I hardly need to repeat the statistics since the greying of our society is a widely acknowledged fact. While increased longevity is a blessing in many ways, it poses various challenges not only to governments but also to the elderly themselves.
The age hierarchy in our society has changed as have occupational and family patterns. Such transformations require a rethinking of old age policies in order to ensure that the elderly receive adequate provision upon retirement for a decent quality of life.
Old age brings with it a number of insecurities that can be psychological, physical, social but also economic as many see a drop in their income. For the elderly of the future there is the added risk of being unable to secure a basic pension unless certain issues are immediately addressed or unless they can afford private retirement schemes. For low income earners, the future is even bleaker.
At the same time, policymakers have to deal with problems of welfare sustainability and economic dependency ratios with the aim of achieving a better balance between those engaged in the labour market and those living on a state pension. The Maltese scenario presents an even bigger headache considering the idiosyncratic features of our labour market characterised by the lowest participation rate of women and of elderly workers in the EU. Added to this, we still also have a high rate of early school-leavers and an unsustainable birth rate.
Our pension scheme reproduces the inequalities existing in the labour market because it is based on the income received from employment. Therefore, it is not surprising that one fifth of those aged 65 and over fall below the poverty line. As a long-term goal, a universal citizens’ pension reflecting a realistic cost of living should be provided to all regardless of previous occupational status considering that every member of society gives a positive contribution through both paid and unpaid work. This can have a positive effect on the economy as it will increase the spending power of lower income groups. Those with higher incomes can always supplement this pension through a private pension fund.
We understand the impact that such a measure can have on state finances but its gradual implementation can have positive effects.
Maintaining the status quo is not an option as the setting up of the Pensions Working Group by the government acknowledges. Thus, Alternattiva Demokratika is proposing a number of measures that may contribute to a more sustainable pension system and to a better quality of life among the elderly.
We believe that pension policy should not be based on one family model but should reflect today’s family diversity.
We do not believe that anyone should be forced to work beyond the age of 65. It should be up to the individual to decide whether to continue working or not beyond retiring age. Despite the longer life expectancy, not everyone feels compelled or even fit to continue working after 65 since this depends not only on the person’s state of health but also on the type of occupation. One cannot expect a manual worker who would normally have started working at an early age to necessarily want to continue working after almost 50 years of service. It may be different for those whose work is less physically demanding and who work in more comfortable settings.
We consider the mandatory 40-year working life for eligibility to a contributory pension to be an obstacle to certain categories of workers, especially women who often have to disrupt their work trajectory due to caring responsibilities. AD appreciates that credits will be given in certain cases to compensate for lost contributions. However, these have to reflect the essential contribution made by those who stop working to care for children, elderly and persons with disability.
Furthermore, in these times of economic crises and increased work precariousness, more workers may find it increasingly difficult to maintain uninterrupted employment. Some categories, such as those with low skill and educational levels, persons with disability, elderly workers and those constrained to work part-time, are more vulnerable.
At present, Malta’s pension scheme rests solely on the pay-as-you-go system. We believe that, further to this first pillar, we should start moving towards the gradual and responsible introduction of a compulsory second pillar whereby the government ensures that this extra revenue is used strictly for pension purposes. It is the state that has to assume ultimate responsibility for this and to ensure that those who cannot pay are adequately covered.
To further ensure sustainability, a pension fund should be established, used exclusively for the payment of pensions and financed through social security contributions and investments. This fund should be managed by the state with the input of the social partners and subject to the scrutiny of the Auditor General.
One of the biggest challenges faced by policymakers is to attract more women of all ages to the labour market and to avoid losing them when they become mothers. While our Mediterranean culture makes it difficult to persuade older women who have dedicated their life to raising a family to enter the labour market now, it should be easier to secure the services of younger women if more family-friendly measures are available in both the state and private sector and if more men are enticed to increase their involvement in caring roles.
Such measures have been shown not only to enable women to continue working but also to have more children, both crucial for welfare sustainability.
The author, a sociologist, is spokesperson for social policy and civil rights of Alternattiva Demokratika, the Green party.