COMMENTARY: Pension reform - Matti Vanhanen’s "Star Wars"

print this

By Marko Junkkari
     
      The decision that the retirement age should be raised, an idea which came to Prime Minister Matti Vanhanen while he was skiing at Ruka, may have been the most significant insight of his term in office. The ingenious decision by a man who became Prime Minister by coincidence may also have been coincidental, but this does not diminish its significance: great things have often been done by accident.
      In 1983 United States President Ronald Reagan announced the Star Wars programme, in which a network of lasers was supposed to be set up in space against Soviet intercontinental missiles. Experts felt that the project was technically and economically nonsensical; the lasers were never built, but just talking about them accelerated the dissolution of the Soviet Union.
      Vanhanen’s proposal to raise the retirement age was also rejected as nonsensical, but its significance could prove to be in the consequences that emerge from the proposal.
     
For Centre Party loyalists, the work pension system is - to borrow Reagan’s rhetoric - a kind of evil empire. The reason for this is the eternal belief that basic security is sacred, while income-linked benefits are not. Furthermore, pension companies are large concentrations of power, where the Centre Party is not welcome. The power is wielded by employers and employees, which is logical, as they are the ones who pay for it all.
      The system has taken upon itself its own supervision and the drafting of the legislation involved. Parliament serves mainly as a rubber stamp.
     
Vanhanen agreed to cancel the idea of raising the retirement age if the labour market partners form working groups and manage to find “credible” ways of raising the age that people retire. Apparently stunned by the uproar, the sides committed themselves to the project.
      The outcome of the year during which the working groups wrestled with the matter proved to be a flop, and OECD economists are not needed in the assessment of its credibility.
      Promoting well-being at work might lengthen people’s working careers, but measuring the impact of the measures is in the realm of voodoo. The age that people retire may increase by a year, two years, or not at all - take your pick.
      The credibility of the different sides in the labour market suffered a considerable blow. Up to now, labour and management have always managed to agree on matters related to the work pension system without state intervention.
      The failure gives the government a justification of sorts to take issue with the system considered to be sacrosanct.
     
However, it is unlikely that the government will propose an increase in the retirement age again, now that there is just a little more than a year left before the next elections. Vanhanen, who is stepping down, might have the guts, but Minister of Finance Jyrki Katainen probably lacks the nerve. Katainen does not want to jeopardise his possibilities of becoming Prime Minister by giving the Social Democrats and the labour unions weapons against it. The work pension system would seem to hold the same status that the Soviet Union had in the doctoral thesis of Paavo Väyrynen: something that is eternal!
     
Helsingin Sanomat / First published in print 2.2.2010


Previously in HS International Edition:
  Disagreement over raising retirement age threatens to delay Rantala working group (1.2.2010)
  Pension changes set to lead to longer working careers (24.11.2009)
  Organised labour angered by government decision on old-age pensions (26.2.2009)

See also:
  Government to ask for OECD assessment on proposals for retirement reform (2.2.2010)

MARKO JUNKKARI / Helsingin Sanomat
marko.junkkari@hs.fi