So­cial in­sur­ance: Ad­vanced scheme to rob the poor

The UB Post - - Front Page - By B.DULGUUN

Our so­ci­ety has turned into one where the pub­lic fi­nances the state and in re­turn, the state robs us even more. Did you know that the state is try­ing to in­crease so­cial in­sur­ance pre­mium by five per­cent­age points to 19 per­cent of our salary by 2020? Well, the only so­lu­tion the gov­ern­ment came up with to pay off the grow­ing pen­sion fund deficit was break­ing into or­di­nary work­ing peo­ple’s pock­ets.

Gov­ern­ment of­fi­cials ex­plained this de­ci­sion very de­cep­tively, say­ing, “In­creas­ing so­cial in­sur­ance pre­mium will make it pos­si­ble to set higher pen­sion for peo­ple. It is ded­i­cated to pre­vent po­ten­tial risks when the pen­sion age is raised in 20 to 30 years.” What this ac­tu­ally means is that the state plans to ex­ploit the pub­lic as much as pos­si­ble in the mean­time.

Don’t be fooled when gov­ern­ment of­fi­cials claim the so­cial in­sur­ance pre­mium ac­cu­mu­lates into sav­ings. On the con­trary, it is recorded un­der your name and spent to “sus­tain” five dif­fer­ent funds.

“Rev­enue to the so­cial in­sur­ance fund is spent on five funds. Among them, the pen­sion fund re­ceives the most fi­nanc­ing from the state. Other coun­tries have these funds re­cover their spend­ing and cre­ate ac­cu­mu­la­tion through rev­enue, or op­er­ate un­der sol­i­dar­ity prin­ci­ple. In Mon­go­lia, we go by the prin­ci­ple to have peo­ple of work­ing age fi­nance the se­niors. We’ve been op­er­at­ing un­der the ‘one for all’ motto for many years and yet, there are some peo­ple who want their money only for them­selves. They don’t un­der­stand this fi­nanc­ing prin­ci­ple well. Ba­si­cally, it means that Dorj’s so­cial in­sur­ance pre­mium is used to pro­vide Dul­maa’s pen­sion. So, it means that it’s im­pos­si­ble for Dorj to have (so­cial in­sur­ance) sav­ings. How­ever, the amount he paid will be recorded,” stated G.Ganchimeg, pol­icy and co­or­di­na­tion spe­cial­ist at the Min­istry of La­bor and So­cial Pro­tec­tion.

...We’ve been op­er­at­ing un­der the ‘one for all’ motto for many

years and yet, there are some peo­ple who want their money only

for them­selves...

Out of the 1.4 tril­lion MNT gen­er­ated to the so­cial in­sur­ance fund in 2017, 61.3 per­cent of the amount was re­al­lo­cated to the pen­sion in­sur­ance fund, 22.2 per­cent to the health in­sur­ance fund, seven per­cent to ben­e­fits and un­em­ploy­ment in­sur­ance funds re­spec­tively, and the rest to the in­sur­ance fund for in­dus­trial ac­ci­dents and oc­cu­pa­tional dis­eases. This ba­si­cally means that the so­cial in­sur­ance fund is prac­ti­cally empty. It wouldn’t be an ex­ag­ger­a­tion to say that this fund ex­hausts all the money tax­pay­ers pay within the year and then some.

Although 65 to 75 per­cent of the money cen­tral­ized to the so­cial in­sur­ance fund is al­lot­ted to the pen­sion fund, this amount is said to be nowhere near suf­fi­cient. Re­port­edly, 300 bil­lion MNT to 600 bil­lion MNT is ex­tracted from the state bud­get each year to pro­vide pen­sions. De­ci­sion mak­ers are shut­ting us down with the ex­cuse that this sys­tem is “sol­i­dar­ity prin­ci­ple” con­sis­tent with “in­ter­na­tional stan­dards”.

Mon­go­lia ac­tu­ally had been con­sis­tently ac­cu­mu­lat­ing sav­ings since the Law on In­di­vid­ual Pen­sion In­sur­ance Con­tri­bu­tion Ac­counts was passed in 1960. How­ever, as in­sid­ers re­ported, politi­cians used all of the money to ful­fill their elec­tion prom­ises and re­pay other out­stand­ing fis­cal deficit. A gov­ern­ment of­fi­cial ex­plained, “The Law on In­di­vid­ual Pen­sion In­sur­ance Con­tri­bu­tion Ac­counts is aimed to de­ter­mine pen­sion for each in­di­vid­ual based on the amount of so­cial in­sur­ance pre­mium they con­trib­uted in the past. It’s not like bank sav­ings that you can get back.”

It’s “un­for­tu­nate” if a per­son who works 40 or so years to re­tire at the age of 60 but pass away at 61. Merely 600,000 MNT is is­sued from the state to cover his/ her fu­neral. The cur­rent law doesn’t al­low chil­dren of the de­ceased to re­ceive the so­cial in­sur­ance their par­ent paid all of their life in their stead. Ap­par­ently, giv­ing that money to an­other liv­ing for a longer time is what the state call “sol­i­dar­ity prin­ci­ple”.

