Sunday, March 07, 2010


This week the Irish government has announced another anti-worker measure. This time it is a new pension scheme that tries to increase the age of retirement to 68. A historical achievement of the working class could be taken back. Workers also will be signed up to a pension plan, non state-guaranteed, and administered by the private sector pension industry, which will get the money through the PRSI system. The new scheme plans as well to bring public sector workers in line with workers in the private sector.

The plan is that those who are 62 now won’t retire until they are 66 (2014), and those who are 49 or younger won’t retire until they are 68 (2029). The government will get rid of the impediments to retire after 65 and will rise accordingly the age to quality for a state pension. At the moment around 50 percent of workers depends on getting only a state pension. The government expect that between 65-70 percent of workers will participate in a mandatory pension scheme, although they will be allowed to opt out, on top of the state pension.

Workers will have to contribute to this scheme with 4 percent of their wages, employers 2 percent and the State another 2 percent. A worker earning €20,000 a year will have to contribute towards the scheme with €10 per week. The state will to try and keep state pensions at the present level, 35% average industrial wages, that is what they say. On the other hand, the public service pension scheme will be changed for new entrants from this year. Pensions will be based on career average earnings rather than final salary. Yet, the government will not guarantee any returns from the mandatory scheme.

The reaction of labour leaders has focussed on the hand out to the private pension sector. Jack O’Connor, SIPTU General President, said that the mandatory pension scheme “amounted to nothing more than a device to camouflage an assault on the State old age pension provision and another handout to the private financial services industry” (SIPTU website). Davig Begg, ICTU General Secretary, has made a similar point:
Firstly, they propose to force people to hand over a portion of their wages to the private Pension Industry in order to facilitate gambling and stock market speculation. Given that Irish pension funds - and therefore those who manage them - have been the worst performing in the developed world, this is like a reward for incompetence. It is also worth noting that the some of the blame for our current financial crisis lies squarely with the foolish investment decisions made by private pension funds ... and yet Government proposes to give them even more money. This is wrong. The second major failing relates to the absence of any initiative to protect people when a scheme gets into …


Jack O’Connor and David Begg are correct. The hand out to private pension funds, given the role of financial capital in the triggering of the present crisis, is one of the most glaring faults in the new scheme. Even the right wing Olwyn Enright, Fine Gael spokesperson for social and family affairs, has said that the plan is “a massive gift to the pension industry.” There have been, however, no comments on the basic framework and assumptions of the new pension scheme. The government has argued that spending on public pensions would increase from 5.5 percent of GDP at present to almost 15 percent in 2050. The media has echoed government “concerns” by popularising and refining that basic argument. An Irish Time editorial, 4th March, for example, argued,
The demographic projections underline the problem’s scale. In future there will be far fewer in the workforce to support those of pensionable age. Today six people of working age support every one aged over 65, but by mid-century there will be two people in the active age group for every one in retirement. For taxpayers that would be an unsustainable burden.
A labour party statement, 3rd March ( fully agrees with that argument. Roisin Shortall TD, Labour spokesperson on Social and Family Affairs, argues that,
Everyone acknowledges that the extension of the retirement age is inevitable given the changes in the demographic structure of our population and the fact that people are generally living considerably longer than when pensions were first introduced.
Pat McArdle, Irish Times economist analyst (4th March), describes further how the Old Age Pension was introduced around 100 years ago in Ireland at the age of 70, when life expectancy was 50. He then thinks that the Government is not going far enough and that the retirement age should be risen “at least” to 70. Roisin Shorthall can’t go that far. She argues that the proposed lead-time for rising the retirement age is too short. Once the basic framework is accepted, however, the game is played according to the rules dictated by others, and all is reduced to bargaining on secondary aspects of the new pension scheme.

The government is at present desperate to reduce public deficit and the “pension burden”. It is just one more area to “reform”, the latest for the moment. The commitment to keep public pensions at present levels sounds like many other broken promises. It is also clear that this is a move towards privatisation. For those who still want to retire at 65 the only means will be returns from the private pension funds. The new field to make huge profits is large, 50 percent of the workforce.

After bailing out bankers, the government now offer a new succulent gift. Employers have immediately announced that they are not willing to contribute to this mandatory pension scheme and that if they are forced to do it will be by reducing wages. That is, workers will have to pay for their pensions. They will have to save and contribute to funds for others to gamble with that are not guaranteed either.


But the worst aspect of this new antiworkers measure is the lie of the demographic myth and the burden. First off all, Ireland is the country with the lowest contribution, measured as percentage of GDP, to pensions in Europe. In 2002, 8 years ago, pensions represented 14.9 percent of GDP in Italy, 14.6 percent in Austria, 13.4% in Germany. At the bottom was Iceland, with a mere 6.7 percent. That was in 2002 (Eurostats). In 2008 pensions represented just 5.5 percent of GDP in Ireland, and only by 2050 the Irish government estimates that we will reach 2002 proportions in other countries like Italy or Austria.

Second, productivity per worker has increased every year at an average of 3.5 percent since 1960 while GDP has grown at a yearly average of 4 percent. Bourgeois economist don’t include all productivity increases in the productivity of labour since they consider that capital is productive, but still that figure tells how increases in productivity per worker greatly outweigh the 0.2 percent increase in GDP expending in pensions till 2050.

Third, wages should not contribute at all to any new pension scheme because in the last two decades there has been a huge transfer of wealth (and power) from the workers to the capitalists. That can be seen in the decreasing share of wages in the Irish economy as percentage of GDP:

1960-70) 77.9
1971-80) 75.9
1980-90) 71.2
1991-00) 62.3
2001-07) 54.0
(Source, K. Allen, 2009, page 26, Ireland’s Economic Crash)

Huge amounts of surplus value, which are generated by wage-labour, which have been gambled by those who are supposed to manage future private pension funds, are increasingly transfer to capitalists. Surplus value is created by labour every year, every month, every day, every hour... and it is distributed in a diminishing proportion for wages. It is there where we have to make the point. Let's not swallow the myth of the demographic crisis. Wages must not pay for pensions.

Finally, to increase the age to retire will also imply that fewer will work longer and contribute to increase unemployment rates. The Irish labour movement should reject the whole pension scheme and include that rejection within a broader fightback against wage and social welfare cuts, and unemployment. The government has shown with hard facts its will to bail out corrupt bankers and developers and make workers pay for a crisis they have not provoked. The labour movement has an alternative: capitalists must pay.