Pensioners Employment and Their Families Well-being in Russia Oxana Sinyavskaya, Independent Institute for Social Policy Family in the Stream of Changes: Demographic Challenges to Social Policy, International Conference, SU-HSE & IISP, November 2007

SU-HSE & IISP conference, Moscow What is going on with pension benefits in Russia?

SU-HSE & IISP conference, Moscow Inequality of pensioners incomes (2003) GINI COEFFICIENT: Pension benefits = 0,211 Incl.: labor pensions = 0,176 Pensioners individual monetary incomes = 0,351 NOBUS data

SU-HSE & IISP conference, Moscow Public transfers through pension system decreases poverty levels… Household Type Poverty level (monetary income p/c) Poverty level (disposable resources (maximum of incomes and expenditures), excluding families with secondary liquid housing Deficit of disposable resources for poor (by disposable resources) households All households 49,026,028,8 Single pensioner of pension age (55/60 and over) 34,48,117,3 Households of pensioners of pension ages 25,26,612,8 Households of pensioners, including pensioners below pension age 51,325,723,8 Households of pensioners and non- pensioners, including people of pension ages 52,931,426,8 Households of pensioners and non- pensioners, all below pension ages 60,036,430,9 Households without pensioners 57,233,631,1 NOBUS data

SU-HSE & IISP conference, Moscow Older generations give more in private transfers than receive – elderly support young RusGGS-2004 data

SU-HSE & IISP conference, Moscow Employment of pensioners decrease poverty of their households NOBUS data

SU-HSE & IISP conference, Moscow Households with working pensioners are the most secured Max! NOBUS data

SU-HSE & IISP conference, Moscow Employment of pensioners is increasing

SU-HSE & IISP conference, Moscow Regulating Pensioners Employment in Russia Has a long history – since soviet time – all pensioners could work without any restrictions on their income – only pensioners preferred smaller benefits calculated by 1990 rules could work since 2002 – all pensioners are allowed working + right to recalculate pension benefit

SU-HSE & IISP conference, Moscow How Long Do People Work on Pension? Shares of working old-age pensioners (45-79 years old) depending on the duration of their pension status NOBUS data

SU-HSE & IISP conference, Moscow Till What Age Do They Work? NOBUS data Shares of working old-age pensioners (45-79 years old) depending on their age

SU-HSE & IISP conference, Moscow The employment rates of men and women of old ages, , % of the number of people of given sex & age LFS data Effect of the reform 2002

SU-HSE & IISP conference, Moscow Evaluation of The Effect of Changes in Demographic Structure and Pension System on The Dynamics of Working Pensioners from 2001 to Growth due to… Statistics data Assessment by NOBUS Statistics data demogr. changes rules change s Share of working old-age pensioners, % to all old-age pensioners in respective ages: all14,79%15,76%23,38%0,97p.p.7,62p.p. below 55/6048,53%48,55%67,37%0,01p.p.18,82p.p. 55/60 and over 11,93%11,86%18,14%-0,07p.p.6,29p.p.

SU-HSE & IISP conference, Moscow On the whole people works regardless of their pension benefit size (Shares of working pensioners in the total number of pensioners, by pension benefit quintile groups ) RLMS data

SU-HSE & IISP conference, Moscow On the whole it is not the poorest pensioners who work (Shares of working pensioners in the total number of pensioners, by household disposable resources per capita quintile groups ) RLMS data

SU-HSE & IISP conference, Moscow Probability to have a job for old-age pensioners or pensioners for long service, years old, full model, both sexes, RLMS Variable Age (age divided by 10) -1,252***-1,488***-1,878*** R's Gender; [Ref=male] -0,316**-1,244***-0,575*** Level of education [Ref - primary vocational] secondary vocational 0,727***0,903***0,553*** higher and post-graduate 1,130***1,556***1,013*** Health by self-identification [Ref - bad health] average 1,012***1,120***1,114*** good 0,852***0,832***0,872*** Marital status; [Ref - married] 0,241-0,210-0,044 Number of other household members except of R 0,017-0,157**-0,048 Respondent's pension benefit, corrected to the ratio of regional and federal subsistence minimums; natural logarithm -0,013-3,840***0,258 Type of settlement; [Ref - rural] 0,406**0,856***0,689*** Regional wage; natural logarithm 0,825***0,650*1,705** Regional unemployment level -0,036-0,002-0,046* Constant 0,14728,480***-7,072 R2R2 0,2750,5220,369 Number of observations

SU-HSE & IISP conference, Moscow What policy options can be done? Tax on pension benefits for those working Working pensioner can attain only a part of her pension (70, 50 or 0%) She can choose: Working and getting a reduced benefit Not working and getting full benefit

SU-HSE & IISP conference, Moscow Predicted probabilities to work Cit.: Kovrova (2006): Why Do Russian Pensioners Continue Working? MalesFemales MeanStd. Dev. MeanStd. Dev. Probability to observe pensioner at work Probability to observe pensioner at work, if we introduce pension tax, that is equal to 30% for those working Probability to observe pensioner at work, if we introduce pension tax, that is equal to 50% for those working Probability to observe pensioner at work, if pension benefits are not available for those working (pension tax=100%) `

SU-HSE & IISP conference, Moscow Household poverty rates by monetary incomes p/c for different policy options (% of households in each group) NOBUS data

SU-HSE & IISP conference, Moscow Average predicted probabilities by wage groups MalesFemales Probability to observe pensioner at work Wage- group Wage- group Wage- group Cit.: Kovrova (2006): Why Do Russian Pensioners Continue Working?

SU-HSE & IISP conference, Moscow Dependency between shares of working pensioners not leaving the labor force and the pension tax differentiated by wage First wage-group 90%0,7180%0,4770%0,2960%0,1750%0,09 Second wage-group 90%0,5180%0,2170%0,0860%0,0350%0,01 Third wage-group 90%0,1780%0,0570%0,0160%050%0 Where: δ – ratio of employed pensioners kept in labor market, γ – share of pension benefit after tax Cit.: Kovrova (2006): Why Do Russian Pensioners Continue Working?

SU-HSE & IISP conference, Moscow Conclusions The growth of the employment of pensioners since 2002 occurs mainly because of removal any restrictions on the combining work and getting pension When no restrictions on the employment of pensioners – health & educations – the most important predictors; If there are restrictions/taxes – incomes become more important

SU-HSE & IISP conference, Moscow Conclusions (cont.) The introduction of the restrictions on employment for pensioners will lead to a mass outflow of pensioners from the formal labour market that will be the larger the higher will be the pension benefits. It will also increase poverty rates among pensioners. If pension benefits were taxed for working pensioners, then the tax rate should depend progressively on wage.

SU-HSE & IISP conference, Moscow Conclusions (fin.) To be effective the policy should be concerned with the issue of increasing effective pension age instead of limiting the right to work for pensioners. Possible solutions: the reform of existing public early pension schemes; equalizing normal pension ages