Progress toward Pension Reform – Labor Takes a Seat at the Negotiating Table …
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| Workers at the Vladimirci shoe factory |
Beograd, Serbia - Two USAID projects teamed-up to discuss the benefits of pension reform with labor and government. USAID partners BearingPoint and the American Center for International Labor Solidarity (ACILS) brought together the leaders of Serbia’s two largest labor unions, Nezavisnost and Savez Samostalnih Sindikata Srbije (SSSS), and government representatives who participated in a two-day conference on lessons learned and best practices in pension reform throughout the region.
Serbia faces an aging population, falling fertility rates, and a national budget constrained by fiscal deficits, escalating social costs, and foreign debt service looming on the horizon in 2006.
Serbia has one of the highest dependency ratios in the region, with 2 million workers supporting 1.4 million pensioners; and one of the highest replacement rates with pensioners receiving as much as 70 percent of their working wage.
With so many stakeholders’ long-term security in question, ensuring the economic and social welfare of current and future generations is no small feat for Serbia, and will require much public support and understanding.
Serbia lags behind other countries in the region when it comes to pension reform, but it is fortunate to have successful pension reform models from countries nearby, many of them driven by USAID technical assistance. Serbia’s labor union leaders and government representatives had an opportunity to hear from the experiences of union leaders and pension regulators from Bulgaria, Hungary and Croatia, as well as technical experts from USAID, BearingPoint and ACILS.
This was the first step toward building a coalition of stakeholders – union leaders, business, government, employees – for Serbia to secure social and economic benefits in the future. Union leaders discussed the benefits of responsible pension reform, such as ensuring stable retirement income for pensioners and numerous macroeconomic benefits that accrue to workers, retirees, and society at large. Experience from Hungary, Croatia and Bulgaria also indicate that pension funds stimulate business, providing financing for private sector to develop and create jobs. In Serbia, a Voluntary Pension Law has been drafted and awaits passage. USAID, in close cooperation with other donors, is providing assistance that will create the supervisory and regulatory institutions to ensure the sound management of pension assets once the law is passed.
Serbian trade union attendees expressed appreciation for the insight gained on the pension reform process and the strategic role trade union leadership can play in advancing this critical reform. With a better understanding of the issues, union leaders discovered how they can play a constructive role in the development of Serbia’s modern pension system. Rosa Chiappe, BearingPoint Senior Pension Advisor, provided a number of recommendations to union leaders, “You should think about this reform holistically. While developing a supplementary, voluntary contribution system (Third Pillar), unions should also look ahead toward the development of a mandatory, privately managed contribution scheme (Second Pillar) simultaneously.
“You can play a key role in establishing an appropriate regulator, supporting rules for pension supervision, and rules of investment to allow for maximum protection of your workers,” advised Denise Lamaute, USAID Senior Pension Advisor. “Serbia needs to develop empirical analytical skills to support policy positions and recommendations based on hard numbers and data in order to make informed decisions.” Lamaute told labor unions to engage with other social actors as partners in this reform. The trade union leaders, eager to continue the dialogue, agreed to meet within the next month to begin working on a six-month strategic plan cementing the trade union’s role in transforming the existing state system into a modern multi-pillar system that ensures stable and secure retirement income for future generations of workers.
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