The basic guidelines for Greece’s social security reform

The guidelines of the government’s proposals for social security reform, unveiled last week, appear deliberately vague in parts and lend themselves to a variety of interpretations; depending on one’s viewpoint, they can be judged anywhere from positive to deeply negative. Media interest in the proposals focused on the issues of retirement age, particularly for women and those employed in the so-called unhealthy and hazardous occupations, and the size of pensions in relation to the last salary. A number of points lacked specifics and caused concern. Retirement age: The proposed general retirement age is 65 for all first insured after January 1, 1993. Exemptions are made for mothers, those in unhealthy and hazardous occupations, and people of special needs. There will be a gradual increase in the retirement ages for those first insured between 1983 and 1992, beginning from January 1, 2008, when the transitional period expires. This is expected to mainly affect women with or without adult offspring, who, under a 1992 law, will as a rule be able to retire at 60 in 2007, when men will generally be retiring at 65. But it will also affect a large number of people who, under the present regime, could have retired as follows: First, men and women aged 58 after 35 years at work in the private sector, and second, men aged 62 and women 57 with 10,000 workdays in their record. Although the same proposal had caused strong reactions a year ago, trade union officials now say that the omens are good for acceptance if it is combined with flexible retirement framework beginning at age 58. Mothers: The Labor Ministry has expressed the intention to change «the framework of protection» for working mothers entering the labor market after January 1, 2003. Those already at work are not affected. Sources say that the ministry is considering a «motherhood bonus» of two years for every child – with a possibility for three years for the third child – irrespective of whether the offspring have reached adulthood. The provision would cover all women, including farmers and those who gave birth at a very young age and are not treated preferentially to male colleagues under current guidelines. The existing provisions for women first insured after 1992, which will be retained as an alternative option, favor those with offspring who are either underage or unable to work. According to these, working women can retire with a full pension at age 55 or a reduced pension at age 50 if they have 6,000 working days or 20 years and an underage child – that is, they have given birth at age 38 or later. Women with at least three offspring, irrespective of age, can also retire earlier provided they have worked for 20 years. Those with three children can retire at 56, at 53 with four and at 50 with five or more children. Unhealthy and hazardous occupations (UHO): The government is proposing a review of the relevant list, with the changes affecting only those entering the labor market after 2003. This, however, holds the danger of employers in the affected sectors replacing the workers already employed as they pay higher contributions for them. Size of pension: No pension may amount to more than the last wage or salary. Downward gradual adjustments will take effect after 2007. The crucial question here is the ultimate size of the adjustment. Theoretically, those first employed before 1993 will be entitled to receive a main pension, which represents 80 percent of their last wage; for those employed from 1993, it will amount to 60 percent. In practice, most pensioners of the Social Security Foundation (IKA) today receive 70 percent of their last wage. Sources say the Labor Ministry will consider establishing a uniform 70 percent for «old» and «new» insured. In any case, it is considered certain that supplementary pensions – which in some cases amounted to 80 percent of the last wage and thus meant total retirement incomes much higher than working ones – are certain to undergo serious cuts, particularly for insurance salespeople, airline staff, merchant marine agents, electricians and those employed in the foodstuffs and pharmaceuticals industries, whose total retirement incomes are estimated to ultimately reach 75 percent of working incomes. The Labor Ministry is giving reassurances that the lowest pensions will not be affected and will look into improvements for the «new» entrants (after 1992). Climate of trust Economy and Finance Minister Nikos Christodoulakis said yesterday that a climate of trust between government and social partners was necessary for successfully reforming the social security system. «If we do not solve the issue we mortgage the future of working people because there can be no efficient and dynamic labor market without a modern, viable and fair social insurance system,» he said during an event in Hania, Crete. Deputy Labor Minister Rovertos Spyropoulos pledged continued state funding of the system and projected that the reform will have been completed by June. Opportunities