The young pays for the old | as easy as ABC

I vividly remember an encounter with an old lady, two decades back in Hannover, Germany. She looked aged, moved like an aged person, but she moved about alone, trying to catch a bus ride. So I did what any person here or elsewhere would do: I helped her get on the bus that always arrived on the dot, and left just as promptly to be on time at the next stop. She surprised me by paying for my fare, which made me feel so embarrassed. I helped her get down at her stop and I wound up getting down from the bus myself.

I thanked her very much for my fare, but she profusely thanked me even more for helping her up and down the bus. All that time, she held my hand like my own grandma. I watched her gingerly walk towards a park where I hoped she would meet up with friends. You see, she was supposed to be in a home for the elderly. It was customary there to put their elderly parents in a home, and their grown-up children, who have families of their own, just consider it as a stage that’s coming for many in their country. There are elderly folks though who choose to stay outside the retirement home, and to live as freely that they are physically used to, for as long as they possibly can, even if it means living and going about alone.

That is not a problem here – we do not deliver our elderly parents to a nursing home when it’s not convenient to take care of them anymore. Maybe the support from children and extended families is the unofficial system that makes people overlook the need of the retired and the elderly to have more decent monthly pensions.

Certainly, some retire more gifted than others. They get hired as consultants, become board directors, set up their own businesses, or perhaps invest in a little piece of real estate from which they get monthly lease income. Some have planned better than others. But the multitude of SSS members worked with modest salaries throughout their careers, and the masses mostly lived on minimum wage. The lowest monthly pension is P1,000 but the highest monthly pension, enjoyed by a few, is about P17,000. The average monthly pension though is a little more than P3,000. So you can imagine the materiality of the proposed P2,000 increase through law (which the President vetoed) – material, although that hardly adjusts for many years of inflation. I mean, to avoid erosion of value of what a retiree receives, those receiving P3,000 monthly two decades ago should easily be receiving about P7,200 today, or a more than P4,000 increase. Of course, that is not what the system can afford, although P2,000 seems to be reasonable because on the average, it is about half of the required adjustment for inflation.

Today, minimum wage is over P10,000. Officially, those who earn P8,700 monthly and support a family are considered to be living below the poverty line. A senior or elderly citizen may no longer be supporting a family, but if he receives P3,500 to P5,000 monthly pension, he can easily consume all of that on maintenance medicine. And we all know how the story ends for those who cannot afford the medicine and need to rely on their pensions for basic needs.

To be sure, pensions are not the only benefits the SSS provides for, although it gets the lion’s share of the funds. It is beaten only by funds going to loans to members. (That is why we should be rightfully concerned whenever we are advised by rumor mongers to take loans from SSS even if we do not need it, as some bogus applicant maybe using our SSS privilege without our knowledge.) Granting that the SSS makes reasonable money on its investments, and collects on members’ contributions and members’ loans, what we still need help on understanding is what the positive impact of expected new members really is. They are estimated to number to more than a million every year.

One of the things the Philippines boasts of, globally or even to the ASEAN community, is its young demography that gives young and energetic new workers aged 20 to 45. It’s a favorable situation that is estimated to be easily sustained in the next 30 years or more. (Japan has the reverse problem of an aging population.) It is difficult to imagine this unique advantage of our country could not be leveraged on to dramatically increase pensions. Do we need to work out a more progressive system of contribution for those who earn more? Those who contribute more may indeed have higher benefits, but they still contribute more to the common pool. What can be done to increase the hiring rate of fresh graduates who can otherwise contribute to the system? Can we simply improve the way we teach communication skills so that graduates can have better chances of landing a job after an interview? The vetoed law of increasing pensions deserves serious review, and searching for creative schemes to make it happen should be the path rather than looking at it as a dead end.

There are at least two among the many reasons why the young should be willing to fund the pensions of the old. One is, if it’s their turn to be senior, the younger ones will also pay for them. The other is actually the human tendencies of our elderly. Give them something, and somehow they make it plow back to you or your children as much as they can. The pension increase may be financial, but to the elderly, it means more dignity. It means more opportunities for them to still make a difference in the younger family they feel they still look after.