Social insecurity

Costas Simitis chaired his last Cabinet meeting on Thursday, and yesterday he stepped down as chairman of PASOK. This was, without question, a milestone in Greece’s history. But one would hardly have noticed it by reading newspapers or watching television. The event passed almost as a tiny footnote in the country’s ever-changing temporal obsessions and in the scripted excitement of George Papandreou’s short walk to PASOK’s presidency. But perhaps even more significant than the ascension of party founder Andreas Papandreou’s eldest son was that the greatest part of the week was spent in a national effort to shy away from dealing with what must be one of the country’s greatest priorities – the need to create a viable social security system. New Democracy, which is leading in the polls in the runup to the March 7 elections, made the possibly mortal blunder of saying in its economic policy program that it would deal with social security on the basis of the reforms it had carried out when last it was in power, in 1990-93. What chief party strategist Giorgos Souflias was apparently trying to do was to suggest the continuity of New Democracy’s policies and to show that whereas PASOK was too scared to do the right thing, the conservatives would adapt reforms that, they say, saved the social security system a decade ago. In his last days in office, Simitis, who has a sly sense of humor, must have smiled sagely at what happened next. It was, after all, an effort to reform the social security system in 2001 that prompted such intense reactions by political friends and foes that his government was knocked off course, and he beat a disorderly retreat from which he never really recovered. The debacle may be the very reason that today Simitis is no longer chairman of PASOK. Stung by the universal abuse that came even from PASOK-led labor unions and ruling party members, and by the news media’s simplistic presentation of the changes as «more work, later retirement for fewer benefits,» Simitis fell into the arms of PASOK’s Machiavelli, Costas Laliotis, and began to blame the «Right» (New Democracy, in other words) for all his ills. As his government’s popularity slid, so did Simitis’s accusations against the «Right» grow more shrill and unconvincing. This is most likely what prompted many non-traditional PASOK voters to cross over into the conservative camp. By the time Simitis took corrective action last summer, which included sacking party general secretary Laliotis, the polls had established a seemingly permanent 8 percent lead for New Democracy. Only through sacrificing himself in favor of the more popular Papandreou did Simitis manage to give PASOK a fighting chance in the elections. But there was another sacrifice in this story – that of the social security system and all those who expect to grow old in it with security. Because the government, caving in before the threat of the political cost, drew up a set of reforms in 2002 that greatly diluted those of a year earlier. For example, whereas the aborted proposal would have established a universal retirement age of 65, women can now retire at 55 and men at 60 after working for 37 years. A report on the Social Security Foundation (IKA), by far Greece’s largest social security and pension fund, which was drawn up in 2002 by the British Government Actuary’s Department, found that if retirement were at 65, this would result in 3.3 employees per pensioner, dropping to 1.9:1 in 2035. Now, there are 2.3 employees per IKA pensioner, dropping to 1.3 to 1 by 2035, when 5.1 million employees will be paying the pensions of 4 million people, the report found. Internationally, a ratio of 2.4 workers to 1 pensioner is seen as the point at which to panic over the system’s viability. But things are far worse when we take into account all pension funds. Data released last October showed that there is one pensioner for every 1.51 workers, a great worsening from the 2.46:1 ratio of 1990. But Labor Minister Dimitris Reppas cheerily declared that things were not as bad as they seemed because some pensioners had been counted twice, due to confusion in their registration with pension funds. The actual ratio is 1.81 workers per pensioner, he said. In effect, it appears that we don’t really know how many workers and pensioners we actually have. According to the law that Reppas drew up in 2002, the State pays an amount equal to 1 percent of GDP to help fund IKA each year. In a breakdown of what IKA would have received in state assistance if New Democracy’s law were unchanged, the Economy and Finance Ministry said on Wednesday that in 2004 IKA would have got 777 million euros whereas under Reppas’s law it will get 1.46 billion. Greece has the lowest birthrate in the European Union and people aged over 65 are expected to account for 25 percent of the population in 2040 if this continues. So who will do the work to pay for our pensions? It is only the influx of immigrants that allowed the 2001 census to show growth rather than decline over the past decade, and it is the immigrants’ contributions that have done much to shore up social security funds. Yet, instead of being seen as a potent part of the solution, immigrants, who are believed to make up 10 percent of the work force, are still treated by the State as if they are a problem and must be subjected to every possible bureaucratic hardship so that they don’t get any fancy ideas about staying here. This results in many of them working illegally because they cannot meet the conditions for legal residence and employment. This is a clear sign of how little serious thought has gone into the issue of social security. The two major parties, at last, do refer to the issue of migrants and social security in their policy programs, but only very vaguely, without touching on the problems that migrants face in getting and keeping jobs in order to contribute to social security steadily. In short, we do not know exactly how many people are employed or retired, so we cannot be sure how this ratio will develop apart from knowing that the numbers are already dire and likely to get worse. The system is already tottering. We also don’t have any ideas of how immigrants will be helped to solve their problems so as to function fully as members of the legitimate work force in order to inject new life into the insurance system. And it is clear that the current form of funding social security will become more problematic as time goes on. When the growth rate is over 4 percent of GDP, as it has been in recent years, the cost of the State’s social security contributions may not seem exorbitant. But there is no guarantee that growth will remain high – and, anyhow, that 1 percent of GDP could go a long way toward helping the education system tune itself to the labor market’s needs and thereby create the engine that will produce more social security contributions. And as if we did not know it, international organizations such as the European Union and the International Monetary Fund repeatedly state that social security reform is one of the structural changes that has to be made to make the Greek economy more competitive. Yet New Democracy’s wish to revise its former reforms if it is elected turned into a godsend for PASOK, with the same union leaders and same newspapers that had harassed Simitis now proclaiming simply that New Democracy wanted to raise the retirement age and reduce benefits. This, inevitably, resulted in universal condemnation of the proposal. New Democracy fell over itself in trying to back away from its proposal and PASOK made clear that it would not dare anything as foolish itself. So, social security will limp along, until the crisis becomes so great that no one can ignore it. For the younger members of the work force, the risk of the cupboard being bare when their turn for a pension comes is greatest. If that happens, it will be worth remembering that everyone entrusted with planning our common future has a share of the blame. The main political parties chickened out in the face of the political cost. The smaller parties and news media did their best to exploit popular fears of a higher retirement age and fewer benefits, thereby forcing the big parties to back down. Union leaders pandered only to their memberships and not to the unemployed or the young, who will foot the bill for everyone else’s pensions. This is not to make light of the challenge involved in dealing with an issue that raises primordial fears of insecurity in one’s old age. The woes of German Chancellor Gerhard Schroeder and the trepidation of the French government are good illustrations that dealing with social security is never easy. But it is tragic that in a pre-election period everyone involved should abdicate their responsibility to prepare the country for the future, to seek ways to channel our labors into viable models that will increase productivity and create the funds necessary to take care of our old age. Instead, shamelessly, despite all the talk of renewal and reform, everyone keeps investing in the past.