvation Army, a Moldovan-American society called "Anacom," the Catholic Church, a Jewish-American organization (which distributes both to Jews and non-Jews) in the form of good quality used clothing and food staples (such as oil, beans, and wheat). Disabled respondents had received help in the form of very small amounts (15-40 lei) from the "Invalids Association." 59  Technical Paper I Attitudes toward social assistance and 1public authorities 237. In the past, large rural families received gifts of food products when children were born. Leonte, for example, reminisces that after the birth of his third child, he used to go to the mayoralty each month for sugar, butter, and sunflower oil, given as a form of assistance to large families. Now he is ashamed to go to the mayoralty "with his hand outstretched." In the past, such assistance was not provided as charity to the poor, but as a stimulus and honor for large families. Large families were invited to the mayoralty on special occasions; enterprises often distributed gifts to children of its employees on holidays. People perceived these forms of assistance as a form of respect the state gave to its citizens. 238. Many recipients of pensions feel cheated by local officials. Varvara, for example, read an article in a local newspaper which cited the district executive chair regarding supplementary payment on salaries and pensions in 1995-96. She wrote to the district executive committee to find out about this payment, since she had received nothing for two years, but never received an answer. Others are angry at the senseless bureaucratic obstacles. Vera, 82, is a blind widow who rarely leaves her house. She asked a neighbor to bring her the 1 kg of sugar she was entitled to receive from the mayoralty. The neighbor was told that the sugar could only be given personally to the recipient, so Varvara remained without. 239. Often, such aid is distributed through local government offices, although respondents express the conviction that much of it is either siphoned off, or sold for profit, by the officials responsible for distributing it. People feel that officials deliberately refuse to share information with them, and use any excuse to deny them assistance. A collective farm worker and mother of five, for example, reported that she had purchased clothes in Belarus for her own children, and to sell. She made 40 lei from this venture, but was told that as a businesswoman, she had disqualified herself from any other assistance. Such is popular cynicism about aid distribution that when used clothes appear on the market, people assume they arrived in the form of humanitarian aid (although in fact many such clothes are brought in by merchants, from Europe or other FSU countries). In Comrat, people complained the government of Turkey had been prornising all sorts of assistance for two years, but they had never seen any of it. CONCLUSIONS 240. Given the precipitous decline in the purchasing power of pensions and other forms of assistance, social assistance plays a smaller role in household economies. Nevertheless, among the people who still rely on such payments, such as single pensioners with no other source of cash, many felt that even a timely, predictable payment would be a great improvement over the current situation of pensions which arrive many months late. Many reported receiving various kinds of ration cards, but resented the fact that when they redeemed them for various products at special shops, they ended up paying higher-than-market prices. Some people received assistance from humanitarian and religious organizations, but especially when it was distributed through local government offices, they suspected that much of it had been diverted to the private use of politicians. Overall, the changing rules, procedures and practices, and late payments, provide little help to the majority of recipients arnd leave them cynical and embittered toward local and national government. 60  Poverty in Moldova: The Social Dimensions of Transition NEW FORMS OF SOCIAL INTEGRATION AND DISINTEGRATION 241. Since 1991, with increased economic stratification, open borders, new patterns of migration, ethnic homogenization, and the pervasive impoverishment of state and family budgets, the social landscape and accustomed patterns of social interaction have altered. This sections examines some of the implications of poverty, in particular, on social relations at the level of family, kin, and community, since these have important implications for the coping strategies of individuals and households. THE FAMILY IN TRANSITION Kinship relations 242. Moldovans rely heavily on their closest family relations, particularly spouses, parents, adult children, and siblings, for child care; for help in repairing houses and gardening; and for goods, particularly food, and money. While exchanges between close family members are freely given, those with neighbors are more often based on different forms of exchange, as the following example suggests. Stefan, a pensioner, has an unemployed son searching for a job, and a daughter-in-law who is employed in a collective farm in Nisporeni district. Although child care is not the traditional occupation for men, Stefan now takes care of his two grandchildren, doing electrical repair work for his neighbor in exchange for a pot of porridge to feed them. Likewise, Scutaru helps relatives in the villages when they need the use of his horse and wagon, but charges the other villagers to plow their fields. 243. Poverty has also weakened relations, especially when new international frontiers and the breakdown or greater cost of communications prevent relatives from keeping in touch or sending help; sometimes, because people lack the resources, financial and emotional, to help kin. These ruptures are tragic for many elderly, when close relatives are unable to visit them or help them pay for things they need, although in such cases, neighbors often lend a helping hand. Varvara, from Nisporeni, is 84. She has one daughter in Russia, but hasn't heard from her in 10 years. Her other daughter lives in the same village, but is an alcoholic who cannot take care of her own household, much less her aging mother. Rodica, 82, from Milesti, finds herself in a similar position. One daughter lives in the town of Ungheni, where she has 4 daughters and no time to visit her mother. The other, who lives in Milesti, is ill and physically unable to help Rodica. In such cases, pensioners sometimes find that even though their grandchildren live nearby, they have stopped visiting their elderly or ailing grandparents. Changing gender roles 244. Within families, the stress of conforming to traditional gender expectations -- providing an adequate income, for men, and ensuring the family is well-fed, well-clothed, and healthy, for women, have taken a toll. Men used to enjoy higher incomes and be considered the family breadwinner and household head. This is no longer always the case, and men feel displaced when their wives earn more than them. These tensions contribute to family stress and disintegration. Women often blame their husbands for the family's financial situation, criticize 61  Technical Paper I them for their lack of success in finding work. Unemployed or underemployed husbands feel emasculated and angry; some confess to losing their tempers and hitting wives and children. Placing Blaime: Tatiana, living in Chisinau, feels that her unemploYed husband has become indifferent to his family. She complains that he sleeps or drinks the entire d4y, sometimes bringing his other alcoholic friends home with him. She has become the family breadwinner. When she returns home from work, her husband often picks a fight and then beats her. Hie has also begun to sell household items, even turniture. 245. The prolonged absence of husbands, and in some cases wives, has further challenged the division of labor and power in the family. When husbands leave for a season or even longer, their fathers sometimes step in as household heads. But in many cases, women take over traditionally male responsibilities and decision-making. Sometimes prolonged absence turns into abandonment, as men establish new families where they work, and women are left to support their children and themselves as best they can. A few women have, likewise, used trips abroad to search for new husbands. Sometimes, husbands object to their wives' working abroad, fearing her prolonged absence may result in divorce. COMMUNITY RELATIONS Social and ceremonial life 246. For urban and rural Moldovans alike, life cycle rituals such as baptisms, birthdays, weddings, and funerals have always been important social events, during which families publicly and symbolically displayed their prosperity. By offering hospitality to relatives, neighbors, colleagues and friends, families maintained their honor, earned respect, and fulfilled necessary social obligations in order to maintain their place in the social collectivity and to maintain relationships, 247. Today, ceremonies which once included whole neighborhoods or the entire village, only take place in a small circle of close relatives. People particularly mourn the demise of the wedding ceremony, a festivity which could involve up to 300 guests. Victor recalls that "in northern Moldova, the wedding party w,as an index of a family's welfare. Parents prepared their whole life for the wedding party. They saved money to purchase furniture, refrigerators and televisions for the young couple. During the Soviet era, it was very shameful for the parents if they couldn't give their children a big wedding. It meant they were poor, and people who were poor were thought of as lazy. Some parents even gave their children a house and car as wedding presents. Weddings then were held either under tents that covered huge land areas, in culture palaces, or in restaurants. Now they are simply held at home." 248. Such ceremonies traditionally also entailed important obligations for guests, who were obliged to come with gifts or money. Pcor Moldovans say they are now forced to choose between refusing such invitations because they lack appropriate clothing and money for gifts, or 62  Poverty in Moldova: The Social Dimensions of Transition borrowing money so they can meet their obligations. Ion, from Ungheni, had to decline several wedding invitations last fall, something he says he had never done in his life. But refusing to attend the wedding of his sister's daughter would have been dishonorable. He therefore borrowed 35 lei for the wedding gift. 249. In addition to the ceremonies which mark personal transitions, people used to celebrate religious and patriotic holidays, such as Easter, Christmas, Temple Day, New Year's, and Labor Day. These were supplemented by constant socializing, which has radically diminished since people are afraid to impose on their hosts, who cannot really afford to offer them the expected meal, and afraid if they visit they will have to receive guests in turn. Visiting used to cement relationships and facilitate information sharing; the decline of such socializing has left people feeling increasingly abandoned and isolated. 250. This collapse of community has been further aggravated by the fact that social institutions from the bath houses to the village Houses of Culture, have practically stopped functioning, because they are no longer funded by municipalities and because people can no longer afford their service. In many villages, clubs and movie houses open only on the annual "village anniversary," Christmas, or New Year's. Sadly, many pensioners, who used to seek solace in the local church, no longer go there because they can no longer afford to buy even the cheapest candles, and find it shameful to go into a church without lighting a candle. 251. Maintaining contact with kin and friends living in other towns has become more difficult with the deterioration in transportation services and the fact that fewer people can afford cars and/or gasoline. Many poor families cannot even afford bus fare except for emergencies. Cash- poor villagers do not even waste money on non-essential bus rides to the nearest town. Typical prices are: 70 ban for a bus ticket from Crihana Veche to Cahul; 9 lei from Cahul to Chisinau. Locally, many villagers have fallen back on a horse- or cow-drawn cart for transportation. Those who have bicycles use them to commute to fields or to the nearest town. In rural areas, the lack of an effective transportation system has cut people off and isolated them from towns and cities, especially during winter and spring, when some roads become muddy and impassable. The isolation is especially severe for poor families who are the most likely to have poorer access to information because they lack telephones, radios and TVs (because of electricity cuts), newspapers, and magazines. Children and youth during the transition 252. Children have become a liability for poor families. The birth rate is falling, the abortion rate rising, and rumors abound concerning poor mothers who have sold -- or been forced by middlemen to "sell" their newborns. Children who have been abandoned or have run away sleep in cellars, sewage pipes, and train stations. Sometimes police take the smaller children to the "child collector," and try to find their parents or relatives. If there are none, they are often sent to special schools, where conditions, according to the Salvation Army, which visits children's institutions, are terrible. A local branch of Save the Children has opened a small home in Chisinau, where they have provided beds for 25 street children, for some of whom they manage to find foster homes. 63  Technical Paper I _ 253. The problems of going to town, combined with lack of social activities in villages is compounded by the fact that schools often close in winter, that families can no longer afford to pay for their children to join after-school music, chess, and other clubs, and that there are no jobs for school leavers. As a result, young men and women find themselves completely idle. Sometimes they organize a discotheque, charging an entrance fee of 50 bani and bringing their own tape recorders and tapes. But parents express great concern over their children's idleness. Maria, from Gordinesti, wishes that the former House of Culture, formerly the venue for regular films and other theatrical events, would start functioning again "so that we would know where our kids are. They have no entertainment or fun and are terribly bored." 254. For some youth, boredom and poverty have combined to create a sharp rise in youth gangs and criminality. While people in villages are often unaware about narcotics and addiction, in Chisinau and Balti, people speak frankly about acquaintances who take drugs. One respondent spoke about a young relative, whose mother buys him drugs, trying to cut down the dose. The respondent viewed his addiction as an illness requiring support rather than recrimination. A young woman observed that young people who used to try drugs out of curiosity now take them from their despair at their lack of a future. 255. Village respondents say they fear going out in the evening because the streets are filled with "aggressive and intoxicated youth." The phenomenon characterizes both village and town life. lura, from Ungheni, was attacked at dawn by a group of young people, who beat him up and stole his watch, leather jacket, shoes, and bag. The police eventually found the group of attackers, and Iura's stolen belongings were returned to him. But the beating was so violent lura had to remain in hospital for 7 months. Crime and the breakdown of trust 256. According to many respondents, violent crime of all sorts has risen sharply, and directly affected their everyday lives. This crime has taken several forms: youth gangs, organized and violent crime by outsiders, and violent assaults, including rape, by intoxicated local youth. Especially in cities such as Balti, respondents claim that the incidence of drug-related crimes have increased. Particularly in towns, which have responded to rising electricity prices by eliminating street lighting, people feel the unlighted streets have encouraged burglaries. In the town of Edinit, gang crime has resulted in several murders, although people make a distinction between the groups responsible for the homicides, and the less organized gangs of jobless youth who steal on the streets and rob apartmenl:s, but have not yet killed. 257. Women noted increasing numbers of sexual assaults, and the inability or unwillingness of the police to protect them. Women such as Ecaterina, forced to work night shifts, reported that a man had attempted to rape her where she worked. Many of the reported rapes have been particularly brutal. Thus, a widow in a nearby village had been gang-raped by 7 men while her 10 year old daughter looked on. Three mnen of the group returned and tried to rape her again, but she managed to escape through a window. She has since moved in with her sister and is afraid to return to her own home. 64  Poverty in Moldova: The Social Dimensions of Transition 258. The way in which crime in communities has altered dramatically reveals the way in which hardship has diminished relations of trust. Although it was common in the past for both management and workers to steal from state enterprises (on the principle that "what is everyone's is no one's), it was rare for people to steal from their neighbor's home or fields. Today, such theft of items ranging from tools to poultry, even to the family horse, are taken from their houses, yards, or farm buildings. Despite their awareness of increased theft, many villagers are powerless against it. Scutaru, for example, reported that he did not have a watchdog because he could not feed it. As a result, his 300 liter oak wine barrel, worth 300 lei, was stolen. Because Scutaru could not identify a possible culprit, the police closed the case without making any effort to pursue it. 259. The rise in crime has left poor people feeling extremely defenseless. Most of those respondents who had reported crimes to police felt the police were not interested in helping them. This was true in cases of village theft, rape, and other forms of assault. At other times, people were too frightened to seek police protection. Respondents from Avdarma village reported that several girls had been raped. The frightened girls did not inform the police, however, because they thought the perpetrator might return to punish them. Similarly, lura, mentioned above, remained in the hospital for 7 months after his brutal beating on the street. Despite the fact that the police had helped him, he decided not to pursue the case when his attackers threatened his life. They even gave him 80 lei with the demand that he bribe the judge to dismiss the case. Iura complied. 260. In some cases, police only acted when the complainant identified the thief; in other cases, thieves were identified but police declined to detain or investigate them. In some cases, when people complain to police, the police often blame them for being victims. A woman purchasing a ticket to Moscow pulled the money out of her purse, only to find herself attacked by three youths. She cried for help, but those around pretended to ignore her. When she complained to the police, they said they could not do anything, and that she was to blame for not taking more precautions. Poor respondents even find themselves in the position of suspecting their own neighbors, in some cases, of taking from them or injuring them, but feel more than ever that they can expect no protection from the official enforcers of law and order. 261. When disputes arise between neighbors, there are few legal channels by which to resolve them. For example, a young woman, living with her baby and her brother, had lost their parents, but remained in their house. Their neighbor offered what they considered a ridiculously low price for the house, with the intention of razing it and building a house for his son on the lot. He suggested the sister and brother move to their grandmother's one-room apartment. They refused, and the neighbor start to harass them in a variety of ways. They complained to the police, but since the neighbor's son works for the police, complaints were useless. They have now written to a newspaper, with the hope of publicly shaming their neighbors. 262. Poor respondents feel abandoned by the very authorities they once looked to for help in difficult situations. In the past, they also had a further recourse -- when local authorities ignored or abused them, they could appeal above their heads to Moscow. This provided a psychological outlet and some hope. Occasionally, people were successful. Elena, mother of six children, is a typical example. During the Soviet period, she had gone to Moscow and successfully appealed 65  Technical Paper I to Valentina Tereshkova, the first Soviet cosmonaut, for a two-room apartment. Likewise, a mother of 9 had moved from a two-room to three-room apartment after appealing to the USSR Council of Ministers. Today, the possibility of further recourse "to higher authorities" after rejection by Moldovan authorities no longer exists. INCREASING SOCIAL DIFFERENTIATION 263. The rocky transition from the planled and centralized Soviet political economy to a market system has assaulted the egalitarian ideology which many ordinary citizens had internalized. To a certain extent, status and access to wealth and power have been successfully monopolized by the political and economic elite, who were able to use their connections to accrue property and invest in business. The volatility of the last few years has also allowed some enterprising people to take advantage of new openings. But the majority of rural and urban workers express great resentment at the new rich. As one farmer observed, "The so-called smart people, those who know what to do and when to do it, have a good life now, just as they did before. The communist era educated the people to be modest, obedient, and grateful for what they had. Most people still live up to this; they retain the idea that if you had something to eat and a place to live, then you should be happy. The government still promotes this idea and stops every initiative that could benefit a poor person." 264. Malevolent rumors, jealousy, and r esentment are easily stirred as people compare the situation of their own families with those of people who have managed to retain their jobs, or find new ones. Valentina, for example, was upset to see that her daughter's friend, who lived nearby, not only dressed better, "but could" afford to eat ice cream!" For Valentina, this difference has an important social significance; the fact that others, by what she assumes is dishonest behavior, are able to provide better for their children, violates all the standards by which she and other Soviet citizens were raised, and makes them feel further alienated in the new Moldova. 265. Part of the resentment is conditioned by a mixture of shame, inferiority, resentment, and envy. On the one hand, poor people complain that the "rich people see us as dirt and not as humans." They also suspect and envy their rich neighbors: "How is impossible that my neighbor is so rich? He has a modest job. Look at the house he's building and at his new car." People are also fearful of the future. If they keep their money in their sock, they fear it will lose its value; if they spend it, they are not sure they will earn any money the following day. As one man put it, "you can now swim wherever you want, but you are given neither boat nor compass." 266. Poor people claim that they are getting used to poverty, and note that they feel an ever- greater solidarity with other poor, at the same time as the distance between them and more prosperous kin, friend, and neighbors increases in proportion to the gap in their incomes. They also mourn the increasing penetration of market values into personal relationships. A respondent from Cahul commented that people were now dominated by the sentiment: "Let the brother be a brother, the cheese still goes for money." People complain that social interactions are increasingly governed by the philosophy of "I do something for you, and you do something for me." 66  Poverty in Moldova: The Social Dimensions of Transition CONCLUSIONS 267. The effects of poverty on social relations are apparent both in families and in the larger communities in which they live. While many people rely heavily on their closest relations for assistance, whether in terms of money, food, or labor, other families are disintegrating under the pressures of unemployment, alcoholism, shifting gender expectations, and extended work-related separations. In many cases, relatives are drifting apart because they can no longer fulfill basic social obligations toward each other, or maintain contact by letter, telephone calls, or visits. 268. The curtailment of traditional social rituals such as christenings, weddings, birthdays, and funerals, as well as cultural events which provided opportunities for socializing, have weakened old community ties. The increase in theft and violent crimes and growth of youth gangs have frightened many people off the streets and decreased trust, especially in urban communities. Those left behind in the sharp and often vicious race for resources and position feel disoriented and betrayed. The old ideology of egalitarianism is disintegrating, while a sharp economic and social differentiation is dividing communities into distinct layers of rich and poor. While some people are striving to maintain a sense of social integration through work and maintenance of old social relations, others have withdrawn into isolation, jealous and suspicious of their neighbors, nostalgic for the past and frightened of the future. 