Indrek Kiisler: Extraordinary pensions hike not justified

Indrek Kiisler.
Indrek Kiisler. Source: Priit Mürk/ERR

Unfortunately, Estonia lacks a political party with courage to say that pensioners are not the most vulnerable group today. There is no one to say to the elderly that their monthly income is safe and that state funds should be spent elsewhere, Indrek Kiisler says in Vikerraadio's daily comment.

The Riigikogu will continue work on next year's state budget this week. Chairman of the Riigikogu Social Affairs Committee Tõnis Mölder (Center) sent out a press release in mid-September to say that despite the economic situation, an extraordinary pensions hike will have to take place in April. That it simply must.

This in a situation where the economic outlook is extremely unclear, the state's loan burden is spiking, unemployment is on the rise, entrepreneurs are struggling to survive and salaried workers have lost all hope in terms of a pay rise.

What is the number one concern of Estonian workers today? It is very likely not their modest salary, just like entrepreneurs are not worried about profits drying up. No, the answer is uncertainty for the future. Whether my job or company will still be there in a year. How long will coronavirus restrictions and the economic crisis they are causing last? These are the questions we cannot answer.

It is very likely that people and societies will get used to the coronavirus after a while. We simply have no other choice as it is impossible to root out. Perhaps it will disappear similarly to previous SARS viruses. We just don't know.

However, this process of getting used to it will likely take years and the uncertain situation will take a heavy toll on the economy.

Estonia entered the coronavirus crisis with a very modest loan burden that has allowed us to borrow on favorable terms. Next year's state budget is easy to sum up – using loan money to keep the system going and taking great care not to do anything differently. And yet, we are still trying to please voters in the shadow of crisis funds.

We should capitalize on the crisis itself.

Borrowing is necessary, while it should be used to exit the crisis faster and stronger than other countries by funding fields that have become bottlenecks for Estonia's development. From fixing up infrastructure to education and smart working. Additionally, it is surely possible to dial back the public sector and unnecessary services. However, the budget holds nothing of the sort.

Looking at the state budget project, one is left with the impression that Estonia is trying to finish all major infrastructure objects using EU finding. While head of the Conservative People's Party (EKRE), Minister of Finance Martin Helme makes no secret of his contempt for the European Union, it seems that asking it for money to build the new Tallinn Hospital or electrify the railroad is perfectly acceptable. Because if major projects are covered with EU funds, the money in the budget is freed up for offering voters a sweet deal.

The median salary came to €1,100 of which workers got to keep €948 after taxes in 2019. The average pension was hiked to €528 in the middle of the coronavirus crisis in April and will rise again next year.

Of course, I am not saying that Estonia has high pensions, while we also have low salaries. Our standard of living is still well behind that of the West. But boosting income requires smart actions and investments in the future.

The income of pensioners is safe during a crisis, while prices have gone down in the past year. For example, the price of heating has fallen by quite a lot as global fuel prices have com down in the conditions of a global economic crisis.

Hiking pensions has been justified by saying that the money immediately ends up in commerce to liven up the economy. I'm sorry, but if the goal is to have more money in circulation, wouldn't it be sensible to lower income tax or VAT instead? That would benefit all members of society, not just a voter group that matters to politicians.

Unfortunately, Estonia no longer has a party with the courage to say that pensioners are not the most vulnerable group today. There is no one to tell the elderly that their monthly income is safe and that money needs to be spent elsewhere. There is no such courage.

The behavior of opposition leader the Reform Party that is trying to distance itself from the pension hike by proposing income tax breaks for pensioners is amusing. I do not understand why a single social group should get an income tax break. Is a single mother raising small children on minimum salary somehow better off?

Estonia has well over 100,000 people who are paid minimum salary or have no work at all. To anticipate accusations according to which I am pitting social groups against each another, let it be said that I'm not talking about slashing pensions in a crisis but simply suggesting that hiking them in one constitutes a bald-faced attempt to flirt with voters.


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Editor: Marcus Turovski

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