Solutions from election runners: social assistance. IPN series. Elections-2014

The minimum pension in Moldova is 798 le at a time when the minimum subsistence level per pensioner is 1,390 lei. IPN News Agency asked the elections runners how they will solve the problem of low pensions given that all the contenders promised to raise the pensions at least up to the minimum subsistence level but didn’t do it when they came to power, and what solutions they have in the case of other social benefits.

Doubling of pension over the next four years

The Democratic Party of Moldova (PDM) says that the average age of the population over the last 20 years increased by 5 years, while life expectancy by 3 years. The low number of taxpayers compared with the number of beneficiaries, the low employment rate and the considerable size of the undeclared economy negatively affect the stability of the pension system in the long run. The government coalition, which includes the PDM, managed to double the average pension in 2008 and raised it from 665 lei to 1,117 lei until now. The pensioners on pensions lower than 1,500 lei receive a bonus of 180 lei a month. The party will make effort for the pensions to be considerably raised annually.

The accelerated economic growth is the only realistic way of ensuring pension raises. The PDM aims to double the average pension and average salary over the next four years. As to the wide discrepancy between the lowest pension and the largest pension (in Moldova there are persons who receive pensions of 5,000, 10,000 lei and even 15,000 lei. One pensioner has a pension of 20,000 to 25,000 lei, e.n.), the PDM says the lower pensions must be raised by a higher percentage than the large pensions. A solution is to provide the 13th pension, which is one more pension besides the 12 monthly pensions, to persons on very low pensions.

As to other social welfare, such as the child benefit and the childbirth allowance, the PDM says that while in power it ensured the rise in the single childbirth allowance from 1,200 lei in 2008 to 3,100 lei in 2014 for the first child. For each next child this allowance is now 3,400 lei. In order to support of families, the PDM suggests reducing the dwelling tax for families with at least two minor children.

Reduction in irrational costs

The Christian Democratic People’s Party said there are a series of internal sources for augmenting the budget incomes and for increasing the social benefits. The substantial diminution of the underground economy and ‘double entry accounting’ would be a generous source for strengthening the state’s capacity to honor its social obligations. At the same time, the drastic reduction in irrational budget costs for maintaining the system of government can lead to considerable savings that can be reoriented to the social sphere. Furthermore, the implementation of protectionist economic policies, of economic patriotism, which is the regaining by the state of the right to protect the home market from the invasion of foreign goods by imposing higher customs duties, and the banning of offshore companies from operating on the country’s territory, first of all in the banking system, would allow to fight the monopolies and cartel agreements and to simultaneously lend efficiently to the national entrepreneurs. The transferring of the currency exchange activity from the private sphere to a specialized state institution would allow redirecting hundreds of millions of lei to the state budget, implicitly for social needs.

The greatest hope is put in the reindustrialization of the country, which implies zero customs duties on the import of technology and raw material for industry. A minimum pension or allowance for invalidity cannot be lower than the minimum subsistence level. In order to get additional financial resources, the useless bodies of the state administration should be liquidated. A measure is to remove the pool of cars for high-ranking officials, except for the President and the Premier, and to no longer earmark money for maintaining the army of bodyguards and traffic police officers.

The childbirth allowance must be increased. It is as important for the state to create conditions for extending and diversifying the employment opportunities in the country. Furthermore, the provision of accessible dwellings for young families and concessions for setting up private crèches or nursery schools will contribute to a higher birth rate. The exodus of young people abroad is the most serious problem and it’s not enough to take economic measures to stop it. National pedagogy is needed, cultivated by our elite, the national leaders with profound patriotic feelings and views, who would serve as models for the young people of the country.

Alternative pension fund

The Liberal Reformist Party aims to gradually reform the social insurance system so as to increase the welfare of the entire population. The pensions, scholarships, allowances and befits can be increased after fighting and reducing underground economy. Illegal payment of salaries, money laundering and corruption at all levels affect the social payments system. Therefore, effort must be made to ensure a transparent, efficient, independent, non-politicized and reformed judicial system. The pensions will be raised gradually, when the political class will be cleaned and will work not for the own or party interests.