67  Technical Paper I _ ETHNIC AND RlE'GIONAL VARIATIONS IN THE STANDARD OF LIVING ETHNIC HETEROGENEITY AND SEPARATISM 269. Following independence, Moldova's ethnic and regional heterogeneity had several offshoots, some quite negative. The first consisted of separatist movements in the Gagauz region in the South (centered around Comrat) and in Transnistria.9 The Gagauz conflict was settled with the creation of the Gagauz Eri autonomous unit. In Comrat district, for example, the heart of Gagauzia, the Gagauz comprise about 70% of the population. Since December 1994, thirty Gagauz villages in Comrat and adjacent districts have certain administrative rights, including the ability to levy special taxes. Some dissatisfaction remains -- some majority Moldovan villages on the Prut River found themselves in Ga,gauzia and have made requests to join the district of Cahul instead. In Transnistria, given its relative concentration of industrial capacity and its pro- Soviet and pro-Russian political orientation, ethnic-related political confrontation turned into a serious armed conflict, starting a flow of refugees into Chisinau and other cities, and creating an economic crisis for much of Transnistria's population. MIGRATION PATTERNS 270. During the same period, many people left Moldova, in part, perhaps, as a result of new nationalism and the tendency for the Rorrcanian language and Latin script to replace Russian and the Cyrillic script, in part because economic conditions in Russia were better. Approximately 190,000 people emigrated to Ukraine and Russia, 38,000 to Israel, 10,000 to the U.S., and 5,000 to Germany. This population loss was somewhat mitigated by over 150,000 mainly ethnic Moldovans immigrating to Moldova fromi Russia, Ukraine and other FSU countries.'0 With the conflict in Transnistria, many ethnic Mo].dovans fled or relocated to other regions of Moldova. 271. Overall, Moldova is now ethnically more homogeneous, although it retains a significant Russian-speaking, Slavic population. Probably a majority of the 35% Russian-speakers (particularly in Transnistria, but elsewhere as well) as well as many middle-aged Romanian- speakers, feel a particular nostalgia for the Soviet period, and would prefer closer reintegration with the CIS. Many elderly, along with some Romanian-speaking intellectuals, express a preference for integration with Romania, 272. The growing presence of ethnic Moldovans in more prosperous countries, such as Germany or Israel, creates new opportunities for those at home, who use old connections to find 2/ Today, the conflict in Transnistria appears closer to peaceful resolution. When the study was undertaken, however, the potential volatility led the World Bank to recommend that the Poverty Study not include Transnistria. Reports from other sources about the comparatively greater hardship there suggest that such a study be undertaken in the near future. -0/ "National Report: The Situation of the Mother and Child in the Republic of Moldova. Realities and Tendencies." Draft, 22 November 1996, Chisinau, p. 19. 68  Poverty in Moldova: The Social Dimensions of Transition jobs abroad. Several respondents had found temporary employment in Germany in this way; some of the workers in Israel had been recruited by Israelis, who may well have been emigres from Moldova. Many Moldovans have relatives (by blood or marriage) in Ukraine, Romania, and Russia, and they also use these ties extensively in commercial transactions. In this sense, while some of the emigres certainly constitute a "brain drain," many retain close connection with home; as economic life improves, they may well constitute a body of future investors. LINGUISTIC ISSUES 273. In 1989, Moldova passed a new language law, giving primacy to Romanian as the state language, and setting off a wave of reaction from ethnic Russians and other Russian speakers (including the Gagauz) throughout the country. According to Russian-speaking respondents in Chisinau, the initial post-independence wave of linguistic nationalism has passed, and once again, they feel comfortable speaking Russian in public. At the same time, lack of Romanian- language proficiency has become an economic impediment to many Russian-speakers, who have lost their jobs to Romanian speakers as the country embarks on a linguistic derussification program, accompanied by the switch from the Cyrillic to Latin alphabets. Some respondents ascribed their joblessness to local prejudices (rather than linguistic competence per se). A Ukrainian shop-assistant in Comrat, for example, thought she had lost her job because she was Ukrainian and did not speak Gagauz. She felt that the Gagauz had made management positions inaccessible to ethnic Moldovans and Slavs. 274. For our respondents, language issues caused other forms of real or perceived exclusion, since mastery of Romanian has become a new criteria for employment. A number of people felt they had been demoted in state institutions because they did not speak Romanian. For some respondents in Transnistria, the origin of their diploma proved a problem. A respondent who graduated from an institute of higher education in Tiraspol found her diploma not acceptable elsewhere in Moldova. 275. Romanian speakers in Comrat district (in Gagauzia) complained that higher education in local institutes is conducted primarily in Russian, forcing them to pursue higher education elsewhere. In Romanian speaking regions, however, Russian-speakers made the same complaint; few poor families were able to contemplate, as one parent stated, that they would send their children to universities in Russia. LEVELS OF POVERTY 276. To the extent that our sample allows us to generalize about patterns of poverty, these patterns appear to derive more from regional variations and opportunities rather than particular patterns of ethnic exclusion. The strongest regional differences occur along the North-South continuum (excluding sharp differences between the left and right banks of the Nistru River which did not form a part of the study). According to many of our respondents, some differences mark living standards and opportunities, seen as lower in the South than the North. Overall, the South is presented as not only more agricultural and less industrially developed compared to the rest of the country, but more conservative in its orientation. 69  Technical Paper I 277. Recent Bank surveys have suggested regional trends from North to South in the difficulties farmers experienced when they wished to privatize."1 In the South, for example, many villagers were very poorly informed about the process and procedures of privatization, and those who did submit applications to withdraw their land from the collective farm experienced many obstructions. In our Study, this was particularly the case in the Comrat region, where many respondents were also fearful about the risk of independent farming in a region so prone to drought. 278. At the same time, our findings do not support sweeping generalizations about regional differences. In the neighboring district of Cahul, in the South, farm workers in Crihana Veche felt forced to stay on the collective, but those working nearby in the village of Manta pushed aggressively to form the Zavoieni farming association. Similar differences appear within central districts of Nisporeni and Ungheni, where some farm workers managed to form an independent farmers association, perhaps inspired by the USAID-funded and organized project on Maiak Collective Farm, yet others remained intirmidated and felt forced to remain within the collective farm. 279. What our Study does show are important intra-regional differences between villages, often based on the presence or absence of direct road and rail links to local towns and cities. In the North, such a pattern can be seen in the Balti and Edinit district. Mihailovca village, for example, is located off main routes, and lacks its own school, town hall, or market. Its inhabitants expressed a much greater sense of dependence on local officials to help surmount the numerous obstacles they faced, and were much more vulnerable to intimidation. EDUCATION AND EMPLOYMENT OPPORTUNITIES 280. Many respondents in the South feel they have fewer educational opportunities than in the Center and North. Indeed, people feel that the Moldovan government has been dominated by people from the northern part of the country, who have given greater priority to that region, and neglected the South. One manifestation of this neglect, according to respondents, is the relative lack of opportunities to obtain a higher education locally. For this reason, many families in the South had responded enthusiastically to a proposal to open a local university in Cahul, which they felt would give talented youth greater chances to continue their studies. This project has stopped. At the moment, a teaching and arts college runs with 60% enrollment, but its art department, the only one in the south, has closed. Likewise, a medical college functions in Cahul, but remains housed in decrepit premises. A new college building is 70% completed, but no funds are left to complete it, despite peoples' understanding that parliament had set aside 1,200,000 lei from the national budget to complete it. They fear that if it is not completed, the finished part will quickly deteriorate. 281. According to many respondents, attitudes in the South are more conservative toward those in the North, especially when it cornes to free market relations. This is reflected in the current term for the local market, "tolchok, " a term which used to signify the black market, and -U/ "Land Reform and Private Farming in Moldova," p. 8. But see the survey by Sorin Radilescu for a varied perspective of North-South differences. 70  Poverty in Moldova: The Social Dimensions of Transition carries a negative connotation reflecting the assumption that many of the goods sold in the market, such as clothing and household and industrial items, have been acquired illicitly. The use of this term evokes the socialist condemnation of individual commerce as a shameful activity. ETHNIC STEREOTYPES 282. Although the Study did not reveal particular differences in degree of poverty according to ethnicity, many respondents categorize those around them in very clear ethnic hierarchies (the order of hierarchy varying with the ethnic identity of the subject and the immediate environment). In Comrat, for example, in response to the increasingly widespread theft which has hurt many poor households, both Gagauz and Moldovan respondents expressed the conviction that because the Gagauz had historically acquired a love of luxurious living, they now avoided hard work and were therefore prone to steal. Likewise, many Moldovan inhabitants characterized gypsies as either typically rich (as in the northeastern city of Soroca, where many gypsies have built huge villas), or thieves. School children sometimes insult each other for poor, ragged clothing by labeling each other as "Gypsies." 283. At the same time, perhaps tired of the post-independence ethnic conflicts and tension, many respondents downplayed the importance of ethnic differences. Yet many alluded to occasional conflicts which had crystallized around ethnic differences. Youth were often the main people involved in village brawls, such as a fight at a village discotheque in Comrat between Russian, Moldovan and Gagauz youth or between Gagauz and Bulgarian youths in a bar. In the north, analogous conflicts have also taken place among youth. CONCLUSIONS 284. Poverty in Moldova appears to be linked more to regional variations and available opportunities than to particular patterns of ethnic exclusion. In addition to the important north- south agroclimatic differences, there are significant intraregional variations in infrastructure development, available resources, trading patterns, and integration with Chisinau. Although this Study did not reveal particular differences in the degree of poverty in relation to ethnicity, the data suggest that ethnicity does influence peoples' attitudes toward their own standard of living and the perceived standard of living of members of other ethnic groups. While linguistic competence in the dominant language of a region increasingly affects educational and job opportunities, people often attribute their perceived disadvantages to their membership in an ethnic group, rather than to their lack of language competence. Likewise, they often employ ethnic stereotypes and hierarchies to boost their own group identity, and to interpret social problems and changes as the responsibility of a particular ethnic group. 71  Technical Paper I _ SUMMARY AND RECOMMENDATIONS INTRODUCTION For the majority of the respondents in this study, impoverishment has been recent and rapid, and few people have fully grasped the causes, consequences, and implications for the future. Many factors have contributed to household poverty. These include unemployment; a dramatic fall in the real value of state sector salaries, pensions and other forms of social assistance; loss of lifetime savings; and the introduction of both official and unofficial fees for health care and education. In rural areas, factors contributing to poverty include: the rupture of old Soviet-wide trade relations; new regulations and fees for cross-border trade; land reform, with the related competition between farm managers and farm workers to assert rights over land and assets; several years of bad weather and poor harvests. Although Moldova is not yet a free market economy, its citizens are beginning to understand they can no longer rely on the state to guarantee their well-being. Many older people, however, have not fully accepted that the era of the paternalistic state and planned economy is over, and their understanding of new economic arrangements, particularly in rural areas and on collective farming enterprises, remains very confused. Whether or not people accept the demise of the old system, a majority of our respondents resent what they perceive to be the dishonesty and unvarnished greed of national, raion, and village leaders, who have successfully used their. power and connections in the old system to ensure positions to secure their power and prosperity in the new one. Many people view the growing differentiation between the newly poor and the newly rich with great antagonism; only younger respondents felt the transition offered them positive economic possibilities. For our poorest respondents, especially those without the skills or resources to compete effectively in the new economy, such as the elderly and/or disabled, and single parents without marketable skills but with many dependents, life has become a struggle to survive. Inability to maintain and repair housing and pay utility bills contributes to the steady deterioration of their immediate living situation. Poor diets and inability to afford medical or dental treatment except in dire emergencies contribute to poor health. School expenses, especially for large families, encourage children to quit school; unforeseen medical expenses can throw vulnerable households into debt. Such households feel they have fallen into a hole from which they cannot climb out. 72  Poverty in Moldova: The Social Dimensions of Transition FINDINGS AND RECOMMENDATIONS Poverty, material deprivation, age, and gender Although most rural and many urban Moldovans have access to land, hunger exists in both urban and rural areas. Even in rural areas, there are households whose members reduce their daily intake to one daily meal by late winter, when food stocks run out, and which send their children to school without breakfast. Those most at risk include the very elderly and/or infirm and households which have no land or insufficient land in proportion to family size. Poor health care compounds problems of poor nutrition and housing, with a two-tier medical system developing. Poor Moldovans are neglecting preventive care, including prenatal care, and waiting until illnesses become acute (and less treatable) before they seek medical care. The situation is particularly acute for rural Moldovans, who have much less access to specialized care than those in large cities. Poor families are least able to feed, clothe, and educate their children, who will thus enter adult life less healthy and less prepared educationally to compete as the job market improves. Teachers complain that absenteeism has reached epidemic proportions, as qualified staff seek other work and children leave school to help their parents farm. Poor children also have little access to higher education; their families can afford neither bribes, supplies, nor their upkeep away from home. The nexus of poverty and crime have put youth at special risk. Respondents connected unemployment (especially in rural areas), lack of relevant and accessible educational opportunities, and lack of affordable entertainment for young people to the rise of youth gangs and youth criminality in villages, towns, and cities. Although this study does not address the incidence of poverty for different population categories, it is clear that many poor and isolated elderly and/or disabled live in appalling material circumstances. In some cases, they cannot even manage to obtain the social assistance to which they are entitled, and are entirely dependent on the goodwill of neighbors who are almost as indigent. Issues: Lack of opportunities for training and education * decline in access to education for the poor, rural, and disabled * school absenteeism and entrance of children into the labor market * development of a two-tier educational system for rich and poor Recommendations: * eliminate the system of private and public classrooms within a single school * educational reform should include incorporation of vocational training geared to current labor market needs, and responsive to local differences * classes in Western business principles, taught by visiting faculty, should be offered to students in village vocational schools 73  Technical Paper I * work with NGOs to ensure that school age children can obtain adequate clothing and school supplies (lack of which is a frequent reason for absenteeism) Issues: Difficulties in learning about and obtaining social assistance and entitlements * lack of access to health care; lack of prenatal and preventive care for pregnant women and children * lack of preventive medical care (including prenatal care) and affordable, competent treatment * poorly targeted and thinly spread social assistance * lack of information and transparency in social assistance and other forms of aid Recommendations: * reform of the medical system to provide a basic package of low-fee preventive care, particularly for pregnant women and children, which can cover salaries of medical personnel at a level which will reduce their demand for unofficial payments * reform of the social assistance program so that payments, whatever their size, are received on time and in the form of cash, and when necessary, by proxy (for the homebound or disabled) Poverty, alienation, and disempowermtient Poverty has created rifts in commrunities between fonner friends and neighbors. People are cynical, suspicious, and jealous of others' successes, which they most often attribute to dishonest and corrupt behavior. In their own communities, the poor feel ashamed and constantly humiliated in their encounter with former neighbors and friends who have prospered. This humiliation is particularly poignant in the case of children and young people, who sometimes prefer to remain at home rather than risk their classmates' mockery at their old clothes. Although poor people extensively rely on each other, frequent mutual suspicions and animosity as well as fear of those in authority neverthleless limit people from cooperating on a community scale to help each other more effectively and improve local conditions. Poverty makes people feel helpless and paralyzed. As old structures of power have dissolved and realigned, many people no longer know where to go for help, or to whom they can appeal. At the same time, they do not yet feel empowered to take initiative; they have neither information, understanding of their iights, or confidence that "paper rights" will be observed in practice. Many Moldovans feel politically powerless, based on real or feared intimidation by officials who still retain considerable power over the day-to-day lives of the population they serve. Increased crime, ranging from pilfering from other poor households and private fields, to violent crimes such as rape and assault (often in the context of burglary), makes people fearful of venturing out of their homes in village, town and city. They feel police neither respond to their complaints nor show interest in protecting them; they are vulnerable to threats, intimidation, and all sorts of abuse from those in power. Poor people have considerably less access than the non-poor to information about rights, entitlements, and opportunities. Many people felt that although the mayor and his office were 74  Poverty in Moldova: The Social Dimensions of Transition the most logical points for disseminating information, that in fact, mayors sometimes stopped information. Whether the topic was information, access to humanitarian aid, or business contacts, respondents complained that information and resources were too concentrated in Chisinau, and that most contacts with the outside world came through Chisinau, and in many cases, never reached them. Issues: Disempowerment and distrust among the poor * difficulties in obtaining timely and accurate information * lack of trust within communities * lack of trust between citizens and officials * collusion between local officials and police and perceptions of a two-tier system of justice * distrust for the banking system and public financial institutions * constraints on citizens' initiative and grass-roots activity, particularly outside Chisinau Recommendations: * ensure regular and full dissemination of information regarding rights, entitlements, and opportunities to mayoralties, along with regular information (disseminated through TV, radio, and newspapers) regarding the kind of information available * more active collaboration with NGOs (and with other international organizations supporting NGOs, such as the Open Social Foundation [Soros]) to help in organizing and delivering services; providing legal and other council to communities. * in working with NGOs, carefully monitor NGO transparency and functioning Poverty, unemployment, and the private sector The poor lack social capital. Patronage ties have increased in importance in proportion to the declining role of the state as protector and provider. As a form of symbolic capital, connections are among the key resources which give people access to information, jobs, and a way to escape poverty. Lack of connections makes escaping poverty more difficult. These relations have great importance in the village, where local officials can more easily restrict access of villagers to information and resources. Poor people are the least able to qualify for loans and credit to start the small enterprises which might help them escape their poverty. Poor people exclude themselves and are excluded from the banking system. Traumatized by the loss of lifetime savings and unable to pay the high interest rates demanded by banks, most Moldovans now save money -- even large savings from work abroad, "in a sock" rather than invest in an institution, and borrow from relatives (at no interest) or private moneylenders (often at high interest rates). When they borrow large sums, they are often forced to risk all their possessions as collateral to high-interest professional moneylenders, a strategy which often ends in disaster for the borrower and his or her entire family. The collapse of public sector employment and the emergence of new labor niches has affected men and women differently. In public sector work, both men and women have lost jobs in production, while lower paying jobs in the social sector, such as teaching and medicine, have 75  Technical Paper I _ become almost completely feminized. Women have also migrated abroad, where they have found work as childminders, housekeepers, and prostitutes. Women have also moved into petty commerce in large numbers, but in private sector work, pregnant women and mothers tend to be more vulnerable than men; some deal with childcare responsibilities by simply leaving small children in the care of those who are slightly older. On the job, they are prone to harassment, even rape. Increasing numbers work as prostitutes in Moldova and abroad. At the same time, they have entered new fields: as migrant laborers and independent landowners, which may give them some share of independence and authority. Issues: Unemployment and lack of skills * lack of skills and training which adequately respond to the current labor market * lack of a clearinghouse of information on job availability in Moldova * extreme vulnerability to abuse and crime as labor migrants abroad Recommendations: * establishment of a clearinghouse for collection of and dissemination of information about regional labor needs and jobs * vocational re/training, available in district centers and/or large villages, based on current labor needs * public works for rural unemployed youth, which can simultaneously address the problem of lack of skills, lack of