The pension reform approved by the parliament in July basically offers two key changes: to increase the required length of work experience and to increase the pension age [gradually to 60 for women and 63 for men].
In other words, what we have here is an attempt to reduce the chronic state Pension Fund deficit by reducing social guarantees.
The government is citing Europe’s experience, which is also going through a stage of increasing pension age. Possibly, this is inevitable for Ukraine as well, but our country is in a very different social and economic situation.
Police on July 7 prevent protesters supporting opposition leader and ex-Prime Minister Yulia Tymoshenko from marching to the front of parliament in protest of the government’s raising of the retirement age for men to 63 from 60, and for women to 60 from 55. The measure is now law. (UNIAN)
In the 20 years since independence, 78 percent of people in Ukraine found themselves below the poverty line, while more than 8 million Ukrainians survive on pensions below Hr 1,000. There is an abyss between the poor and the rich, and during the last year it has deepened.
In these circumstances, reducing social guarantees further dooms millions of our citizens to a miserable existence.
The faction of [ex-Prime Minister] Yulia Tymoshenko’s bloc in parliament has suggested a different alternative, which will increase revenues to the Pension Fund without increasing pension age and minimum work experience.
It even leaves enough money for an increase in pensions.
Paradoxically, Ukraine has plenty of options for filling the Pension Fund that are not available in most European countries. Between 40 and 60 percent of Ukraine’s economy is in the shadows, according to estimates.
A whopping Hr 120 billion of monthly wages are paid out in envelopes, depriving the Pension Fund of Hr 40 billion in revenues. In other words, there is a major resource for filling the Pension Fund.
Paradoxically, Ukraine has plenty of options for filling the Pension Fund that are not available in most European countries.
The choice we’re facing today is not so simple: it’s a choice between two philosophies concerning the nation’s development.
The first one, which is implied in the reform proposed by the government, is solving the economic problems by reducing social protections and imposing the lion’s share of the social burden on future generations.
The second option is much more complex because it implies a “shock therapy” not for the people, but for those in power, the bureaucrats who have to restrain their appetites, learn to live without bribes, and set the state procurement system straight.
I think that priority should be given to the following elements of the pension reform:
Firstly, creation of a competitive economic environment and creation of a true free market;
Secondly, cracking down on the shadow economy, addressing corruption in the state service, and assisting business in the process of legalization – not though repressive means, but though stimulation;
Thirdly, increasing the living standards and social protection for the Ukrainian citizens.
These are the three priorities you have to start with to achieve true social reform. Unless those in power start with themselves, the social reforms will not make any sense. People’s trust is a key condition for a successful reform conducted with the people in mind, not the bureaucrats.
Nataliya Korolevska is a member of the Verkhovna Rada, Ukraine’s national parliament, as part of the Bloc of ex-Prime Minister Yulia Tymoshenko.
