The need to put social security back on the agenda

Valentin Burada
Fundatia pentru Dezvoltarea Societatii Civile

Romania’s accession to the EU on 1 January 2007 was promoted as a guarantee of improved living conditions, but as far as social security is concerned, there are few solutions in sight. Although only 22% of Romanians believe that the national social welfare system provides wide enough coverage, social security concerns have been pushed off the political agenda by issues like corruption. In this context, civil society must play a role in defending social security as everyone’s right.

On 1 January 2007Romania became a member state of the European Union (EU). After long years ofinsecurity, EU membership has been presented and marketed as a guarantee thatlife will improve for all citizens. However, as far as social security isconcerned, solutions should not be expected to come from the EU level.

According to a recent report released by the World Bank (2007), absolute povertydecreased from 35.9% in 2000 to 13.8% in 2006, as the estimated number of peopleliving with less than USD 3 per day fell to under three million (out of a totalpopulation around 22 million). On the other hand, relative poverty increasedfrom 17% to 19%.

Nevertheless, only 22% of citizens believe that the national social welfaresystem provides wide enough coverage (European Commission, 2007a). According tothe Eurobarometer survey from spring 2007, twice as many Romanians (17%) areconcerned about pensions than the average in other EU states, and this figurejumps to over 45% among citizens in urban areas (European Commission, 2007b).Meanwhile, 27% of the population is concerned about the health care system(compared to an average of only 15% in older EU member states).

Although these issues have been high on the public agenda in recent years, theyhave not been given priority by political decision makers. Moreover, in thecontext of Romania’s negotiations to join the EU, they were deliberately givena low profile: of the priority issues for EU accession, only the fight againstcorruption was high on the political agenda.

Rising work force emigration and informality spark concern

Romania is one of the 20 EU member states with national legislation settingstatutory minimum wages. The statutory minimum wage in Romania in January 2007was USD 157, which ranks Romania in 19th place among the 20 countries, justahead of Bulgaria (USD 127) (Eurostat, 2007). According to Eurostat data, 9.7%of employees received the minimum wage in 2005. However, this percentage doesnot entirely reflect the reality, since it is quite common for employers toregister their employees with the minimum wage and offer supplementary forms ofpayment in order to avoid paying higher taxes. According to data provided by theNational Institute of Statistics, the average net salary in April 2007 was RON1,027 (approx. USD 420) (NISR, 2007).

Industrial restructuring is in an advanced phase and the privatization of formerstate-owned assets is almost complete. Over recent years the private sectorshare of GDP has increased substantially. At the same time, the informal sectorhas grown significantly. As a result, while the entire work force was formerlycovered by public forms of social security and trade union representation, todaylarge numbers of workers are unprotected. Out of an active labour force ofroughly 10 million, 1.2 million workers are estimated to be employed in theinformal non-agricultural sector, and the total figure including theagricultural sector is much higher, according to unofficial estimates (ILO,2007).

With an unemployment rate of 7.2%, the country is close to the EU average of7.1%. The relatively low unemployment rate is not the result of economic growthor state policies, but rather of massive emigration to older EU member states(especially Italy and Spain). According to estimates from the National TradeUnion Bloc (BNS), there are 3.4 million Romanian citizens working abroad. Forits part, the Ministry of Foreign Affairs reports that 1.2 million Romanianswork abroad legally, while the Ministry of Labour estimates that just over twomillion people work abroad with or without legal authorization (Coidianul,2007).

According to data provided by the country’s central bank, Romanian citizensworking abroad sent home EUR 5.3 billion (USD 7 billion) in 2006. While theseremittances contribute, in the short term, to alleviating poverty in the poorestregions of the country, this massive emigration – of which a part is temporarylabour migration – creates problems and concerns. Both employers and tradeunions have manifested their concern over the unprecedented labour force deficitin several important economic sectors, including construction and the textileindustry. The total labour force recently reached 10 million people, and aquarter of it has already left the country. Most of the people working abroad donot contribute to the public social security systems (pension, health care andunemployment). When you add to this the large number of people working on theblack (or grey) market – estimated at around 1.4 million – it becomes clearwhy the public social security system is feared to be moving increasingly closerto a grave crisis.