rural employment opportunities, and youth crime 3 create a regulatory framework to give some protection to labor migrants working abroad and private sector workers in Moldova and enforce child labor laws * support the rural unemployed in the form of training, marketing assistance, and organization for small scale entrepreneurs and, paruticularly in local crafts Issues: Impediments to entrepreneurs (includingfarmers) * lack of knowledge about how and where to market * lack of access to low-interest loans * lack of clear information about registration, taxation, importing and exporting regulations on legal procedures, etc. * lack of access to legal advice and support in pursuing their entitlements * lack of clear dispute-resolution mecthanism for businesses * high level of taxation for new enterprises Recommendations: * establishment of clearinghouse for rmarketing information (TACIS has initiated a marketing project for agriculture, which could be expanded to non-agricultural domains) * micro-credit programs aimed at small entrepreneurs and new private farmers, especially women, who cannot qualify for bank loans * dissemination of clear information about legal requirements for registration, taxes, and other bureaucratic requirements 76  Poverty in Moldova: The Social Dimensions of Transition * establishment of a system of free legal advice, available in villages (this could expand on the TACIS program, now funding the National Farmers' Federation to train villagers to give advice regarding land reform legislation) * reduction of taxes for the first few years, as an enterprise gets on its feet * establishing an effective, fair, and transparent mechanism for dispute settlement regarding financial issues, contracts, land clams, property claims Issues: Problems of independentfarmning * arcane, obstructive and expensive procedures for establishing private farms and obtaining land titles and non-land assets * lack of access to small quantities of inputs * lack of knowledge about running an entire farm * lack of extension services * lack of accurate information regarding entitlements * lack of legal advice and support in acquiring entitlements Recommendations: * simplification of bureaucratic procedures involved in land reform (this simplification is said to be underway) * technical assistance in establishing purchasing and marketing cooperatives * a simplification and reduction of taxes and export tariffs for new farmers * access to longer-term (5-7 years), low-interest loans to invest in off-farm enterprises such as food processing and agricultural equipment (with reduced interest rates for environmentally friendly technologies) * access to low-cost extension services which can provide advice about new technologies, more efficient farming methods, and organization and financial aspects of running an independent farm * establishment of information centers or networks to disserninate information and advice about export regulations and procedures, local and foreign markets * a state policy which actively supports and assists private farmers; actively pursues demonopolization of state purchasing and supplying enterprises Regional and ethnic variations in poverty Ourfindings do not demonstrate significant differences in the standard of living among poor households in the North and South. It is true that the South faces more frequent droughts, has a less developed infrastructure, and is traditionally considered to be the poorest region. On the other hand, significant differences do exist within single districts, depending on proximity to major roads and international borders; presence or absence of administrative offices, schools, and other community facilities; and finally, individual officials. Caution should be used before assuming that a given community will conform to regional social, political, or economic stereotypes. 77  Technical Paper I Language and ethnicity have catalyzed ethnic conflict and separatism in Moldova, and their significance should not be underestimwated. Our respondents tended to play down the depth and seriousness of purely ethnic conflict, ;although older -- and some younger -- Russian speakers ascribed their unemployment to language discrimination. Our study did not focus on or particularly discern marked economic diff-erences between different ethnic groups, but it did show that many respondents believe such differences to exist. Poverty takes differentforms in rural and urban settings. Most -- but not all -- rural families have access to enough land to feed their families, while poor urban residents are often forced to survive on cash or barter. Rural opportunities, however, for education, employment, and information, are far more limited than in cities, particularly in the capital. In many cases, information, opportunities, and practical assistance remain there, never reaching outlying districts in the North and South In some districts, collective farm leaders, village and city mayors tended to be former Communist Party officials with strong links to the central government, who use their offices to hinder land reform, violate legislation and: ignore citizens' rights. Violations included media censorship, suppression of demonstrations, and obstructing independent NGOs and small enterprises. Issues: Regional and rural/urban disparities * North-South differences in investment, infrastructure and opportunities - serious underdevelopment and neglect of rural areas - concentration of resources and non-governmental assistance to and/or through Chisinau, with the lion's share remaining in the capital Recommendations: - Focus a SIF or SEF-type project on reconstruction of rural infrastructure. Individuals and NGOs offered us the following suggestions: * asphalting village roads * repairing public buildings * renovate run-down summer camps where summer courses in both vocational skills and foreign languages could be offered to children from poor families * renovate and re-open Houses of Culture for films, clubs, musical groups, discotheques, and other activities aimed at village youth * The Bank can aid the process of opening public debate about issues, problems, and potential responses by expanding the debate cutside Chisinau: through regional workshops, regional press conferences, engaging with NGOs and grass-roots organizations in the North or South of Moldova rather than in the more accessible Center. 78  Poverty in Moldova: The Social Dimensions of Transition ANNEX I: DEFINITIONS OF FARM TYPES Cooperative farming enterprises: These include state and collective joint stock companies, partnerships, cooperatives, and so-called "associations," all of which continue to rely on joint agricultural production. Joint stock companies: These are enterprises the statutory capital of which has been fully divided into shares. The members, or "shareholders," are responsible for the obligations of the Company in proportion to the number of shares they own. Although many collective farms refer to themselves as joint stock companies, few have actually gone through the required restructuring process. Land shares: These are paper shares (sometimes referred to as "certificates of entitlement" which entitle an individual to a physical parcel of land in a collective enterprise. These should not be confused with the "title" an individual receives when s/he registers a specifically designated parcel of land. Peasant farm: These are independent family farms, based on land shares individuals or households have formally withdrawn from collective farning enterprises, and can actually identify on the ground. Peasant farm associations or cooperatives: These are groupings of peasant farms, which come together, formally or contractually, to produce, process and/or sell agricultural products. Because of the law (in effect from February 1995 until January 1996) restricting individual households from withdrawing from collectives, and the difficulties encountered by individual households in receiving their value quotas (share of non-land assets), many peasant farms registered as "associations" for purely formal reasons. Household plots: These are the approximately 0.30 hectare (on average) plots distributed to rural households. Families with more than 3 members qualify for an additional .10 ha per member. 79   TECHNICAL PAPER II POVERTY IN MOLDOVA: PILOT RESULTS FOR FEBRUARY 1997 by Jeanine Braithwaite The World Bank The views contained herein are those of the author only, and do not represent the opinions of the World Bank nor of its Board of Directors, nor of any individual country member, nor federal, nor local govermnent.   Poverty in Moldova: Pilot Results for February 1997 Table of Contents I. Introduction .I 1:I. Moldova Poverty Profile ........................................4 A. Location ........................................5 B. Household Composition .....6..................................6 C. Gender ....................................... 10 D. Housing, Durables, and Inequality ....................................... 11 im. Regression Analysis ....................................... 12 IV. Social Safety Net ........................................ 13 A. Incidence Analysis ....................................... 15 B. Pensions, Child Allowances, and Privileges ....................................... 17 C. Proxy Means Tests and Targeting ....................................... 20 V. Conclusions and Policy Recommendations ....................................... 22 Bibliography ........................................ 25 Annex 1: Text Tables ....................................... 29 Annex 2: Additional Tables ....................................... 51 Annex 3: Poverty Lines ....................................... 54 Annex 4: Equivalence Scales ....................................... 56   Poverty in Moldova: Pilot Results for February 1997 Poverty in Moldova: Pilot Results for February 1997* I. Introduction Moldova is a small, land-locked country of the former Soviet Union (FSU), situated between Ukraine and Romania, facing similar challenges in managing poverty during the transition to a market economy. More agrarian and less diversified than Ukraine, but smaller than Romania, Moldova's early days of independence following the break-up of the Soviet Union were troubled by a violent civil conflict that resulted in substantial loss of life and the de facto partitioning of the country. Although the territorial integrity and sovereignty of Moldova as a whole country is recognized internationally, in practice the economy is bifurcated, and with two separate currency regimes. The defacto separation of the country into two separate econornic zones with different prices, currencies, and market relationships somewhat complicated the comparison of poverty in the two areas, but on a whole, the measurement problem was resolved by the excellent work of the Moldovan Department of Statistics, which was able to conduct a pilot household budget survey in the two separated regions (hereafter, the pilot survey). Unless otherwise noted, all the information in this report is derived from using the pilot survey data base.' In this report, statistics are reported for the country as a whole (Moldova), and separately for the area called the Left Bank or Transnistria, and for the remainder of the territory, called the Right Bank. The Right/Left Bank terminology is a bit awkward as it relates to the direction of the flow of the Nister (Dnestr) river which physically separates the two areas, and is supplanted in this report by the terms Right Bank and Transnistria. The major city in the Right Bank area is the capital, Chisinau (formerly spelled Kishinev), and the major city in Transnistria is Tiraspol. When Moldova is used, it is understood to reference aggregated statistics for the country as a whole. Many thanks to Wlodek Okrasa, Task Manager, and the team at Moldova Department of Statistics for a job well done! Special recognition of Robert Ackland, who although continents away, always provided crucial assistance cheerfully. The research assistance of Giselle Nevada, Zhongmin Wang, and Catherine Ying is acknowledged. Document processing and other vital services were performed by Precy Lizarondo under extreme time pressure. The following provided helpful comments: Robert Ackland, Arup Banerji, and David Lindauer. I The pilot survey methodology is described by Okrasa et al in a series of processed notes (1997), including information about the sampling and population weights created, the variables created, and how the information was extracted from a free-form household diary combined with a standard questionnaire module. This information is not repeated here in this report, except to note that the pilot survey data were for one month only (February 1997) and can not be generalized to annual-based data or other general conclusions without caution. 1  Technical Paper ll _ In order to discriminate between the.poor and non-poor, poverty must be defined and a poverty line or threshold adopted. Conceptually, few would dispute that poverty is the inability to sustain some minimal level of existence. Yet defining that "minimal" level, especially when money income may not give a good measure of real consumption opportunities, is problematic. A standard approach to defining an absolute level of poverty is to price a basket of essential goods and compare income to the cost of these necessities. Both in the definition of nutritional needs and the calculation of corresponding cost, value judgments occur on the part of experts or the politicians deciding on a certain method, and the reliability of conclusions formed on this basis depend critically on the reliability of the income infonnation to which it is compared.2 In a variety of country contexts, households do not fully disclose their income to survey interviewers/enumerators or even to the tax authorities. However, there have been legal challenges in some OECD countries (e.g. the United States) which safeguarded the confidentiality of household income responses to the Census and other surveys. While such legal challenges may have encouraged households to be more forthcoming in the US context, there is no evidence that poverty investigators in other country contexts have similarly benefited. Particularly in Latin America and the former Soviet Union, but found in every country everywhere, the inforrnal sector plays a major role in household behavior and welfare in transition economies. During the Soviet period in Moldova, virtually all informal sector activities were illegal with severe penalties, and it would be unrealistic to expect that Moldovan households today would not be careful to under-report such income. Indeed, in every World Bank assessment of poverty in a FSU country to date, reported expenditures have exceeded, in some cases by several orders of magnitude, reported income, suggesting that households are cautious to report the full extent of informal sector income, private entrepreneurial income, private remittances, and private transfers.3 Since the goal of poverty analysis is to assess the real welfare of households and the people who comprise them, expenditure can be a better measure of household 2 Although many statistical publications rely on household income as a measure of household welfare, there are many studies which demonstrate that if household expenditure data are available, they should be used in preference to data on household income, which tends to be under-reported, especially on the high end of the income distribution (Deaton and NMuelbauer 1986, Hentschel and Lanjouw 1996). Household income tends to appear frequently in statistical publications of many countries because typically, monthly estimates of household income are made by central statistical agencies for national reporting imperatives, while household expenditures data are more commonly available on an annual (or sometimes quarterly) basis. 3 For example, in data from nationally representative surveys in Russia (conducted by the All-Russian Center for Public Opinion Polling (VTsIOMI) and by ISEPN in a longitudinal study of Taganrog), as well as the Russian Longitudinal Monitoring survey and, to a limited extent, official Goskomstat Rossii data, reported income has found to equal less than 50 percent of actual household consumption (measured by the value of household purchases of consumer goods and food, and household production of food on private plots). In practice, this pervasive and informnal sector renders the use of income only for means-testing as highly problematic. The only reliable way to rank household welfare is to use consumption-based measures that include the value of food produced on private plots. 2  Poverty in Moldova: Pilot Results for February 1997 consumption than income (Deaton and Muellbauer 1986). Beyond the saving and non- saving of households attempting to smooth their consumption over time, expenditure aggregates can be constructed to include the imputed or self-reported value of food produced on a household's private plot of land, and also the consumption of food or other goods received in kind by the household. In Moldova, Russia, and other FSU countries, households (even urban ones) have access to small plots of private land. In the Soviet period, these plots made up 3 percent of arable land, but produced 25 percent of gross agricultural output (Gregory and Stuart 1991). Thus, the choice of an appropriate poverty line is conditioned to a large extent on what the line will be compared to, and also, to the availability of data for construction of an absolute poverty line. In the Soviet period, even data for providing the food component of an absolute poverty line were scarce, and Moldova and other FSU countries inherited a concept of a "minimal consumer basket" that was not minimalist in any sense. The actual basket contained over 250 norms for the consumption of food and non-food goods, including alcohol and tobacco, and a "normed rate" of savings (Sarkisian and Kuznetsova 1967). This basket is inappropriate for truly determining vulnerability in Moldova or indeed, in any other FSU country today (see Annex 3: Poverty Lines). Diet-based or nutrient-based absolute poverty lines have their advocates (Ravallion 1992) as well as their critics (Lanjouw 1996). Although, in principle, it would have been possible to use the pilot survey data set to extract information about the physical consumption of food products of those in the lowest consumption decile or alternatively, to use diets based in other countries, to construct absolute lines, the extreme seasonality of the database rendered this attempt premature. Since data were reported only for February 1997, a month that cannot be considered representative of annualized food consumption, there was no attempt made to derive an absolute poverty line from the pilot data. Instead, for comparison, some standard absolute lines were tested (see Annex 3: Poverty Lines). As a result, a relative poverty line was chosen for this first attempt at examining who is poor in Moldova. The relative poverty line adopted was 40 percent of the unweighted mean per capita consumption in the Right Bank (Moldovan lei 67.12 per person per month) and in Transnistria (Transnistrian ruble 7,831 per person per month). There are many methodological issues associated with the choice of the poverty line (see Annex 3: Poverty Lines), but this particular line was used for one very practical reason--it was available immediately while the versions of population weights were being finalized. Using the population-weighted mean per capita consumption would lead to a slightly higher poverty line and therefore a slightly higher headcount in Transnistria, but to a slightly lower poverty line and, therefore, a lower headcount in the Right Bank. Neither line is "right" or "wrong"--they are merely different. If the final population weights had been available slightly earlier, the population-weighted mean would have been used, but the findings in the report would not have been affected since the two measures are so 3  Technical Paper II _ close.4 A per capita line was chosen because econometric tests did not indicate that there were significant economies of scale in consumption (see Annex 4: Equivalence Scales). Finally, all the results in this cross-sectional analysis are highly affected by data measurement issues, the extreme seasonality of the data (pertaining to only one month, February 1997), and the first-time nature of the pilot survey itself. Further, during the crop years both preceding and immediately following the pilot survey period, Moldova experienced serious droughts, which depressed food production and consumption. Therefore, results should be viewed as indicative but not necessarily definitive. II. Moldova Poverty Profile Moldova shares many of the general characteristics of the poverty profiles observed to date by the World Bank (for example, Russia and Ukraine) for FSU countries, while differing in some important ways from Armenia and from Eastern Europe (Grootaert and Braithwaite 1997). In general, the poor in Moldova, as in other transition economies, are children, the working poor (especially, therefore, the working poor with children), and some, but not all, elderly people. Pensioners defined as those who receive a pension from the state are not at special risk of poverty. Those who live in the capital (or in the case of Moldova, the capital city of Chisinau and the major city of Tiraspol) are much better off than those in other cities, while those in rural areas of Transnistria are also better off (as observed in most FSU countries). However, in the Right Bank area of Moldova, there are more poor households in rural areas than in other urban areas. In this section, poverty correlates are explored and possible explanations considered, leading in turn to further econometric exploration in the following section. Summary poverty measures are presented in Table 1 (Poverty Measures, February 1997). All tables are presented in Annex 1: Statistical tables. Summary poverty measures include the headcount (the share of the population with a per capita consumption below the 67.12 Moldovan lei per person per month in the Right Bank, the share of the population with a per capita consumption below the 7,831,000 Transnistrian rubles per person per month in Transnistria, and the weighted average headcount for the country of Moldova), the P1 measure (sometimes called the depth of poverty), the poverty gap (the percentage shortfall between the consumption of the poor and the poverty line), and the P2 measure (sometimes called the severity of poverty).5 4 In no way should this statement be read as a criticism in any way of the Moldovan team who produced the pilot survey and data set. It is merely a reflection of the fact that the extended team (Moldova/World Bank) was separated by an ocean and other responsibilities. For example, for the background paper on the labor market (Lindauer 1997), poverty dummy variables were required sooner since that paper was written before this one. See Ravallion 1992, Ravallion 1988, Grootaert and Braithwaite 1997. 4  Poverty in Moldova: Pilot Results for February 1997 Based on the relative poverty line of 40 percent of unweighted mean per capita consumption, approximately one-quarter (23.3 percent) of the Moldovan population is poor, and there is very little difference between the rate for the Right Bank (23.5 percent) and Transnistria (22.6 percent), suggesting that the distribution of consumption in the two regions is very similar. However, the structure of relative prices and the difference between currency regimes are obviously quite diverse, and some interesting results emerged upon experimentation with various poverty lines (Table 2). II. A. Location In every FSU country with a poverty assessment completed to date, poverty rates in the capital or two largest cities have been markedly lower than in the rest of the country. Besides the famous example of Moscow and St. Petersburg in Russia, this finding was true for Kiev, Yerevan, Baku and several other FSU countries. In Moldova, this pattern repeats exactly. Chisinau, capital of the country and the major city of the Right Bank, has a much lower poverty rate than other Right Bank urban areas, while Tiraspol, the major city in Transnistria, also has much lower poverty (Table 1). One of the striking characteristics of FSU countries with household surveys which allow the market-price valuation of food produced and consumed by the household, is the finding that rural households are less at risk for poverty than urban ones. This finding, although somewhat unconventional for many developing countries, is rather standard for the FSU, and relates in some ways to the changes in relative prices instituted after the breakup of the Soviet Union on December 25, 1991. In January, at highly differentiated rates, the newly-independent countries allowed some prices to rise. In particular, food prices in general (not just one or two items but rather all food and many consumer goods), which had been extremely subsidized, were subject to substantial phased increases and in many countries, eventually freed. At the same time, the prices of rent, utilities, and transportation remained controlled and (sometimes cross-) subsidized, so that the relative price of food greatly increased. Then, further, with the breakup of the ruble zone and the established supply and trading network of the estimated 16,000 monopolistic (and therefore, utterly dependent on other up- and down-stream monopolies by deliberate design of the planned economic system), GDP collapsed in the FSU, leaving households unable to afford much of the newly available range of non-food goods and greatly increased services. Therefore, depending on the survey period, it is quite possible that a market-based imputation for food prices would show household consumption to be higher in rural areas, which was found to be the case in Russia (earlier years 1992-94), Ukraine, and Armenia. In Armenia, there was a crucial incentive--land privatization--which some have suggested kept the country from outright starvation during the armed conflict and continuing economic blockade with Azerbaijan. There is a very clear link between early land privatization such as Armenia's in 1992 and increased welfare for rural households (World Bank 1995 Armenia Poverty Assessment). 