Pensions in Greece
Wednesday, March 26th, 2008I see there’s been a tempest over pensions in Greece lately, and it’s a familiar story in several senses. A story that’s played out in various parts of the world, well beyond Greece, and in many different forms.
But, the essence remains the same: The need to curb pension costs, and resistance from the left and unions, which never seem to be able to resist the urge to kill the golden goose.
And, reform was needed. An OECD survey from last year was titled, “Pensions: a comprehensive reform is urgently needed.” It warned that the Greek pension system would not be sustainable unless spending was curbed and disincentives were removed for older workers.
Spending control involves more than just the amount of pensions paid out. For example, with the reform bill being passed, more than 130 pension and social security funds of various kinds will be consolidated into just 13 funds. That should reduce overhead and administrative costs significantly.
No doubt every one of those 130 plus funds has its own cadre of staffers, starting with receptionists and going all the way up the hierarchy to the presidents (or their equivalents). And every fund no doubt has actuaries, investment advisors, treasurers, and so on. Of course, once you have an organization with more than a few staff, you add a human resources department to hire, fire (well not very often, I’m sure), and help manage the staff.
Result: Overall the pension system spends far more on administration and overhead than it should. The unions don’t mind, though. They get to put all those people into their organizations and collect the monthly dues. It also gives them extra clout when negotiating collective agreements. After all, if the people who process pensions go on strike, seniors can be expected to put added pressure on the government to settle quickly, and to settle the way the unions would like.
Similar kinds of dynamics play out around the developed world, with the left and unions putting the interests of select groups of public employees before the interests of those who collect the pensions.
Fortunately, the Greek government has won its battle, and Greek pensioners, especially those who will retire in the future, can look forward to getting their pensions, and getting bigger pensions than they would had the system not been reformed.
But that’s just one battle, expect more battles in more countries as the pension efficiency battles continue.
You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.
