pensioners’ employment and their families well-being in russia oxana sinyavskaya, independent...

Pensioners’ Employment and Their Families Well-being in Russia

Oxana Sinyavskaya, Independent Institute for Social Policy

Family in the Stream of Changes: Demographic Challenges to Social Policy,

International Conference, SU-HSE & IISP, 28-29 November 2007

28.11.2007 SU-HSE & IISP conference, Moscow

What is going on with pension benefits in Russia?

0

2040

60

80

100120

140

1990 1992 1994 1996 1998 2000 2002 2004 2006

%

10

1520

25

30

3540

45

%

real pension benefit (1990=100)pension benefit to pensioner's subsistence minimum

average pension to average wage (right axis)


Public transfers through pension system decreases poverty levels…

Household TypePoverty level (monetary income p/c)

Poverty level (disposable resources (maximum of incomes and expenditures), excluding families with secondary liquid housing

Deficit of disposable resources for poor (by disposable resources) households

All households 49,0 26,0 28,8

Single pensioner of pension age (55/60 and over) 34,4 8,1 17,3

Households of pensioners of pension ages 25,2 6,6 12,8

Households of pensioners, including pensioners below pension age 51,3 25,7 23,8

Households of pensioners and non-pensioners, including people of pension ages 52,9 31,4 26,8

Households of pensioners and non-pensioners, all below pension ages 60,0 36,4 30,9

Households without pensioners 57,2 33,6 31,1

NOBUS data


Older generations give more in private transfers than receive – elderly support young

0 5 10 15 20 25 30

18-19

20-2425-29

30-3435-3940-4445-4950-54

55-5960-6465-6970-7475-79

receive only both receive and give give only

RusGGS-2004 data


Employment of pensioners decrease poverty of their households

32,7 9,72,7

55,6

33,333,216,4

9,4

0102030405060

monetary incomes disposable resources

Poverty level by ...

% o

f hou

seho

lds

households of pensioners incl.: with working pensioners

households of pensioners and non-pensioners incl.: with working pensioners

NOBUS data


Households with working pensioners are the most secured

1800

3465

1633

2932

2465

2495

4511

2311

3622

2984

not-working pensioners

pensioners, incl. working

non-pensioners and not-working pensioners

non-pensioners and pensioners, incl.working

non-pensioners only

HO

US

EH

OLD

S O

F ..

.

RUR, 2003

Monetary incomes p/c Maximum disposable resources p/c

Max!

NOBUS data


Employment of pensioners is increasing

0

5

10

15

20

25

30

1999 2000 2001 2002 2003 2004 2005 2006

by the end of the year

% o

f pen

sion

ers

all pensions labour old-age


The employment rates of men and women of old ages, 1999-2005, % of the number of people of given sex & age

30

35

40

45

50

55

60

65

70

75

80

feb.99-nov.99

feb.2000-nov.2000

feb.2001-nov.2001

feb.2002-nov.2002

feb.2004-nov.2004

feb.2005-nov.2005

0

5

10

15

20

25

m, 55-59

f, 50-54

f, 55-59

m, all ages

f, all ages

m, 60-72

f, 60-72

LFS data

Effect of the reform 2002


0

5

10

15

20

25

30

35

lowest 1 2 3 4 highest 5

1996

1998

2000

2001

2002

2003

2004

On the whole people works regardless of their pension benefit size(Shares of working pensioners in the total number of pensioners, by pension benefit quintile groups)

RLMS data


15

20

25

30

35

40

1 2 3 4 5quintiles of disposable resources (max of incomes and expenditures) p/c, excl.

pensioners' labor incomes

1996

1998

2000

2001

2002

2003

2004

On the whole it is not the poorest pensioners who work

(Shares of working pensioners in the total number of pensioners, by household disposable resources per capita quintile groups)

RLMS data


Probability to have a job for old-age pensioners or pensioners for long service, 45-69 years old, full model, both sexes, RLMSVariable 1996 2001 2004