The pension system will be reviewed as it is unbalanced. It’s impossible to make all the pensions equal, but a solution is to actively increase the pensions that do not reach the minimum subsistence level, without razing the pensions that do not exceed 5,000 lei for example, at least for a period of four years. Another solution is to create an alternative pension system so that the persons who reach retirement do not depend only on what the state offers.

The low birth rate and population aging represent a serious threat to Moldova. Without a problem aimed at remedying the situation, Moldova risks having an aged population that will further increase the burden on the diminishing working class. Not only the small childbirth allowances influence the birth rate. The young families should have access to dwelling and the state should provide assistance to single parents so as to prevent embankment. A national program is needed to actively stimulate the rise in natality by providing considerable state financial support to the families.

Accumulation of taxes paid by salaried employees to the pension fund on personal account

The National Liberal Party said that the average old age pension in 2013 represented 26% of the average official salary, the minimum acceptable level being 40%. In Moldova, the ratio of working people to pensioners is 2:4 plus a budget, which is fatal for any state. There are such categories of people as judges, MPs and public servants whose pension is up to eight times higher than the average old age pension. Another challenge is that about 152,400 of the total number of recipients of pensions work in the national economy. The legislation does not provide for the recalculation of pensions of persons who continue work, though they continue to pay social insurance contributions.

A cumulative system of pensions should be instituted within which the social insurance contributions would be invested, instead of being spent on paying benefits to the current pensioners. The social contributions are invested using the financial markets whose development is positively associated with economic growth. Another factor is the optimization of labor so as to create preconditions for economic growth premise. Thus, the net impact of the reform will be the decrease in the number of pensioners living below the absolute poverty level by 2% more than in the scenario ‘without reforms’ until 2020. The pension system reform should be done by accumulating the taxes paid by salary earners into the pension fund into a personal account. Such a measure will stimulate the people to pay the social taxes.

As to solutions for single parents or families where the husband and wife need to work to ensure decent living conditions, but have children younger than three, who are not accepted into the nursery school, the party considers that a specials fund should be created for remedying the demographic situation, including by attracting amounts from the assistance provided by the foreign partners.

Raising benefit for children with disabilities at least five times

The Party of Socialists of the Republic of Moldova pledges in two years to increase the minimum guaranteed incomes of the population up to the minimum subsistence level and to reinstitute nominal compensations for particular categories of people and to also regularly index all the payments in accordance with the rate of inflation. The party also aims to review the criteria based on which social assistance is provided and to reduce the bureaucratic procedures. The benefit for raising children with disabilities should be increased at least five times, while pensions should be raised annually by at least 20%. The money needed for the purpose can be obtained by increasing the employment rate in the national economy and reducing the underground economy, by optimizing budget expenditure, etc.

In order to help the families with children, the party will promote the state program “Maternal Fund”. When giving birth to the first child, the families will receive 15,000 lei from this fund, 30,000 lei for the second child and by 50,000 lei for the third and next children. Each child will have a guaranteed place at the nursery school or crèche. In the families with three children and more, one of the parents who will stay at home to bring up the children will be able to claim a ‘family salary’ that will not be lower than the minimum subsistence level. Conditions will be created for the young families to be able to take out loans granted by the state for purchasing homes. When giving birth to the second child, the loan will be reduced by15%, while when giving birth to the third child – by 35%.

Allowances for raising children of €5,000

The People’s Party of the Republic of Moldova considers that the ratio of working people to pensioners will be reduced by reforming the pension system based on the cumulative principle. The calculation methodology must be modified based on the annual average size of the minimum subsistence level and depending on the necessities.

The party’s program includes meioses to support the young families and the families with many children. The allowances will be indexed annually, according to the rate of inflation. A single allowance for raising children of €5,000 will be provided in several tranches, until graduation of the secondary school, based on the incomes of the family, socialization of the child (nursery school and school) and social behavior of the parents. Starting with the third child, the allowance will be raised by €500 for each child. The money needed for these allowances will be allocated from the state budget from the incomes accumulated from moderate taxes and from revenues from economic activities.

The number of ministries and functionaries should be reduced. There should be only 71 MPs. Conditions will be created for reducing the underground economy, combating smuggling and improving management of the state budget by digitizing it so as to collect money for implementing the aforementioned proposals.