Pension increases: urgently needed,dangerously abrupt

The reform of the pension policy was initiated in 2000 as an attempt to copewith the sharp decline in coverage that has occurred over the last decade.Currently, however, one of the greatest challenges facing the public pensionsystem is to ensure financial sustainability in the long term. Facultativepension schemes and privately managed pension funds have been proposed aspotential solutions by the government. Legislation has been introduced since2004 to create alternative private pension schemes. Trade unions have beenparticularly concerned about flaws in the legislation and have demandedadjustments in order to ensure equal treatment of women and men in this field, afair distribution of the savings, lower administrative costs and more time forpeople to become informed and aware of the reforms. It is also estimated thatthe introduction of private pensions will result in a deficit of around 0.8% ofGDP for the public pension system (Voinea, 2007).

Between January and June 2007, the government approved a series of decisionsincluding an increase in the number of employees in the public sector andincreases in public sector salaries, military pensions, and social assistancebenefits for families and children. All of these commitments represent anadditional 3% of the national GDP (Voinea, 2007).

Meanwhile, as politicians are gearing up for two consecutive rounds of elections– European elections in 2007 and national elections in 2008 – the decisionhas also been taken to increase public pensions by 100% by 2009. In order toreach this level, as of 1 January 2008, public pensions will increase 43%. Theaverage pension in 2008 will be around USD 230, close to 3.6 times higher thanin 2002 (USD 65). However, this is still at least three to four times lower thanpensions in other ‘new’ EU member states like Hungary, Poland and Slovakia.The allowances for the almost one million pensioners in the agricultural sectorwill also double as of September 2007.

Many argue that, although necessary, this very swift increase will have negativeeffects in the medium and long term. Economic analysts and politicians alikehave expressed doubts that the financial resources necessary to cover thesecommitments, estimated at around USD 3 billion, can be collected (Bobocea,2007). Experts maintain that the increase in public pensions should have beenintroduced gradually beginning in 2005, as opposed to this riskily abruptimplementation (Cabat, 2007).

Public health care system plagued withproblems old and new

During these last 17 years of transition, statistics and research have revealeda deterioration of the population’s health, including a drop in the lifeexpectancy and the reappearance or aggravation of poverty-related diseases.Romania has the highest incidence of tuberculosis in the EU, while childmortality is four times greater than the EU average.

In 1990 Romania’s medical system was exclusively public, highly centralizedand financed from the state budget; services were offered to the populationofficially free of charge. However, due to a decline in financing levels, thequality of services declined abruptly, with medical staff working in dilapidatedbuildings lacking the necessary medical equipment, along with insufficientdomestically produced medicines and very expensive imported medicines,unavailable to most of the population. As a result, most of the costs weretransferred, directly or indirectly, to the beneficiaries, including throughinformal payments to medical personnel (Dobos, 2006). While the universitycentres offered excellent hospitals, primary medical assistance did not coverthe entire country, and rural areas especially were cut off from service. Thehealth system was centred on hospital care, and so 70% of the already poorhealth budget had to be allocated to hospitals.

In this context, political decision makers decided to move to a system based onhealth insurance. The legislative framework began to be modified in 1996, andthe system entered into force in 1999 (Dobos, 2003). The restructuring of thebasic set of medical services also seemed necessary because the system could notcope with all the costs. The number of hospital beds dropped from 207,000 in1994 to 142,500 in 2004. In the meantime, however, there has been no substantialimprovement of the outpatient health system.

In 2003 co-payments were introduced for some services, and this measure furtherlimited access to medical care for the poor population. For large categories ofvulnerable people the obligation to contribute to the public health care systemwas subsequently removed. Albeit a positive move, this further reduced thevolume of contributions to the system (Dobos, 2003). Currently, contributions tothe health insurance fund are made up of 6.5% of the gross salary of employees,with an additional 7% paid by the employers.

In general, experts consider that the whole reform process has led to increasedcosts, confusion among medical personnel, delays in the creation of thelegislative framework defining the responsibilities of different actors withinthe system, and malfunctions in the disbursement of the funds. Many decisionshave been taken without a prior evaluation of their social impact. Although thepercentage of those not insured is not very high (between 5% and 10%), the newsystem has reduced the population’s access to medical services through theexistence of a category of people who can only benefit from emergency assistance(Dobos, 2006).

