The fiscal 2022-23 budget bill, submitted to the Iranian Parliament on Dec. 12, had initially envisioned an increase in retirement age by two years amid mounting challenges troubling the Social Security Organization, including the government’s whopping 3,000-trillion-rial ($10.1 billion) debt to the organization.
The measure was removed from the bill on Saturday, following widespread criticism by experts and civil servant workers about the implications of the move.
Experts say the measure would have led to a surge in applications for early retirement. Estimates indicate that 370,000 people are nearly eligible for retirement; they would have been quick to apply for retirement to avoid becoming subject to the new law, the Persian daily Jahan-e Sanat reported.
“As per the law, proposals on increasing retirement age must be included in the budget for a period of one year and not beyond,” Ali Dehqankia, the head of Tehran Retirement Center, said.
“This is while the government bill had been designed to be permanent. Such a measure is in fact a process that must be proposed by pension funds and based on their resources and expenditures.”
Dehqankia said governments have so far pursued policies that are clearly reflected in state and military pension funds.
“The issue here is not the current government, but the approach. It has been pursued by previous governments and has led to the destruction and bankruptcy of state and military pension funds. As per standards, five people must work for one retiree to receive benefits.”
According to the official, at present, 0.63 people are working for state pension funds and one person is retired, while 0.83 people are working and one person receives pension from military pension funds.
At present, 0.63 people are working for state pension funds and one person is retired, while 0.83 people are working and one person receives pension from military pension funds
Noting that this is the peak of pension funds’ crisis, he said the government spent 2,000 trillion rials ($6.73 billion) on pension funds last year.
If the Social Security Fund suffers the same fate as state and military pension funds, Dehqankia said it won’t be easy to resolve the ensuing crisis “because the number of SSF retirees is two and a half times more than that of state and military pension funds, such that even the sale of 6 million barrels of oil per day won’t be enough to afford the costs of the organization.”
Noting that the first thing the government needs to do is to pay its debts to SSO, he said, “The government imposes a monthly cost of 45 trillion rials [$151.52 million] on Social Security Organization, but does not pay for it either. According to the [cooperatives] minister, SSO runs a deficit worth 50 trillion rials [168.35 million] on a monthly basis. The government has failed to allocate a single rial to the organization in the next year’s budget … All governments have fixed their eyes on the resources of the Social Security Organization.”
On workers’ wage increase, the official said, “As per Article 41 of the Labor Law, workers’ wages must be set based on the real inflation rate announced by the Central Bank of Iran. The second paragraph of Article 41 of Labor Law also stipulates that if the inflation rate announced by CBI does not offset labor costs, the so-called ‘household expenditure basket’ should be used, meaning that expenses of a three-member household must be calculated and equivalent of which must be paid to the worker.”
Dehqankia stressed that the government is not expected to bridge the threefold gap between the minimum wage, which stands at 40 million rials [$134], and the living wage, which now stands at 120 million rials [$404] overnight.
“Our only expectation from the new government is to avoid pursuing the same approach adopted by previous governments, as such a route ends nowhere. In fact, the minimum work that the government can do for the workers’ wages is to calculate the difference between the minimum wage and expenses of households at the beginning of the year and the minimum wage and expenses of households at the end of the year and pay the difference to workers. By doing so, at least the government will be able to counteract the widening of the income gap. At present, income meets a maximum of 10 days of a worker’s household expenses,” he concluded.
Short-Term Pain Relief
Increasing the retirement age without considering other reforms required by the Social Security Fund could offer a short-term pain relief, but it will not cure the disease of this pension fund, Soghra Aliabadi, the head of Insurance and Social Security Department of Tehran Chamber of Commerce, Industries, Mines and Agriculture, said.
She said the rise in retirement age was proposed within the framework of the empowerment plan of pension funds.
“It aimed at providing financial assistance to the funds so that they are able to remain afloat,” she was quoted as saying by Tccim.ir.
Noting that the retirement age in Iran is 60 compared with 65 in developed countries, she said, “In addition to the young retirement age in Iran, various types of early retirement have also been defined in Iran. Therefore, besides the increase in retirement age by just two years, early retirement, particularly of those covered by the Hard and Hazardous Occupations Law should be revised.”
A high percentage of early retirements are being offered to hard and hazardous jobs.
Aliabadi said calls have been made for an amendment to the law years ago, but to no avail.
“Statistics show that 50-60% of early retirements are being sought under the Hard and Hazardous Occupations Law. But are there really these many hazardous and polluting workshops in the country? The law hurts both pension funds as well as the production and business environment,” she said.
“The government is advised to find a solution to the problems of pension funds, especially the Social Security Fund, in a comprehensive bill. Besides, the retirement age can increase as well.”
On the positive and negative impacts of increasing the eligibility age for social security pensions, Aliabadi said one of the positive outcomes of such a move is that employers would not lose their experienced employees, although it would reduce job opportunities for the youth.
