Ironing Out the Kinks? Putin Addresses the Retirement Age Hike

On Wednesday, August 29th, Russian President Vladimir Putin took to national television in Russia to explain, endorse, and tweak United Russia's proposed pension reform project.

United Russia, Putin's big-tent political party, recently proposed that the retirement age in Russia should be raised. Currently, Russian men retire at 60, Russian women retire at 55. Under the original plan, the retirement age for men would increase at a rate of six months per year, topping out at 65 by 2028. For women, the change would be more gradual: it would top out at 63 by 2034.

This proposal, passed unanimously by the United Russia delegation in the State Duma in its first of three readings, but received considerable criticism from members of the Communist Party and Liberal Democratic Party, a relatively rare development.

While not a particularly disagreeable policy project on the surface, the proposal invited many complaints. Russia's communist history makes it especially unpopular to reform or change the country's social safety net. The relatively low life expectancy for Russian men (66 years as of 2016) aroused complaints that Russian men would not live to see their pension benefits. The timing of the proposal's introduction during the World Cup invited critics to accuse the Kremlin of skewed priorities by dumping billions of roubles into an unnecessary soccer tournament but becoming stingy with elderly and potentially vulnerable citizens. And the gradual nature of the program made skeptics wonder how much economic benefit this new program would actually return, as the Kremlin claimed this would be a benefit.

President Putin decided to address the Russian people on this proposal via national television, despite his spokesman previously claiming that the President wasn't involved in the policy proposal.

Putin spoke forcefully, but amicably. In his address, he referred to his audience as "my dear friends" and concluded his remarks with a humble "I ask for your understanding". In regards to the issues, Putin claimed that the retirement age would not be raised to 63 for women, only 60, and that more people would be eligible for earlier benefits and early retirement. Despite his tone, Putin still endorsed the program in general, touting it as a necessary step to economic recovery.

It's too early to gauge whether this speech will stop Putin's high-but-not-invincible approval rating from slipping. The original and wildly unpopular proposal brought the President's approval rating from the low 80s to the mid 60s in only a few months. A report from Meduza, which is generally critical of the Kremlin, claimed that Putin's approval rating had risen back to 70%, but admitted that "Pollsters from the Levada Center told the newspaper Kommersant that the president’s August 29 national address about pension reform had a minimal effect on their survey results, given that only a small number of respondents were contacted after the speech." In fact, that Meduza report only came out one day after the address, and when we consider that there is usually a margin of error to these polling reports, the change is most likely minimal.

This speech may not be all that helpful to the President's approval rating, however. In fact, it could even backfire.  As mentioned before, Putin's spokesman claimed that the President was not involved in the proposal, and now he has thrown his arms around it, for better or worse. The proposed change from 63 to 60 for Russian women is indeed a concession, but women live longer than men in Russia, by nearly 10 years. Russian men are still set to retire at 65 and therefore the fear they may not live to see their benefits still exists. The optics of getting stingy with pension benefits while using a mammoth amount of taxpayer money to fund a soccer tournament still exist. Furthermore, Putin's changing the new retirement age for women to 60 from 63 and claiming wider eligibility for benefits may actually make the plan even more expensive, possibly cancelling out any projected jump-start for the economy. Critics claimed that the gradual nature of the retirement age hike would make any benefits minimal, and now they may be even smaller or nonexistent.

This pension reform project is not law yet in Russia, though it has the support of the United Russia super-majority in the Duma and Putin's endorsement. While Putin still enjoys considerably popularity, the only way he might be able to recapture his previously sky-high approval rating is by scrapping the program, but this would force him to backtrack from a proposal they seem adamant to push into law and find other ways to try to jumpstart the shaky, sluggish economy. In other words, this is probably unlikely. If they push it through, the Russian people will be frustrated by a very unpopular new policy and may not even realize its heralded benefits. Unless a rapid change in public opinion occurs, the Kremlin has put itself into a rut with few good options out.

Putin's Pensioner Problem: United Russia and the Retirement Age

Russian President Vladimir Putin's normally rock-solid approval rating has experienced a sudden drop in recent months.

While it is still high enough to be envied by many political leaders in Western Europe and North America, it is noticeably lower than it used to be. In April 2018, Putin's approval rating stood in a familiar position - 82%. He had just won his fifth Presidential election with 77% of the vote, leaving the second-place candidate, Communist Party member Pavel Grudinin in the dust with 11.77%, and the spectacle of the World Cup was fast approaching. The world was coming to Russia to enjoy one of the world's biggest sporting events outside the Olympics, which had come four years previously.

The World Cup was, by most measurements, a massive success for the Kremlin. There were no incidents of fan violence. Fans from abroad who visited Russia raved about their time spent in the country. The soccer was exciting and featured unexpected results and riveting play. Most of all, the home team considerably over-performed expectations by convincingly winning their group and upsetting a massively favored Spanish squad in the Round of 16. Even in the game where Russia was eliminated against Croatia, the Russian team showed tenacity and fight, holding the Croatians at bay to send the game to extra time and scoring a last-minute goal to tie the game at 2 and send the game to penalty kicks. As a fan, it was sad to see the run end but it's hard to deny the pride felt by the team's run.

In July 2018, Levada Center published a new poll, showing Putin's approval rating down to 67%, a drop of  15% in 3 months. The Russian Public Opinion Research Center put it even lower, at 63%.

