“That pension systems are unable to finance the retirement of ever increasing numbers of longer-lived pensioners nobody in aging Europe doubts,” writes Joanna Solska in Poland’s biggest selling, influential current affairs magazine Polityka1. Meanwhile Prime Minister Tusk insists that, “the aim of the pensions bill is to bring pleasure.” The proposed bill raises the retirement age of men from 65 to 67 and of women from 60 to 67. The former deputy minister for work, Agnieszka Chłoń-Domińczak, claims that making women work an extra seven years will reduce the risk of poverty among female pensioners from 45% to 13%. This is quoted from Gazeta Wyborcza (Feb 24th), Poland’s biggest selling quality daily newspaper, which, entirely independently of the government, is mounting an intensive campaign in favour of lengthening the working lives of Poles. The campaign against leisure (Poles already enjoy one of Europe’s longest average working weeks) has been under way for at least five years and now it’s full steam ahead as various people try to convince the public that work, rather than leisure, is a measure of wealth.
Among the vast majority of the population there is considerablyless enthusiasm about this proposed cut in living standards2 but even on the left few seem to seriously doubt that at some point in the not too distant future Poland will be unable to support its pensioners with the fruits of its workers’ labour. Perhaps encouraged by demographers, government spokespeople and journalists confidently throw around facts, figures and predictions about the next generation but there is almost no reference to the country’s projected wealth. In 2040 (by which time the changes will have taken effect in full) Poland is likely to be a lot richer than it is now.
Sceptics prefer to concentrate on issues like the health of Poland’s aged: Polish 65-year olds are simply not as healthy as their counterparts in Western Europe and cannot work as productively. This is a valid question but it is firmly within the frame of the debate as set out by the government. Przegląd (2012:8), a left-wing magazine, has a lone paragraph briefly mentioning gross domestic product buried in a lengthy story on the subject, which also accepts the way the story has been framed by the government3 . That framework is one that will be familiar to most readers in Europe, not just Poland.
The demographers tell us loud and clear: the proportion of working people to non-working people is falling and will continue to fall. Economists add that eventually there will not be enough workers paying into the system to support the pensions being paid out of it. This takes no account of rising productivity per worker. It takes ever less labour to produce the same amount of wealth. Barring war or natural disasters this is to be expected as science and technology advance. Any rational person would consider a country that requires less labour to produce a good living a richer country than one which – other things being equal – requires more labour.
Poland’s Central Statistical Office publishes, among other things, a “Concise Statistical Yearbook” in both Polish and English, with all kinds of statistical breakdowns and data (2011 and 2000 are where the figure below come from)4. The population of Poland in 2000, conveniently, was almost exactly the same as in 2009: 38.2 million people. Gross domestic product (GDP) in 2000 was 744 billion zloties (all figures are in 2011 zloties, and there’s about 4.15 of them to a euro). In 2009 it was 1,343 billion zloties. So in 2009 there was nearly 50% more wealth to share around the same number of people than there had been about a decade earlier (the Statistics Yearbook gives an index of 146 for 2010, with 2000 being 100). Looking a little further back, the pattern holds: gross domestic product has been on the up since the early 1990s. If in 1990 the GDP index was 100, in 2010 it was 200: Poland was twice as rich. The population was virtually unchanged (38.1 million in 1990).
It is true that in these years the proportion of non-working age people to working-age population fell but by nowhere near enough to account for 100% growth in GDP. Nobody likes statistics and nobody likes arithmetic but they’re not as dismal as economics. To quote Dean Baker (who is referring here to the US):
“The reason that we are on average much wealthier today even though we have a much larger population of retirees is productivity growth. Productivity growth has averaged over 2.0 percent annually over the last 50 years. (It has averaged 2.5 percent over the last 15 years.) If productivity growth averages 2.0 percent a year, then in 20 years workers will be on average be producing almost 50 percent more in an hour of work. In 40 years they will be producing 120 percent more in an hour of work. Such gains in output will allow our children and grandchildren to enjoy much higher living standards than workers today, even while supporting a larger population of retirees” (The Guardian Unlimited, January 20, 2011).5
If you look back at that quotation from Joanna Solska at the start of this article you will notice that she talks of the “pension system,” not the state. The choice of words is careful (Polityka is usually more measured than Gazeta Wyborcza). A glance at the statistics – not to mention common sense – indicates that there is nothing to suggest that the state will be unable to support its retirees in the future. A given pension system may run into difficulties – may even need bailing out by the taxpayer – but what taxpayer will complain about funding retirement if his real wages still continue to rise?
A little over a decade ago Poland reformed its pension system by semi-privatising it. This left a bitter taste in the mouth – apparently people believed the advertisements showing retired Poles lazing around the tropics enjoying the interest accumulated from the investments in the stock market made on their behalf by their Open Pension Funds (Otwarte Fundusze Emerytalne). The first payouts under the new system were in 2009 and they were meagre to say the least. Some cynics are even saying that working lives are being extended by two years (men) and seven (women) (three and eight, actually, since the government also wants to send children to school a year earlier) so that – despite high unemployment and emigration – money will keep rolling in to the (private) pension funds. And there is no shortage of cynics who say civic-minded Poles should have the good manners to save the pension funds money by dying as soon after late retirement as possible.
Deputy Prime Minister Waldemar Pawlak of the Peasant Party recently went on record saying that he did not trust the state for a pension. The problem is not demography. It’s not even poverty. It’s distribution. It’s politics.
Notes:
1. Polityka (2012:7, p6)
2. http://www.gadu-gadu.pl/sondaz-polacy-nie-chca-podniesienia-wieku-emerytalnego
3. http://www.przeglad-tygodnik.pl/pl/artykul/emerytury-tuska
4. http://www.stat.gov.pl/gus/roczniki_PLK_HTML.htm
5. http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/the-tidal-wave-of-nonsense-on-demography