EASTERN EUROPE'S HUNGRY CHILDREN
[In Russia, pensioners will vote in their millions for the
Communist Party on December 17th, giving credence to the
idea that the old have suffered most from market reform in
Eastern Europe. That idea is wrong.]
If poverty in Eastern Europe makes you think of a `babushka'
hidding in the snow hawking a bottle of moonshine, think
again. A whey-faced child whining in a communal kitchen
would be more accurate. Families with children have done
worse than pensioners from Eastern Europe's transition. "I
tell people in Eastern Europe...pensions policy is
impoverishing their children," says Louise Fox, a World Bank
pundit. "The demands of pensioners are taking food out of
the mouths of working people's children." That is a big
difference from 1989, when children were better off than
their grandparents.
The reason is...wages plus welfare have fallen sharply in
real terms, hurting families, while pensions have generally
stayed high enough to keep grandpa out of penury. The United
Nations Children's Fund...has looked at 18 countries of
Eastern Europe and the former Soviet Union. It points
out...if official statistics are to be believed, pensions
have kept ahead of the average wage in ten countries since
1989 and fallen only slightly in another four.
That does not mean...the old have become better off:
pensions have still fallen relative to prices. But wages and
children's benefits have fallen even more. Compared with the
rest of the population, pensioners tend to be...well
sheltered from acute poverty by non-monetary forms of
protection: many pensioners work or farm on the side, live
with another pensioner, get money from relations or live in
cheap housing.
Pensions have kept their relative value while most other
benefits declined, because post-communist countries wanted
fifty-somethings to retire early, and used generous
pensions provisions to bride them to make way for new
generations at work. In Poland, the average pension
increased...in 1994; it is now indexed to wages. The cost of
this generosity has been huge. Bulgaria, Hungary and Latvia
each spend more than 10% of their GDP on old-age pensions,
higher than...spent...by the much richer G7 countries...
In contrast, children's welfare is dependent on real wages,
which have fallen everywhere. The drop ranges from 15% in
the Czech Republic to more than 80% in Azerbaijan. ...it is
clear that, in most countries, wages have fallen a lot.
Several other factors have worsened the plight of families
with young children. The rise in unemployment since 1989 has
produced more one-income families. ...so have social
changes, such as the growth in out-of-wedlock births, the
number of absent fathers, and deaths among middle-aged men.
Payroll taxes...provide a fourth set of reasons for
declining take-home pay for families; in contrast, pensions
go untaxed. ...since 1990 child allowances and family
benefits have kept up neither with inflation nor - except in
Azerbaijan - as a proportion of average wages. ...
The outlook for families may not be quite as bleak as all
this suggests. Poor families can work their way out if
poverty; poor pensioners...tend to stay poor until they die.
As economic recovery boosts incomes and creates new jobs,
working families can expect to benefit the most. In the
meantime...the face of poverty will remain a young one.