Age (age divided by 10) -1,252*** -1,488*** -1,878***

R's Gender; [Ref=male] -0,316** -1,244*** -0,575***

Level of education [Ref - primary vocational]

secondary vocational 0,727*** 0,903*** 0,553***

higher and post-graduate 1,130*** 1,556*** 1,013***

Health by self-identification [Ref - bad health]

average 1,012*** 1,120*** 1,114***

good 0,852*** 0,832*** 0,872***

Marital status; [Ref - married] 0,241 -0,210 -0,044

Number of other household members except of R 0,017 -0,157** -0,048

Respondent's pension benefit, corrected to the ratio of regional and federal subsistence minimums; natural logarithm

-0,013 -3,840*** 0,258

Type of settlement; [Ref - rural] 0,406** 0,856*** 0,689***

Regional wage; natural logarithm 0,825*** 0,650* 1,705**

Regional unemployment level -0,036 -0,002 -0,046*

Constant 0,147 28,480*** -7,072

R2 0,275 0,522 0,369

Number of observations 1603 1326 1219


What policy options can be done?

Tax on pension benefits for those working

Working pensioner can attain only a part of her pension (70, 50 or 0%)

She can choose: Working and getting a reduced benefit Not working and getting full benefit


Predicted probabilities to work

Cit.: Kovrova (2006): Why Do Russian Pensioners Continue Working?

Males Females

Mean Std. Dev.

Mean Std. Dev.

Probability to observe pensioner at work 0.24 0.22 0.16 0.18

Probability to observe pensioner at work, if we introduce pension tax, that is equal to 30% for those working 0.23 0.22 0.15 0.17

Probability to observe pensioner at work, if we introduce pension tax, that is equal to 50% for those working 0.22 0.21 0.14 0.17

Probability to observe pensioner at work, if pension benefits are not available for those working (pension tax=100%) 0.20 0.21` 0.11 0.16


Household poverty rates by monetary incomes p/c for different policy options (% of households in each group)

0 10 20 30 40 50 60 70 80 90

All

With labour old-age pensioners

… labour disability pensioners

... labour survival pensioners

... state old-age, disability, survivalpensioners

... pensioners for long service

... social pensioners

BASE (2003)Pensioners do not workReal amount of pension benefit is … decreased by 10%Real amount of pension benefit is … increased by 10%

NOBUS data


Average predicted probabilities by wage groups

Males Females

Probability to observe pensioner at work

Wage-group 1

0.026 0.078

Wage-group 2

0.203 0.292

Wage-group 3

0.491 0.661Cit.: Kovrova (2006): Why Do Russian Pensioners Continue Working?


Dependency between shares of working pensioners not leaving the labor force and the pension tax differentiated by wage

First wage-group 90% 0,71 80% 0,47 70% 0,29 60% 0,17 50% 0,09

Second wage-group 90% 0,51 80% 0,21 70% 0,08 60% 0,03 50% 0,01

Third wage-group 90% 0,17 80% 0,05 70% 0,01 60% 0 50% 0

Where: δ – ratio of employed pensioners kept in labor market, γ – share of pension benefit after tax

Cit.: Kovrova (2006): Why Do Russian Pensioners Continue Working?


Conclusions

The growth of the employment of pensioners since 2002 occurs mainly because of removal any restrictions on the combining work and getting pension

When no restrictions on the employment of pensioners – health & educations – the most important predictors;

If there are restrictions/taxes – incomes become more important


Conclusions (cont.)

The introduction of the restrictions on employment for pensioners will lead to a mass outflow of pensioners from the formal labour market that will be the larger the higher will be the pension benefits.

It will also increase poverty rates among pensioners.

If pension benefits were taxed for working pensioners, then the tax rate should depend progressively on wage.


Conclusions (fin.)

To be effective the policy should be concerned with the issue of increasing effective pension age instead of limiting the right to work for pensioners.

Possible solutions: the reform of existing public early pension

schemes; equalizing normal pension ages

pensioners’ employment and their families well-being in russia oxana sinyavskaya, independent...

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