5  Technical Paper II _ On the other hand, not every household survey is designed to easily facilitate the imputation of market prices for food products consumed from household production. This is unfortunately the case for the Moldovan pilot household survey. Respondents were asked to report their own valuation of what the food they both produced and consumed was worth. While in principle it might be possible to reconstruct the data base to calculate some market prices based on other inforrnation (household purchases), the open-ended diary system used in the pilot survey makes this an extremely formidable programming problem. Adding prices from other sources (such as the State Department of Statistics) would open up the potential of adding bias from mixing two very different sources of information. So, it was decided to retain the self-reported valuation of food products, even though this is probably the major reason for the surprising finding for Moldova that the rural consumption-based poverty rate is higher in the Right Bank than in other urban areas. Of course, there are more poor rural Right Bank Moldovans since more people live in rural areas than in urban areas in the Right Bank. Finally, the extreme seasonality of the survey meant that rural households were asked about their food consumption in February, just as household stores are running out, but too early for spring vegetable harvests. For Transnistria, the poverty rate of rural households is also higher than that of other urban households, but not quite as noticeably as for Right Bank, while Tiraspol poverty is sharply lower than other urban or rural poverty. In the final analysis, these results, especially for rural poverty in Moldova, are probably as reflective of problems associated with the pilot nature of the survey (only one month of data, and that was the nadir month of February following on from a previous drought, plus reliance of the self-reporting of the value of food produced and consumed by the households, which has been slhown to lead to dramatic undervaluation of actual consumption in other countries), as they are indicative of underlying differences in the country. On the other hand, from the qualitative assessment (De Soto and Dudwick 1997), and other anecdotal information, the results that poverty rates are lowest in Chisinau and Tiraspol should be viewed as robust and reliable. II. B. Household Composition In international comparisons and from simple common sense, the over-arching effect of household (family) composition on a household's poverty status emerges as the single most important determinant of household poverty in virtually every country, and 6 Moldova is no exception to this general rule. Household composition matters because 6 In Moldova, "family" and "household" are often used interchangeably, with family used colloquially and household being the province of statisticians and economists. There is a standard definition of a household which was used by the Moldovan team who produced the pilot survey. This is a group of people living together who share income and expenditures. The term household does not imply that the group of people are related in any way at all. Of course, in a country like Moldova, a household is usually formed out of family groups that are related by blood, marriage, or by degrees of relationships (particularly in rural 6  Poverty in Moldova: Pilot Results for February 1997 some household members can contribute more to the common pool of resources from which the household decides to save or consume, while other members (dependents) contribute little or nothing to the household's cash or physical resources. In households with a high dependency ratio, the income earners will have to be better-paid in order to cover the costs of these extra dependents, or the general level of household welfare will decline when new dependents are added. There are two serious considerations that pertain to this generalization about household composition. The first consideration is the extent to which household members can share resources in ways that are more effective than a single person could. For example, the marginal cost of an additional household member can decline up to certain limits. The household already has a flat or house. An additional member can be brought into the flat (squeezed in somewhere), so that now the rent which was previously divided by, say 5, is now being divided by 6. So the marginal rental cost of the sixth person is lower than that of the fifth. In a similar way for other things (like reusing clothing as hand-me-downs to younger children or "stretching" a stew by adding potatoes instead of meat), families may be able to achieve economies of scale in consumption. Further, to the extent that dietary requirements differ among family members, household needs also vary with composition. For example, a recent paper by Ravallion and Lanjouw (1995) demonstrated that larger families were not necessarily poorer in some country contexts because of economies of scale in consumption. In the United States, t'The poverty line" is actually a set of 7 different poverty standards, based on differing household compositions, to take into account these economies of scale. In a different approach, the OECD countries have adopted a standardized equivalence scale (which is the termninology used for measuring economies of scale in consumption) whereby the first adult in the household is assigned a value of 1.0, the second and subsequent adults are assigned values of 0.7, and children are assigned values of 0.5. However accurate this scale might be for OECD countries, it does not seem to perform well in econometrics tests when applied to FSU countries (see Annex 4). It is possible to estimate econometrically whether a particular data set displays economies of scale in consumption (see Annex 4). For Moldova, there were not found to be any significant economies of scale in consumption, so the equivalence scale for Moldova is a simple per capita one. Having tested economies of scale and found them to be not statistically significant in the pilot data household set for Moldova, we therefore settled on a per capita standard for the poverty line used in this report. Interestingly enough, this was also found to be true for Russia some years ago (Foley 1993), and probably reflects the impact of the prolongation of maintaining defacto price controls (through controlling "margins" or cross-subsidization) in Moldova. In this sense, the villages) that would not be thought of as especially close in some Western countries (e.g. first and second cousins), but are binding enough so that the people involved are pooling their incomes, labor effort, and expenditure responsibilities (De Soto and Dudwick 1997). 7  Technical Paper 11 relative price of non-food items has either not changed much (rent, utilities) so the composition of household expenditure remains oriented towards food, or in some limited cases, other prices have become so strataspherically expensive (restaurant meals, Western clothing) that hardly any families purchase these items, given the general economic malaise in Moldova and the low level of per capita GDP. The second serious consideration about household composition and consumption is the intra-household distribution of household consumption (sometimes called the "unitary model" of household consurription). In this study and in most economic analyses of poverty, it is assumed that the household will divide its consumption "fairly" or "according to efficiency considerations" to the various household members, but in reality as observed by anthropologists and other social scientists, this may not be the case. (See Folbre 1995, 1994, Haddad et al. 1994.) Since this problem has not yet been handled tractably in the literature, it is not further addressed in this study, although careful reading of De Soto and Dudwick (1997) may raise questions about the applicability of the unitary model in Moldova. At the same time, it is clear the most of the cost of an additional household member in Moldova is food, regardless of how other goods are allocated among the individual members. Just as the non-unitary models, (De Soto and Dudwick 1997) and common sense would suggest, so too can it be demonstrated through the quantitative findings of the pilot survey that some kinds of dependents are more serious a burden for a household (have a greater impact on the chance that the household will be poor) than others (Table 1). For example, in Moldova, as in Russia, UJkraine, and Armenia, the presence of children in a household is strongly associated with poverty, and more strongly so than the presence of elderly members. In both the Right Bank and Transnistria, poverty headcounts and other measures of severity are much higher for families with children than families with no children or elderly members (which is certainly as one would expect), but also marked so for the case of families with elderly members but no children (Table 1). In other words, if a household wants to avoid poverty, better to have elderly members than children! But what if a household has both children and elderly members--would not such a household be the worse off of all? In Transnistria, this is clearly the case--households with both children and elderly members have tlhie highest headcount and worst associated measures of poverty severity. However, in the Right Bank, this "double whammy" or "double burden" does not appear. Families with both children and elderly members are indeed poorer than families without either, but not quite as poor as families with children only. There are several logical reasons for this finding in the Right Bank. First of all, an extended family structure in a mostly rural country context would enable the household to diversify its household production. 'While an elderly grandfather mnight be too old to do heavy plowing, he could watch the younger children while the mother and father turned the soil together. Also, depending o:ri how the private plots were allocated before Moldovan independence and the uneven course of land reform, it is possible that senior 8  Poverty in Moldova: Pilot Results for February 1997 or more well-established families might have preferential access to more or better land (De Soto and Dudwick 1997). Third, there are fewer alternate employment opportunities in Transnistria on private plots than in the Right Bank, as Transnistria is much more urban. Almost four-fifths of the Right Bank population reported having access to a private plot, but only about 45 percent of Transnistrian households did. Having a grandmother to babysit a child is not as much of a boost to household consumption if the father or mother can't find an industrial job that pays salaries on time (see Lindauer 1997). One mechanical effect of any per capita standard for a poverty line is that larger families will appear to be poorer (Ravallion and Lanjouw 1995), but this is a valid finding for Moldova, given that initial empirical testing validated the per capita standard (see Annex 4: Equivalence Scales). In Moldova, larger households have higher poverty rates than smaller households (Table 3). In Moldova, this effect is further driven by the influence of children as contributing more to the dependency burden than elderly members. For example, in Table 4, poverty rates sharply increase with an additional child under the age of 14. It should be noted that there was only one household in Right Bank with more than six children, so this finding is not especially representative, but is indicative, while in Transnistria, there were no households with more than 3 children under the age of 14. The findings for elderly family members are quite different (Table 5). Adding an elderly member (aged 65 and over) will not increase the measured poverty rate in the Right Bank at all, as a matter of fact, households with one elderly member have a lower poverty rate than households with none, and households with two elderly members have an even lower poverty rate (perhaps because many of them are living in families without children). In Transnistria, households with one elderly member do have a higher poverty rate than households without, but then, the poverty rate drops sharply for Transnistrian households with two elderly members. Stepping outside of the household framework, and looking at individuals only, some of the lowest headcounts in the sample were for Transnistrian men and women at or beyond retirement age (60 years for men, 55 for women) of approximately 14 and 19 percent each, while the situation for Right Bank men and women at or beyond retirement age was not as advantageous (21 and 19 percent poverty rates respectively), these rates were still below the average of 23.5 percent for the Right Bank as a whole. The finding that the elderly are not especially at risk for poverty in Moldova is a conventional one for the FSU countries, as demonstrated by World Bank poverty assessments in Russia, Ukraine, Armenia, Kyrgyzstan, Azerbaijan, and Estonia and also emerged from cross-comparisons with Eastern Europe (Grootaert and Braithwaite 1997). This finding can be a difficult one for the general reader to accept, especially given the way that the elderly sometimes characterize their own situation. For example, in De Soto and Dudwick (1997, p. 42), one female village respondent's situation was described as follows. "Like many pensioners, she had given her land lot to relatives, who she says 9  Technical Paper II _ occasionally 'throw her some potatoes.' Pensioners with children, even if the latter live in town, often give their land to them in return for a share of the harvest." Although elderly respondents may bitterly resent the loss of independence represented by the intragenerational transfer of the responsibility for the land plot, the reality seems to be that the pensioners are "being thrown some potatoes" and other kinds of food, too. Later in the study, De Soto and Dudwick do document extensive intra- familial and intra-social sharing and coping strategies among the poor. These arrangements do seem to be working to keep many of the elderly out of poverty, as defined in this study, which is based on the value of consumption, including gifts given to the household in kind (e.g. food from plots farmed by friends or other family). Of course, it is not clear how long such coping mechanisms can continue to function, and additionally, it is clear that sharing arrangements would be greatly facilitated by a more rational distribution and use of land through land reform. II. C. Gender Although gender has emerged as a significant correlate of poverty in many countries of the world, to date, it has been difficult to establish quantitatively the impact of gender on poverty in the FSU countries. There are several reasons for this difficulty, and a major cause is the impact of the use of the unitary model in which household consumption is divided either by the number of household members (per capita) or by household per equivalent adult members (equivalence scale) means that gender differentials in within-household consumption are not observable in household survey data. For example, the participatory survey stated that "Respondents were quite consistent about how they go about this [dividing up inadequate amounts of food]: women, responsible for preparing and planning meals, first fed their husbands, then their children, and only after the others have finished, allow themselves to eat the leftovers" (De Soto and Dudwick 1997, p. 12). Although this is very likely true in Moldova as was also documented in Armenia (Dudwick 1995), it can not be confirmed nor disproved by using household survey data of the type of standard questionnaire used in the Moldovan pilot survey (and in countless household surveys in other countries, such as the Consumer Expenditure Survey in the US). For example, the age-specific poverty rates for Right Bank and Transnistria (Tables 6 and 7) show very little gender differentiation, but striking age differentiation. Children are clearly much more at risk for poverty than the elderly in Moldova, but the differences between males and females reported in the tables are so small as to be likely statistically insignificant and practically meaningless in terms of discriminating among the poor. Again, the elderly of both areas are much less likely to be poor, but there is little difference between elderly men and women, except in Transnistrian males aged 60 and over. The difference in the reported poverty rates between males aged 60-69 and 70 and above in Transnistria is likely influenced by the demographic impact of World War II, which probably reduced the naturad number of males in the 60-69 age cohort. 10  Poverty in Moldova: Pilot Results for February 1997 An additional factor is the relatively low number of female-headed households in the FSU when headship is determined by either the absence of a male of working-age in the household (regardless of marital status) or as in the Moldovan pilot survey, by the gender of the highest income earner in the household. In Moldova, about two-thirds of households were male-headed (Table 8) since headship was determined by the highest income-earner criterion. However, there was no difference in poverty rates by gender in the Right Bank, while in Transnistria, female-headed households had a slightly lower headcount than male-headed households. These results in Transnistria probably reflect the labor market situation there, and the lower rate of female labor force participation, as explained by Lindauer (1997). II. D. Housing, Durables, and Inequality In Moldova, there are few strong correlates between the poverty status of the household and its assets, whether these assets are housing amenities (such as number of rooms or indoor plumbing) or consumer durables (such as washing machines or refrigerators). There are examples where poverty rates of the "haves" differ noticeably with the "have-nots" (such as private plot access on the Right Bank, Table 10), but the difference is not large enough to serve as a discriminator between the truly needy and the less needy for the purposes of targeting of the poor by the social assistance authorities (see Section IV. B.). This is also a common heritage of the former Soviet system and characterizes the poverty profiles in all the FSU countries done to date by the World Bank. The lack of strong correlation between poverty status and whether the household has, for example, a radio or a car is due to the previous system whereby consumer goods were allocated not by price, but by non-market mechanisms, primarily by queuing, po znakomstvu (through acquaintanceship), reciprocal and delayed reciprocation favor-trading (blat), and more recently, through outright bribery, side-payments, and under-the-table payments, often in kind.7 In the Right Bank, there is a rather larger difference between, for example, the number of rooms in a house and the poverty status of the household than in Transnistria, since so many Right Bank residents live in homes they constructed themselves during the Soviet period (when this was permitted on private plots in rural areas), and rather stronger correlation between other housing amenities and poverty. However, overall, the distribution of housing amenities and consumer durables remained rather much the same among the poor and non-poor in Moldova in February 1997, reflecting mostly that households had inherited a housing stock and distribution of consumer durables primarily from the previous system, so holdings were not determined 7 These informal sector activities were so pervasive under the old system that in total, they were called "the second economy" or "the shadow economy" (Braithwaite 1995, Dudwick 1995, De Soto and Dudwick 1997, Gregory and Stuart 1991 and therein, a list of other textbooks and references). 11  Technical Paper ll by market outcomes (such as how much household income was). Of course, by early 1997 this was beginning to change, and as could be expected, the few households which reported ownership of such high-end consumer goods as videocassette recorders and personal computers were not found to be poor in this study. Further change in the distribution of such proxies for household wealth as housing amenities and consumer durables are highly likely, considering how very unequally current consumption was distributed in Moldova in 1997 (Table 11). A common measure of inequality, the Gini coefficient, for both the Right Bank and Transnistria was around 40 or 41 percent.8 This compares to Brazil (49 percent) or Russia during some of the worst transition years (49 percent) or Armenia (52 percent). In other words, inequality in per capita consumption is very high in Moldova. Other indications of a highly dispersed distribution are the very high decile ratios presented in Table 11, although the ratios for household income should be treated with some caution.9 To the extent possible, given the limitations of the pilot data base, these characterizations about the poverty profile and inequality in the distribution of consumption in Moldova were econometrically assessed, and the econometric analysis corroborated the findings illustrated up) to this point by poverty cross-tabulations (Tables 1-10). II. Regression Analysis Multivariate regression analysis revealed little, given measurement problems in the data and the inability of even a basic model to explain the differences in per capita consumption across households (Table 12). However, nothing in the regression analysis contradicted the pattern for the profile of poverty as shown in the preceding section through cross-tabulations. Even worse was the case for other FSU countries (Grootaert and Braithwaite 1997); models used to explain per capita consumption in Moldova were not very convincing, with extremely low values for the R2 statistics estimated in every case. 8 Expressed as a percent, the closer the Gini coefficient is to 0, the more equal the distribution. The closer it is to 100, the more unequal. Sometimes the Gini coefficient is normalized to 1 instead of 100 percent. The standard for this study is per capita household consumption, which was calculated as the sum of household purchases in cash (or in kind), the self-reported value of consumption of food in kind regardless of source (own-production or gift/private transfer from another household), and the self-reported consumption of non-food goods in kind regaridless of source (own-production or gift/private transfer from another household). The income information provided by the Moldovan team was not used extensively, owing to concerns about its reliability. In every FSU household survey, reported purchases in cash have been greatly in excess of reported income. Dae to the algorithms used by the Moldovan team to construct their income aggregates from the diary information, household gross income is essentially equal to reported household expenditures, suggesting some untenable imputation procedures. This issue will be investigated further in subsequent work. 12  Poverty in Moldova: Pilot Results for February 1997 It is difficult to be sure why these disappointing results were encountered. There is clear evidence of measurement error in some of the variables. For example, whether or not a household had access to a private plot was not estimated as a significant causal factor for household consumption in the Right Bank. Since we know from a variety of other sources of information, including direct observation, that the private plot plays a major role in rural subsistence and sustenance in the Right Bank, it is disturbing that the regression analysis did not attribute any statistically significant weight to this factor. This could reflect problems with the household's imputation of food consumed from private plot production (as noted above), problems with accurately recording the response to this question, or both. Performance was slightly better for Transnistria in terms of explaining overall consumption, but more regression coefficients were statistically significant in the Right Bank than in Transnistria. Both areas clearly demonstrated at a high level of significance that the presence of children in a household was negatively correlated with consumption (in other words, children are linked to poverty in Moldova). All other family composition variables were significant in the Right Bank, but not in Transnistria, where the presence of both the elderly and of female adults did not correlate significantly with household consumption. In the Right Bank, adding any sort of household member depressed consumption at more or less the same level, but in Transnistria, children reduced consumption much more than other kinds of additional household members. In both areas, higher education was strongly correlated with higher consumption, but no other variable was more than 10 percent significant, except for rural location in Transnistria, which was associated with higher consumption than the omitted variable of other urban location. Even though these findings are disappointing, overall by simply using the regression coefficients as estimated, approximately three-quarters of household were correctly identified as poor or not poor, suggesting that variables which are as basic and easy to collect as household composition could do a tolerable job of identifying the poor for targeting purposes (see additional on proxy means testing below). Probit analysis worsened these dismal findings considerably, with very few factors found to contribute on the margin to the probability of a household's being poor. As a result, the Probit findings are not reproduced here, except to note that an additional child increased the probability of the household's being poor by 7 percent in the Right Bank and by 6 percent in Transnistria.'0 0 Full results can be obtained by direct request to the author. 