The social policy frameworks that Russia and neighboring countries inherited from the pretransition period suffered from significant gaps between the desirable (stated goals of universal social benefit coverage, "free" access to quality health and education services) and the feasible, particularly in terms of unfavorable demographic trends, postcommu nist propensities for tax evasion, and limitation on state capacity. For example, the high tax rates needed to fund universal benefit schemes helped drive economic activity into the informal sector, where taxes are not collected and social benefits are not provided. The sustainability of pension and health care systems is jeopardized by unfavorable demographic and employment trends, reflecting the merciless logic of aging, shrinking labor forces, and the rationalization of postcommunist labor markets. Complicated tax, benefit, and protection systems overwhelm the not-unlimited capacity of the relevant stage agencies and depress job creation rates. Complicated social benefit systems can create disincentives to work ("poverty traps") that take people out of the labor force, further reducing employment. The emphasis on categorical (but often poor-quality) social protection schemes can preclude the targeting of vulnerable groups. The focus on categorical (as opposed to targeted by vulnerability) benefit schemes generates a profusion of complicated and overlapping beneficiary categories, many of which do not provide support to those who are in greatest need. This complexity can overburden the administrative capacity of social welfare agencies, promote corruption, and reduce benefit take up. These systems, combined with unfavorable demographic trends and the large declines in incomes that took hold in the 1990s, play a large role in explaining the sharp increases in poverty and inequality that took hold in the first decade of transition.
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