The main reason for this drop is simple. Putin and his United Russia party want to raise the retirement age. In Russia, men retire at 60 and women at 55. Under United Russia's plan, the retirement age for men would rise to 65 by 2028, whereas for women it would rise from 55 to 63 by 2034.  The proposal was passed in hopes that it would jump-start the sluggish Russian economy. While no longer in the considerable recession it was in between 2014 and 2017, the Russian economy's recovery has been extremely modest and shaky. The rouble is losing value again, now sitting around 67 per US Dollar after stabilizing around 58 earlier this year because of the spat between the United States and Turkey over the slumping Lira.

At first glance, this retirement age hike doesn't seem like a particularly radical or earth-shattering proposal. A substantial amount of countries have their retirement age around the 65/63 range, and moving the age up 5 and 8 years respectively over periods of ten and sixteen years is considerably gradual. Therefore, from the outside looking in, it may seem a bit unusual that this of all things is receiving relatively fierce opposition. But the proposal is still very unpopular for a few different reasons.

The retirement age as it stands now (60 for men, 55 for women) has been in place since the early 1950s and was signed into law by none other than Iosif Stalin. The fact that the retirement age has not changed in over sixty years, even through the collapse of the Soviet Union and the reformation of Russia under Putin means that this new idea represents a break from a perceived social contract between the Russian people and the Russian government. The Moscow Times reported that Gennady Zyuganov, leader of the Communist Party, lamented when the bill was introduced that "While we were marveling at the goals scored during the World Cup, the Medvedev government decided to score a goal against every one of us...your children and grandchildren won't forgive you for this." Vladimir Zhirinovsky, the ultranationalist and often foul-mouthed LDPR leader, also pledged that his party would vote against the proposal. It is rare to see the Communists and LDPR oppose United Russia in the Duma, but they did in this instance. The Communists have proposed putting the issue to national referendum, which is unlikely to occur. 

There's also the issue of life expectancy in Russia. Russian men are expected to live to around 66, women around 77. This reality has struck fear into Russians, particularly men, that they would not even live to see their pension benefits. While it's true that the life expectancy for Russian men has steadily rebounded from its previous lows in the 1990s and early 2000s, it is still relatively low and mostly due to the high tobacco and alcohol consumption among Russian men especially. Vodka and cigarettes are not as popular as they once were in Russia but they are still consumed in high numbers. 

Another reason for the unpopularity of these reforms is the extraordinarily poor timing of their proposal. The bill to raise the retirement age was introduced during the World Cup, and the perception's unpopularity was amplified considerably by that timing. By proposing these reforms during the World Cup, it is easy for opponents to claim that the government has monstrously skewed its priorities by dumping billions of roubles into a soccer tournament run by the cartoonishly corrupt FIFA but getting stingy with elderly Russians who want to retire. It is also being interpreted as dishonest to propose legislation which is decidedly unpopular during a time when many are distracted by a soccer tournament their country is hosting. 

This is not the first time the Kremlin has tried to reform the social safety net to considerable criticism. In 2005, Putin's government decided to overhaul various benefits for its pensioner population by replacing benefits such as free public transportation and subsidies for telephones, housing and medicine with scheduled cash payments. The new program was poorly rolled out with many never receiving their new cash payments. Those who did receive their payments complained that the cost was insufficient and didn't cover their previous benefits. The program was seen as stingy when the Russian economy was soaring high and had a massive budget surplus. In a rare occurrence, the Kremlin decided to back-track and reinstate the old system. 

United Russia's new proposal has passed its first of three readings through the State Duma, but it is not law yet. The Medvedev government has the opportunity to backtrack and work out the kinks of the bill to make it less unpopular before it becomes law or scrap it altogether if they fear its current implementation will weaken their grip on power. If they insist on pushing it through, however, they may completely lose the surge in popularity they received after the annexation of Crimea. Not only that, the proposed change is gradual and even if the Kremlin is right that it will benefit the economy, effects are probably not going to be particularly noticeable. 

The Communists' hopes for a referendum are unlikely, but if it did happen, it could further cement a policy loss for United Russia if the people convincingly reject the change at the ballot box. If the government tries to manipulate the result to their liking, it could doubly backfire.    

It would be silly to expect a Euromaidan-esque Revolution to come of this policy change (if it happens at all), but Putin has been in power for 18 years and none of his close confidants like Prime Minister Medvedev or Defense Minister Sergei Shoygu or Foreign Minister Sergei Lavrov command the same level of trust or confidence as Putin himself among the Russian people. United Russia has largely stayed popular in Russia because of its loose policy commitments and big-tent attitude, instead opting to pursue generally popular ideas as they come up rather than sticking to a ideological commitment. It's worked well for them, which makes this proposal a considerable break from that path. And in a twist of irony, the proposal is not at all radical from the outside looking in.

United Russia is in a bit of a pickle here, and their best option may be to backtrack like in 2005. If they push through the current bill and the economic benefits don't come, the unpopularity will linger. If they double down in an attempt to speed up the claim of economic benefits (for instance, moving retirement ages directly to 65 and 63 on January 1, 2019) they risk an even more unpopular proposal and a fired up opposition. If the referendum happens, a defeat at the ballot box is very much in play, and United Russia hasn't suffered many of those.