13  Technical Paper II IV. Social Safety Net Moldova inherited a social protection philosophy and system from the former Soviet Union which has proved to be tnsuited for the immediate needs of the transition itself, much less the requirements of El modem market economy. In spite of the best intentions of policy-makers and the deep devotion of individual social workers and social protection staff, the current system is staggeringly untargeted, inefficient, and inequitable. There is a general historical context to the problem, and then there are factors specific to Moldova and steps that Moldova did or did not take immediately following its declaration of independence from the former Soviet Union, which have created the challenges currently facing the social protection system. The general milieu in which social protection policy was formed in Moldova was that of the former Soviet Union, since Moldova was one of the fifteen titular republics of that conglomeration. In the FSU, social protection policy did not really exist as policy per se, but was an outgrowth of the Marxist labor theory of value and how this was expressed in the command economy system (Braithwaite 1995, 1991, 1990). Generally, working-age people were expected to work, and the system of formally low-wage payments with significant fringe benef'its combined with price controls and very large subsidies on certain consumer goods, increasingly in the late 1970s and especially throughout the 1980s on food as well as non-food consumer goods, meant that only those without a link to the formal labor market were considered as needing special interventions. Further, the system of social insurance (sick pay, maternity benefits, and pensions) was set up to further the links between formal employment and the avoidance of social protection as a general policy. Maternity leave, sick leave, university study and special work-release retraining educational programs, as well as military service all were counted into the worker's stazh (work-tenure expressed in years, months, and days). This left only the hard-core "social parasites" such as political prisoners, alcoholics, and drug addicts, as well as the mentally ill who were u-nable to work regularly as the primary concern of the social protection authorities. A highly individualist case-based system evolved for social protection, with local social workers with a very good degree of individual knowledge of their clientele, and a rather small clientele at that. The transition to the market economy brought with it sweeping changes in economic relationships, a precipitous decline in GDP as established monetary and trading relationships collapsed, and the emergence of a new and large group of working people who were demonstrably poor, and unlike the previous clientele of the social protection system, in many cases, through "no fault of their own." This numerous group of newly- needy people were termed "the new poor" in Russia (Braithwaite 1995), but they emerged throughout the FSU and to a lesser extent in Eastern Europe (Grootaert and Braithwaite 1997). 14  Poverty in Moldova: Pilot Results for February 1997 In Moldova and the rest of the FSU, social workers were swamped by a rapidly rising caseload, and frustrated by the lack of tools with which to help these new poor. Especially, the working poor could not be handled by the old system, which was premised on the idea that working people would be able to support themselves and their families through formal employment supplemented by social insurance. The only sort of general cash benefit that social workers could give to a working poor family was the so-called "one-time emergency assistance" (razovaya skoraya pomoshch'). Social workers also tried to help their clients work the system as best they could, informing them of what limited cash transfer options were available, identifying where and how clients could qualify for so-called privileges (I'goty)--benefits in kind or reduced prices for certain consumer goods (particularly utilities and transportation), and directing them to whatever limited non-governmental or humanitarian assistance was available in the immediate area. In Moldova from 1992 onwards, these problems were compounded by a series of poor policy decisions on the macro level, which led to rampant inflation and sharp GDP declines, as well as a series of decisions on social protection (such as trying to defend the average old-age pension from erosion from inflation) which had severely negative fiscal consequences, which then fed back into the general economic malaise. For example, in the FSU, there were no generalized child allowances until 1991. There was a system of payments to single mothers and mothers of many children (set up in 1927 and expanded immediately following World War II), but there were no general child allowances." The system of generalized child allowances was decreed in 1991 for the Soviet Union, but very early in 1992, most of the independent countries adopted it. Moldova has retained some forms of child allowances, but with the continuing growth decline, increasingly, the government has not been able to pay these allowances on time. There are also clear problems in implementing these allowances (see below) owing to. local fiscal crises and the devolution of collection and payments responsibilities between the Moldovan Fund for Social Welfare (national, regional, local), the Pension Fund, and the federal and local governments. As a result of these various factors, Moldova today has a very poorly-targeted and regressive systems of social protection as do many neighboring countries in the FSU, an area which is notable for having poorly-targeted social protection programs. The problem is partly due to the nature of poverty in Moldova and indeed the FSU, where it is difficult to fully explain poverty using conventional variables (as explained above in the regression section), and partly due to Moldova's case-based system being overwhelmed by a flood of applicants who can not easily be processed on a case-by-case, individual basis in a system where there are no real tools (targeted benefits, public works, training programs) with which to help these applicants help themselves. See description of the Soviet context in Ukraine by Braithwaite and Hoopengardner (1997). 15  Technical Paper II IV. A. Incidence Analysis Incidence analysis is a technique for studying the targeting performance of a social protection system. An illustration of the low targeting performance of the system is somewhat indicated by comparing the per capita average amounts of a given benefit received by the poor or the non-poor (Tables 11 and 13). These tables were constructed by summing the total amount of any given benefit or private transfer (and for illustration, a few forms of income reported by households), dividing by the number of household members, and comparing the average per capita amount received by poor households to non-poor households. However, there are several problems with this approach, since it is based per capita (per household member). Since larger households are poorer, and since per capita amounts are constructed by dividing total amount received by th.e number of household members, the average per capita benefit paid to the poor should almost always appear to be lower than that paid to the non-poor, because the non-poor have a smaller family size on average. Conversely, where one can identify a transfer, bene:Fit, or income item which is larger on a per capita basis for the poor than the non-poor, one can expect that this item would be especially significant for the poor. Unfortunately, there are no state benefits in the Right Bank for which amounts received by the poor on a household per capita basis are greater than those received by the non-poor, but this is true for private transfers (income received from non- specific "other individuals" and from individuals in Russia). In Transnistria, poor households did report receiving significantly more on average than did non-poor households for child allowances, suggesting that child allowances might be better- targeted in Transnistria. Also telling are those cases on a per capita basis when either not a single recipient household was poor (for the Right Bank, this includes alimony and the state benefit for care of an elderly or disabled family member, and the social pension paid to those with inadequate stazh (work tenure), while for Transnistria, no household reporting receipt of the state benefit for care of an elderly or disabled family member or a survivors' pension or an early retirement pension was pocr) or when the amounts reported by the poor family were so low that on a per capita basis, they were essentially zero (and are shown as zero in this formulation). Another way to look at the issue of targeting is to consider the percent of recipient households which are poor or not poor. In other words, for all households which reported receipt of any positive amount (or amounts) of a given transfer or benefit, how many were poor and how many were not (Tables 14-15). Tables 14 and 15 are on a population basis, which means that data from the pilot household data set were weighted to sum to the total of the population in Moldova.12 The final column gives one some idea of how many 12 Details of the weights are provided in an annex to Okrasa (1997). 16  Poverty in Moldova: Pilot Results for February 1997 households did not report receipt of a given benefit or transfer. For example, in Table 14, less than 0.1 percent of Right Bank households reported receipt of an unemployment benefit, so this particular finding about the unemployment benefit being distributed slightly more to the poor than to the non-poor should not be viewed as representative for the Right Bank area--simply because too few households reported receiving this sort of benefit. Unfortunately, this non-representative finding for the unemployment benefit in the Right Bank is the only example of a benefit (or private transfer, or income type) which is received by more poor households than non-poor households. In both Transnistria and the Right Bank (Tables 14 and 15), more non-poor households receive all the sorts of government benefits included than do poor households, with 100 percent of these benefits "leaking" to the non-poor: maternity and sickness pay and social pensions in the Right Bank, and the benefit for the care of an elderly or disabled family members, the survivors' benefit pension, and the early retirement pension in Transnistria. There are much more sophisticated approaches to incidence analysis than the few presented here (Milanovic 1997), but some technical problems with manipulating the data base in its current free-form diary format made it difficult to implement any of these approaches by the deadline for this incomplete first draft.13 IV. B. Pensions, Child Allowances, and Privileges The pension system in Moldova is currently in financial crisis, and public dialogue over reform options is active and pointed at times. It might be useful to review the implications of the poverty profile and the incidence analysis for this debate. Although detailed information on the incidence analysis of child allowances was not available at the time of writing this partial first draft, previous work in Moldova (Mabbett 1994a, 1994b) and the experience of neighboring countries (Russia, Ukraine, and Armenia) suggest strongly that of all the various benefits offered in Moldova, only the child allowance was at all pro-poor. Since the child allowance only accounts for a small percent of total expenditures on social protection, it is the most cost-effective transfer in Moldova today. 13 Again, as noted previously, there were problems verifying the algorithms used by the Moldovan team to produce subcomponents of income items such as government transfers. One of the worst technical issues was the use of a free-form diary for expenditure and income items, which then was precoded by the Moldovan team, tagging various individual items. These were then aggregated by the team to produce six basic "analytic" files and 22 "raw data files." However, the aggregation used by the Moldovan team was not very precise for government transfers, which were more or less lumped together in one of the six basis "analytic" files. This meant that information for the incidence analysis had to be reconstructed from using the six- or eight-digit codes provided in one of the 22 raw data files, a file itself which had more than 16,000 observations for the Right Bank alone. Of course, this awkward structure was then repeated for Transnistria. It is strongly recommended that the Moldovan team switch to a more standard format for its database construction, learning from the pilot experience, since in practice, it is extremely difficult to extract the necessary information quickly for precise analysis of many important variables, including individual cash transfers from the Moldovan government. 17  Technical Paper 11 As shown in the poverty profile above, children are at much greater risk for poverty than the elderly, regardless of whether the elderly are pensioners who actually receive their pension or not. Indeed, so many Moldovans are eligible for one kind or another of pensions that resources are not available for paying child allowances on time, much less increasing their level. In Moldova, all four major types of pensions appear to be poorly targeted, with the worst offenders being the early retiremnent pensions (za vyislugu let) and puzzling enough, social pensioners in the Right Bank, although few old-age pensioners are at real risk for poverty.14 Disability pensions award in Moldova and other FSU countries soared in 1992-93 for two major reasons: this was really a disguised form of firing people, and people could bribe the VTEK (expert commission of doctors which certify labor disability) for the certificate more readily and with less fear of being caught than previously (De Soto and Dudwick 1997). The quantitative findings of this study and several others in the FSU (World Bank, various poverty reports) and the general region including Eastern Europe (Grootaert and Braithwaite 1997; Milanovic 1997; Milanovic 1996; Milanovic 1995; Krumm, Milanovic, and Walton 1995) have al]L documented repeatedly that the elderly are not especially at risk for poverty in the FSTJ, and in Moldova. Yet individual stories are heartbreaking (De Soto and Dudwick [L997, author interviews in Orhei region Spring 1997), and there is an extremely strong public perception that pensioners are especially needy. De Soto and Dudwick (1997) argue strongly that these perceptions relate to the contrast between the difficulties of the transition period and the nostalgic perceptions of the previous period. Certainly, the relative price of food has increased and Moldovans are aware that they are spending a higher proportion of their household budget on food and other necessities than they were previcusly (Tables 16 and 17). At any rate, there is no evidence presented either in this quantitative study, in Lindauer 1997, in De Soto and Dudwick 1997, or in previous work on Moldova (Mabbett 1994a, 1994b) which suggests that pensioners are especially poor in Moldova. The implication of this findingy and the poverty profile are that first and foremost, children should be the major focus of social protection efforts. In a non-scientific sample of social workers interviewed in Chisi-nau city and region and Orhei region, every single social worker named families with children (especially with many children) as the worst- off of their clients (author interviews Spring 1997). Yet there are few ways that social workers can actually help clients with children, particularly the working poor who may have a job on paper, but haven't been paid in months. 14 Social pensions are lower than the minimum old-age pension, and are paid to those with inadequate stazh (work tenure), who typically are women. Since most elderly women do not live alone (particularly not in the Right Bank), the implications of the household unitary model and the per capita poverty line used in this study meant that none who actually received their pension were found to be poor. The problem is that we can not be sure how many people were eligible for a pension, but did not receive it, since the household survey was not constructed to provide a detailed analysis of social assistance and insurance beneficiaries. 18  Poverty in Moldova: Pilot Results for February 1997 The inability of social workers to help families with children stems from a lack of proper tools (such as a poverty-targeted cash benefit from the government), which in turn is caused by a catastrophic lack of financing for targeted social protection. Here the major contributors to the financial crisis are the untargeted system of pensions noted above, and the prevalence of special privileges (I'goty) which are collected by only those savvy enough to know about the system of privileges and those with the ability to manipulate it--traits which were conspicuously absent in the poor in Moldova (De Soto and Dudwick 1997). Moldova, like many FSU countries, has a bewildering array of special privileges for specific categories of people deemed to be needy. These special privileges are the provision of no-cost or low-cost food and consumer goods and services, especially fuel such as coal, and reduced fares for inter- and intra-city transportation. Along with the rest of the FSU, Moldova in general and sometimes specific localities, adopted these privileges in an ad hoc and unorganized way. However, based on information from the Government of Moldova, the list of such privileges in Moldova seems at least as long or longer than the privileges maintained by the central Russian government.15 Such privileges are expensive for the economy as a whole. Someone (usually a state-owned enterprise or newly-privatizing enterprise or a local or central government) has to cover losses caused by distributing goods at prices below cost. Such implicit subsidies mean that resources are diverted towards covering these costs while the privileges themselves are not received by the most needy. Additionally, there is a real cost in time and human energy in managing such essentially barter transactions. The household must make arrangements to pick up the goods or to use the service. Meanwhile, social workers, already overwhelmed by a greatly increased case load, must try to figure out how to get perishable food to client A, to help client B use the coal privilege, to get client C to point D to pick up item E... the deadweight loss from these activities is staggering to contemplate. Since in Moldova, the list of those eligible for privileges is essentially many variations on the theme of those categories thought to be vulnerable in the previous social protection system, these privileges are not going to the non-poor. In the poverty profile section, it was demonstrated that the largest category of the poor are families with children. For example, the data calculated from Table 18 demonstrate that 77 percent of poor households in the Right Bank, 66 percent in Transnistria, and 76 percent of poor households in Moldova have at least one child member under the age of 15. Typically for the system of privileges, if someone in the household has a formal job (regardless of whether that person has been paid), they are ineligible for the privilege. 15 A list of special privileges in Russia was published in the journal Chelovek i Trud (No. 9, 1996) available to specific groups. A superficial comparison with the Government of Moldova list and this article suggests that the array of privileges is at least as large in Moldova or larger than in Russia. 19  Technical Paper I1 This means that most families with children are excluded from privileges, except for families with "many" children, defined variously in the system of privileges and child allowances (usually 3 or 4 or more). Of course, relatively fewer families have that many children (Table 4), so most families with one or two children are not receiving special help from the system of privileges. At the same time, the genuine devotion of Moldovan social workers to their clients may mean that some families in especially dire circumstances receive privileges on an ad hoc or arbitrary basis. Also, the repeated use of the cash benefit for urgent help is also sometimes a last resort of social workers. Technically this benefit is supposed to be used "one-time only" for a crisis such as a fire which destroys the home or some other cataclysmic event. However, people do what they can to help others, and this benefit and privileges are sometimes used by social workers in ways not covered by the existing legislation. Unfortunately, these acts of mercy and any system which is essentially arbitrary and not based on clear rules and a good definition of who is poor are both likely to be perceived by those who do not get such extra help as unfair, and this has clearly happened in Moldova (De Soto and ])udwick 1997). IV. C. Proxy Means Tests and Targeting Moldova's difficulty in deterraining the poor is not unique. In the FSU in general, strong poverty correlates of the type demonstrated by data from Latin American and African countries are absent. However, it is not true that lack of strong poverty correlates precludes improvements in targeting. First, most benefits are regressive, and this is true in Moldova, Russia, and the majority of FSU countries. Almost any targeting device would lead to improved outcomes in such a case. Even more significantly, proxy means tests have been found to lead to acceptable targeting outcomes even in the absence of strong poverty correlates (Grootaert and Braithwaite 1997). A proxy means test is a method to estimate household consumption or welfare without requiring extremely detailed information about household income. In countries such as Moldova, Russia or Chile, wlhere there is a large informal sector, it can be very difficult and administratively very costly to verify true household money income. Furthermore, in Moldova and other countries, a very significant part of household food consumption comes from food grown on private garden plots. It can be very difficult to estimate the true value (impute the value correctly) of home-produced goods, since typically, they are produced with "costless" family labor and their quality may be different than, for example, food items which are produced for sale. In proxy means tests, rather tlhan trying to measure total income perfectly, information is collected on items which are much easier to measure and verify, such as the number of children in the family, etc. These variables should be ones which are known to correlate with poverty in the country, and ideally, which are easy to measure and thus require little administrative cost to verify. The first large-scale use of proxy means-testing occurred in Chile in ttLe late 1970s and 1980s, in a program called the 20  Poverty in Moldova: Pilot Results for February 1997 Ficha CAS (card for social assistance). Since 1994, Costa Rica and Columbia have adopted proxy means-tests for some of their social assistance programs, Mexico is about to start a proxy means-test program, and Argentina and Venezuela are actively considering the idea. The measure of household welfare used here is total household consumption, which includes the household's own estimate of the value of food and other goods it produced and consumed and the value of all household reported purchases of food, non- food goods, services, and mniscellaneous other purchases. Total household consumption is then divided by the number of household members to generate per capita consumption. Thus, below per capita is understood to be "per household member." The next step was to try to measure the correlation between household welfare (per capita consumption) and other easily-measured variables. The technique used was stepwise least squares regression, in which variables are excluded if they are not significantly correlated with per capita expenditures. Technically speaking, this technique should only be used for variables which are thought to be independent (exogenous) and not directly correlated with each other. However, since we are only trying to find proxies (substitutes) for poverty which are more easily measured than household expenditures (rather than trying to decide what determines poverty) we can ignore this caveat in this context. However, the relatively poor performance of the Moldova pilot data meant