Tuesday, June 12, 2012

Demographic Collapse in Russia Threatens Pensions

The collapse in the birth rate after the breakup of the Soviet Union two decades ago will cause Russia's labor force to shrink 11 million by 2030, while the number of pensioners will grow by 9 million. _MoscowTimes

Perhaps the silver lining of Russia's pension problem is that Russian men do not often live long enough to enjoy their pensions. High death rates from heart disease, alcoholism, suicide, tuberculosis, crime, accidents, and smoking related diseases allow only a few old Russian men to live long enough to complain about their pensions.
One solution involves increasing the time Russians would have to work to receive a full pension. The Social Development Ministry proposes boosting this period to 40-45 years, up from just five years at present.

In one of his first decrees as the new president, Putin has called for a mechanism that rewards pensioners who work beyond the official retirement age.

"It is a hidden hike in the pension age, but they don't want to do this openly," said Julia Tsepliaeva, chief economist at BNP Paribas in Moscow.

To save money, the plan would also have to penalize Russians who still retire at 55 or 60. It's far from clear that Putin has the political stomach for such an unpopular step.

. "Unfortunately, people don't realize that they are paying for pensions themselves," said Gurvich. "They have paternalistic thinking and think that the government pays. So they don't like the idea of working longer." _MoscowTimes

Somehow I doubt that Putin -- or any Russian politician or official -- can get away with raising work requirements for a pension from just 5 years all the way up to 40-45 years.

With the average life expectancy for Russian men barely at or above 60 years, most men will not be healthy enough to work that long, and many will not survive that long -- work or no work.

As the numbers of ethnic Russians inside the country continues to shrink -- and the numbers of non-Russians inside Russia continues to grow -- there will be the further problem of conflict between the non-Russian workers who may not wish to pay high taxes to support ethnic Russian pensioners.

Of course, that conflict can arise in any country where demographic replacement -- due to differential birthrates and immigration -- is taking place.

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