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By Shwan Zulal:
This article first appeared on Niqash
How will I support myself in my old age? People ask this question all around the world. One Kurdish writer argues that a universal pension scheme could be a catalyst for a more dynamic private sector and economic growth in Iraq.
No matter where they live, one of the questions in the back of many people’s minds is: how will I support myself and my family when I am no longer able to work? Whether that is because of old age or illness, it’s a common concern.
In Iraq and in the semi-autonomous region of Iraqi Kurdistan, people ask the same question. And given the recent unstable history of the country, people are understandably anxious about the future.
Most Iraqi businesses in the private sector do not have any kind of pension scheme. And while there are various benefit programmes, these tend to be vague and certainly don’t instil any sense of security. Which is why this fear has driven many people to do whatever it takes to become eligible for the generous government pension schemes for state employees.
On average, working in the private sector will see employees paid higher salaries but often there are more demands are made on staff members in this sphere, where productivity is measured more closely. But a government employee who retires after an average of 20 years in a state job may get paid more in the long run.
Additionally every year, scores of graduates enter the Iraqi job market and they most often expect to be employed by the government. The system dates back to Iraq under Saddam Hussein when there were few other employers than the government. Speak to any young person in Iraq and you’ll hear the same message: why should I do a hard day’s work when I can get a low level, public sector job and do as little as possible for a guaranteed salary and a pension? Public servants also get other perks – they may qualify for housing grants and interest free loans from the government, including loans that allow them to get married.
Public sector employment policies are not the meaningless folly that some might think. Because in many ways it is the easiest way for the state to spread the country’s wealth, which comes mainly in the form of oil revenues. However it is also a policy that is damaging in the long term and leads to the rentier economy syndrome.
This system becomes more entrenched all the time. The Kurdish government is already the largest employer in Kurdistan region; in July local media announced that this year in Kurdistan, 18,000 new public sector jobs had been created. Locals almost take these jobs for granted and if they don’t get a government-supplied job, they demonstrate on the street.
Which is why state jobs are also, and have been in the past, part of a deliberate attempt to make the Iraqi people dependent on the state. Public dissatisfaction with their government’s performance and the lack of movement in private sector development leads the state to use their ability to employ just about everybody, to keep a lid on that discontent.
An exit strategy out of this kind of labour policy will be very tough. As the state sector has grown, the Iraqi public expect more and more jobs in the public sector will be created. They don’t understand that this is just not sustainable.
In the process this has also led to a large, unproductive and unskilled workforce – which is something that both local and international private businesses have often complained about. Sometimes it feels like Iraq’s workforce is becoming less skilled by the day.
And the strain is starting to show on the government’s budgets. Moreover the biggest time bomb is actually the Kurdish and Iraqi workforce, which has learned that it can have something for nothing – and indeed, which expects that.
It is unthinkable that the policies in place now be scrapped or overhauled overnight. Iraq still has a lot of security and political problems that will take precedence over policies to do with a future workforce. However Iraqi Kurdistan is relatively stable and could well begin to tackle this problem. And there are many other ways to tackle this problem of an oversized public sector.
One of these may well involve a universal pension scheme.
Any such package would need to competitive and able to be slowly integrated into the private sector so that small and medium sized businesses can offer their employees’ pension schemes or contribute to the government scheme, via taxes.
A pension scheme for all would immediately eliminate the fear of being left destitute in one’s old age and would also make it acceptable for the government to get tough on public sector employees by cutting numbers or demanding more productivity.
Why? Individuals would no longer have to worry about how to survive in their old age as their pensions are guaranteed. Incentives could be pushed into the private sector by giving them options to contribute more, and thus have a larger pension fund.
When there is a social welfare safety net at the end of the road then the government cannot be expected to provide jobs in the public sector – or at least, it can justify not providing them. And it can focus on encouraging private enterprise by adopting better policies.
However currently things seem to be going the opposite way in Iraq. In Baghdad the state seems to be trying to more tightly control all industry and enterprise in Iraq. This is making it almost impossible for private enterprise to expand and is leading the country down the road toward a Saudi Arabia-like situation where a rentier economy exists and nearly all income flows from one central source.
This is not happening in the same way in Iraqi Kurdistan. However here, the need to create public sector jobs has become a real headache as well as drain on public finances. Uncertainty in the private sector and the good terms offered by government jobs is making it difficult for private businesses to recruit new staff.
Resentment of those that ordinary Iraqis see as “high ranking public officials”, or their relatives, runs deep in Iraq and Iraqi Kurdistan. They see these individuals as getting an unfairly large slice of the pie. However a universal pensions scheme, if implemented properly, could even out some of those perceptions of injustice – if not the actual unfair situation itself.
With a pension scheme, the government would be sending the right message to the general public, giving them a sense of a more just society and social welfare system and also the feeling that the national wealth is being shared.
It’s true that it would take a fearless politician or party to make this move as it would involve short term financial pain. And it is important to note that if a pension scheme is introduced within the system that currently exists, the dependence of the Iraqi people on their state for survival would be even greater. But if a pension scheme is introduced, and in the best possible way, then it might well lead to a more sustainable economic model for the future of Iraq.