that the proxy means test was less successful than those done for other FSU countries. Few regressors were able to meet the entry criteria for the stepwise regression. In the Right Bank, all of the household composition variables (children, male and female adults, elderly), whether the head had higher education, and whether or not the household had a car or a private plot, were all included into the specification. Using all these estimated coefficients, approximately 76 percent of households could be correctly predicted to be poor or not poor. The prediction was slightly better for the poor--78 percent of poor households were correctly identified by the proxy means test. In Transnistria, the proxy means test performed essentially as well as in the Right Bank, identifying correctly 75 percent of households and 78 percent of poor households. However, the admitted regressors were quite different--the Transnistria proxy means test did not include the elderly (unlike the Right Bank) nor higher education. Instead, variables such as the age of the household head and the age squared (this approximates a life cycle effect) as well as rural location were found to be significant predictors of the poverty status of the household. Curiously enough, the performance of proxy means tests for both the Right Bank and Transnistria significantly worsened if imposed on only the lower half of the distribution. Overall errors increased to 42 and 36 percent respectively, which are not acceptable rates for using the proxy means test for targeting exclusively to the lower part of the distribution. This is in sharp contrast to the experience of other data sets for the 21  Technical Paper II region (Grootaert and Braithwaite), and suggests that the pilot data are unusually non- robust, since the proxy means tests based on the full sample correctly identified 78 percent of the poor households. It is not clear why restricting the sample to the lower part of the distribution should worsen the predictions of consumption so starkly. V. Conclusions and Policy Recommtendations Moldova's system of social protection is stressed beyond a level which can be maintained. Urgent reforms are needed to get the system back on track and to have focus on those who are actually poor in the country, instead of wasting resources on those who are not as needy. The situation is a challenge for any government that has endured 5 years of declining or very slow growing GDP--there's simply not enough to go around, and everyone rightly feels poorer than before. Solving these macroeconomic problems is a task for the government which is beyond the scope of this paper, but its importance clearly comes through from this analysis, from Lindauer 1997, and from De Soto and Dudwick 1997. From strictly the poverty point of view, there are two key questions awaiting resolution: land reform and reform of the pension system. Early land reform (1992) was shown to keep most of the rural population of Armenia out of poverty (World Bank Poverty Assessment; Braithwaite 1995; Holt 1995; Dudwick 1995). With the bulk of the poor in Moldova living in rural areas of the Right Bank, land reform is clearly a pressing task. Pension reform is also a clear priority for financial stability in Moldova, but there are important poverty implications for the direction of that pension reformn. Pensioners are not the poor in Moldova, and most pensioners are among the better off in the country, in spite of the continued payments crises in the pension system suffered until mid-1997. Resources are being spent on the non-poor, while families with children are not being adequately helped by the system. The social protection system is in desperate need of rationalization, so that resources could be freed to create a poverty benefit (or sometimes called a family benefit) of last resort for families with children. Once there is the possibility of financing such a benefit, it should be properly targeted. Once non-pilot data are available from the national household survey, and following on from further regression analysis of the poverty profile (as done in Grootaert and Braithwaite 1997), it should be possible to significantly irmprove the targeting of the system by using a proxy means test for benefit eligibility. A proxy means test is a formula for determining eligibility for a poverty benefit which is based on information from a nationally representative household survey. Poverty correlates are determined from household survey data and used to construct a household score, which then is used to determine whether the household is eligible for a poverty benefit. The idea first surfaced in Chile, where it was implemented in the Ficha CAS program (Grosh 1994). Currently, experiments are underway in the region (in 22  Poverty in Moldova: Pilot Results for February 1997 Armenia and in Volgograd oblast, Russia) to bring this technique to social protection authorities.16 Using the rich source of the forthcoming quarterly or semi-annual national household survey, it should be possible to extend this technique to Moldova. However, without serious decisions about pension reform and eliminating the system of privileges, Moldova will not have the financial resources necessary to adopt such a poverty-targeted benefit, nor to help its poor families--especially those with children. 16 The Government of Armenia and the World Bank are collaborating on research work under the general direction of Margaret Grosh (Grosh 1994) for refining the Paros program currently used to distribute humanitarian assistance. It is expected that these findings will be used by the Government of Armenia to introduce a targeted poverty benefit (called the family benefit) in the near future. Additionally, the technique is being used experimentally in Volgograd oblast as part of the Social Protection Adjustment Loan from the World Bank to the Government of Russia. Details of the Volgograd conceptual framework are available in both English and Russian (Braithwaite 1997) and the Volgograd authorities have agreed to make public the implementation experience and documentation used, once the experimental program has been nationally evaluated. 23  Technical Paper II Bibliography Braithwaite, Jeanine and Tom Hoopengardner. "Who are Ukraine's Poor?" Chapter 4 in Cornelius, Peter K. and Patrick Lenain. Eds. Ukraine: Accelerating the Transition to Market. pp. 61-80. Washington, DC: International Monetary Fund, 1997. Braithwaite, Jeanine. "General Concepts for Proxy Means Testing In Russia." Mimeo. February 14, 1997. . Two Chapters in Jeni Klugman (Ed). Poverty in Russia: Public Policy and Private Responses. 1997. Washington, DC: The World Bank, 1997. . 1994. Poland: Poverty in Poland, Report No. 13051-POL, Washington, DC: September. . "Armenia: A Poverty Profile." ESP Working Paper No. 80. World Bank, 1995. . "From Second Economy to Informal Sector: The Russian Labor Market in Transition." Background paper for Russian Poverty Assessment. ESP Working Paper. World Bank, 1995. _ "The Old and New Poor in Russia: Trends in Poverty." Background paper for Russian Poverty Assessment. ESP Working Paper. World Bank, 1995. . "The Social Safety Net in Arrnenia." Chapter in World Bank. Armenia: Country Economic Memorandum. Forthcoming 1994. Edited version in World Bank. Armenia: Overview of Recent Development and Reform Priorities. Prepared for the Consultative Group Meeting for Armenia. October 12, 1994. Braithwaite, Jeanine D. and Timothy G. Heleniak. "Social Welfare in the USSR: The Income Recipient Distribution." Center for International Research, US Bureau of the Census, September 1989. Conniffe, Denis. "The Non-Constancy of Equivalence Scales." Review of Income and Wealth. No. 4. pp. 429-44:3. December 1992. Deaton, Angus and John Muellbauer. "On Measuring Child Costs: With Applications to Poor Countries." Journal of Political Economy. Vol. 94. pp. 730-744. 1986. De Soto, Hermine and Nora Dudwick. "Poverty in Moldova: A Qualitative Study. June 1996-May 1997." Mimeo. 1997. 24  Poverty in Moldova: Pilot Results for February 1997 Dudwick, Nora. "A Qualitative Assessment of the Living Standards of the Armenian Population: October 1994-March 1995." Mimeo. 1995. Fisher, Franklin. "Household Equivalence Scales and Interpersonal Comparisons." Review of Economic Studies. 1987. pp. 519-524. Folbre, Nancy. "Children as Public Goods." American Economic Review, Papers and Proceedings. Vol. 84. pp. 86-90. May 1994. "Engendering Economics: New Perspectives on Women, Work, and Demographic Change." Paper for World Bank's Annual Bank Conference on Development Economics. May 1995. Foley, Mark. "Family Allowances in Russia: Progressivity and Equivalence Scale Implications." Mimeo. August 1993. Gregory and Stuart. The Soviet Economy. 1991. Grootaert and Braithwaite. "The Determinants of Poverty in Eastern Europe and the Former Soviet Union." Draft. Mimeo. 1997. Grosh, Margaret. Administering Targeted Social Programs in Latin America: From Platitudes to Practice. World Bank. 1994. Haddad, Lawrence and Ravi Kanbur. "How Serious is the Neglect of Intra-Household Inequality?" Economic Journal (U.K.). Vol. 100. pp. 866-881. September 1990. Haddad, Lawrence, John Hoddinott, and Harold Alderman. "Intrahousehold Resource Allocation: An Overview." US: World Bank, Policy Research Working Paper, No. 1255, February 1994. Hentschel, Jesko and Peter Lanjouw. "Constructing an Indicator of Consumption for the Analysis of Poverty: Principles and Illustrations with Reference to Ecuador." Living Standards Measurement Study Working Paper No. 124. World Bank. 1996. Klein, Thomas. "A Specification Separating Family Size and Individual Age Effects on Subjective Equivalence Scales: A Note." Review of Income and Wealth. No. 2. pp. 209-219. June 1988. Lanjouw, Peter and Martin Ravallion. "Poverty and Household Size." Economic Journal (ULK) Vol. 105. pp. 1415-1434. November 1995. Lanjouw, Peter. "The Purpose and Importance of a Poverty Line in Central Asia." in Falkingham, J. et al. Household Welfare in Central Asia. MacMillan, 1996. 25  Technical Paper 11 Lindauer, David. "Labor and Poverty in The Republic of Moldova." Mimeo. August. 1997. Nelson, Julie. "Methods of Estimating Household Equivalence Scales: An Empirical Investigation." Review of Income and Wealth. No. 4. pp. 295-310. September 1992. Okrasa, Wlodek et al. Notes on the M[oldova Pilot Survey. Mimeo. 1997. Ravallion, Martin. "Poverty Comparisons: A Guide to Concepts and Methods." World Bank. Living Standards Measurement Study Working Paper No. 88. 1992. Sen, A. K. "On Weights and Measures: Informational Constraints in Social Welfare Analysis." Econometrica. Vcjl. 45. No. 7. pp. 1539-1572. October 1977. . "The Welfare Basis of Real Income Comparisons: A Survey." Journal of Economic Literature. Vol. 17. pp. 1-45. 1979. . "The Living Standard." Oxford Economic Papers. N.S. 36 (supplement). pp. 74-90. 1984. . Commodities and Capabilities. Amsterdam: North-Holland, 1985. Subbarao, K. et al.. Safety Net Programs and Poverty Reduction. Directions in Development. Washington, [DC: The World Bank, 1997. Van Der Gaag, Jacques and Eugene Smolensky. "True Household Equivalence Scales and Characteristics of the Poor in the United States." Review of Income and Wealth. No. 1. pp. 17-28. Tvlarch 1982. World Bank. 1996a. Armenia: Conjronting Poverty Issues. Report No. 15693-AM. Washington, DC.: June. . 1996b. Belarus: An Assessment of Poverty and Prospects for Improved Living Standards, Report No, 15380-BY. Washington, DC: June. . 1996c. Estonia: Living Standards During the Transition, Report No. 15647-EE Washington, DC.: June. I . 1996d. Hungary: Poverty and Social Transfers, Report No.14658-HU. Washington, DC: March. _ 1995a. Kyrgyz Repubi'ic: Poverty Assessment and Strategy, Report No.14380-KG, Washington., DC: May. 26  Poverty in Moldova: Pilot Results for February 1997 . 1994. Poland: Poverty in Poland, Report No. 13051-POL, Washington, DC: September. _ 1995b. Russia: Poverty in Russia: An Assessment, Report No. 141 10-RU, Washington, DC: June. . 1995c. Ukraine: Poverty in Ukraine, Report No.15602-UA, Washington, DC: June. 27   Poverty in Moldova: Pilot Results for February 1997 Annex 1: Text Tables Table 1: Moldova: Poverty Measures, February 1997 Right Bank Transnistria Moldova Overall Headcount 23.5 22.6 23.3 P1 measure 2 7.5 7.9 7.5 Poverty gap 3/ 31.9 35.1 32.4 P2 measure 4' 3.5 4.3 3.6 Major City/Other Urban/Rural 5/ Major City Headcount 11.3 20.1 13.7 P1 measure 2' 4.1 8.5 5.2 Poverty gap measure 31 35.8 42.0 37.5 P2 measure 4' 2.0 5.1 2.8 Other Urban Headcount 22.8 28.2 24.3 P1 measure2' 6.7 9.7 7.5 Poverty gap measure 31 29.5 34.4 30.8 P2 measure 4' 3.0 5.4 3.6 Rural Headcount 27.5 18.0 26.7 P1 measure 2' 8.8 4.8 8.5 Poverty gap measure 3/ 32.0 26.6 31.6 P2 measure 4' 4.2 1.8 4.0 (Continued) 29  Technical Paper 11- Annex 1 Table 1: Moldova: Poverty Measures, February 1997 (Continued) Right Bank Transnistria Moldova 1 Family Composition 6! No Children, No Elderly Members Headcount 12.6 13.2 12.7 P1 measure2' 3.4 5.4 3.9 Poverty gap measure 31 26.9 40.9 30.2 P2 measure 4' 1.4 3.2 1.8 Children, but no Elderly Mermbers Headcount 29.9 31.2 30.1 P1 measure 21 10.1 10.7 10.2 Poverty gap measure 3/ 33.8 34.2 33.8 P2 measure 4' 5.0 6.1 5.1 Elderly Members, but no Children Headcount 17.0 16.2 16.8 P1 measure 2' 4.5 3.7 4.3 Poverty gap measure 3/ 26.3 22.8 25.6 P2 measure 4' 1.9 1.4 1.8 Both Children and Elderly lembers Headcount 23.7 39.4 26.4 P1 measure 2' 7.0 14.9 8.4 Poverty gap measure 31 29.6 37.8 31.0 P2 measure4' 2.7 6.8 3.4 Source: Author estimates from Moldovan Pilot Household Survey, 1997. Notes: " Moldovan totals are the weighted (by population) average of the individual measures for Right Bank and Transnistria. 2' Foster-Greer-Thorbecke P1 measure sometimes called "depth" of poverty (see text). 31 Poverty gap terminology from Grootaert and Braithwaite (1997, see text). 4/ Foster-Greer-Thorbecke P2 measure often called "severity" of poverty (see text). 5' For Right Bank, the major city is the capital of Moldova, Chisinau. For Transnistria, the major city is Tiraspol. 6/ Family composition was defined as follows: children are under the age of 14 and elderly are over the age of 65. Adults are aged 14-64. 30  Poverty in Moldova: Pilot Results for February 1997 Table 2: Moldova: Various Poverty Lines, Sensitivity and Exchange Rates, February 1997 Right Bank 1 Transnistria 2/ Poverty Headcounts Poverty Headcounts Lines Lines Alternative Poverty Lines 40% of Unweighted Per Capita Consumption 67.12 23.5 7,831 22.5 40% of Sample Weighted Per Capita Consumption 69.41 24.7 8,059 23.4 40% of Population Weighted Per Capita Consumption 59.32 19.0 8,286 23.8 Sarkisiyan Minimum Consumption Basket (MCB) 415.00 96.9 62,250 98.0 Sarkisiyan MCB Food Portion Only 201.00 78.7 30,150 84.6 Absolute Minimum PPP Per Capita Poverty Line 3/ 14.40 0.9 2,160 2.8 Market Exchange Rate $3/day Per Capita Line 4/ 140.28 61.4 21,042 74.8 Unweighted PC crossed with Market Exchange Rate 5' 52.21 13.7 10,067 36.4 Sample Weighted PC crossed with Market Ex Rate 5t 53.73 14.5 10,411 38.9 Population Weighted PC crossed with Market Ex Rate 5/ 55.24 15.6 8,899 27.7 New Line as 90 percent of Base Line 6/ 60.40 19.3 7,048 17.6 New Line as 80 percent of Base Line 6/ 53.69 14.5 6,265 13.7 NewLineas 10percentofBaseLine6' 73.83 28.1 8,615 25.9 New Line as 120 percent of Base Line 6/ 80.54 33.1 9,398 31.4 OECD Per Equivalent Consumption 67.12 11.8 7,831 11.9 (Continued) 31  Technical Paper II - Annex I Table 2: Moldova: Various Poverty Lines, Sensitivity and Exchange Rates, February 1997 (Continued) Right Bank Transnistria Percent Percent Percent Percent Change Change Change Change in Poverty in in Poverty in _____________ _ Line Headcount Line Headcount Sensitivity Measures4/ 40% of Sample Weighted Per Capita Consumption 3.4 5.1 2.9 4.0 40% of Population Weighted Per Capita Consumption -11.6 -19.1 5.8 5.8 Sarkisiyan Minimum Consumption Basket (MCB) 518.3 312.3 694.9 335.6 Sarkisiyan MCB Food Portion Only 199.5 234.9 285.0 276.0 Absolute Minimum PPP Per Capita Poverty Line 3/ -78.5 -96.2 -72.4 -87.6 Market Exchange Rate $3/day Per Capita Line 4' 109.0 161.3 168.7 232.4 Unweighted PC crossed with Market Exchange Rate 5' -22.2 41.7 28.6 61.8 Sample Weighted PC crossed with Market Ex Rate ;' -19.9 -38.3 32.9 72.9 Population Weighted PC crossed with Market Ex Rate 5/ -17.7 -33.6 13.6 23.1 New Line as 90 percent of Base Line -10.0 -17.9 -10.0 -21.8 New Line as 80 percent of Base Line -20.0 -38.3 -20.0 -39.1 New Line as 110 percent of Base Line 10.0 19.6 10.0 15.1 New Line as 120 percent of Base Line 20.0 40.9 20.0 39.6 OECD Per Equivalent Consumption 0.0 49.8 0.0 47.1 Exchange Rates Lei-Dollar 4.676 (1 US$ = 4.676 ML) Lei-Russian Ruble 82.52 (100,000 Russ R = 82.52 ML) Lei-PPP (February 1997) 3/ 0.48 Official Lei-Transnistrian Ruble Cross Rate 126 (1 ML= 126,000 TRR) Estimated Market Lei-Transnistrian Ruble Crcss Rate 150 (1 ML=150,000 TRR) Source: Author estimates based on official data and estimated market rate for ML-TRR from Wlodek Okrasa. Notes: Unless otherwise noted, crosses made into Transnistrian rubles were done at the estimated market ML/TRR rate. ' Poverty lines in Right Bank are expressed in Moldovan lei per person per month. Headcounts are percent of Right Bank population. 2/ Poverty lines in Transnistria are expressed in 10)00 Transnistrian rubles per person per month. Headcounts are percent of Transnistrian population. 3' Based on a 1993 PPP rate of US $1 = 0.16 lei, irnflated to February 1997 by the CPI, yielding US$1 = 0.48 PPP lei and the World Bank Absolute Minimum Poverty Line of $1 per person per day and 30 days per month. 4/ Based on the February 1997 market exchange rate (lei to dollar) and $30 (that is, $1 per person per day). For Transnistria, this number crossed by the estimated market exchange rate. 5' For Right Bank, the first three poverty lines from Transnistria crossed into lei at a rate of 150 TRR = 1 ML. For Transnistria, the first three poverty lines from Right Bank crossed into Transnistrian rubles at a rate of I ML = 150 TRR. 61 Using the unweighed per capita consumption line as the base for calculating percent changes in poverty lines and in their associated headcounts. 32  Poverty in Moldova: Pilot Results for February 1997 Table 3: Moldova: Household Size and Poverty Status Number of Household Right Bank Transnistria Country Members Headcount (PO, in percent) 1 7.7 9.1 8.0 2 13.9 14.7 14.1 3 19.4 22.2 20.0 4 21.7 27.7 22.6 5 34.9 32.2 34.6 6 32.2 48.3 34.0 7 24.6 0 22.9 8 63.1 ... 63.1 9 100.0 ... 100.0 Total 23.5 22.6 23.3 Poor (Number) 1 19,514 7,639 27,152 2 73,717 24,811 98,527 3 129,719 37,959 167,678 4 214,419 46,269 260,688 5 229,271 25,999 255,270 6 107,891 19,728 127,619 7 28,054 0 28,054 8 22,105 ... 22,105 9 19,938 ... 19,938 Total 844,627 162,405 1,007,032 Population (Number) 1 254,702 83,692 338,393 2 531,652 168,823 700,475 3 667,086 170,734 837,819 4 988,150 166,958 1,155,108 5 656,042 80,758 736,800 6 334,913 40,877 375,790 7 114,027 8,362 122,389 8 35,023 ... 35,023 9 19,938 ... 19,938 Total 3,601,534 720,203 4,321,736 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997. 33  Technical Paper ! - Annex I Table 4: Moldova: Children Under 14 and Poverty Status Number of Children Under 14 Right Bank Transnistria Moldova Headcount (Percent) 0 14.0 14.0 14.0 1 21.8 30.7 23.0 2 31.7 37.9 32.6 3 41.1 ... 39.6 4 35.5 ... 35.5 5 48.9 ... 48.9 6 ... 7 100.0 ... 100.0 Total 23.4 22.6 23.3 Poor (number) 0 187,110 55,084 242,194 1 224,400 51,729 276,129 2 263,015 55,593 318,608 3 129,332 0 129,332 4 2.0,832 0 20,832 5 8,521 0 8,521 6 0 0 0 7 11,417 0 11,417 Total 844,627 162,405 1,007,032 Population (number) 0 1,337,801 393,125 1,730,926 1 1,030,678 168,551 1,199,229 2 831,105 146,626 977,731 3 314,435 11,901 326,336 4 58,660 0 58,660 5 17,438 0 17,438 6 0 0 0 7 1.1,417 0 11,417 Total 3,601,534 720,203 4,321,737 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997. 34  Poverty in Moldova: Pilot Results for February 1997 Table 5: Moldova: Number of Elderly and Poverty Status Number of Elderly Members (Over Age 65) in the Household Right Bank Transnistria Country Headcount (PO, in percent) 0 24.4 21.8 24.0 1 21.9 29.0 23.3 2 14.4 11.9 13.9 All 23.5 22.6 23.3 Poor (Number) 0 699,868 119,215 819,083 1 116,449 38,013 154,461 2 28,310 5,178 33,487 All 844,627 162,405 1,007,032 Population (Number) 0 2,871,742 545,683 3,417,425 1 532,882 130,968 663,848 2 196,610 43,552 240,161 All 3,601,234 720,203 4,321,436 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997. 35  Technical Paper II - Annex 1 Table 6: Moldova: Poverty, Age and Gender in Right Bank, February 1997 No. o population In percent of total Poor N,-n-poor Total Poor Non-poor Total Children under 5 80,798 178,166 258,964 31.2 68.8 100.0 Children 5 to 9 114,893 210,415 325,308 35.3 64.7 100.0 Children 10 to 14 83,380 259,241 342,621 24.3 75.7 100.0 Children 15 to 19 50,382 220,877 271,259 18.6 81.4 100.0 Adults 20 to 29 137,529 358,034 495,563 27.8 72.2 100.0 Adults 30 to 39 133,633 401,582 535,216 25.0 75.0 100.0 Adults 40 to 49 93,521 427,088 520,609 18.0 82.0 100.0 Adults 50 to 59 62,959 239,856 302,816 20.8 79.2 100.0 Adults 60 to 69 48,307 263,300 311,607 15.5 84.5 100.0 Extremely aged"' 39,225 198,346 237,571 16.5 83.5 100.0 ___________ M ales Children under 5 52,131 107,658 159,788 32.6 67.4 100.0 Children 5 to 9 58,552 101,397 159,949 36.6 63.4 100.0 Children 10 to 14 52,545 139,160 191,705 27.4 72.6 100.0 Children 15 to 19 22,942 97,594 120,536 19.0 81.0 100.0 Adults 20 to 29 63,850 166,975 230,825 27.7 72.3 100.0 Adults 30 to 39 64,235 197,539 261,774 24.5 75.5 100.0 Adults 40 to 49 43,216 190,647 233,862 18.5 81.5 100.0 Adults 50 to 59 28,045 96,775 124,820 22.5 77.5 100.0 Adults 60 to 69 22,014 1.05,028 127,042 17.3 82.7 100.0 Extremely aged"' 15,031 71,071 86,103 17.5 82.5 100.0 Females Children under 5 28,667 70,509 99,176 28.9 71.1 100.0 Children 5 to 9 56,341 109,018 165,359 34.1 65.9 100.0 Children 10 to 14 30,835 120,081 150,915 20.4 79.6 100.0 Children 15 to 19 27,440 123,283 150,723 18.2 81.8 100.0 Adults 20 to 29 73,676 191,059 264,738 27.8 72.2 100.0 Adults 30 to 39 69,399 204,043 273,442 25.4 74.6 100.0 Adults 40 to 49 50,305 236,442 286,747 17.5 82.5 100.0 Adults 50 to 59 34,914 143,082 177,996 19.6 80.4 100.0 Adults 60 to 69 26,293 158,272 184,565 14.2 85.8 100.0 Extremely aged"' 24,194 127,275 151,469 16.0 84.0 100.0 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997. " Extremely aged are those age 70 and above. 36  Poverty in Moldova: Pilot Results for February 1997 Table 7: Moldova: Poverty, Age and Gender in Transnistria, February 1997 No. of population In percent of total Poor Non-poor Total Poor Non-poor Total Children under 5 4,287 14,924 19,211 22.3 77.7 100.0 Children 5 to 9 14,226 31,298 45,524 31.2 68.8 100.0 Children 10 to 14 22,472 44,253 66,726 33.7 66.3 100.0 Children 15 to 19 15,926 51,768 67,694 23.5 76.5 100.0 Adults 20 to 29 15,724 85,870 101,594 15.5 84.5 100.0 Adults 30 to 39 27,947 62,922 90,870 30.8 69.2 100.0 Adults 40 to 49 31,108 83,613 114,721 27.1 72.9 100.0 Adults 50 to 59 9,652 72,786 82,437 11.7 88.3 100.0 Adults 60 to 69 9,874 63,331 73,205 13.5 86.5 100.0 Extremely aged"' 11,189 47,033 58,222 19.2 80.8 100.0 Males Children under 5 2,193 9,553 11,746 18.7 81.3 100.0 Children 5 to 9 9,394 16,594 25,988 36.1 63.9 100.0 Children 10 to 14 9,217 27,890 37,107 24.8 75.2 100.0 Children 15 to 19 6,901 28,212 35,113 19.7 80.3 100.0 Adults 20 to 29 6,053 40,139 46,192 13.1 86.9 100.0 Adults 30 to 39 14,262 24,978 39,240 36.3 63.7 100.0 Adults 40 to 49 16,202 36,127 52,329 31.0 69.0 100.0 Adults 50 to 59 5,397 29,036 34,433 15.7 84.3 100.0 Adults 60 to 69 2,021 29,029 31,050 6.5 93.5 100.0 Extremely aged"' 3,488 9,555 13,043 26.7 73.3 100.0 Females Children under 5 2,094 5,371 7,464 28.0 72.0 100.0 Children 5 to 9 4,832 14,705 19,536 24.7 75.3 100.0 Children 10 to 14 13,255 16,363 29,618 44.8 55.2 100.0 Children 15 to 19 9,026 23,556 32,581 27.7 72.3 100.0 Adults 20 to 29 9,670 45,731 55,402 17.5 82.5 100.0 Adults 30 to 39 13,685 37,944 51,630 26.5 73.5 100.0 Adults 40 to 49 14,906 47,486 62,392 23.9 76.1 100.0 Adults 50 to 59 4,255 43,750 48,004 8.9 91.1 100.0 Adults 60 to 69 7,854 34,301 42,155 18.6 81.4 100.0 Extremely aged"' 7,701 37,478 45,179 17.0 83.0 100.0 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997 Extremely aged are those age 70 and above. 37  Technical Paper II- Annex I Table 8: Moldova: Gender of Household Head and Poverty Status Gender of Household Head Right Bank Transnistria Country Headcount (PO, in percent) Male 23.4 24.3 23.6 Female 23.5 19.5 22.8 All 23.5 22.6 23.3 Poor (number) Male 550,101 111,982 662,082 female 294,526 50,424 344,950 All 844,627 162,405 1,007,032 Population (Number) Male 2,346,734 461,006 2,807,740 Female 1,253,970 259,198 1,513,168 All 3,601,534 720,203 4,321,737 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997. 38  Poverty in Moldova: Pilot Results for February 1997 Table 9: Moldova: Private Plot and Poverty Status Whether the Household Has A Private Plot Right Bank Transnistria Country Headcount (PO, in percent) No plot 16.2 20.5 18.6 Has plot 25.4 25.0 24.9 All 23.5 22.5 23.3 Poor (Number) No plot 123,180 80,049 203,229 Has plot 721,447 82,357 803,803 All 844,627 162,405 1,007,032 Population (Number) No plot 760,659 330,032 1,090,691 Has plot 2,840,875 390,171 3,231,044 All 3,601,534 720,203 4,321,736 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997. 