Social Security sustainability: do workers live too long?

Para quem se sente confortável com o idioma inglês, aqui fica um artigo meu publicado originalmente em finlandês no órgão oficial do Sosialistinen Vaihtoehto (Alternativa Socialista), um colectivo marxista simpatizante do Comité por uma Internacional dos Trabalhadores (CIT) na Finlândia. O texto e os argumentos nele avançados ganham uma actualidade redobrada em Portugal, onde o governo se prepara para aumentar a idade da reforma dos funcionários públicos para 66 anos.

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It is common to hear statements in favour of a prolongation of the retirement age in Finland, especially from employers’ research institutes such as the Elinkeinoelämän tutkimuslaitos (ETLA) or the Elinkeinoelämän valtuuskunta (EVA). In fact, even the Prime Minister Jyrki Katainen has previously supported this measure. Usually, the argument advanced is that the average life expectancy has grown in the last decades, so also the work-career duration should be proportionally lengthened.

In the first place, even if we consider this argument valid, it is noteworthy that only a veritably decadent system would penalize workers for living too long. Should not the fact that we live longer than a hundred years ago be a blessing, permitting us to enjoy   more the good things in life? Not under capitalist rule, so it seems. If it depended upon our bosses, we would work until we drop dead.

However, is that argument valid? Is the Social Security system unsustainable because the workers live too long? Not in our perspective. The unsustainability of the Social Security system is deeply rooted in the very structure of capitalist social and economic relations, especially in its neoliberal form. Neoliberalism emerged as a response of the capitalist system to the international crisis of the 1970’s. It is based primarily on the privatization of the state-owned sectors of the economy and the over-exploitation of the workforce. This last policy is usually materialized through the undermining of the stable labour relations achieved during the post-World War II period. That means augmentation of the workday duration, eradication of permanent contracts and other workers’ rights, decrease of wages and a high level of structural unemployment (which also serves as an additional downward pressure on wages), among other measures. Logically, this brings a huge amount of pressure upon the Social Security funds, ultimately leading to their decapitalization. In an economy with a regular unemployment rate of over 10%, no social welfare system is ever sustainable. On the other hand, since this new generation of precarious workforce does not have stable contracts and earns extremely low wages (for example, in 2012, 7.300.000 German workers were paid less than 60 cents per hour and a sixth of the German working class earned a monthly wage of 400 euros, a salary of authentic destitution), the contributions to the Social Security funds are substantially lower than a few decades ago.

The logic is quite simple: in order to keep their profit and accumulation rates above the waterline, the corporations need to lower the labour costs, mainly through the decrease of wages, increasing the length of the workday or through massive redundancies. If the wages decrease, the contributions to the pension funds also decrease, and if a million of workers is all of a sudden unemployed, the Social Security system entitles them to an unemployment benefit. In bankruptcy cases, it is not uncommon that the Social Security fund has to pay the compensation money in advance to the workers, while the cases drag on in the courts. In other words, the state finances the restructuration of the corporations in their desperate struggle against the falling tendency of the profit and capital accumulation rates. It is no surprise that, when we have an unemployment rate of 12, 2% in the Euro Zone, the public Social Security funds tend to be decapitalized. Plus, we should bear in mind that corporations do not contribute to the Social Security fund according to the value created or their profit-rates. However, unsurprisingly, no liberal economist has ever thought of changing this in order to improve the sustainability of the social welfare system.

On the other hand, according to data provided by the Tilastokeskus [the Finnish Statistics’ Centre], the average life expectancy in Finland grew 11,75% from 1975 to 2012, meaning that the Finnish citizens now usually live to be 80 years old, nine years more than in 1975. However, the official statistics also tell us that the GDP per capita grew 939,5% during the same period. In one word, Finnish workers produce almost ten times more than what they did in 1975. Even so, this enormous increase in production has not had a proportional effect either on wages or on the employers’ deductions for the social welfare fund. On the contrary, we are permitted to assume that this enormous surplus has been appropriated by capital, since the entrepreneurial income amounted in 2011 to almost 30 times what it did in 1975, and the share of wages in the national income has decreased from 55,2% in 1990 to 49,8% in 2012. Again, we have not heard any liberal economist, despite their painstaking efforts in finding a solution for the sustainability of the pension funds, addressing these questions overtly. Could it be because they would be menacing the capitalists’ sacrosanct profits?

To aggravate the situation, there are the consequences of still other socio-economical process, the “eugenization of the labour market”, as it is called by the Portuguese researcher on labour and social conflicts, Raquel Varela. According to her, there is an ongoing process of substitution of the older workforce – with stable contracts, benefiting from labour rights, politically organized and unionized – for a younger  workforce – with precarious contracts, without any rights, politically inexperienced, not unionized and usually with a higher education degree. This replacement of workforce is accomplished by luring the older workers into early retirement with profitable conditions offered by the public welfare system, constituting still another factor for the decapitalization of the public pension funds for the benefit of private corporate interests. Raquel Varela has noted the existence of this tendency among the Portuguese dockers, shipyard and metallurgic workers, as well as in the banking and telecommunications sectors. She argues, nevertheless, that this may be an all-European tendency.

Summing up, the Social Security funds are decapitalized not due to the growth of the average life expectancy of the workers but due to the neoliberal socio-economic relations, which are structured upon a high level of unemployment, increasingly low wages, precarious labour relations and the over-exploitation of the workforce. Neoliberalism leads workers to the abyss and Keynesianism is not applicable to a capitalist economy in recession. In fact, several European governments have been applying some Keynesian policies and they have categorically failed.  The allocation of public resources for private companies and the reduction of the corporate tax – two of the most important measures of Katainen’s government, for instance – have not served the alleged purpose of encouraging the capitalists to hire more workers. On the contrary, the big companies have utilized public resources exclusively to alleviate the effects of the falling tendency of the rate of profit and to prevent a further fall of the capital accumulation pace. To this, we should add that a general increase of wages, other policy suggested by some neo-Keynesians, would most likely lead to the bankruptcy of thousands of small companies. It is impossible to solve intrinsically capitalist contradictions within the capitalist system.

We must not feed any illusions: the right-wing and the employers are aiming at the prolongation of the retirement age. Even though the SDP [the Finnish Social-Democrat Party] has categorically refused such a measure in the beginning of this year, if we consider the recent trail of political treason from the governmental left, it is clear that the workers should not put their hopes in the opposition of either the social-democrats or the Left Alliance. The opposition to the right-wing’s intentions must come from a grass-root level, the workers themselves. This measure will affect the working class as whole and it should trigger a proportional unified response by the whole working class, in a national-wide united struggle.

This social movement should also understand that the sustainability of the Social Security system in the long run is only possible through a policy of full employment, something which is only attainable with the reduction of the workday duration, the socialization of the means of production and the establishment of a planned economy under the democratic workers’ control, submitted to a logic of fulfilment of the social needs and not the ever-growing accumulation of capital in the hands of a minority. Only then could we all work less, satisfy our needs of consumption and have more time to leisure. As Leon Trotsky once stated, “the Revolution, above all, will in lofty struggle win for every individual the right not only to bread but to poetry”.


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