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The West and the Rest:
Poverty Reduction Strategies with and for Older Persons in Europe and the CIS.
Dr. Dorothy J. Rosenberg
Senior Advisor for MDGs and Civil Society
Poverty Group, Bureau for Development Policy
United Nations Development Program
Presented at the 15th Annual celebration
of the International Day of Older Persons
October 6, 2005
Prior to
transition, all countries in the region had comprehensive health, education and labor-based social insurance systems, supplemented by social protection schemes, which consisted mostly of in-kind benefits and privileges such as reduced rent and utility payments, reduced or free public transportation for the elderly and disabled, free or very inexpensive medications and medical devices, etc. Guaranteed employment ensured virtually universal coverage for working age adults and their dependents and near universal pension coverage. While most of these countries had moderate standards of living, all had low or very low levels of poverty, low levels of relative poverty (with a an estimated high of 10-12 % in Central Asia) and very low levels or absence of absolute poverty.
Since transition in 1989 in Central Europe and 1991 in the former Soviet Union, the situation has changed dramatically. The region has seen a rapid and significant increase in poverty, as well as the appearance of absolute poverty, usually in post-conflict areas, but not limited to them and in both urban and rural areas. The region has also seen rapid and extreme increases in inequality in the countries former Soviet Union, with significant, if less radical changes in equity in Central and Eastern Europe.
The reason for these changes has been a negative cycle in which the collapse of the economy has led to the collapse of the social protection system, which in turn reinforced the negative spiral of economic decline with massive job losses due to disappearing domestic, as well as foreign demand for goods and services. Systems of guaranteed employment and labor-based social insurance either ended or were radically cut as enterprises were privatized. At the same time, dwindling tax revenues led to full or partial privatization of pension systems, health insurance and education. In addition to outright unemployment or hidden unemployment in the form of wage arrears, the value of real wages was sharply reduced by inflation.
While most countries in the region are characterized by the "working poor", i.e. individuals engaged in economic activity but unable to earn sufficient income to stay out of poverty, those most likely to be poor are the elderly, the young, the disabled and those who have care responsibilities for them, including households with more than one member in any of these categories.
Societies fall back on family and inter-generational redistribution in time of difficulty, meaning that those without family or a multi-generational household find themselves least able to cope with adversity in the absence of public support. Those most likely to be
poor are the single elderly or orphans. Those most likely to be old and poor are women, although the smaller number of single elderly men are often the least capable of coping.
The Role of pension benefits, subsidies and privileges
Even where benefits are inadequate to support a single pensioner, income transfers to older members of households in the form of a stable small cash income constitute a major contribution to a family budget. Subsidized rent and utilities privileges reduce pressures on the family budget, as well as payment arrears to public utilities and housing authorities, while free transportation privileges allow older household members to take on an important role in the family. These payments contribute to improving the welfare of all household members through intra-household transfers such as the payment of school fees and other vital cash payments in largely in-kind economies.
While there are numerous experiments currently under way with non-contributory "social pensions" and cash transfers, experience thus far indicates that broad, state-backed systems are far more effective. Private and employer-backed schemes tend to be unstable, while micro-credit schemes can contribute small improvements in income, but are insufficient and not stable enough to lift and sustain participants out of poverty.
In a prevailing situation of oversupply of labor, age discrimination is very likely to become a significant factor. Throughout the region, those who lose their employment after the age of 45 are most likely to become the long-term unemployed or shift to the informal economy where they work without any form of social protection, minimum wage or maximum hours regulation or even the assurance that they will receive payment for their work. There has also been a divergence into the "young old" or those who are still able to participate in the subsistence or informal economy, frequently under very difficult conditions and low return, and the "old old" who are able at best to take on a larger share of household and child care work to free younger women for wage or field work.
Poverty Reduction Strategies
If they are to have any chance of succeeding, poverty reduction strategies must be designed to address the factor outlined above. Strategies must be based on a comprehensive analysis of poverty characteristics, distribution and dynamics, using and mapping data disaggregated by gender, age, urban/rural residency, geographical location and, if possible and relevant, ethnic or confessional minority status. In conditions of mass unemployment, job creation for the able bodied is unlikely to be sufficient to lift households out of poverty, as market-based wages will not rise to a level capable of supporting dependents. Comprehensive and universal social protection for all members of society, introduced in a step-by-step fashion and categorically targeted to the most vulnerable social groups in tandem with job creation will underpin reviving growth by stabilizing domestic demand -- the only way to ensure stable economic recovery and social inclusion. "Social safety nets" which offer only exception, temporary help do not address the root causes of poverty and exclusion and are insufficient to alleviate the effects.
It is a fundamental error to view pension and social protection payments as pure expenditure. In fact, cash pension benefits to the elderly as well as other forms of social transfers tend to recycle directly into domestic economic demand for locally produced goods and services. As such they tend to stabilize the local economy, providing counter-cyclical support to small businesses, which is in turn recaptured through taxation. As bi-lateral donors and multi-lateral development organization expand and systematize their practical and analytical work in this area, we can expect to see more and better evidence of both the economic and social utility of comprehensive, universal social protection.
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