20 December 2012

Why the government will have to stimulate the employment of older people

Country of working pensioners

Kirill Sugrobov, "Tape.ru"Russian Prime Minister Dmitry Medvedev supported the ban on the use of indications on the maximum allowable age of applicants in job advertisements, and also called on employers to actively involve pensioners in the economy.

The effectiveness of the first measure is doubtful, but it seems that officials will inevitably have to encourage Russians to work in old age – by 2030, the number of pension recipients will equal the number of employees.

Dmitry Medvedev's statement is significant because for the first time, at least at such a high level, the government announced measures to stimulate the employment of pensioners. According to the Prime Minister, 10 million pensioners are currently working in Russia, and another 300 thousand would like to work. "We are talking about the upcoming shortage of labor resources – this is really such a byword. But elderly people are, as a rule, experienced personnel," the prime minister said. As for job advertisements with a restriction on the age of applicants, Medvedev noted that "such instructions look unworthy."

The Minister of Labor and Social Protection Maxim Topilin immediately reported that on the eve of his department sent to the government amendments to the law "On Employment" and to the Code of Administrative Offenses prohibiting age restrictions in job advertisements. Topilin explained that the amendments provide for sanctions for companies publishing vacancies with an "age limit". In addition, the Minister of Labor announced additional measures that will attract older Russians to work: in particular, regional employment centers will be allowed to spend money on professional retraining not only unemployed of working age, but also pensioners.

Currently, the retirement age in Russia is 55 for women and 60 for men. The average old–age pension is 9.5 thousand rubles, disability – 5.9 thousand rubles, and loss of breadwinner - 5.7 thousand rubles per month. At the same time, the average salary fluctuates around 25 thousand rubles.

It is unlikely that such measures will be able to employ a significant part of pensioners and avoid the "coming shortage of labor resources." Currently, discrimination of employees based on gender, age, race or religion, language, place of residence, social, official or property status is already prohibited by article 64 of the Labor Code of the Russian Federation. Nevertheless, on the websites of the largest recruitment agencies, many vacancies contain indications of gender and age. Even if employers are forbidden to indicate their age in ads, nothing will prevent personnel workers from refusing elderly job seekers after a phone call or interview.

As for retraining courses, their popularity is not very high, and they bring real help to the unemployed mainly in small towns and villages. The effect could be given by measures to stimulate later retirement, which the Ministry of Finance spoke about a few months ago. The business press wrote that the agency proposes to significantly increase the size of pensions for those citizens who refuse to receive them after reaching retirement age and continue to work for several more years. Finance Minister Anton Siluanov stated that the department's proposals would be submitted in the fall of 2012, but no steps in this direction were included in the final pension strategy. Nevertheless, the interest of officials in ensuring that as many pensioners as possible continue to work is obvious.

Demographic crisisThe main reason encouraging officials to actively involve pensioners in the economy is the increase in the number of the latter while reducing the number of able–bodied population.

What this can lead to, is stated, in particular, in the report of the Gaidar Institute for Economic Policy "Key forks of pension Reform", presented in Moscow on December 18.

According to the authors of the report, currently the Russian budget system spends 8.6 percent of GDP on pensions, while in other OECD countries (the Organization for Economic Cooperation and Development, also known as the "club of rich countries") the figure is only 7.1 percent. At the same time, Russia has a younger population than in most OECD countries, and the retirement age is lower. Insurance rates, which are directed to the maintenance of currently living pensioners, in the Russian Federation amount to 22 percent against the OECD average of 16.8 percent. Thus, the possibilities of raising taxes to increase pensions have been exhausted, since high insurance premiums, among other things, hinder the development of non-resource sectors of the economy and the withdrawal of salaries "from the shadows".

In the future, the Gaidar Institute notes, the situation will only worsen. This will be due to the low retirement age, low required minimum work experience, as well as an increase in life expectancy. So, by 2030, according to the institute's calculations, the number of pension recipients will equal the number of the working population. This will lead to a drop in the replacement coefficient of lost earnings (the ratio of pensions to salaries). In addition, pensioners will make up about half of the voters, which will make it impossible to take any drastic steps in the pension sphere.

Forecast of the number of employees of organizations and the number of recipients of labor pensions

Source: Rosstat of Russia, calculations of the E.T. Gaidar IEP The natural response to the aging of the population is to raise the retirement age.