39  Technical Paper II - Annex I Table 10: Moldova: Inequality Measures, February 1997 Based on Per Capita Consumption 1/ Right Bank (In percent Transnistria (In percent (M. Lei) of total) (1000 Tr r) of total) First 31.8 2.1 2953.4 1.6 Second 54.0 3.6 6452.0 3.6 Third 69.5 4.6 8240.3 4.6 Fourth 84.5 5.6 9865.1 5.5 Fifth 102.6 6.8 11792.1 6.5 Sixth 125.8 8.3 14459.1 8.0 Seventh 150.7 10.0 17621.6 9.8 Eighth 186.2 12.3 21231.3 11.8 Ninth 241.0 16.0 28688.4 15.9 Tenth 463.4 30.7 59131.7 32.8 Total 1509.6 100.0 180435.0 100.0 Decile ratio 2 14.6 20.0 Gini coefficient, consumption 3' 40.0 40.8 Gini coefficient, gross household income 4/ 39.7 39.5 Gini coefficient, net household income 4' 39.6 39.6 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997. Notes: 1/ Consumption defined as the sum of total purchases plus the value of gifts received or given to others (see text). 2/ Percent of consumption of the top (tenth) decile divided by percent of consumption of bottom (first) decile. 3/ The Gini coefficient is a measure of inequality. The closer it is to 0, the more equal the distribution. The closer the Gini coefficient is to 100 (percent), the more unequal the distribution. 4/ Income defined by Moldovan team (See Okrasa 1997). On a population basis. 40  Poverty in Moldova: Pilot Results for February 1997 Table 11: Moldova: Average Benefits and Transfers Received by Right Bank Households, February 1997 Per Capita (Per Household Member) Amount Received (Moldovan lei) Income Received from Resale of Goods Poor 0.0587 Non-poor 1.5004 Average 1.2056 Alimony Poor 0 Non-poor 0.0336 Average 0.0267 Care of Elderly or Disabled Member Benefit Poor 0 Non-poor 0.0345 Average 0.0274 Disability Pension Poor 40.1749 Non-poor 114.9845 Average 99.6912 Child Allowances, all types Poor 0.3526 Non-poor 0.815 Average 0.7205 Old Age Pension Poor 6.5242 Non-poor 15.8067 Average 13.9091 Income Received From Other Individuals Poor 0.3381 Non-poor 6.6974 Average 5.3974 (Continued) 41  Technical Paper ll - Annex 1 Table 11: Moldova: Average Benefits and Transfers Received by Right Bank Households, February 1997 (Continued) Per Capita (Per Household Member) Amount Received (Moldovan lei) Income Received from Individuals in Russia Poor 0.2974 Non-poor 0.0639 Average 0.1116 Reported Earnings from the Private Sector Poor 3.1564 Non-poor 9.6639 Average 8.3336 Social Pensions Poor 0 Non-poor 0.0312 Average 0.0249 Student Stipends Poor 0.138 Non-poor 0.8248 Average 0.6844 Survivors Pension Poor 0.138 Non-poor 0.8248 Average 0.6844 Early Retirement Pension Poor 1.7302 Non-poor 5.6956 Average 4.885 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997. 42  Poverty in Moldova: Pilot Results for February 1997 Table 12. Moldova: Regression Results, February 1997 Linear Model (Dependent Variable is Per Capita Consumption) Coefficien Standard P> Itl Coefficient Standard P> Itl Estimate Error Estimate Error Right Bank Transnistria Constant 122.41 52.41 0.02 43,592.99 10,798.71 0.00 Children 0-13 -24.59 4.09 0.00 -4,213.66 1,150.10 0.00 Elderly -24.12 5.85 0.00 -1,292.32 1,119.90 0.25 Male Adults 14-64 -24.91 6.62 0.00 -2,914.81 1,449.45 0.05 Female Adults 14-64 -25.42 10.82 0.02 -2,669.21 2,221.39 0.23 Higher Education 59.30 13.10 0.00 4,819.36 2,671.54 0.07 Vo-Tech Education 2.23 10.41 0.83 2,222.22 2,252.46 0.33 Primary Education -22.15 16.94 0.19 2,352.55 3,872.84 0.54 illiterate I/ -4.86 28.85 0.87 -2,556.29 9,690.22 0.71 HH Head Age 3.27 2.00 0.10 -684.46 457.18 0.13 HH Head Age Squaredc2 -0.03 0.02 0.19 5.76 5.21 0.27 Not working 3 -2.44 12.93 0.85 2,302.76 2,924.58 0.43 Capital City 15.85 14.79 0.28 316.48 2,857.66 0.92 Rural 9.92 12.05 0.41 3,684.03 2,188.44 0.09 Plot 16.97 14.80 0.25 -2,878.58 2,095.94 0.17 Number of observations 918 2.84 Prob >F 0.00 0.00 R square 0.13 0.16 Adjusted R square 0.11 0.12 Predicted Poor Error 23.97% 23.70% Source: February 1997 pilot household data set. Notes: 1/ Primary and incomplete primary education comprised the omitted variable. Other urban was omitted for location. 2/ Squaring the age of the head of household approximates a life-cycle effect, which was found to be significant for both the Right Bank and Transnistria. 3/ If an individual reported that her/his main source of income was an unemployment benefit, social assistance, pension, stipend, or was self-described as "dependent", then the individual was classified as "not working" for the purposes of this regression exercise. 43  Technical Paper II - Annex I Table 13: Moldova: Average Benefits and Transfers Received by Transnistrian Households, February 1997 Per Capita (Per Household Member) Amount Received (1000 Tr r) Income Received from Resale of Goods Poor 81.2 Non-poor 1288.9 Average 1039.5 Care of Elderly or Disabled Member Benefit Poor 0.0 Non-poor 16.7 Average 13.2 Disability Pension Poor 46.3 Non-poor 145.6 Average 125.1 Child Allowances, all types Poor 109.5 Non-poor 24.8 Average 42.3 Old Age Pension Poor 1619.8 Non-poor 2571.9 Average 2375.3 Income Received From Other Individuals Poor 32.2 Non-poor 300.5 Average 240.0 Reported Earnings from the Private Sector Poor 6.4 Non-poor 797.2 Average 633.9 (Continued) 44  Poverty in Moldova: Pilot Results for February 1997 Table 13: Moldova: Average Benefits and Transfers Received by Transnistrian Households, February 1997 (Continued) Per Capita (Per Household Member) Amount Received (1000 Tr r) Reported Earnings from State-Owned Enterprises Poor 2588.1 Non-poor 4336.7 Average 3975.7 Student Stipends Poor 33.1 Non-poor 150.2 Average 126.0 Survivors Pension poor 0.0 Non-poor 29.2 Average 23.2 Early Retirement Pension Poor 0.0 Non-poor 257.9 Average 204.7 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997. 45  Technical Paper II-Annex I Table 14: Moldova: Share of Riglit Bank Households Reporting Receipt of various benefits or kinds of income u, by Poverty Status, February 1997 Poor Nonpoor (percent) (percent) Missing cases 2 Alimony 0.0 100.0 3,589,926 Income received from resale of goods 9.2 90.8 3,470,694 Benefit for Care of Elderly 20.4 79.6 471,256 Disability Pension 20.4 79.6 471,256 Individual Labor Activity Income 0.0 100.0 3,593,828 Child Allowances, all types 31.8 68.2 3,483,551 Old Age Pension 17.2 82.8 2,738,610 Income from Other Individuals 12.3 87.7 3,253,647 Income from Individuals from Russia 24.2 75.8 3,585,799 Income from Private Sector 17.9 82.1 3,166,327 Sickness or Maternity Benefit 0.0 100.0 3,570,169 Income from State-Owned Enterprise 17.1 82.9 2,287,975 Social Pension 0.0 100.0 3,598,092 Student Stipend 15.8 84.2 3,526,702 Survivors Benefit Pension 29.7 70.3 3,564,149 Unemployment benefit 64.6 35.4 3,590,100 Early Retirement Pension 14.7 85.3 3,517,026 Source: Author estimates based on data fromr Moldovan Pilot Household Survey, February 1997. Notes: 11 If a household reported any positive amounit received of the benefit or income item. Of these households, how many people living in such recipient households were poor or non-poor. 27 Obviously, under-reporting of all income items, including transfers, was substantial. 46  Poverty in Moldova: Pilot Results for February 1997 Table 15: Moldova: Share of Transnistrian Households Reporting Receipt of various benefits or kinds of income 11, by Poverty Status, February 1997. Poor Nonpoor (percent) (percent) Missing cases 21 Income received from resale of goods 10.1 89.9 667,558 Benefit for Care of Elderly 0.0 100.0 718,182 Disability Pension 22.1 77.9 696,523 Individual Labor Activity Income 0.0 100.0 701,041 Child Allowances, all types 42.9 57.1 666,738 Old Age Pension 14.8 85.2 491,993 Income from Other Individuals 5.3 94.7 643,077 Income from Individuals from none reporting none reporting 720,203 Romania Income from Private Sector 18.2 81.8 680,789 Sickness or Maternity Benefit 41.0 59.0 716,778 Income from State-Owned Enterprise 21.4 78.6 386,938 Social Pension none reporting none reporting 720,203 Student Stipend 4.1 95.9 676,845 Survivors Benefit Pension 0.0 100.0 717,140 Unemployment benefit none reporting none reporting 720,203 Early Retirement Pension 0.0 100.0 698,091 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997 Notes: 1/ If a household reported any positive amount received of the benefit or income item. Of these households, how many people living in such recipient households were poor or non-poor. " Obviously, under-reporting of all income items, including transfers, was substantial. 47  Technical Paper ni - Annex I Table 16: Moldova: Struicture of Right Bank Monthly Per Capita Consumption", (In percent) Total Poor Nonpoor Households Food and beverages 73.2 60.7 63.4 Alcoholic beverages and tobacco 2.5 2.2 2.3 Clothing and footwear 3.2 6.3 5.6 Housing (rents and utilities) 4.1 6.2 5.7 Furniture and household items 2.3 2.3 2.3 Healthcare 1.1 3.2 2.7 Transportation 1.2 1.7 1.6 Miscellaneous 2' 2.2 3.1 2.9 Private transfers to others 1.1 3.1 2.6 Consumption in kind3' 8.4 11.2 10.5 Total 100.0 100.0 100.0 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997 Notes: " Based on population weights. Includes the self-reported value of consumption in-kind of food and non-food goods (see note 3). 2/ Sum of communication, entertainment, education, hotels, meals purchased outside the home, insurance, and other miscellaneous expenclitures. 31 Consumption in kind. Could include food and/or non-food goods from other households. Does not include consumption of food in-kind prodluced by the household's own private plot (which was classified in "food and beverages"). 48  Poverty in Moldova: Pilot Results for February 1997 Table 17: Moldova: Structure of Transnistrian Monthly Per Capita Consumption"1, (In percent) Total Poor Nonpoor Households Food and beverages 79.8 67.7 70.4 Alcoholic beverages and tobacco 3.1 2.3 2.5 Clothing and footwear 1.1 5.7 4.7 Housing (rents and utilities) 2.0 2.9 2.7 Furniture and household items 1.7 1.3 1.4 Healthcare 1.2 2.4 2.1 Transportation 1.0 1.4 1.3 Miscellaneous 2.5 3.7 3.4 Private transfers to others 2.1 2.8 2.7 Consumption in kind3' 3.7 8.9 7.7 Total 100.0 100.0 100.0 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997 Notes: " Based on population weights. Includes the self-reported value of consumption in-kind of food and non-food goods (see note 3). 2' Sum of communication, entertainment, education, hotels, meals purchased outside the home, insurance, and other miscellaneous expenditures. 3/ Consumption in kind. Could include food and/or non-food goods from other households. Does not include consumption of food in-kind produced by the household's own private plot (which was classified in "food and beverages"). 49  Technical Paper II - Annex I Table 18: Moldova: Family Composition and Poverty Status Family Composition Right Bank Transnistria Countiy Headcount (PO, in percent) No children, no elderly 12.6 13.2 12.7 Children but no elderly 29.9 31.2 30.1 Elderly but no children 17.0 16.2 16.8 Both children and elderly 23.7 39.4 26.4 Total 23.5 22.6 23.3 Poor (Number) No children, no elderly 115,532 37,325 152,857 Children but no elderly 584,336 81,891 666,227 Elderly but no children 71,578 17,759 89,337 Both children and elderly 73,181 25,431 98,612 Total 844,627 162,405 1,007,032 Population (Number) No children, no elderly 917,209 283,205 1,200,414 Children but no elderly 1,954,532 262,477 2,217,009 Elderly but no children 420,592 109,918 530,510 Both children and elderly 309,199 64,601 373,800 Total 3,601,534 720,203 4,321,737 Source: Author estimates based on data from Moldovan Pilot Household Data, February 1997. Note: Children are aged 0 through 14 inclusive. Elderly are aged 65 and above. Adults are aged 15-64. 50  Poverty in Moldova: Pilot Results for February 1997 Annex 2: Additional Tables Annex Table 2-1: Moldova: Location and Poverty Status Locality Right Bank Transnistria Country Headcount (PO, in percent) Major city (Tiraspol or Chisinau) 11.3 20.1 13.7 Other cities 22.8 28.2 24.3 Rural 27.5 18.0 26.7 Total 23.5 22.6 23.3 Poor (number) Major city (Tiraspol or Chisinau) 78,809 51,288 130,097 Other cities 164,711 75,336 240,047 Rural 601,107 35,782 636,889 Total 844,627 162,406 1,007,033 Population (Number) Major city (Tiraspol or Chisinau) 697,216 254,791 952,007 Other cities 721,135 266,909 988,044 Rural 2,183,182 198,503 2,381,685 Total 3,601,553 720,203 4,321,756 Source: Author estimates based on data from Moldovan Pilot Household Survey, February 1997. 51  Technical Paper II - Annex 2 Annex Table 2-2: Moldova: Prices, Exchange Rates and Real Wages (,Pi,/ (US$/LCU)/ Real Wage Exchange Rate 1992 Jan 8.6 109.51 Feb 11.33 97.13 Mar 13.4 99.53 April 16.49 99.37 May .18.26 123.67 Jun :17.62 143.3 Jul 18.32 139.51 Aug 119.88 130.72 Sep 22.82 137.61 Oct 28.62 132.61 Nov 39.36 152.14 Dec 44.75 292.57 1993 Jan 69.67 0.51 106.34 Feb 88.48 0.65 91.76 Mar 111.67 0.73 95.43 Apnil 128.08 0.82 89.54 May 141.66 1.04 96.72 Jun 189.25 1.31 98.13 Jul 2160.98 1.21 106.94 Aug 321.53 1.54 105.74 Sep 447.89 2.04 85.65 Oct 642.72 2.38 65.85 Nov 788.62 3.85 69.24 Dec 1255.48 3.64 89.24 1994 Jan 1492.77 3.67 47.18 Feb 1815.2 3.85 40.76 Mar 1996.72 3.93 41.32 April 20'36.56 4.06 37.35 May 2153.17 4.07 39.69 Jun 2211.3 4.07 48.88 Jul 2259.95 4.06 49.49 Aug 2257.69 4.14 50.8 Sep 2314.13 4.21 53.02 Oct 241]1.33 4.23 52.53 Nov 2495.72 4.24 52.95 Dec 2568.1 4.27 76.78 (Continued) 52  Poverty in Moldova: Pilot Results for February 1997 Annex Table 2-2: Moldova: Prices, Exchange Rates and Real Wages (Continued) CPIp (US$/LCU)21 Real Wage Exchange Rate 1995 Jan 2642.57 4.33 47.62 Feb 2703.35 4.38 43.55 Mar 2722.28 4.42 47.23 April 2738.61 4.49 45.14 May 2749.57 4.54 47.73 Jun 2755.06 4.56 49.55 Jul 2760.57 4.53 50.81 Aug 2766.1 4.53 50.48 Sep 2838.01 4.53 48.83 Oct 2915.17 4.54 52.37 Nov 3089.52 4.57 50.72 Dec 3179.12 4.53 71.64 1996 Jan 3290.38 4.53 45.30 Feb 3372.64 4.56 46.60 Mar 3409.74 4.54 50.20 April 3447.25 4.55 50.08 May 3474.83 4.59 51.05 Jun 3478.30 4.64 54.53 Jul 3481.78 4.65 54.24 Aug 3471.34 4.61 53.79 Sep 3523.41 4.63 53.09 Oct 3579.78 4.61 56.19 Nov 3629.90 4.65 57.50 Dec 3658.94 4.67 80.63 1997 Jan 3728.46 4.67 51.72 Feb 3780.66 4.68 Mar 3818.46 4.65 April 3849.01 4.59 May 3879.80 4.58 Source: Moldovan Economic Trends. Notes: ' CPI - Consumer Price Index 2/ LCU - Local Currency Unit (Moldovan Lei) 53  Technical Paper H - Annex 3 Annex 3 Poverty Lines Setting a poverty line is at best an approximate "science" and absolute poverty lines tend to be more arbitrary or relative than suggested by name. Most current thinking on the subject (Ravallion 1993, 1994l; Atkinson 1992) suggest that "absolute" poverty lines are actually fairly arbitrary and open to criticism even about the food portion of the absolute line. Standard World Bank practice is to set at least 2 poverty lines, and to test for sensitivity to these lines. Although the notion can be difficult for many to accept, the reality that all poverty lines are arbitrary or normative has been well-established in the literature (Sen 1977, Lanjouw 1995). The "poverty" lines used in Mtoldova currently trace their origin to the USSR. When the USSR adopted a means-tested benefit in 1974 designed to alleviate material difficulties for "under-provisioned" families, the income test adopted reflected several years of study on "minimum consumption budgets" initiated during the Khrushchev era (Sarkisyan and Kuznetsova 1967, Atkinson and Micklewright 1992, Sipos 1992). The Tninimum consumption budget was intended to be an absolute measure of what would be minimally acceptable consumption under a socialist system, and not an absolute measure of poverty per se (since, after all, poverty did not officially exist). In the USSR, during the Khrushchev era, work was done by an Armenian economist following the Armenian academic tradition of relatively independent scholarship on establishing "norms" for the "socially desirable" consumption of food, non-food goods, and a few services (Sarkisian and Kuznetsova, 1967). This was called misleadingly "the minimum consumption budget" (MCB). The MCB included very generous consumption allowances for meat, milk, and other products which do not normally consist in a "minimum survival" basket of food products, and also included such non-essentials as alcoholic beverages, tobacco, and even a "normed rate" of savings. The minimum consumption basket approach resurfaced in the late 1980s, when poverty issues were first openly discussed. Unfortunately, galloping inflation in the early 1990s made any poverty line based on the minimum consumption basket to be unaffordable. During the high inflation years of 1992 and 1993, the MCB lost whatever policy relevance it ever had, and many (although not all) FSU countries have since repudiated the contents of the MCB basket (e.g. Russia and most recently, Ukraine, have adopted official poverty lines with less generous allowances than in the MCB). The most crucial task for a poverty line is to serve as an effective way to separate the needy from the not-so-needy. In many countries, there is both an official poverty line and a line of social assistance eligibility (e.g. the US) which is lower or markedly lower than the official poverty line. When Dfficial poverty lines are used that classify more than 50 percent of the population as poor, the usefulness of the line is undermined. Since no 54  Poverty in Moldova: Pilot Results for February 1997 government can afford to help 75 or 95 percent of the population, it is better to use a line of social assistance eligibility that can differentiate the poorest and which is affordable. A variety of poverty lines were estimated for this study (Table 2). The MCB line still somewhat in use in Moldova would classify 97 percent of the Right Bank population as poor and 98 percent of Transnistria. Although 100 percent of both populations may feel poor, the reality is that other absolute poverty lines would suggest that less than 3 percent of the population was poor. The relevant reality for policymakers lies within these two extremes. There is no one "right" poverty line for Moldova. For pragmatic reasons, relative lines of 40 percent of the unweighted mean per consumption were used (see text). Other relative lines would have been equally valid. The choice of a particular line is not the objective; rather one should seek a way to differentiate the poor from the rest of the population, and to only hive off an amount of people for which one can realistically anticipate budgetary support. 55  Technical Paper II - Annex 4 _ Annex 4 Lquivalence Scales In this study, per capita expenditures and income were used where per capita is understood to mean "per household member" not per individual in the population. The relative poverty lines are a percent of real (family member) per capita expenditures. In such a formulation, each household member has been assumed to consume equal values. In actuality, the needs of household members differ. It is not very difficult to show that if families can obtain economies of scale in consumption, using a per capita poverty standard will overstate poverty (Lanjouw and Ravallion 1994). Economies of scale in consumption mean that an additional household member does not cost as much as preceding members. Some common-place examples are using hand-me-down clothes for young children, "stretching" a stew by adding potatoes instead of meat, and the mechanical effect that comes from dividing a fixed cost (such as rent) by an increased number of household members. A related consideration is the fact that nutritional requirements vary among people, depending on their age, gender, and activity levels. Since household composition is different, caloric requirements will also differ, depending on the age-gender make-up of the household members. A standard approach is to normalize the household to (typically) a standard male adult, which results in a scale that assigns an equivalence of less than one to a female adult, and even lower to a child as children tend to consume less goods than adult males (Ravallion 1992). An example of anr equivalence scale used in the OECD is adult male equals 1, adult female equals 0.7, arid a child equals 0.5. In the OECD approach, a child is assumed to consume 50 percent of a working age adult, and an adult at or past retirement age is assumed to consume 70 percent of a working age adult. Sometimes equivalence scales are differentiated by gender. ][n the US, an alternate approach is used. The US poverty line is said to take into accou1nt economies of scale in consumption,'7 and there are actually 7 different US poverty lines, based on different family compositions.18 Rather than apply a normative scale such as the OECD one or one derived from another country's experience, it is preferable to estimate equivalence directly when household data are available. The fi:rst step is to test the hypothesis that there are no economies of scale; that the appropriate standard is per capita. Following Deaton and 17 Economies of scale in consumption mean that the marginal cost of an additional family member declines. This results from the fact that soirme fixed costs are little affected by the addition of an additional family member (e.g. the heating bill) as well as "savings" in variable cost familiar to anyone who has worn "hand-me-down" clothes or eaten a stew "stretched" to feed an unexpected guest. 18 In actuality, the US poverty methodology has not been revised since the 1956 regressions run by Orshansky, and is open to criticism on this and other points. 56  Poverty in Moldova: Pilot Results for February 1997 Muelbauer (1980), Lanjouw (1995), and Foley (1993), we estimated theta (0) based on a regression of the Moldovan household data. Unfortunately, we had no regional price index, but were forced to regress the food share as follows: foodshare = constant + I3iln(total consumption) + f321n(household size) + PA2(number of elderly) + A3(number of children). This regression led to an estimate of 0 of 0.97, which was statistically indistinguishable from 1. When 0 = 1, there are no economies of scale in consumption and a per capita standard is indicated. There was essentially no difference if we used children as the omitted dummy variable and ran on number of adults instead of number of children. Preliminary results from the RLMS indicated that economies of scale in consumption were not significant in Russia if a simple equivalence scale based on household size was estimated (Foley 1993). In such a case, household per capita income is an acceptable approximation of the equivalence scale, which is also the preliminary finding for Moldova. Since Moldova met the criteria for a per capita standard, further work on estimating a gender-separated or age-differentiated equivalence scale was not necessary. Given the nature of the pilot survey data, and the fact that approaches for estimating equivalence are not without controversy in the literature (Nelson 1992, Van Der Gaag and Smolensky 1982, Klein 1988, Conniffe 1992, Fisher 1987), suggest that further experimentation is not warranted. 57   TECHNICAL PAPER III POVERTY IN THE REPUBLIC OF MOLDOVA IN MAY AND AUGUST 1997 by Robert Ackland Australian National University The views contained herein are those of the author only, and do not represent the opinions of the World Bank nor of its Board of Directors, nor of any individual country member, nor federal, nor local government.   Poverty in the Republic of Moldova in May and August 1997 Table of Contents 1. Introduction .......................................1 2. Measuring Living Standards: Levels and Distribution .......................................2 3. Measuring Poverty .......................................4 4. Poverty Profile: Cross-tabulations .......................................9 5. Poverty Profile: Regression Analysis ...................................... 22 6. Targeting of Social Assistance ...................................... 25 7. Proxy Means Tests ...................................... 30 8. Conclusions and Policy Recommendations ...................................... 33 9. References ...................................... 35 Appendices Appendix A: A Locational Food Price Index .37 Appendix B: Relative and Absolute Poverty Lines .41 Appendix C: Economies of Scale in Household Consumption .45 Appendix D: Sensitivity Analysis .47 Appendix E: Functional form for regressions: linear versus semi-log .49 Appendix F: Poverty in the Republic of Moldova: Additional Tables .51 List of Tables Table 2.1: Distribution of monthly per capita household consumption .3 Table 3.1: Poverty measures by location, May 1997 (percent) .5 Table 3.2: Population and poverty shares by location, May 1997 (percent) .6 Table 3.3: Household consumption budget shares, May 1997 (percent) .8 Table 3.4: Share of calorie consumption and food shares, May 1997 .9 Table 4.1: Poverty rates by number of children and elderly persons, May 1997 (percent). 12 Table 4.2: Poverty rates by type of settlement and presence of food plot, May 1997 (percent).. 19 Table 4.3: Selected housing characteristics by household poverty status, May 1997 .21 Table 5.1: Consumption regression, May 1997 .23 Table 6.1: Incidence of receipt of social assistance, May 1997 .27 Table 6.2: Impact of social assistance on individual poverty measures, May 1997 .29 Table Al: Average prices and budget shares, Right Bank, May 1997 .39 Table A2: Average prices and budget shares, Transnistria, May 1997 .39 Table A3: Food price indices, May 1997 .39 Table B 1: Per capita quantities, calorie shares and prices (Right Bank, May 1997) .41 Table B2: Per capita quantities, calorie shares and prices (Transnistria, May 1997) .42 Table B3: Relative poverty lines, Moldova 1997 .44 Table C1: Assumed size elasticity and average size of poor and non-poor households .46 Table DI: Sensitivity analysis, May 1997 .48  Technical Paper III List of Figures Figure 3.1: CDF of log monthly per capita consumption, Right Bank, May 1997 .........................7 Figure 4.1: Poverty rates by household size, May 1997 ............................................................ 