Poor families, particularly in rural areas and among the Roma people, havelimited access to health services (Bleahu, 2006). They cannot afford theco-payments required for the provision of some services and the purchasing ofmedicines, as well as extra payment for doctors and auxiliary personnel. For 40%of people in rural areas, transportation and its cost represent a furtherobstacle to access to medical services (Dobos, 2003).

There are also problems inherited from the old system that have not been solvedand that limit access to medical services or reduce their quality. These includethe lack of primary medical assistance in many rural localities, the shortage ofmedical facilities and equipment, the low salaries paid to health care workers,and the practice of informal payments to medical personnel. The crisis in thehealth system has reached such proportions that at times it has even becomeimpossible to ensure appropriate food and accommodation for hospital patients.Many hospitals do not meet basic public health standards and function in veryprecarious conditions.
For instance, in one county alone in June 2007,22 hospitals were fined for various such breaches (Crisan, 2007).

The public health system’s problems have been heightened in recent years bythe growing inability to provide free or subsidized medicines for those who needthem. The liberalization of the pharmaceutical market and decrease in domesticproduction have led to a steep rise in prices for pharmaceutical products,further limiting the poor population’s access even to vital, obligatorytreatments.

The supply of medicines to hospitals has often been discontinued by businessconflicts between the public health system and large pharmaceuticaldistributors. During this turf war, those affected are the patients. To recovertheir debts, medicine suppliers have halted their operations and further hikedup their prices (David, 2007). Adding to this problem are the aggressivemarketing tactics of pharmaceutical companies targeting doctors. In exchange forsponsorships covering their participation in international medical conferencesand seminars, doctors prescribe medicines which are more expensive. Pharmaciestherefore reach the quota of subsidized or free medicines that they are entitledto offer each month much more quickly, leaving more poor patients without accessto needed medication.

In 2004 there were only 22.2 doctors per 10,000 inhabitants, or one doctor forevery 450 people. The medical educational system is underfinanced and has beenaffected by a decrease in enrolment space in medical schools to allow forgreater enrolment in other university departments. As a consequence, each yearthe number of new doctors entering the system decreases. A recent surveyconducted by the professional association of doctors in Iasi, the second largestcity, revealed that over 50% of doctors and 75% of other medical staff haveconsidered leaving the country to work in Western Europe. When compared to theentry salary of a resident doctor in Western Europe, a Romanian doctor earns 10times less. Meanwhile, Western European countries have a deficit of doctors andhave opened their health sectors to doctors from new member states.

Given the insufficient financial resources in the health care sector, one ratherunorthodox means of keeping qualified medical personnel in the country has beenthe toleration of corruption, which plagues the public health system at alllevels. A survey funded by the European Bank for Reconstruction and Developmentrevealed that so far in 2007, 30% of Romanian citizens have made informalpayments to medical personnel. The country’s health system tops the list forillegal payments made by populations to public institutions. According to astudy carried out through a World Bank project, in 2004 Romanians paid USD 360million to public health system personnel. This amount represents 10% of thetotal health budget for 2004. Poorer families pay larger amounts (up to 78% oftheir monthly income). Pharmaceutical companies also are reported to offerillegal commissions to purchasing agents and to doctors who prescribe theirmedicines. Meanwhile, the use of electronic tenders, although introduced inorder to improve efficiency and eliminate corruption, has lead to the purchaseof low quality or ineffective products.

Giving back meaning to the rightto social security

During Romania’s transition from asocialist to a market economy and preparation for EU accession, article 22 ofthe Universal Declaration of Human Rights has been lost along the way. Today,the phrase “Everyone, as a member of society, has the right to socialsecurity” seems emptied of any meaning for most of the population. Although socialprotection represents a critical need for most of the people, it is no longerperceived as a right. It has been taken off the public agenda, and is absentfrom the political agenda. It is in this context that civil society is called onto act and promote debate over social security as a right, and therefore anessential priority around which public policies must be created at the serviceof a healthy society.


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