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5. The Great Abnormal Pensioner Booms: Strategic Social Policies in Practice
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CHAPTER 5 The Great Abnormal Pensioner Booms Strategic Social Policies in Practice “Policy is produced by human actors who are not merely driven by natural impulses or by the compulsion of external factors. Instead, public policies are the outcomes—under external constraints—of intentional action.” Fritz Scharpf (1997, 19) How have post-communist governments allocated their scarce resources towards different social groups? In keeping with Taylor’s (1988a) emphasis that we need both individualist explanations of structures and other macro-phenomena and structuralist explanations of individual attitudes and beliefs, I have indicated how governments could reduce disruptive protests by splitting up selected groups of threatened workers into different work–welfare categories. This chapter discusses stylized evidence from Hungary, Poland, and the Czech Republic.1 The aim is to draw together a number of indicators that concisely capture state social policies towards various work–welfare groups. These indicators can be used to check whether behind the messy empirics of transition more systematic political mechanisms can be detected. I compare policies towards the unemployed , young families, and pensioners and show how pensioner favoring policies have led to dramatic increases in the number of nonelderly pensioners in Hungary and Poland, amounting to a Great Abnormal Pensioner Booms. 74 Divide and Pacify 5.1. The unemployed: Divided first, squeezed later Unemployment benefit programs in post-communist Central Europe evolved in two phases.2 Initially, comparatively generous programs were provided. But in subsequent years they were progressively, often radically , tightened. As table 5.1 shows, between 1991 and 1995 unemployment benefit replacement rates (u) have been reduced for all duration spells. Governments have also made cuts in other program parameters. New ceilings were imposed on the maximum level of benefits that could be paid out in Hungary and the Czech Republic. The minimum level of benefits was reduced in Hungary and abolished in Poland. In Hungary, the real value of per capita unemployment benefits eroded in three years’ time to less than half of their 1992 levels (Ferge, 2001). By April 1993, the average benefit was 9,500 HUF. This was well below the minimum subsistence level for a family of four, at 12,500 HUF per head in villages and 13,000 HUF in towns (Nesporova and Simonyi, 1994, 15). Overall, this amounts to a severe tightening of the unemployment benefit system, not least by international standards.3 Table 5.1. Selected unemployment policy parameters in Hungary, Poland and the Czech Republic, 1991 and 1995 Max. duration (months) Benefit minima (% of min. wage) Benefit maxima (% of min. wage) u first 3 months (%) u first year (%) u second year (%) Coverage Rate Hungary Dec 1991 24 100 None 75 59 34 80 Dec 1995 12 70 150 58 51 0 40 Poland Dec 1991 Openended 100 Average wage 70 53 40 75 Dec 1995 12 None None 45 45 0 55 Czech R Dec 1991 12 None None 65 58 0 72 Dec 1995 6 None 150 60 30 0 48 Notes: u = gross benefit income in unemployment as a percentage of gross wages in previous employment; rates average those of two unemployed, aged 40, who have been working at the average wage continuously since age 18 with no interruptions and who [34.200.248.66] Project MUSE (2024-03-28 19:48 GMT) The Great Abnormal Pensioner Booms 75 were earning, respectively, the average wage and two-thirds of the average wage. In Hungary , benefit minima and maxima figures refer to relativities between benefit floors and ceilings and the minimum wage in 1995. Unemployed people who were previously earning less than the benefit minima are entitled to 100 percent of the previous earnings. Coverage rate = unemployment benefit recipients as a percentage of registered unemployment . Source: Boeri (1997a, 130, table 2). Between the early and the mid-1990s, the maximum duration of unemployment benefit entitlements was halved in Hungary and the Czech Republic and was more strongly reduced still in Poland. As a result, coverage rates have gone down drastically. By the end of 1995, only 40 percent of Hungarians and roughly half of Poles and Czechs who were registered as unemployed actually received any benefits. Neither early pensions nor disability pensions were subject to similar duration limits. Thus, condition (4.3), that entitlement periods for abnormal pensions (y) exceed those for unemployment benefits (x), applies. The incentives enabling divide and pacify policies to split up relatively homogenous groups of workers into different work–welfare categories were therefore in place. The theory also offers an alternative...