The political economy of retirement

The challenge of our times is not only the unemployed youth, but also the more active silver hair crowd

Pic By BLOOMBERG

That’s not Russia’s domestic affair at all, because the questions of what is retirement, old age and the obligations of a state to its citizens are suddenly becoming highly debatable worldwide. 

But anyway, that story shook our nation to the core. Russia President Vladimir Putin’s ratings had suddenly plummeted in August, down to 47% of approval (now they are 64% and climbing back to the familiar powerful majority).

There was no mystery about the only reason for that, and that reason was a pension reform planned not exactly by Putin himself, but by his not-always-popular government.

Simply speaking, ladies were supposed to retire with a government pension at 63, and gentlemen at 65. The previous age was 55 and 60 subsequently. The outrage was (and still is) terrible.

There were 26 regional governor by-elections, of which the ruling United Russia party lost three and suffered setbacks in some other cases. “Pensions” were the unanimous explanation to that.

In the end, the pension reform has been passed by the Parliament last week, with presidential amendments.

Presidents in Russia are supposed to correct their governments. And Putin did something of the kind, namely addressed the nation live. He’s amended the reform draft (to 60 for the ladies), but also tried to explain its reasons.

The reasons are simple. The state pensions — with obligatory deduction from salaries to state pension funds — were designed many decades ago, when people of 60 were considered old, and when there were not so many lucky ones alive and active at that age.

European nations have raised their pension age long ago, avoiding the very real situation when there would be a rate of one working person to one retiree.

In the US, look at a line from a publication in one of my favourites, The Daily Signal: “Lawmakers need to act now — not only to address Social Security’s looming insolvency…”

What? Insolvency? So, all the West and the former East (that’s Russia) have arrived at the same situation at the same time, when the obsolete system cannot sustain the rising life expectancy. But the Russian government treated it as a technical task and encountered an unexpected problem — a shattered compact between a citizen and a state.

That compact is not exactly communist, but definitely socialist, and at a time of global competition between capitalism and communism both tried to demonstrate their superiority in social care.

It’s hard to explain that reality to some nations, where a retirement account is at best a free contract between a person and a bank.

But in many nations, people tend to think that if not the state, then the society is obliged to keep them in old age. It simply owes them. If you raise that age, you rob the old of their well earned money.

The communist world was the first where that system began to crumble.

As Putin explained in his speech, the insolvency of the pension fund was clear even before 1991, when the USSR (Union of Soviet Socialist Republics) went down. But in the 1990s and early 2000s, the state just could not touch the system, leaving millions of elderly people with nothing at all among the imperial ruins.

Now Russia, growing stronger, can afford at least to start the reset. But the change in thinking of the active generations must be profound.

The state and society, simply speaking, will start to mean less for them. So, what will the implications be for social unity and stability? Or to the idea of families, where the young will have to feel again their obligations to the old? And then, there is one more thing that relates not only to the so-called West. And that thing figured prominently in Putin’s address — a profound change in the idea of old age.

Simply speaking, today the formerly “old” people are back in societies, as active participants.

The Russian government’s reform, he said, had to be complemented by a lot of programmes reintroducing the people of older generations into working places. To add: It’s not only the problem of those over 60, in need of adjusting to a cruel digital age. It’s also a problem of the young, in need of welcoming back those people who grew up in the previous age, which was not digital, but maybe more human and communicative.

Governments cannot do much along these lines. Putin’s amendments included the idea of big fines for those who fire or do not hire those close to the pension age. Business disagrees, since there are many ways to deny an applicant or to get rid of someone not fitting into the youthful team of computer nerds.

So, we all need to understand that the challenge of our times is not only the unemployed youth, but also the more active and not-very-retireable silver hair crowd.


Dmitry Kosyrev is an author of 8 novels and a book of short stories, as well as a columnist for 2 Moscow publications. Orientalist by education (Moscow University), he has a special love for Malaysia. The views expressed are of the writer and do not necessarily reflect the stand of the newspaper’s owners and editorial board.