The Ministry of Finance has long advocated such a step, but this measure traditionally raises a number of objections. Its opponents refer to the difficulties of pensioners in finding work, the poor health of the population, because of which the elderly really cannot work, as well as low life expectancy. The last objection is not entirely correct: the indicator also takes into account early (including infant) mortality, and the survival time (life after retirement) in Russia is comparable with developed countries. Nevertheless, in 2012, the Russian Federation finally refused to raise the retirement age (it is believed that this was done because of the position of President Vladimir Putin).

The ratio of the average pension and the average salary in 2013-2030

Source: Rosstat of Russia, calculations of the E.T. Gaidar IEP

"Active longevity"The Gaidar Institute offers its own solution to the problems associated with the demographic crisis.

The Institute's experts state that the crisis of the pension system currently observed in many countries, including Russia, is associated with the obsolescence of the distribution scheme. In addition to the high tax burden on the economy that it generates, the distribution system undermines the desire of the population to work, limits a person's full life to retirement age and strengthens political populism. Therefore, the institute proposes to gradually abolish it and switch to a new system that will provide for significant voluntary savings of citizens and "state insurance against poverty." The latter will guarantee income regardless of age: a person can become disabled at the age of 50 or remain healthy and active until 80.

The idea of the "iron Chancellor"
The distributive pension system was first introduced in Germany in 1889 by Chancellor Otto von Bismarck. Then the retirement age was 70 years, and the average life expectancy was 45. In 1908, the system appeared in the UK, the retirement age was 70 years with a life expectancy of 50. Over the past 100 years, life expectancy has been growing. The retirement age has been declining for a long time, but since the 2000s, developed countries have begun to raise the retirement age.

Since such a transition requires both political will and considerable time, the Institute offers a temporary strategy of "active longevity", which is very similar to the already mentioned developments of the Ministry of Finance. The program assumes that citizens who voluntarily agreed to postpone retirement, the state will increase the amount of future payments every year. So, if a citizen decides to work for another five years after the retirement age, his pension should double. At the same time, pension rights are proposed to be inherited if a citizen does not live to retire. According to the authors of the strategy, it will not be perceived by the population as an increase in the retirement age and at the same time will change the psychology of people: they will rely less on the state and try to remain able to work longer.

The fact that the state has a labor reserve among pensioners is obvious, but its size can be greatly exaggerated. Currently, there are 38 million people in the country receiving a work pension. At the same time, according to Arkady Solovyov, Director of the Actuarial Calculations Department of the Pension Fund of Russia, only 22 million people receive an old-age pension from them. The rest are pensioners on disability, on loss of breadwinner and those who are eligible for early retirement. Solovyov noted that currently in Russia citizens can already postpone retirement, but only six (!) people have used this opportunity in the entire 10-year history of the program.

According to the Ministry of Labor, there are now 10.9 million early retirees in the country, and the vast majority of them continue to work. Thus, taking into account 10 million old-age pensioners already working, the state has a reserve of 12 million people (however, it is not known how many of them are incapacitated). For comparison, more than 70 million people currently work in the country.

The solution to the problem of "early retirees" and the length of service required for retirement is being solved in the pension strategy already approved by the government, the implementation of which will begin in 2013. In particular, the government intends to increase insurance premiums for employees eligible for early retirement. The minimum length of service required to receive a pension is planned to be raised to 15 years, and the standard length of service required for a full pension is proposed to be increased to 35 years.

In early December 2012, the Public Opinion Foundation conducted a survey of 2,500 respondents of pre-retirement age in 105 localities in Russia and found that 55 percent of citizens intend to continue working after retirement. Of these, 63 percent say they want and will be able to keep their current job. At the same time, Russian citizens have quite high expectations of life in retirement: 58 percent would like to help their children and grandchildren, and 67 percent would like to travel. It is noteworthy that 18 percent of respondents expressed interest in the mentioned program of the Gaidar Institute, and four percent would agree to participate in it.

Perhaps the measures called by Prime Minister Dmitry Medvedev will not bring serious results. At the same time, it is obvious that the employment of pensioners can support the Russian economy during the demographic crisis. In 2020, people who were born in 1960 and 1965 and made a significant part of their careers in the 2000s and 2010s will retire, and therefore are much better adapted to the market economy than the current generations of pensioners. Given their distrust of state aid, Russia can become a country of working pensioners without raising the retirement age and any other government measures.

Portal "Eternal youth" http://vechnayamolodost.ru20.12.2012

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