Pension Reform: let's live now.

These are difficult times for unions in Belgium. The government has (finally) decided to go ahead with a pension reform and is doing so with an unprecedented speed. The political agreement and the deadline for its implementation, leaves little room for dialogue between the social partners and the government. It is generally accepted by the public that pension reform is needed so the time seems to be right. But this is not how the unions see it. They see three problems:

1. They have not sufficiently been involved in the debate about the pension reform (“erosion of social dialogue”);
2. They see individual rights threatened (“broken promisses”) not only in terms of pension rights but also in terms of unemployment protection;
3. They see the rights of entrepreneurs and companies broadly untouched (“injustice through unfairness”).

The first problem might be the most important one. Belgium has a strong tradition of social dialogue and a high trade union density. Unions owe it to themselves to react. That explains the harsh language and the announced strikes. Unions do what they do and the rituals are needed to get through this without loss of face. In the past these actions have always led to compromises. But today something peculiar is going on. The minister responsible for pension reform – Vincent Van Quickenborne – announces that he will go through with it, even when this means he will never get re-elected. This is unheard and a new political courage. The socialist party – who has provided the prime minister – confirms that these reforms will go through. The unions are not at ease with this fait accompli and this determination. I can imagine that they are getting nervous.
Union leaders claim now that they have tried their best to keep things calm so far, but they can no longer guarantee that emotions will not lead to wild strikes. They have called for a national strike end of January to channel those emotions (to be honest, the strike was pre-emptive as it was announced before the government was formed). The strike comes after the deadline that the government has given itself. Unions are taken by surprise by the speed in which the reform will be presented to Parliament. They are surprised by the no-way-back and there-is-no-alternative (a style that they know very well themselves). So the national strike might come too late.
Even when unions have a point when they say that the tradition of social dialogue has not been maintained, unions are not informing their members correctly. So let’s put forward some elements.

1. Belgium has one of the lowest activity rates for elderly people. There are other countries that combine later retirement with low unemployment, and high quality of labour with high employment. We need to look at other countries like the Netherlands or the Scandinavian countries to see that it’s possible. So why not in Belgium?
2. The pension system as we know it, is underfinanced and future generations will not be able to support the retired if nothing happens. There are no reserves. The real pension age has been too low for decades through systems of early retirement. Subsidized systems of work time reduction or sabbaticals have become so popular that not only they are costly but they have also contributed to the deficit of the system. All this in combination with the increased life expectancy has undermined the financial stability of the pension system.
3. The economic crisis has created a budget deficiency, which requires budgetary action. This is most probably the main cause for the wrath of unions, but saying that the banks should pay instead of the workers is populism. A pension reform was needed also before 2008, when the financial and economic crisis started.
4. Belgium is one of the last countries in Western Europe to go ahead with a pension reform. It’s a matter of competitiveness and of image.
5. The pension reform cannot be a surprise. The debate has been going on for years and there was a modest prelude in 2005. That year the generation pact has been voted. The effect of this generation pact has been modest not to say insufficient.
6. Social Expenditure in general in Belgium has gone up. This is an indication that there is no erosion of social protection. (see a recent publication of the social security agencyhttp://www.socialsecurity.fgov.be/nl/nieuws-publicaties/nieuwsoverzicht/2011/12.htm#151211). We need to heed the efficiency of the system (but working costs have not gone up dramatically) and it’s a sign of good governance that a government wants to prevent a derailment of the system. There should be no doubt about that.
7. All in all, the reforms are even not that dramatic. The legal age for retirement has not increased. Compared to our neighbouring countries many things have been kept intact. This probably means that the reforms will not be sufficient and more reforms will be needed. It took Germany 15 years to reform their pension scheme. In the coming reforms we need to make sure that people acquire during their working life sufficient reserves to maintain the quality of life after retirement.

A different way of thinking is needed
The elements above are of a technical nature. What we need to do is to change the way we look at work. Work is not something that prevents us from living. It’s a part of our life and it gives life a purpose. It’s a pity to value retirement as the ultimate reward of work, as the main deferred benefit. Let’s live now.