We pay so­cial in­sur­ance pre­mi­ums, hop­ing to use it when we re­tire. We will­ingly al­low the state to deduct health in­sur­ance con­tri­bu­tion from our monthly wage so that we can re­ceive health care when we need it in the fu­ture. Sim­ply put, the well­be­ing of Mon­go­lians de­pend on that small blue book­let and their life guar­an­tee de­pend on the red book­let. Yet, nei­ther of them are able to be a “ticket” to liv­ing a de­cent life. There’s al­ways the pos­si­bil­ity we will not sur­vive un­til we can ben­e­fit from the so­cial in­sur­ance pre­mium we pay. Even though in­sur­ance should be pro­vid­ing us pro­tec­tion against a pos­si­ble even­tu­al­ity, it’s be­come a mech­a­nism for the state to off­set its deficit, while putting the pub­lic un­der fi­nan­cial bur­den.

RELOOKING INTO PACK­AGE LAWS

Par­lia­ment de­cided to raise seven types of taxes last year, fol­low­ing the en­rol­ment to the In­ter­na­tional Mon­e­tary Fund’s Ex­tended Fund Fa­cil­ity. Spe­cial­ists at the So­cial In­sur­ance Gen­eral Of­fice gave in­sights on the ef­fects of the one-per­cent rise of em­ployer and em­ployee so­cial in­sur­ance con­tri­bu­tions.

Pol­icy im­ple­men­ta­tion and re­search spe­cial­ist S.Lkhag­vadorj stated, “Be­tween 1995 and 2007, em­ploy­ers and em­ploy­ees con­trib­uted 19 per­cent of their wage to the pen­sion in­sur­ance fund. Start­ing Jan­uary 2008, the con­tri­bu­tion was re­duced to 14 per­cent. At the time, no­body said any­thing but good things about this de­ci­sion. Now, the pub­lic are de­mand­ing higher pen­sion. To in­crease pen­sions, we needed to in­crease rev­enue to the so­cial in­sur­ance fund. How­ever, we re­frained from im­pos­ing abrupt in­creases to em­ployee and em­ploy­ers’ so­cial in­sur­ance con­tri­bu­tions. We de­cided to take pro­gres­sive steps to re­turn to 2007’s amount over the course of three years. This may be bur­den­some to the in­sured and em­ploy­ers in some ways but it will al­low them to re­ceive higher pen­sion in the fu­ture.”

Pro­gres­sive in­crease to so­cial in­sur­ance con­tri­bu­tion is es­ti­mated to in­crease the pen­sion fund’s rev­enue by 122 bil­lion MNT this year, 193 bil­lion MNT next year, and by 337 bil­lion MNT in the fol­low­ing year. This im­prove­ment is also ex­pected to cut down state funds des­ig­nated to the pen­sion fund in ad­di­tion to rais­ing pen­sions, ac­cord­ing to spe­cial­ists.

Even so, there are down­sides to this. As many peo­ple com­plained, not every­one gets as much pen­sion as they paid for, not to men­tion again that not every­body is able to live un­til the pen­sion age. Some peo­ple con­sider that it’s best to in­stead start a sav­ings in a bank that will give monthly in­ter­est.

“I think it’s wrong to in­crease the so­cial in­sur­ance pre­mium. Tax is in­creased al­most ev­ery year. It wouldn’t be an ex­ag­ger­a­tion to say that ap­prov­ing the state bud­get with deficit has led to an al­most empty so­cial in­sur­ance fund. I hear that there will not be enough money to pro­vide pen­sion by 2020. To ac­cu­mu­late funds in ad­vance, the gov­ern­ment is ran­sack­ing our pock­ets. I should’ve just put all the money into my sav­ings ac­count and ben­e­fit­ted from the in­ter­est,” said J.Zorigt, a res­i­dent of Bayan­gol District.

J.Zorigt im­plored oth­ers to thor­oughly in­ves­ti­gate the spend­ing of funds as his pen­sion was set much lower than how much he’d paid and that there have been sev­eral cases of ex­ploita­tion of de­ceased peo­ple’s pen­sions. The most re­cent case took place in Bayan-Ul­gii Prov­ince where a de­ceased per­son’s pen­sion was al­lot­ted to an­other for four years after his death, he said.

Res­i­dent of Bayan­gol District D.Du­lam­suren com­plained, “The gov­ern­ment keeps in­creas­ing taxes when it hasn’t in­creased wages. Pen­sion and ben­e­fits pro­vided from the so­cial in­sur­ance fund is not be­ing con­verted into mon­e­tary value. Just re­mem­ber what we could buy with 1,000 MNT in 2010 and then, think about what it can buy to­day. Their value should be com­pared and equal­ized. The gov­ern­ment should stop set­ting pen­sion based on the av­er­age of wages.”

