Russia's Frayed Safety Net
The nation's 60 million pensioners see their living standards erode
RECENT visitors to the Soviet Union have been struck by the number of beggars in public places. Gnarled hands are extended at church doors, swaddled invalids use wheelbarrows as wheelchairs, and the elderly peddle used garments at the markets. All this is now part of Soviet life. Soviet pensioners have been hard hit by declining economic conditions. Since the doubling and tripling of retail prices on April 2, many older citizens are unable to buy milk and must survive on bread, salt, and water. The government's struggle to erect a social safety net in the midst of economic collapse has proved futile. The newly created USSR Pension Fund, responsible for financing pension payments, is bankrupt. And pensioners, who make up almost one-fifth of the Soviet population, find themselves i
A downtrodden group accustomed to conforming and surviving, Soviet pensioners lack political organization and are one of society's most vulnerable subgroups. The majority of pensioners live below the poverty line. According to the law, minimum pension benefits must not be less than the subsistence wage, currently set at 100 rubles a month. Most agree, however, that the official poverty level is unrealistically low, and calls have recently been made to raise it above 200 rubles. To supplement meager inco m
e, pensioners who are able continue to work, others sell buttons and rags on street corners or collect recyclable bottles for rebates, and some simply beg. Although panhandling is a criminal offense, women over 55 and men over 60 are exempt, according to a study by David Powell of Harvard University's Russian Research Center.
In May 1990, working on the social safety net, the Soviet legislature passed a new pension law. It increased the amount of compensation and reworked the financing of payments. The USSR Pension Fund was created as an independent financial and banking institution. Diverging from past practices when pensions were paid primarily out of the state budget, the USSR Pension Fund receives social-insurance contributions directly from enterprises, organizations, private companies, and individuals, along with limit e
d funds from the state budget. The new law stipulates that employers contribute one-fourth of monthly wage payments to the all-union pension fund; individual citizens must contribute 1 percent of their wages. On Jan. 1, 1991, the USSR Pension Fund took over financing and distributing benefits to the country's pensioners.
The USSR's political and economic chaos has virtually assured the failure of the new pension fund. Six out of 15 Soviet republics have refused to participate. Among the holdouts, the three Baltic states created their own structures for providing benefits, while the Russian republic legislated its own pension laws and fund. Economic and bureaucratic inefficiencies are another problem. The creation of an executive board and various regional branches and offices fell behind schedule, the fund issued instru c
tions for enterprise payments late, and enforcement mechanisms ensuring employer and citizen contributions were not put in place.
A recent Izvestia report describes the financial state of the new pension system as "catastrophic." To get off the ground, the all-union pension fund borrowed 20 billion rubles from the USSR State Bank. Oleg Tarasov, chairman of the fund's board, believed the money would last a month and a half, and in the meantime contributions would replenish the coffers and enable the fund to support pension payments and pay off the credit. But the expected mandatory payments to the fund are not being made. Tarasov c i
tes "the general decline in discipline" as a factor in the lack of payments. "No one is in any hurry to give up money," he said in a recent Izvestia interview. The fund is sinking, causing anxiety among pensioners and leaving the government to cover them.
When the USSR Pension Fund was initially created, many worried about its reliability. The executive director of the pension fund, A. G. Solovyev, assured pensioners that there were "no grounds for alarm.There is money," he said, referring to the loan from the USSR State Bank. But the bank is now unwilling to lend the fund more money.
In a democratic USSR, pensioners would possess a powerful political voice. As a segment of the population, they have grown from 4 million in 1940 to more than 60 million today. Even the still undemocratic Soviet Union is unlikely to abandon such a large segment of its population. But to meet pension payments, the government will most likely resort to printing money. The near-certain result will be to intensify the spiraling inflation of consumer prices that is the greatest threat to the living standards
of Soviet pensioners.