No more ‘social subsidies’?

For the first time, an official document by the Labor and the Economy ministries puts in doubt the continuation of the social security system’s funding through social subsidies. This includes benefits for lower-priced tickets, charges from notary services going to the Lawyers’ Fund, and more. The government’s intention of opening discussion on the matter of social security benefits, within the spirit of European guidelines, is clearly recorded in the Greek Pension Strategy Report. This report, published last Friday on the Labor Ministry’s website, refers to the specific action needed for the sufficiency, viability and modernization of the pension system and stresses the need to «minimize pension variations and to effectively end burdening third parties with social resources.» The issue is expected to create a storm of reaction, as social benefits and parallel contributions support 50 social security funds with a total 6,812,731,393 euros, an analogy of 60.37 euros per person insured. There are many points in the report that may cause controversy. Although the proposals are expressed in a general and non-specific fashion and the text reads more like a set of responses to the EU, it is no coincidence that there is no mention of maintaining the minimum pension, while it preserves the suspicion that the main and the auxiliary pension may merge as well as the possibility of the creation of a national minimum pension. The report’s points – also the first agenda for the debate on the social security issue – are the following proposals: – Substitution of as much as possible of the earnings level that workers enjoyed before the social security threat. – Securing a minimum income from pensions, which, combined with a series of benefits, structures and goods, will allow for a decent living. – Support social cohesion by facilitating the completion of time requirements for retirement through accepting periods of optional, virtual or nominative social security for social groups with greater needs. – Facilitation of retirement in cases of geographical or professional mobility through the institution of successive social security. – Facilitation (through organizational and monitoring measures) and support (via tax incentives) of initiatives by professional groups or enterprises for an improvement in the public pension coverage with additional supplementary benefits. – Minimization of pension discriminations and burdening third parties with social resources. – Grouping or merging retirement bodies; where not possible, harmonization or introduction of single retirement requirements or minimum social benefits. – Simplification of the system’s laws and administration to make it more transparent and accessible to the people insured. – Priority to public and social dialogue on pensions with government interventions. Aging population Another interesting point in the report is its reference to the country’s demographic problem. «The issue emerging is to what extent the influx of resources into the system by each working generation will suffice for the benefits distributed to people who depend on them and no longer work. «Based on the demographic projections of the National Statistics Service (NSS), from 2005 to 2050, we note that the overall population, though at some point showing a temporary rise from 11.08 million to 11.35 million, begins to shrink from 2019, ending up at 10.79 million in 2050 and will be almost twice as old as today. This is expected to happen because, from that point on, deaths will outnumber births. In the long term this phenomenon will lead to an inverted pyramid in the diagrams of the population age spread. «According to the same projections, people under 65 years old (as a portion of the 15- to 64-year-old population) will increase from 26.75 percent in 2005 to 55.76 percent in 2050. This will result in the accumulation of ever older population groups in the pensioners’ category. While in 2005 people aged 15-64 make up 67.53 percent of the population and people aged over 65 are 18.06 percent of the population, these percentages will gradually reverse, resulting by 2050 in 56.41 percent of the people being aged 15-64 years old and 31.46 percent of the overall population being aged 65 or over. Furthermore, in Greece, in the latter half of the last century, the fertility rate dropped from 2.57 children per woman to 1.28 in 2003, that is a 50 percent reduction. From 1970 until 2002 there was a drop in fertility. Since 2002, there has been a small rebound that is expected to continue. Yet even if it is projected to rise to 1.53 children per woman by 2050, it will remain much lower than 2.1, the rate for full population renewal. In the long term, this phenomenon leads to the shrinking of the younger population (0-14 years), the swelling of the aged population (65 years or more) and the shrinking of productive ages (15-64 years). In contrast, the death rate is falling impressively year by year. Life expectancy at birth has now reached 76.61 years for men and 81.42 years for women, so a 65-year-old male pensioner will receive a pension for 16 years and a female for 18 years. In 2050, this will rise to 19 and 22 years, respectively.»