All governments, in one way or another, try to meet the needs of aging people who can no longer provide for themselves. Albania, as a developing country, tries to grow the economy, its citizens meanwhile face difficult issues of how to cope with the increase in expenses and the cost of living through income that is obtained from work, capital or from the state budget.<\/p>\n
Currently in Albania, there is a lot of discussion about pensions, mentioning various schemes to cope with the increased social pressure over the years, but also to influence the current scheme, which suffers from the narrowing of the base of contributors (emigration and increase low population), as well as from evasion in the correct declaration of salaries and respective contributions.<\/p>\n
But, in the discussions of the last months, we have suggested that the transition from public pension to more market-oriented policies that include private pension schemes should be planned very carefully.<\/p>\n
This approach takes on even greater meaning when it is seen that even in the developed world, long-functioning pension systems (public and private) that have sufficed for decades are now threatened by a rapidly expanding pensioner population with a shrinking base of productive workers to provide them with future funds.<\/p>\n
This demographic time bomb has ignited an intense debate about pension reform in general and particularly whether it is necessary or desirable to consider aggressive planning schemes, where the approach of decentralizing public schemes is to transfer responsibility from government pensions to private plans. or publicly funded.<\/p>\n
With so many countries now engaged with these issues, it is the right time for a reflective discussion of the simple economics of pensions and the prerequisites that the Albanian economy suggests for the creation of new systems as well as for the adaptation of mature and older ones.<\/p>\n
Rational policy-making begins by agreeing on objectives and then proceeds to discuss the instruments for achieving them.<\/p>\n
In general, the objectives of all pension systems are threefold:<\/p>\n
– ensure security against poverty in old age;<\/p>\n
– smooth out the distribution of consumption expenditure over a lifetime, shifting some of it from the most productive years to the least productive years; AND<\/p>\n
– a guarantee aspect, to ensure life requirements for those with long life spans.<\/p>\n
However, current debates in Albania about pensions involve arguments over whether government promises are safer than assets owned or held in the names of individuals, and how much a generation of workers will pay for the old age pension bill. The political disagreements and populisms of the government and the opposition increase the confusion and the economic bases of the pension scheme, public or private.<\/p>\n
Some themes now seem to relate no longer to the adequacy of the scheme to provide the necessary resources for individuals at the end of their lives, but to the adequacy of the economic model and political system to meet their needs.<\/p>\n
These topics are necessary to be part of national consultations (instead of referendums which are absent in the country). The gravity of the national dialogue should not be the subject of discussion by its leaders (the current political class) but by civil society and all interest groups that are not part of today’s and past politics. The main topic of discussion should be driven by the help of technology about whether there is enough national production for the realizability of all the pension promises, looking at it in the perspective of the widespread uncertainty that faces all the current discussions.<\/p>\n
Our preliminary answer to all long-term addresses is to diversify the structure of the economy. Today the economy is left to flow, unoriented by any political vision towards services, trade and investment of money from informal sources in sectors that are growing beyond the need and demands of the market.<\/p>\n
So, we think that the economy should now move towards the difficult path of production, as it is the sure way to return the economy and the market to all the fulfillment of the unrealized promises of welfare, jobs and prosperity.<\/p>\n
After all, the production and consumption of goods and services is central to any effective retirement plan. Through accumulation from production, although under the conditions of a political system based on socialist ideas, the pension scheme at that time was effective and was inherited safely many years after the fall of the previous political system.<\/p>\n
Meanwhile, the development of production and the increase of capitals (not only in construction) would take a great meaning for their use in the future. So, production manages to create capital reserves which are worth exchanging in the future for higher benefits to guarantee the pension scheme. With the current economic model and the mistakes governments have made in the way they handle regulatory and fiscal policy for the economy we have created to date, it is of course impossible to save some of the profits to create a pool of money to expand the economy for the future.<\/p>\n
Under these conditions, the informality of wages is not the only problem, even though it is a considerable problem that erodes the policies of the system. In fact, the informality, tolerated by the inaction of the institutions and the lack of political will is a strong argument to understand that the current pension scheme, no matter how many modifications are made, cannot meet the objectives for higher pensions and a stability of scheme in the long run.<\/p>\n
It is this argument, considering that the increased corruption from political patronage, as well as the poor administration of economic and human resources does not enable the guarantee of the scheme financed by the financial means created over a period of years. That’s why the government now has only to guarantee the continuity of the scheme through the increase of wages paid by taxes and debts, which consumes the current tax revenues.<\/p>\n
Both sources of financing (payment of current contributions to pensioners and payment from current taxes) are of no use to pensioners if the country does not produce enough goods and services to meet these demands from additional sources that go beyond the domestic market. This is why there is already a further burden of financing the pension scheme and social policies, after the devaluation of the euro and foreign currencies. Whoever thought that this approach of allowing devaluation beyond the demand and supply of the foreign exchange market from the inputs and outputs of the economy should now be thinking about how to give advice on the antidote to the poisoning of the economy by the infection of the strengthening of the lek.<\/p>\n
Pensioners are not interested in currency, but in food, heating, medical services, and everything that makes their living as dignified and affordable as possible without any help from family members and self-employment.<\/p>\n
In fact, pensioners suffer from the problems introduced by the 2015 reform, where the pensions that have been received are inversely proportional to the contributions. While the scheme had to finance from progressive taxation pensions and contributions proportional to income, thus making the scheme more redistributive of benefits than until now.<\/p>\n
It is now required that the public pension scheme be harmonized with privately funded plans. The argument that private schemes are subject to risk and uncertainty applies equally to the public scheme.<\/p>\n
In the long term, risks include demographic changes such as the rapid aging of the population which now poses serious problems for the pension scheme. In the short term, it is seen that the public scheme is languishing due to mismanagement and the inability of governments to fulfill the promises of increasing pensions.<\/p>\n
These uncertainties, which may also be present in private schemes, threaten the sustainability of all pension schemes, because they are affected by the uncertainty conveyed by the politics of the day and depend, critically, on effective governance.<\/p>\n
The government can even subsidize the promises of pensions at the end of 2024, as the fiscal policy can protect against inflation temporarily if they manage to throw more lek for pensioners and social classes, since part of the lek that will be given will be taken back through taxes.<\/p>\n
But, in addition to reforming the pension scheme, the government must know how to stand in front of the demographic dilemma. Until the underlying economic realities of population pressures are fully addressed, solutions limited to different approaches to financing seem inadequate.<\/p>\n
If the government wants to be remembered for the biggest demographic confrontation that Albania has in these 3 decades, then it will first have to reformat the economy, where the most important thing is the increase in production. This is the only way to ensure that financial claims for future production can be converted into goods and services sufficient to meet the needs of retirees. Production is the only and primary approach to reversing the current trend towards low pensions. The situation of pension funding sources is a consequence and not the main reason. The argument that reforming the current scheme (even with the help of foreign experts) in itself solves unfavorable demographics is an insufficient alibi and policy.<\/p>\n
Expanding the base of contributors through production should also be supported by facilitating the formalization of the labor market, improving conditions for childcare, through tax policies that do not penalize part-time employment. But, of course, in order to expand the labor market and the number of contributors, we must use responsibility and not populism and the importation of labor force.<\/p>\n
Finally, given the demographic outlook, pensions should encourage later retirement and ensure that perceptions of the actuarial relationship between contributions and benefits match reality.<\/p>\n","protected":false},"excerpt":{"rendered":"
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