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Why raising pensions did not raise ratings of Ukrainian authorities?

Source : 112 Ukraine

Ukraine's pension reform is a mechanism of getting rid of the annoying electorate that in 2028 will no longer have a long-term "Soviet" work experience
16:53, 5 January 2018

Read the original text at 112.ua.

112 Agency

In the past year, pro-Ukrainian groupings of the Ukrainian establishment encountered a paradox, which in the future may be called the "Reva’s casus" or "paradox of Rozenko". I am talking about the pension reform. In fact, pension reform is a mechanism of getting rid from the state's shoulder of the annoying electorate, which in 2028 will no longer have a long-term "Soviet" experience, but there will have experience of long-term informal employment during the years of independence.

In the course of pension reform, officials were rightly convinced that such a radical change in the basic parameters of retirement will inevitably lead to righteous national anger. In Germany and in France people would not stand it... We are not talking about the actual age of retirement, but only about the adequacy of the applied changes to the realities of our lives. After all, one thing is to increase the age of retirement in the EU (taking into account the average life expectancy of the population), but another thing is Ukraine. In addition, the insurance experience in Western European countries, where the official labor market is developing, where countries experience high wages and low unemployment, is one thing, and in our country, everything is exactly the opposite, there are two big differences.

Related: Muzzy prospects of Ukraine's funded pension system

That is why Western technologists, who developed the concept of pension reform in Ukraine, decided to offer pensions increase for some groups of pensioners as compensators of national anger, caused by an increase in the minimum required insurance period. The logic here was extremely simple: Ukrainian lives today, and if he or she is offered some additional 7-150 dollars to the pension, provided that all his grandchildren, great-grandchildren and non-born descendants will see the same pension like snow in the tropics, then the Ukrainian will agree for this additional money, that is, it will change its "birthright" to a lentil boot.

So, the creators of pension reform had a little miscalculation with the fears of a popular "explosion": the long-term prospect of retirement worries the Ukrainians on an equal footing with the meteorite threat and the risk of the emergence of artificial intelligence, which will enslave earthlings under the rule of robots. Especially since many potential retirees who are 25-30 years old and who could collect 35 years of custodial insurance, have already stumbled upon European "skis" and are more concerned with the pension system of Poland or Germany.

Related: Pension modernization in Ukraine to last till 2021, - Ministry

But there is a serious gap with the "compensators". Having received a retirement allowance, Ukrainian pensioners began to even cover their favorite power even more, and the level of social stimulation only increased.

Do you imagine how the rating of Kuchma or Yushchenko, would have increased, if they managed to add 70-80% to the pension?

Here is the paradox: if in 2014-2015, the ratings of the pro-government coalition (for comparison, let us take the indicators of the largest fraction) were at maximum level (steadily higher than 20%), and this is against the background of the maximum inflation and devaluation of the hryvnia, then in a more stable period (2016 -2017 years), when the change in prices and the exchange rate of the national currency was not so radical and the gradual improvement of the basic economic parameters began, the ratings fell to the slope. Scheduled political scientists, of course, will find this another on-call explanation, such as "Yatsenyuk has depreciated most of the discontent" or "the war in the early years has acted as a mobilizing factor uniting the power and the people." But let us look at this "phenomenon," using an economic angle.

Related: New pension reform: Genocide of Ukrainian retiree

During the last 20-25 years Ukraine had an implicit social contract, which was considerably stronger than the Constitution, consolidating the mutual obligations of the main social groups (or classes, as the classic would have said) of the country. On the one hand, the population as a result of voucher privatization completely abandoned the colossal property production complex, which remained after the collapse of the Soviet Union. All these assets worth hundreds of billions of dollars were given to several pro-government groups for very low prices; these groups have formed their financial and industrial clans on this basis. On the other hand, the authorities, which grew up with big business, partly fulfilled their part of the unscrupulous promises (which can be more precisely called verbal signs): low tariffs, all kinds of benefits, simplified retirement arrangements, gradual growth of wages and social standards (for example, pensions), low taxation and the possibility for small businesses to work illegally.

In recent years, this Vanity Fair was ended. And the reason is not in the crisis of 2008 or the events of 2014-2015. The old industrial complex simply ordered a long life as a result of the policy of de-industrialization, and large exporters of raw materials, which play an ever-increasing role in the current economic coordinate system, do not show the will to continue this tacit social contract. Hence increased utility tariffs, market price for gas for the population, pension reform, devaluation of the national currency (in the interests of the same exporters of raw materials) and much more.

Related: Ukraine's slow road to state pension reform

But the problem is that (as opposed to developed Western countries) the rational Homo Economicus was not formed in Ukraine, who can be easily fooled, believe in economically justified tariffs and the market price of gas. Homo Sapiens continues to live with its own inner emotions and its quiet demand for justice. It is for this reason that the "Ultimatum" game, proposed by the current authorities to its people in the form of the new pensions, did not find the expected response. No, nobody gave their pensions back, but this "gift" was rejected psychologically. And the "giver" caused even greater emotional rejection than before.

For many years, the problem of distorted justice will be the deterrent factor that will prevent Ukraine from becoming the "new Poland" or even "new Romania", not to mention South Korea. A society whose request for justice is not satisfied is not able to move forward faster, it is just like a car with a manual brake. The economic boom strategy involves long-term (10-15 years) “tightening of the belts,” limiting the level of unproductive consumption and investing savings in the national economy. But for this purpose, a certain “ascetic politician” should come to power, and the people would trust him. This “ascetic politician” should be able to tighten his own belt.

Related: Pensions for disabled people to be raised from December 1

There is, of course, one more option. We might wait until a new generation appears in Ukraine, which will be absolutely sure that all these factories, nuclear power plants, and CHPPs have been built by their current owners. Most likely, this is the baseline scenario. It is not necessary to count on increasing the level of "serotonin" in the near future. "Diet" will not allow doing this...

As was reported before, October 3, 2017 the people's deputies have "improved" the lives of our citizens and significantly tightened the requirements for the insurance period. In particular, in 2018, to retire at the age of 60, a person should have 25 years of experience. With an experience of 15-25 years, you can retire at 63 years old, and if a person has less than 15 years - at 65 years. People who do not have the necessary insurance experience will only be able to obtain social assistance when they reach 63 years. This is despite the fact that Ukraine has very high mortality of men in middle age.

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