20 It is also in strong contrast to Chile, where social transfers are extremely well targeted. For example, almost % of the benefits from public works and unemployment insurance in Chile accrue to the lowest income decile and % to the bottom three deciles. In the UK, about 80 percent of benefits from social assistance ("income support") is paid to the bottom three deciles (Figure 4). In Poland, on the other hand, the bottom three deciles receive less than 60 percent of social assistance and unemployment benefits, and in Bulgaria, only 40 percent of unemployment benefits. In Romania and Russia, social assistance accurues proportionately more to the rich than to the poor.” Fact 5. The "winners": the educated, private sector. The "winners" in the transition are skilled white-collar workers, private entrepreneurs, city people, and (less certainly) women. An explanation for improved position of the skilled white-collar workers is increased demand for many "new" skills: for computer specialists, people with knowledge of foreign languages, accountants, bankers, even economists, the usual service sector people who do well in Western economies. This increased demand is a reflection of the rising share of the almost entirely private service sector in the GDP.

Returns to education have also risen. Vecéernik (1994a) calculates for the Czech republic that the rate of return to one additional year of education has, on average, risen from 3.5 percent to 6.2 percent. Comparing Czech and Slovak earnings distributions for 1984 and 1993, Chase (1995) finds the increase in the rate of return to education to have been between 2 and 3 percent. World Bank (1994, p. 93) report on Poland finds the increase to be from 6.4 percent in 1989 to 7.5 percent in 1992. As for returns to experience, one would expect that they decline as experience acquired under the previous regime becomes of less value in new market conditions. Indeed this is what the studies find in eastern Germany, Poland, the Czech Republic, and Slovakia. Only in Slovenia, returns to experience have increased.“ The results for Slovenia may be due to the less dramatic system change in that country (Slovenian enterprises were much more independent from the state than their counterparts in Czechoslovakia or Poland) and to some possible endogeneity in the results: it seems that wages of the older workers were deliberately raised in order to increase their pension base and allow them to retire early at rather comfortable pensions.*° “For Russia, see World Bank (1995, p. 49). For Romania, see Subbarao and Mehra (1995, p. 22), “There may be some similarity between the recent distributional outcomes in transition economies and in the West. In both, “winners” seem to be the people employed in non-tradables; losers, blue-collar workers whose industries became exposed to foreign competition.

“For eastern Germany, see Bird, Schwarze and Wagner (1992); for Poland, World Bank (1994, p. 93); for the Czech republic and Slovakia, Chase (1994); for Slovenia, Vodopivec and Orazem (1994).

“It is also worth noticing that, after fitting the standard human capital regression, all studies find that the unexplained portion of the earnings variation is greater after the transition. The conjuncture is that firm- and individual-specific factor that are not captured by education or experience are now much more important than before. The goodness-of-the-fit is about the same as obtained by the standard human capital models in Western economies.