“We earn 1.6 mil­lion MNT a month and vol­un­tar­ily pay 13 per­cent of it as so­cial in­sur­ance con­tri­bu­tion. Next year, ap­par­ently we’ll pay 15 per­cent. In­stead of rais­ing taxes, the num­ber of gov­ern­ment of­fi­cials should be cut down, or their wages given based on their per­for­mance,” she sug­gested.

The ma­jor­ity of pen­sion­ers worked through­out their youth as they paid so­cial in­sur­ance con­tri­bu­tion only to re­ceive 243,000 MNT to 248,000 MNT as pen­sion per month. This is nowhere near enough to make ends meet in to­day’s sit­u­a­tion. It is lower than al­lowances given to peo­ple liv­ing with dis­abil­i­ties and guardians bring­ing up chil­dren whose par­ents have died. A per­son who used to earn a mil­lion MNT a month and paid so­cial in­sur­ance con­tri­bu­tion for 20 years will be able to re­tire with a monthly pen­sion of 280,000 MNT. Dis­sat­is­fied with this, nu­mer­ous peo­ple are im­plor­ing the state to relook at the pack­age laws re­lated to the so­cial in­sur­ance and de­ter­mine pen­sions based on the to­tal amount of paid pre­mium.

Ex­perts have con­tra­dict­ing opin­ions about hav­ing so­cial in­sur­ance pre­mium raised by 2.5 per­cent by 2020.

La­bor eco­nom­ics re­searcher N.Naran­gerel sup­ports the gov­ern­ment de­ci­sion.

He said, “Our na­tion’s in­sur­ance fund ex­ists be­cause of the money de­ducted from peo­ple’s wages. It could be said that not a sin­gle in­sur­ance fund has sav­ings be­cause all the money ac­cu­mu­lated in in­sur­ance funds un­til 1990 were spent as the so­ci­ety changed and the eco­nomic sit­u­a­tion wors­ened. Since then, Mon­go­lia’s eco­nomic ca­pac­ity and la­bor pro­duc­tiv­ity wasn’t enough to ef­fec­tively cre­ate sav­ings in the so­cial in­sur­ance fund,”

“More­over, the Mon­go­lian pop­u­la­tion grew be­tween 1965 and 1985, but the birth rate de­clined start­ing 1990. Peo­ple who were born dur­ing the peak pe­riod will re­tire in 2020. How­ever, there is in­suf­fi­cient fund to pro­vide so­cial wel­fare for all of them and there’s also the pos­si­bil­ity that the num­ber of pen­sion­ers will ex­ceed the num­ber of em­ploy­ees pay­ing so­cial in­sur­ance pre­mium. There’s also a study that shows the per­cent­age of peo­ple ex­pected to ac­tively work start­ing 2030 will be rel­a­tively smaller than now. At this rate, in­sur­ance funds may go bank­rupt by 2035. To pre­vent that from hap­pen­ing, in­sur­ance funds need to be in­creased. To en­sure sus­tain­abil­ity, it’s cru­cial to take steps to raise em­ployer and em­ployee so­cial in­sur­ance con­tri­bu­tions. The only thing to fo­cus on next might be to im­prove su­per­vi­sion and mon­i­tor­ing the fund’s spend­ing.”

On the other hand, a la­bor eco­nom­ics and ac­count­ing pro­fes­sor at the Mon­go­lian La­bor and So­cial Re­la­tions In­sti­tute says it’s not the time to in­crease so­cial in­sur­ance pre­mi­ums yet.

Pro­fes­sor L.Khishig­tog­tokh said, “I un­der­stood that the so­cial in­sur­ance pre­mium raise is aimed to ac­cu­mu­late the fund’s money and in­crease fis­cal rev­enue. At this time, when peo­ple’s real in­come is low and prices of com­mod­ity and ser­vices are un­sta­ble, it’s wrong to in­crease the pre­mium amount. A oneper­cent rise may be lit­tle in terms of an in­di­vid­ual but when every­one’s por­tion is com­bined, it will be con­sid­er­ably large. There are many peo­ple who would agree that the health­care and wel­fare for the pub­lic is poor. In other words, if these ser­vices will not im­prove even if the so­cial in­sur­ance fund is in­creased, there’s no point for tax­pay­ers to pay higher taxes and fees. Be­fore any­thing, so­cial in­sur­ance sys­tem, its ac­ces­si­bil­ity and ser­vices need to be im­proved. When peo­ple’s in­come in­crease and the ef­fect of ex­change rate fluc­tu­a­tions on liveli­hood is re­duced, only then should so­cial in­sur­ance pre­mium and other taxes be raised.”

In any case, as ap­proved by the gov­ern­ment and In­ter­na­tional Mon­e­tary Fund, so­cial in­sur­ance pre­mi­ums of em­ploy­ers and em­ploy­ees will be raised by 0.5 per­cent­age points in Jan­uary next year and by two per­cent­age points in 2020.

Photo by E.KHARTSAGA

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