No rest for the weary babushka: would pension reform benefit older Russian women?

By Eloise Goldsmith and Kasey Stricklin

The Kremlin unveiled an unpopular proposal to raise the pension age for the first time in nine decades just as the 2018 World Cup kicked off in early June. The government denies that it used the tournament as cover when announcing the raise, and has since discussed softening the reforms. The proposal intends to increase the retirement age from 60 to 65 for men and from 55 to 63 for women. News outlets have noted that this would place retirement above average male life expectancy, meaning many Russian men will not live to receive their pension, but there has been less coverage of the impact it will have on female pensioners, who outnumber male pensioners two to one.

In addition to economic arguments, the proposal included the “change in the status of women in society” as a justification for the age increase. Some Russian female economists agree that this is a positive change and will allow women to participate in the economy longer and therefore earn a larger pension. The reality, though, is more complicated. Income inequality, gaps in women’s career trajectories and women’s disproportionate role in housework and childcare inherently place them at a disadvantage in earnings-related pension schemes. Women may work for longer under these new reforms, but it is not a clear step towards equality as advertised by the Kremlin.

Previous reforms

As in most countries, implementing any pension reform in Russia is difficult, but significant changes have taken place in the past two decades. In 2002, the Russian government switched from a single system of publicly distributed benefits, much like the US social security system, to one that includes a privately funded, earnings-related component. Until 2016, workers born after 1967 were able to choose between contributing the full pay-roll tax amount (22 per cent) towards the public, pay-as-you-go pension plan, or splitting the contribution: 6 per cent towards the funded plan and 16% towards the public plan.

Due to this switch, the amount of money put towards the public, pay-as-you-go system that supports current pensioners decreased. As workers opted to put money into an individual account, the government had less money to allocate out, a problem compounded by a shrinking number of workers per pensioner. When the Russian pension program first began there were 3.7 workers per pensioner. This number has dropped to 2 workers per pensioner and will continue to decrease in coming years.

With the current pension deficit at 256.8bn rubles, the government is eager to implement new reforms. Decreasing the number of pensioners by raising the retirement age is one of the options open to the government to relieve some of this financial burden.  

Facts and figures

Picture1

Source: https://data.worldbank.org/indicator/SP.DYN.LE00.FE.IN?locations=RU

Although the Russian retirement age has not increased since Stalin was in power, important demographic changes have taken place. For example, the chart above demonstrates that since the 1960s the life expectancy of women has risen from age 70 to 77, while the life expectancy of men has only increased from 62 to 67.

This disparity in life expectancy is significant because it contributes to a high ratio of female to male pensioners. According to the UN, 20 percent of Russians will be over the age of 65 by 2050. Of this total retired women made up about a third of the Russian population. More males are born in Russia than females per year, but by the time Russian women turn 25, the number of males in the same age bracket starts to decrease at a rate that is rare outside the post-Soviet region. In the 55-to-64 age bracket there are .75 males for each female. This drops to .45 males per female in the 65 and older bracket.

Better for women?

The government has framed the proposed increase as a necessary change given societal and demographic shifts. In addition to stating that the increase in women’s average lifespans, the original proposed bill included an explanatory note stating that equal retirement ages will promote gender equity. It references that there is now a more equal distribution of household duties among family members and noted that other countries have implemented equal retirement ages with the aim of promoting gender equality.

Experts such as Oksana Sinyavskaya of the Institute for Social Policy agree that this move would benefit female pensioners. She argues that by raising the retirement age, women will work longer and increase the amount they accumulate in earnings-related pension funds. The move could also help combat age discrimination in employment. Currently, employers know that women are able to retire by the age of 55, and are therefore disincentivized against hiring them. Sinyavskaya states that there are even sectors of the economy where employers won’t hire employees above the age of 40 or 45. Setting the retirement age later will decrease this age discrimination and allow women, according to this group, to work their way up the career ladder.

Women may have more time to earn pension dollars based on record of service, but it would not address life-long inequalities that women face as wage earners. Women are inherently disadvantaged in pension schemes because of “gender differentials in labor and employment.”  In a working paper for ONCHR, Frances Raday explains that even in countries where the retirement age is the same, women still work fewer years on average than men. For low and middle-income countries, women participate in the formal economy 40-60 per cent of the total time men are employed in the formal economy. This number is higher in the industrialized world (80-90 per cent). In Russia women lag behind men in labor force participation in all income brackets.

Russian women experience interrupted career trajectories due to traditional division of labor within households. This is not unique to Russia – in a 2015 report, the International Labor Organization asserted that women worldwide are more likely to receive lower pay than men due to both labor market interruptions to care for children and employment in lower-paying, family-friendly jobs after childbirth. Within Russia specifically, a gender diversity survey of Russian businesswomen conducted in 2017 found that 57 per cent of survey participants “believe women are forced to interrupt their careers” and 52 per cent said it is difficult to find the right balance between work and family.

Women are also barred from certain professions and earn less on average than men in Russia. There are 456 occupations that the Russian government considers too threatening to women’s health, particularly reproductive health, to perform. Instead of ensuring work place safety for all employees, the government has failed to strike down this legislation that prevents women’s equal economic participation. Finally, the gap between what women earn on average compared to men is between 20 and 27 per cent, though this is down from 40 per cent in 2005. This yields lower accumulated pension wealth over time, even women work for the same number of years as men. 

Packaging reforms as a move towards greater gender equality will be a hard sell when the government removes over 10 million elderly women from the current pension system. Allowing women the option to work longer is an important step towards economic equality, but implementing this reform without targeting pay gaps and other structural barriers will not yield real change.

 

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