Friday, December 17, 2010

The First Pensions Cut Will Not Necessarily Be The Deepest

When we heard that ominous rumbling noise that happens every time the markets think they can make some more money out of Spain's economic troubles, my assumption was that we would almost immediately get the "pensionazo" - the expected cutback in Spanish state pensions. As it happens, we got another emergency package to keep the sharks at bay for a day or two.

However, we have more or less received the announcement of the first part of the pensionazo. The Pacto de Toledo, the all-party group that meets to make recommendations on pensions, has a majority in favour of extending the period used to calculate the final pension. This is currently set at the last 15 years of someone's working life, and now looks almost certain to be extended to the last 20 years. The great advantage of this kind of measure is that it represents a concealed cut in pensions for many recipients, as the latter years of our working lives are often the ones with the highest salary. At least that's how it worked before the latest neo-liberal tsunami took shape. 

For some the change has already been made. Self-employed autonomos have had the rules changed by earlier legislation to extend the period of final pension contribution. The Pacto de Toledo hasn't for the moment reached any recommendation on delaying retirement age from 65 to 67, as the government has proposed. Despite this, Zapatero has today made it fairly clear from Brussels (where he goes these days to receive his instructions) that this remains the aim of his administration and it's reasonable to expect that the announcement is not far away.

Some people say it doesn't matter that much if the retirement age is delayed, after all don't we all live longer these days? Depends. Apart from the fact that average life expectancy is a poor indicator of the number of people actually receiving pensions, it also hides from view the grimmer realities of social inequality. I read something a few months ago about the differences in average male life expectancy in the UK between those living in Blackpool and those living in the London Borough of Kensington and Chelsea. The difference if I remember correctly, was between 73 years for Blackpool Man compared to 83 for K&C Man. Not bad, an impressive testament to how successive governments have happily made the UK one of the most unequal societies in the developed world. 

Apply to that particular case a two year retirement delay from 65 to 67 and you find that your 73 year old loses a whopping 25% of his retirement time, whilst the 83 year old loses a little over 10%. The life expectancy differences are largely based around social class and guess which one of the two will probably have had a longer working life and paid more years of contributions. Yes, that's right, the one most likely to die first. That's why the retirement age is important and why delaying it contributes even further to increasing inequality. Before we even consider the effect of all the other measures currently being implemented with similar results

On my holiday last week I read a book called The Spirit Level which I throughly recommend as an examination of how inequality has a whole series of disastrous social effects in societies which produce great wealth but only for a select minority. It clearly won't be top of the Christmas wish list for those who are currently leading the offensive against public services, they will just be buying shares in the companies that will build the privately run prisons needed to deal with the consequences of their policies. 

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