10 Figure 4.2: Poverty rates by number of children under 14 years, May 1997 ................................ 11 Figure 4.3: Poverty rates by number of elderly persons, May 1997 ............................................. 12 Figure 4.4: Poverty rates by gender and age, May 1997 ............................................................ 13 Figure 4.5: Poverty rates by gender and age of household head, May 1997 ................................. 14 Figure 4.6: Poverty rates by education level - persons 2 14 years , May 1997 ............................ 16 Figure 4.7: Poverty rates by education level of household head, May 1997 ................................ 16 Figure 4.8: Education attainment by poverty status - persons > 14 years, May 1997 .................. 17 Figure 4.9: Poverty rates by gender and socio-economic group (persons 2 14 years), May 199718 Figure 4.10: Poverty rates by gender an,d socio-economic group of household head, May 1997.18 Figure 6.1: Incidence of social assistance receipt, May 1997 ................................................ 26 Figure 6.2: Percentage of total social assistance received by households, May 1997 .................. 28 Figure DI: CDF of log monthly per capita consumption, Right Bank, May 1997 ....................... 47  Poverty in the Republic of Moldova in May and August 1997 1. Introduction 1.1. In this paper, an analysis of poverty and the targeting of social assistance in the Republic of Moldova using data from the 1997 Moldova Household Budget Survey (MHBS) is presented.' The data from the MHBS presently available for analysis were collected in the second and third quarters of 1997. Approximately 2000 households were sampled in each quarter. Household consumption in the second quarter was adjusted to the prices of the month of May and the consumption of households sampled in the third quarter was similarly adjusted to August prices. For reasons explained below, the majority of the analysis in this paper uses the data from the May 1997 quarter. 1.2. There is a de facto partition of Moldova into two economic zones which are known as the Right Bank and Transnistria. The two zones have different prices, currencies and market relationships and this necessitated that the household survey be conducted separately in each zone. In this report, results are therefore presented separately for the Right Bank, Transnistria and for Moldova as a whole. As is shown below, the poverty situations are markedly different in the two zones. Within each zone, statistics are generally presented separately for the capital or major city (Chisinau in the Right Bank and Tiraspol in Transnistria), other urban areas and rural areas. 1.3. The overall objective of poverty analysis is to identify which households and individuals are most vulnerable to poverty and to provide input into the design of policy measures that help to reduce poverty and improve living conditions for the poor. The first step of poverty analysis is defining a measure of living standards that can be used to rank households from least well-off to most well-off in a consistent fashion. The measure of household welfare used in this paper is expenditure, although non-monetary indicators of welfare such as health status and access to basic services are also often used to rank households. The second step in poverty analysis is determining a rule that is used to distinguish the poor from the non-poor; this involves the setting of the poverty line against which household consumption is compared. The third step involves using the living standards indicator and poverty line to construct the poverty profile which identifies the salient characteristics of the poor and thus provides information on the causes of poverty. As one of the main policy tools for tackling poverty in a particular country is the social assistance program, an additional important component of poverty analysis is an assessment of the effectiveness and efficiency of the targeting of social assistance. 1.4. The structure of the paper is as follows. In Section 2, there is a discussion of the measure of living standards used in the analysis (total household consumption) and a brief description of the levels and distribution of this measure. The poverty line used in the analysis is described in Section 3, as well as the index numbers of poverty (describing 1 The paper updates and builds on the analysis of Braithwaite (1997a) who used data from the February 1997 Moldova Pilot Survey. Many thanks to Jeanine Braithwaite for helpful comments on an earlier draft. 1  Technical Paper ll incidence, depth and severity) which are used to describe the poverty situation in Moldova. In Section 4, the poverty profile (which shows how the poverty rate differs across types of individuals and households) is presented. A regression-based poverty profile is presented in Section 5. In Section 6, there is an analysis of the efficiency and effectiveness of the social assistance program in Moldova. Proxy means tests, which can be used as inputs into the targeting of social assistance, are presented in Section 7. Section 8 concludes the paper. 2. Measuring Living Standards: Levels and Distribution 2.1. It is common practice in poverty analysis to use household consumption as the measure of living standards. In forme:r Soviet Union (FSU) countries, consumption is preferred to money income as a measure of household living standards because there is a tendency for income to be underreported (this is particularly true of high income earners) and also the fact that many households rely on food grown in garden plots. Full details of the construction of the consumption measure used in this study are given in Ackland (1998). Briefly, household consumption consists of 'regular' cash and in-kind expenditures (such as on food, clothing, rent and utilities, health care, transportation, entertainment and education), plus the self-reported value of consumption of home production of food, plus cash and in-kind gifts given and received, plus goods and services received free from either a place of study or through humanitarian or social assistance. 2.2. The measure of living standards used in the present study is per capita household consumption (total household consumption, divided by household size). As discussed in Appendix C, no adjustment is made to account for the demographic composition of the household (in general, there is reason to expect that young children and the elderly may consume fewer calories and hence have lower living costs than adults). Similarly, economies of scale (the presence of certain types of fixed expenditures, for example heating and rent may imply that an additional household member does not cost as much as preceding members) are not adjusted for. The focus of most of the analysis is on the individual as opposed to the household. In the absence of information on the intra-household allocation of consumption, the same per capita household consumption is attributed to each household member. 2.3. Table 2.1 shows the distribution of monthly per capita household consumption.2 The first point to note is that the data exhibit a large degree of seasonality, as would be expected during this time of the year. While the CPI only increased by 0.2 percent between May and August 1997 (see Ackland 1998), mean per capita monthly household consumption increased by 9.3 percent in Right Bank and 30.3 percent in Transnistria. The exceptionally large increase in mean consumption in Transnistria is suspect and there may be a problem with the 2 It should be noted that all survey results presented here are weighted population results. 2  Poverty in the Republic of Moldova in May and August 1997 data for the August quarter.3 For this reason, the results in this report focus on the May 1997 data (all results for August are contained in the additional tables paper; in general, the results were qualitatively similar between the two quarters). In May, average household consumption was around 25 percent higher in urban areas compared with rural areas. For Moldova as a whole, average household consumption in the top 20 percent of the distribution of welfare was between 8 and 10 times higher than average spending in the bottom quintile and accounted for over 50 percent of total consumption (while the lowest quintile accounted for less than 5 percent of total consumption). Table 2.1- Distribution of monthly pe capita household consumption May 1997 Aueust 1997 RB Trans RB Trans % of % of % of % of Mean total Mean total Mean total Mean total Urban lowest 50.0 4.1 6361.3 4.1 56.4 4.3 6965.0 4.6 2nd 89.8 8.0 9921.2 8.5 102.0 8.1 12152.9 8.7 3rd 133.9 12.8 14083.2 13.0 148.6 13.2 17980.9 14.8 4th 200.6 22.4 21341.2 24.7 218.7 20.8 25710.0 23.1 highest 384.8 52.6 48144.5 49.8 441.6 53.6 45760.3 48.8 All 183.3 100.0 20809.7 100.0 207.1 100.0 22696.6 100.0 Rural lowest 34.6 4.7 2718.4 5.4 41.5 4.4 7298.0 5.2 2nd 67.4 9.4 6094.8 7.9 75.0 9.6 12903.3 9.6 3rd 98.9 14.6 10916.7 13.9 104.6 14.9 18765.9 16.9 4th 147.4 21.7 18140.1 25.4 147.9 21.2 29287.7 25.7 highest 296.7 49.6 36935.2 47.4 334.3 49.9 68284.2 42.6 All 145.9 100.0 16758.0 100.0 156.4 100.0 31605.5 100.0 All lowest 40.0 3.8 4677.5 2.5 46.2 4.5 7078.8 3.7 2nd 75.1 8.1 9001.6 7.4 82.4 8.1 12338.3 7.6 3rd 109.6 12.3 13309.4 12.6 118.4 13.3 18295.0 10.6 4th 165.5 21.9 20543.5 21.0 170.9 20.1 26656.3 18.7 highest 335.3 53.8 44222.8 56.6 379.5 54.1 54847.3 59.5 All 161.5 100.0 19548.2 100.0 176.6 100.0 25469.0 100.0 Source: Author estimates based on MHBS, 1997. Note: Quintiles are defined in terms of persons rather than households. Per capita consumption in Right Bank expressed in Moldovan lei per person per month. Per capita consumption in Transnistria expressed in 1,000 Transnistrian rubles per person per month. 2.4. Another measure of the equality of the distribution of consumption is the Gini coefficient which is bounded between 0 (inequitable distribution) and I (equitable distribution). In May, the Gini (calculated over individuals) for per capita consumption was 0.4 in the Right Bank and it was 0.44 in Transnistria. These Ginis suggest that consumption is fairly inequitably distributed in Moldova; however, they are comparable to Ginis calculated 3Note that only rural households in Transnistria experienced a very large increase in consumption between May and August. It is not entirely clear whether there is a problem with under-reporting of consumption in May or over-reporting of consumption in August. 3  Technical Paper III for other transition economies.4 The Ginis were slightly higher in rural compared with urban areas; in May in the Right Bank (Transnistria), the Gini for urban areas was 0.38 (0.43) compared with a rural Gini of 0.4 (0.45). 3. Measuring Poverty 3.1. Derivation of the poverty line. There are two main approaches to constructing a poverty line. An absolute poverty line is constructed under the assumption that it is possible to define minimum standard of living based on physiological needs for food, water, clothing and shelter (see Appendix B for a full description of how absolute poverty lines are constructed). In contrast, a relative poverty line is set so as to reflect a generally acceptable standard of living which is specific to the country and the time of the study. Relative poverty lines are often set at a particular proportion of mean per capita consumption. Hence, they reflect the norms of the particular society being studied both through the decision as to what proportion of mean per capita consumption is considered appropriate for setting the poverty line and also the contents of the basket of goods and services used to measure consumption. 3.2. For several reasons, it was decided that a relative poverty line was appropriate for use in the present poverty study. First, it was necessary that a particular poverty line be chosen in a fairly short period of time (so it could be used as input into other research being conducted as part of the Moldova poverty assessment). This precluded the construction of an absolute poverty line, which would have taken a long time, especially since the raw expenditure data are fairly unwieldy and idiosyncratic. The fact that there are different price structures and currency regimes in the Right Bank and Transnistria would have further complicated the construction of an absolute poverty line. A final reason for using a relative poverty line relates to the potential problem of either under- or over-reporting of expenditures in the MHBS data which was mentioned above. Such errors of measurement are less likely to affect the conclusion of poverty analysis when a relative poverty line is used. 3.3. The relative poverty line chosen for the study was 40% of weighted mean per capita monthly consumption (calculated over individuals), calculated separately for Right Bank and Transnistria.5 The May 1997 poverty line was 57.4 Moldovan lei per person per month for the Right Bank and 7,350 Transnistrian rubles per person per month for Transnistria. It should be emphasized that if the poverty lines were set at different levels this would obviously affect the conclusions from the poverty analysis (see Appendix D for a sensitivity analysis). However, it is expected that the qualitative conclusions from the poverty analysis would be reasonably robust to small variations in the level oDf the poverty line. 4 Foley (1997) calculated a 1993 per capita consumption Gini for Russia of 0.49; Ackland and Faikingham (1997) calculated a 1993 per capita consumption Gini for the Kyrgy2; Republic of 0.47. S This is consistent with the poverty line used in Braithwaite (1997a). 4  Poverty in the Republic of Moldova in May and August 1997 3.4. Measures of poverty: incidence, depth and severity. The incidence of poverty or headcount index (P0) is defined as the percentage of individuals who are poor (i.e. who live in households that have per capita consumption below the poverty line). While the headcount index is the most widely used measure of poverty, it does not give any information on the extent to which the welfare of individuals falls below the poverty line. The depth of poverty is measured by the poverty gap index (PI) which measures the average shortfall of per capita consumption, expressed as a percentage of the poverty line. The poverty gap index is not sensitive to the distribution of welfare among poor households; if a household just below the poverty line were to make a transfer to a much poorer household, there would be no change in PI. The Foster-Greer-Thorbecke index (P2) measures the severity of poverty, and puts greater weight on the welfare levels of very poor households as compared with households with per capita consumption close to the poverty line.6 3.5. The incidence of poverty in Moldova (calculated over individuals) was 19.3 percent in May 1997 (Table 3.1).7 As is found in many countries, poverty is much higher in rural compared with urban areas. In May, the rural poverty rate was 24.6 percent, compared with only 10.8 percent of individuals being classed as poor in major cities and 13.6 percent in other Table 3.1: Poverty measures by location, May 1997 (percent) RB Trans Moldova Major city Po 6.9 25.2 10.8 P1 1.5 7.2 2.7 P2 0.6 3.3 1.2 N 919.4 219.2 1142.5 Other city P0 16.8 6.7 13.6 Pi 4.5 1.9 3.7 P2 1.7 0.7 1.4 N 953.0 409.0 1381.2 Rural P0 23.3 36.5 24.6 P1 8.2 16.0 8.9 P2 4.2 9.4 4.7 N 3053.6 297.8 3328.4 All Po 19.0 20.7 19.3 P1 6.2 7.7 6.5 P2 3.1 4.1 3.2 N 4926.0 926.0 5852.0 Source: Author estimates based on MHBS, 1997. Note: Weighted sample sizes for individuals are shown. 6 The three poverty measures can be calculated using the following formula: (=I where a = 0,1,2; q =number of poor individuals; N= number of individuals; z poverty line; yi= consumption of i'th individual below the poverty line. 7 Since poor households tend to be larger, the household poverty rate in May (16.2 percent) was lower than the individual rate. 5  Technical Paper 111 cities. The rural poverty rate is higher than the urban rate in both the Right Bank and Transnistria. However, while persons living in Chisinau had a very low incidence of poverty in May (6.9 percent, compared with a raral poverty rate in the Right Bank of 23.3 percent), the poverty rate in Tiraspol is relatively high (25.2 percent compared with 6.7 percent in other cities in Transnistria and 36.5 percent for rural residents).8 The distribution of poverty also varies markedly by type of location (Table 3.2); while 18.7 percent of the population of RB live in Chisinau, only 6.8 percent of the poor in RB live there. In contrast, 62.0 percent of RB individuals live in rural areas, yet rural poverty accounts for 76.1 percent of all poor. Table 3.2: Population and poverty shares by location, May 1997 (percent) RB Trn Moldova Poor All Poor All Poor All Major city 6.8 18.7 28.9 23.7 10.9 19.5 Other city 17.1 19.3 14.3 44.2 16.6 23.6 Rural 76.1 62.0 56.8 32.2 72.5 56.9 Total 100.0 100.0 100.0 100.0 100.0 100.0 Source: Author estimates based on MHBS, 1997. 3.6. The finding that the rural poverty rate is higher than that for major cities corresponds to what has been found in most other F'SU countries. However, it has generally been found in other FSU countries that rural poverty rates are lower than those for 'other' urban areas (i.e. urban areas which are not the capital or major city). In Moldova, the converse was found. It has been argued (see, for example, Braithwaite, 1997a) that the main reason why in the FSU rural residents are found to be better off than those living in other urban areas is that rural residents are able to consume food that is home produced (i.e. grown in a garden plot or produced on a farm). However, in order to be able to adequately value this consumption of home produced food, it is necessary to impute market prices. While some household surveys are designed for relatively easy market--price valuation of home consumption, the Moldova household survey was not such a survey. Instead, households were asked to give self-reported valuations for home consumption, which most likely has led to an undervaluation of home consumption (this has been found in other countries such as Russia). This is most likely the reason for the finding that in Moldova, individuals living in rural areas have a higher poverty rate than those living in other urban areas. 3.7. Stochastic Dominance Tests. The incidence of poverty in Moldova in May is represented graphically in Figure 3.1 which shows the cumulative distribution functions (CDFs) of the log of monthly per capita consumption for urban and rural residents in the Right s A relatively high poverty rate in Tiraspol in May contradicts the findings for August and also the conclusions from De Soto and Dudwick (1997) that poverty is lowest in the major cities. It also contradicts the general conclusion that in the FSU, capital cities are markedly less poor than other towns (Braithwaite et al., 1997). A potential explanation for this result arises from the calculation of locational food price indices in Appendix A. Food prices in Tiraspol are estimated to be 10 percent below the national average, while in other Transnisti an towns food prices are estimated to be 28 percent above the national average (Table A3). Any adjustment for differences in the cost-of-living across different locations in Transnistria would, therefore, result in welfare levels being adjusted upward in Tiraspol and downward in other towns. This could reverse the finding of a relatively high poverty rate in Tiraspol. 6  Poverty in the Republic of Moldova in May and August 1997 Bank. The vertical line represents the poverty line and the incidence of poverty can be read off the vertical axis as the proportion of individuals with per capita consumption falling below the poverty line. Stochastic dominance techniques can be used to test the robustness of the conclusion that rural poverty is higher than urban poverty in Moldova. The theory of stochastic dominance shows that if the CDFs do not intersect at any point in the graph, poverty in the population represented by the curve lying everywhere above the other is greater, and this will be the case for whatever poverty line is chosen. This conclusion holds not only for the incidence of poverty, but also measures of depth and severity of poverty. The CDFs in Figure 3.1 are typical of those found in many transition countries in that rural poverty dominates urban poverty over all possible poverty lines (this was also the case for the CDFs for Transnistria). Figure 3.1: CDF of log monthly per capita consumption, Right Bank, May 1997 1- - 0.9 - g 0.8 poverty line o0.6 0 0.5 1 2 3 4 58CDF-r-u 0.4 03 030.233 0.117 0.1. ............. 0 0 1 2 3 4 5 6 7 8 Log monthly per capita expenditure Source: Author estimates based on MHBS, 1997. 3.8. Table 3.1 also shows estimates of the depth and severity of poverty. Given that Moldova has a relatively high level of inequality in consumption as measured by the Gini coefficient, it is of interest to note that the overall poverty gap of 6.5 percent is quite small. Russia, in contrast, had poverty gaps ranging between 9.8 and 13.2 percent over the years 1992 to 1995 (Foley, 1997). The relatively shallow poverty gap for Moldova shows that a considerable number of households are bunched just under the poverty line; this has implications for poverty alleviation policies. 3.9. Patterns of Consumption. The analysis of budget shares in Table 3.3 reveals that Moldovans spend a large amount of their budget on food and beverages (67.8 percent in May). This may in part be due to falling living standards due to economic transition, but it is also because imputed household rents and flow of services from consumer durables have not been 7  Technical Paper 111 included in the household consumption measure. As expected, the poor allocate a larger share of the budget to food (82.6 percent) compared with the entire population, and spend (proportionately) less on all the other consumption categories (except for housing related expenditures in Transnistria). Private expenditures on health care and education are very low in Moldova. Table 3.3: Household consumption budg^et shares, May 1997 (percent) RB Trn Moldova Poor Adll Poor All Poor All Food and beverages 82.5 67.9 82.6 67.4 82.6 67.8 Alcohol, tobacco etc. 1.9 3.1 2.0 2.7 2.0 3.1 Clothing and footwear 2.3 4.9 1.9 5.1 2.2 4.9 Housing - rents, utilities 2.6 5.4 4.4 4.0 2.9 5.2 Housing - furnishings etc. 1.6 2.1 3.0 2.3 1.9 2.2 Health care 1.7 2.5 0.4 2.5 1.4 2.5 Transportation 1.0 2.0 0.3 1.7 0.8 2.0 Communication 0.1 0. 4 0.1 0.8 0.1 0.5 Entertaimnent 0.3 0.5 0.0 0.6 0.3 0.5 Education 0.0 0.1 0.0 0.1 0.0 0.1 Eating out 0.5 0.4 0.0 0.3 0.4 0.4 Other 0.6 1.2 0.5 1.3 0.6 1.3 Total 100.0 100.0 100.0 100.0 100.0 100.0 Source: Author estimates based on MHBS, 1997. 3.10. Table 3.4 shows calorie and food shares for May 1997. In the Right Bank, the poor derived over 50 percent of their calories from cereals, compared with a cereal calorie share of 41.9 percent for the entire population c the Right Bank. In the Right Bank, the poor also derived relatively less of their daily calories from meat and dairy foods. These consumption patterns are broadly reflected in the food shares (percentage of food budget accounted for by each food group). The estimates of calories consumed per person per data are at this stage only tentative (as detailed in Appendix B). Despite this, the fact that the average calorie consumption of the poor in both the Right Bank and Transnistria is below the standard cut-off of 2,100 calories per person per day is of concern, and it supports the finding of De Soto and Dudwick (1997) that some of the poor in Moldova are experiencing a lack of a nutritious and varied diet, and, in some cases, outright hunger. 8  Poverty in the Republic of Moldova in May and August 1997 Table 3.4: Share of calorie consumption and food shares, May 1997 RB Trn Poor All Poor All Share of calories grains 52.3 41.9 44.2 37.8 meat 1.9 4.4 0.8 3.0 fish 0.3 0.4 0.2 0.6 dairy 17.0 23.8 26.6 24.8 oils 14.7 13.8 12.7 17.2 fruit 0.0 0.1 0.0 0.1 vegetables 8.7 7.6 9.0 7.2 sweets 5.0 8.0 6.5 9.3 Total 100.0 100.0 100.0 100.0 Total calories/person/day 1830.9 3481.5 2092.9 3643.4 Food share grains 39.0 27.5 17.0 21.8 meat 11.8 20.5 4.5 14.4 fish 5.5 5.2 0.8 4.4 dairy 11.3 13.4 4.0 11.4 oils 8.3 6.8 1.9 5.7 fruit 1.6 3.2 0.0 1.8 vegetables 16.1 15.3 70.6 34.7 sweets 6.3 8.0 1.1 5.8 Total 100.0 100.0 100.0 100.0 Source: Author estimates based on MHBS, 1997. Note: See Appendices A and B for details of the calculations. 4. Poverty Profile: Cross-tabulations 4.1. This section looks at how the poverty rate differs according to differing characteristics of individuals and households.9 It is found that poverty in Moldova shares some of the general characteristics found in studies of poverty in other FSU countries.'0 In particular, the incidence of poverty in rural areas is higher than that found in the major cities, children are particularly at risk of poverty and the working poor (especially workers in the agricultural sector) also have high poverty rates. The risk of poverty for pensioners is found to be lower than that of the general population, while those living in female-headed households have a higher poverty incidence. 9 In the paper accompanying this report there is a full set of tables which contain the numbers in the figures from this section, as well as tables for August 1997. The tables in this accompanying paper are referenced with the suffix 'a'. '