Social Security Abroad

Rumania’s rapid rate of economic growth in post,war years has allowed for a significant increase in real wages of t,he working population, despit,e the diversion of a large portion of increasing national income into capital accumulation. Despite a similarly rapid rise in total expenditures for pension purposes, growth of benefits granted to t,he average pensioner has not, kept, pace wit’h earnings of the active labor force. As the first, of a number of significant changes in the social security system the Government’ at the end of 1966 substantially raised pension benefits to improve the lot of the retired population. Subsequent inflat.ionary development,s and GOVernment, act,ions, however, brought about. a retrenchment, that left, only part, of the projected 1966 improvement intact. These developments took place against the background of Rumania’s move toward modest) economic reform. The Government considered a revamping of the price st,ructure to be a necessary precondition for more fundamental changes. The price changes introduced, however, had the incidental effect of bringing about. a new increase in consumer prices that threatened to erode the real incomes of the workers. In compensating the worker by raising and restructuring wages the Government then found that, in the process, it had also raised the base for computation of pensioners’ benefits. Faced with the prospect’ of higher outlays in this direction than it had envisaged, the Government announced that it was compelled to revise the pension formula downward. At, a lat,er stage it introduced a further reduction on t,he grounds that pension benefits were sd high that the wages of needed skilled workers presented too small a differential to act as an incentive to remain in the active working force.