Rus­sia con­sid­er­ing rais­ing re­tire­ment age


Tak­ing care of pen­sion­ers who are his bedrock of sup­port has been a key fea­ture of Pres­i­dent Vladimir Putin's rule, but as cri­sis bites, the Rus­sian gov­ern­ment is moot­ing an idea that has been taboo for 80 years: rais­ing the re­tire­ment age.

Since 1932, Rus­sian men have been el­i­gi­ble to re­tire at the age of 60 and women at the age of 55. In nu­mer­ous pro­fes­sions, es­pe­cially haz­ardous ones like min­ing, peo­ple may re­tire even ear­lier.

But the bud­get has come un­der strain as peo­ple have started to live longer, as Rus­sian women now have a life ex­pectancy of 76 and men 65.

Now, faced with a shrink­ing econ­omy thanks to West­ern sanc­tions over Ukraine, an oil price that is half of what it was a year ago and a weak ru­ble, even Putin is cau­tiously bring­ing up the sub­ject, which threat­ens to un­leash protests and hurt his high rat­ings.

“The re­tire­ment age is one of the key is­sues,” the pres­i­dent said in his an­nual phone-in ses­sion ear­lier this month. In 2016, Rus­sia will have to spend 3 per­cent of its gross do­mes­tic prod­uct (GDP) on pen­sions — over US$50 bil­lion — he said.

“Here is the ques­tion: where, in fact, will we get this money?” Putin pon­dered.

In­ter­na­tional in­sti­tu­tions such as the World Bank have long pressed Rus­sia to re­form its pen­sion sys­tem, but the Krem­lin re­sisted, de­spite con­stant warn­ings by fis­cal hawks that it poses an un­bear­able bur­den on the bud­get.

The re­ces­sion adds to the prob­lem of an age­ing pop­u­la­tion com­bined with fewer Rus­sians en­ter­ing the work­force due to a slump in births in the 1990s, and has prompted the gov­ern­ment to sound the alarm.

“The faster we re­solve this is­sue, the bet­ter for the econ­omy and for the bud­get,” Fi­nance Min­is­ter An­ton Silu­anov said re­cently, propos­ing to hike the re­tire­ment age to 65 for both men and women.

Econ­omy Min­is­ter Alexei Ulyukayev last week backed rais­ing the re­tire­ment age grad­u­ally, by six months per year.

“From the point of view of the econ­omy, they should have raised it a long time ago,” said Igor Niko­layev, direc­tor of the FBK Grant Thorn­ton In­sti­tute of Strate­gic Anal­y­sis.

“The re­serve fund is be­ing quickly de­pleted,” he said, re­fer­ring to a rainy-day fund the Rus­sian gov­ern­ment has filled with US$75.7 bil­lion earned from oil and gas sales in re­cent years.

“Next year they may ex­haust com­pletely.”

‘Touchy sub­ject’


Rais­ing the re­tire­ment age now, how­ever, could cause se­vere dis­con­tent ahead of par­lia­men­tary polls next year and pres­i­den­tial elec­tions in 2018.

The gov­ern­ment “would not take such an un­pop­u­lar de­ci­sion be­fore the elec­tions, es­pe­cially as the cri­sis is still un­fold­ing” and real wages have de­clined by 10 per­cent, Niko­layev said.

Steadily in­creas­ing pen­sions were a vi­tal cam­paign is­sue for Putin ahead of his re­turn to the Krem­lin in the 2012 elec­tion and re­main at the core of his so­cial wel­fare pack­age.

Moscow reg­u­larly stresses that pre­serv­ing so­cial sta­bil­ity is a top pri­or­ity.

“No­body should doubt that how­ever dif­fi­cult the sit­u­a­tion, we will pay salaries and in­crease pen­sions,” Prime Min­is­ter Dmitry Medvedev said last week.

A poll by the in­de­pen­dent Le­vada Cen­ter found last month that 79 per­cent of men and 81 per­cent of women are against the pen­sion age rise. Most peo­ple still view the prospect of such a hike “with hos­til­ity,” said Le­vada Cen­ter so­ci­ol­o­gist Stepan Gon­charov.

Rus­sian women are par­tic­u­larly huffed as they of­ten re­tire early to help raise grand­chil­dren.

“The gov­ern­ment is now try­ing to gauge the public mood and un­der­stand how strong the protests will be,” he told AFP.

In an ap­par­ent at­tempt to sway public opin­ion, law­mak­ers have pro­posed rais­ing their own re­tire­ment age to 65.

“It's a very touchy sub­ject,” Medvedev said. “The de­ci­sion should be a re­sult of calm dis­cus­sion with the public, tak­ing into ac­count all points of view.”

Gon­charov said the de­ci­sion could have a strong im­pact on Putin's rat­ing, but much de­pends on “how the is­sue is pre­sented” by the gov­ern­ment and the op­po­si­tion.

He ex­pects the gov­ern­ment may at­tempt to chan­nel the public anger “into anti-Amer­i­can sen­ti­ment.”

The gov­ern­ment may suc­ceed in con­vinc­ing peo­ple that “Rus­sia is suf­fer­ing due to sanc­tions, not be­cause we are fol­low­ing bad poli­cies,” said Gon­charov.

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