In an aging country the flow to pensions affects the economy as those who leave are not replaced
The… river of retirements does not turn back and especially in the public sector it leaves black holes in the already under-functioning services due to the memorial policies. It’s about the flight of baby boomers from work. It is a flow that has now taken on a dimension where it will leave after 2020 and since then we count over 200,000 retirements per year. It is characteristic that 30% of retirements concern early retirement, which means that even in the regime of extreme profiteering that has been established in the country since the middle of 2021, older workers choose retirement even if the income is not sufficient for living their. If one were to add up all those who left their jobs within the current decade, they would find that they reach 800,000.
In an aging Greece, this flow towards retirement leaves a black mark on the economy, as those who leave are not replaced by other more experienced ones. This occurred during the last decade of memory (2010-19) due to the flight of hundreds of thousands of experienced wage earners abroad (estimated at more than 600,000), who preferred foreignness to the erosion of quality of life due to wage erosion. Thus there is a huge gap between the experience of those who retire and the inexperience of those who are young in age who are called upon to take up the vacant positions, as the middle ages have gone abroad.
In addition to this, EFKA’s finances are burdened the most since it pays out more and more pensions, while at the same time the positions of those leaving are occupied especially in the private sector by workers with an obviously lower salary – many times full-time and part-time positions are also replaced. The burden on the finances is obvious, given that the premiums paid by the employer and the employee come out as a percentage based on the amount of the salary.
The retirement rate is doubled
When the population ages, the labor market shrinks. This is clear if we take into account the productivity of a newer one as well as the difficulty of adapting to new technologies of an older one. Of course, the gap is bridged if one adds experience to the mix. But here comes the will of the older one. This is the retirement dream shared by almost the entire workforce in Greece.
Therefore, whoever has the right to retire exercises it. Early retirements may have been frozen in August 2015 in the context of the third memorandum through annual extensions of the retirement age, but what was achieved then was a small extension of time. All projections at the time indicated that the mass exodus to retirement problem was simply pushed seven years later. So what would have exploded as a “retirement boom” in the seven-year period 2016-22 has been postponed for the seven-year period 2022-29.
This happens because the pension rights of those who have been called baby boomers, that is, those born between the years 1960-65, have matured. It was then that Greece was the last to emerge from the rest of the Western world from the wounds of the Second World War and the Civil War that followed. In these five years there was an explosion of births in Greece (hence baby boomers). It is characteristic that during that period the annual births exceeded 170,000, while within the current decade they do not exceed 90,000. All those born then when they came of age filled the labor market in the private and public sector and now after 40 years it is time for retirement.
This fact in combination mainly with what is happening in the labor market from the neoliberal interventions from 2019 – high risk, minimization of controls that contribute to the explosion of the indicated work, reduction of income especially through the flexible eight hours established in 2021 and begets free overtime, etc. – but also the dream of retirement held by generations of workers brings a doubling of pension applications compared to the previous decade.
Reduction of the penalty in the work of pensioners
Such are the conditions in the Greek labor market that those who leave cannot bear to work any further. This is evidenced by the very few pensioners who worked under the previous regime (a 30% penalty had been established). With the Katrougalou Law (4387/2016) a 60% reduction penalty on the pensionable salary was established horizontally for all, regardless of the days of employment. This meant that even one working day resulted in a 60% reduction. Then in 2020 and in view of the explosion of retirements with the Vroutsi Law (4073/2020) the same regime remained, i.e. a reduction even for one day of employment per month, but the percentage was reduced to 30% of the pensionable salary.
According to the EFKA records, despite the reduction from 60% to 30%, those who work while receiving a pension are only 50,000 out of a total of 2.45 million pensioners (a percentage of only 2%). Law 5078/23 on the employment status of pensioners is now in force. Based on the new regime, the 30% on the pension is abolished and a contribution of 10% on the salary is instituted.
The government’s expectation is on the one hand to increase the number of working pensioners, on the other hand to bridge the experience gap. However, and given that this is a recent measure, no one knows if the specific category will increase, given the triple taxation trap to replace the 30% penalty set by the Mitsotakis government.
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