Public-private partnerships in the area of social protection

The Liberal Party considers it is possible to raise the minimum pension at least to the minimum subsistence level. The long-term solutions for improving the social payments system include supporting the private social protection system by legalizing the alternative pension funds, developing interment funds, private pension funds and investment insurance companies as alternatives to commercial banks so that they provide investment resources.

Public-private partnerships can be promoted in the area of social protection and financial assistance projects and programs can be attracted from the EU donors. The discrepancy in the size of pensions is unjustified and should be reduced not only by excluding groundless payments from the social insurance budget and by raising the minimum pension. All the social benefits will be increased by adjusting the laws to the EU legislation an including the problems related to caring after elderly people in the local, regional and national development agendas, increasing the role of civil society in the decision-making process and of the social protection programs.

The child benefits have constantly increased since 2009, some of them 3-4 times. Other measures will be taken to help the families with any children, such as tax exemptions for those who raise more than three children, provision of preferential loans for building or purchasing dwellings, salary bonuses for parents with minor children.

Benefits higher than the real minimum subsistence level

The Green Ecologist Party said the minimum subsistence level of 1,390 lei is the declared one, while the real one is 3,000 lei. It would be normal for the pension, invalidity pension and the other benefits not to be lower than the real minimum subsistence level. Money can be accumulated by reducing the costs for the government system. An example is the Ministry of Agriculture, which has tens of all kinds of subdivisions and institutions for breeding cattle, rabbits, etc, but the companies buy not from them, but from abroad. All these subdivisions and institutions absorb a lot of money for maintenance.

Reduction in state costs

According to independent candidate Oleg Brega, the social benefits can be increased by imposing higher taxes on cigarettes, alcoholic veer ages, gambling, by taxing church businesses and by instituting separate taxes for the rich. The social budget can be also increased with money from privatization. The administrative reform and the reduction in state costs are yet the most important. The country is suffocating now. Millions of lei is paid not only for the 101 MPs, but also for as many MP consultants, for a huge building that was recently renovated, for too expensive and too many cars. Money is also wasted in the Government, the State Chancellery, the district councils and the mayor’s office with tens of thousands of employees.

Pensions should be balanced by raising the low pensions to the minimum consumer basket first so that those people do not die of hunger and despair and more people start to have confidence in the state institutions. The productivity of the working people will increase as they are the relatives of those living below the poverty line.

A sufficient number of crèches and nursery schools are needed and other conditions should be created for the parents to be able to work when their children are small. The state must create a stable and legal business environment that would generate safe and sufficient salaries for the parents to be able to raise and educate the future citizens and taxpayers. The orphans and abandoned children must be integrated into adoptive families, while the state should create attractive conditions for bringing up these children.

Rooting out of corruption and diminution of underground economy

The Centrist Union of Moldova said that in general the current system of social payments is appropriate to the situation in the national economy. For its part, the national economic is unbalanced and monopolized and does not ensure conditions for competition-based economic activity that would generate efficiency, workplaces, decent salaries and adequate social benefits. The method of calculating the minimum subsistence level must be modified, while the minimum pension must be raised to 2,000 lei, but not under the minimum subsistence level.

The necessary financial resources will be taken from social payments and from the higher social insurance contributions. The state budget incomes can be increased by reducing the underground economy, which now represents about 36-42% of the GDP, which is 29-30 billion lei on which no taxes are paid and approximately 7-8 billion lei fails to be collected into the state budget. There should be also rooted out corruption, which absorbs up to 40% of the profit of the economic entities. Another 4.5-5 billion lei could be thus collected annually into the state budget.

The childbirth allowance must be essentially increased, up to 100,000 lei for each child, regardless of the cumulative incomes of the family. Otherwise, Moldova will become a state without people and without territory. About 3.5-4 million lei is needed annually for the purpose.

Note: IPN News Agency asked all the election runners to state their views on the given issue. The article contains the answers provided by the agreed date. The IPN series of materials produced before the November 30 parliamentary elections will continue with other important issues identified by the public. So far there were addressed such issues as the undeclared economy and the mandatory health insurance funds.

Irina Ţurcanu, IPN

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