POPULATION: Cuba Looks for Ways to Lighten Social Security Load

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Aug 6 1998 (IPS) - The combined effect of a prolonged economic crisis and an ageing population has turned Cuba’s social security system into a time bomb and the authorities are looking around for the right measures to deactivate it.

The government’s dilemma is that, while the system and social assistance programmes are among Cuba’s greatest achievements, the economy has been in crisis for eight years now, so social justice has to be balanced with economic interests.

One indication of the priority Havana has given to the social security system is the amount it has spent on it: the 1.630 billion pesos paid out in 1993 was 2.4 times the 1980 figure.

The peso is on par with the dollar at the official exchange rate, but in the legal foreign exchange bureax, the dollar is bought and sold for 21 Cuban pesos.

Social security payouts are expected to total 1.91 billion pesos this year and, if current legislation remains unchanged, they will amount to 3.5 billion pesos in the year 2010, according to Raimundo Diaz, an expert on the economy who writes for ‘Bohemia’, a Cuban magazine.

This increase is also linked to a predicted rise in the number of elderly people among the nearly 12 million Cubans. Due to decreasing mortality rates and a life expectancy that has risen to 75 years, Cuba will have 2.1 million people over the age of 60 in the year 2015.

The number of people on pensions grew from 1.13 million in 1990 to 1.35 million in 1995. On average, they receive just over 94 pesos a month each. The retirement age is 60 for men and 55 for women. There are also 120,000 people who have retired as a result of total disability in the past decade: close to 40,000 have not yet reached retirement age.

With the aim of controlling the increase in spending on social security, the authorities have launched a campaign to decrease fraud, reduce the number of medical certifications and prevent violations of the regulations for partial and total disability.

Experts say social security is the second most important source of state income for the population, after salaries.

The system’s basic source of financing is the employer – state enterprises – who is required to contribute 14 percent of salaries to social security.

This makes the Cuban system different from that of other countries, where contributions to social security generally come from the employee, the employer and the government budget.

One of the direct consequences of Cuba’s economic crisis is that many state firms are unable to make their contributions, so they have to be covered by the government budget in order to avoid accumulating arrears in the payment of pensions.

Many Cubans imagine that they will not be spared the impact of the economic reforms that the country has been undergoing for the past four years, which include a programme for “industrial improvement”, targeting the public firms.

“The tax on salaries and the contribution to social security will only apply when industrial improvement is extended to the more than 2,000 projected firms,” said President Fidel Castro, who added that the improvement programme included payrises.

Another proposal deals with replacing the subsidized sale of food through rationing cards with a system that benefits only low- income groups as a form of social assistance.

But the increasingly aging population means that any reforms in the current legislation may also require a postponement of the retirement age.