Russian government to slash budget deficit

In recent weeks the Russian government has announced plans to slash the country’s federal deficit by half by 2013, a move requiring drastic cuts in government spending. While the Kremlin has yet to unveil a full package of austerity measures, in late June Finance Minister Alexei Kudrin proposed raising the pension age for men to 65 and for women to 60.

The average retirement age in Russia is currently 54 for men and 52 for women, however, as 30 percent of the work force falls into job categories eligible for early retirement. Some economists now advocate junking these special categories and increasing the number of years that a person must work before becoming pension-eligible. They also propose making it illegal for a pensioner to work when he or she is receiving retirement benefits. Currently, 30 percent of Russia’s pension-age population stays in the workforce because they cannot survive on what the government provides. Grandmothers begging on the streets are a common sight in Russian cities.

Kudrin’s proposal has elicited concern from layers of the government over its potentially explosive consequences. An increase in the retirement age in Russia would reverberate throughout the entire economy and expose the fragility of the social system. After observing that 40 percent of the male population does not live to the current retirement age, Evgeny Gontmakher, told Novie Izvestiia on July 15, “Women, who currently retire at the age of 55 and do not work, take care of their grandchildren and elderly parents. This means that government pensions are effectively financing the lack of nursery schools and nursing homes.” In short, forcing these women back on to the labor market would create a crisis for working parents. Furthermore, increasing the pension age would also significantly raise the number of job seekers—driving unemployment up and wages down.