Rude awakenings Part 2

Fourth: LeniLeaks. This country’s recent political history of coup d’etats with a woman at the forefront has brewed speculations and concerns over VP Leni Robredo’s alleged involvement with her Party alongside sympathetic foreigners in a bid to oust the President. The issue came into the open when the VP was sacked by the President as Cabinet member ie. Chair of the Housing and Urban Development Coordinating Council in early December last year. This perennial “personality problem” between the two highest seats in the land is an effect of the Philippine electoral system whereby the VP position as with the President is voted on by the people and oftentimes the VP hails from the opposition Party. What if the VP is instead an ally of the President? We can learm from Barack Obama’s final speech as outgoing US President particularly in his reference to VP Joe Biden:

To Joe Biden, the scrappy kid from Scranton who became Delaware’s favorite son: you were the first choice I made as a nominee, and the best. Not just because you have been a great Vice President, but because in the bargain, I gained a brother.

That ought to be the case. How could a President possibly make progress when he is at the start saddled with an enemy from within his own house? The Vice President whose words and actions in public wilfully undermine the President’s while raising his/her own image as if s/he is the President is in danger of committing high treason and cannot be trusted therefore. Ask also any company president or CEO. Or children of endlessly bickering parents. In any case, that vice president need to re-take a class in Role of the Vice Presidency 101.

Whoever thought and approved of setting up the Presidency for failure should be given standing ovation for this wise move. Past Presidents who had gone along with this system…it was, well, plain self destruction.

Fifth: SSS pension reforms. How did Congress come up with it’s PHP2,000 pension increase recommendation? is the million-dollar question staring SSS member-contributors in the face in the new year. And sans public presentation of computations to back the recommendation the process reeks of yet another pak! ganern! policy making; as if the country’s pensioners are mere cattle being bidded out in the marketplace- 100? 200? 300?…500? 1000? 1500? You there mister? 2000 you say? Going…going…anyone? gavel hits the podium with finality And 2000 it is! Sold to the gentleman in black! Pak! Ganern! In all that noise, not a yea or nay heard from the herd.

Adding fuel to the fire is Senator Drilon’s statement that

The passage of this bill is an early Christmas gift of the Senate to the SSS pensioners, who depend on these pensions for their daily expenses.

I’ve resolved to utter less cuss words this year so. But I understand the decisionmaker’s ie. the President’s difficult position of what to make of the Two Thousand Pesos. In the end perhaps out of public pressure – the figure’s already been publicized and we know the masses- any amount of increase whether or not it’s the right or correct one is good enough – the President just went ahead with One Thousand Pesos.

I remember the head of office at my former workplace who got mad at the practice by some colleagues who placed documents on his table for him to sign (this was before he hired a secretary) without an accompanying note summing up what the document was about or for why he was being asked to sign the papers. With mile-high of documents getting piled up on his table everyday, did his people suppose he was going to do their work ie. read each, page by page and make summaries? As it happened, everyone of us got a memo strongly warning us against “unprofessional behavior inconsistent with an organization such as ours” (I’m one of those people who don’t ever put documents on my boss’ (or colleagues’) table like that so it hurt that I received one. But, that’s life in organizations).

There is of course a scientific process of making policy recommendations in pension systems. Sweden, for instance, in 2006 successfully transitioned from public-defined-benefit pension plan to defined contribution plan and this was attributed to the Minister of Social Policy and parliamentary party members that comprised the review committee who by way of analyzing demographics (age structure of the population and age of median voter) computations demonstrated how the reformed system is better compared to the old. The reviewers used

random sample of the 1995 Swedish Household Income Survey (Statistics Sweden, 1995), which comprised about 20,000 individuals ages 18–65. Because we use data from the census database, the tax authority, and the social insurance board, non-response is 0%. Their income histories from 1960 are known (the previous pension system was implemented starting in 1960).

We then calculate the proportion of winners in the electorate, i.e., those who benefit from the reform. We repeated the calculations for selected years, before and after the actual implementation of the reform in 1999. Given that those who benefit would favour the reform, the calculations indicate what the attitude of the electorate would have been – if the reform had been implemented from 1990, 1995, 1999, 2005, or 2015. The underlying question is: do changes in population structure or economic growth affect the expected proportion of winners?

For this exercise, we needed population and income data for the years after 1995. Population data and population projections by age and sex are from Statistics Sweden.
We simulated income for the years after 1995 using a 2% annual real earnings growth assumption. Simulated earnings rise steadily from 1995. But to avoid a low lifetime income due to a low, possibly temporary income in 1995, we used the highest annual income that was earned between 1990 and 1995 as a starting point. That is, we used the maximum of these years for individuals with income below 1 basic unit.6 Our procedure does not account for switching to better-paid jobs, a deficiency that might be important but mainly for young people. We examine the effects of various economic growth rates and return rates on the individual accounts in the new system and test the sensitivity of our model against some other assumptions.

The voting age in Sweden is 18. We assume that this age is fixed and that identical shares of voters of all age cohorts vote, although younger persons and low-income workers have lower voting rates than others.

We assume that the pension system does not affect lifecycle incomes. To cope with pension commitments in the old system, the future contribution rate must be raised, and this should result in lower wages and accordingly, lower pensions, especially for younger generations. The higher work incentives in the new system affect lifecycle incomes by increasing labour supply and reducing incentives for early retirement. This, in turn, should result in higher pensions, especially for younger generations. Consequently, our result might underestimate the number of non-winners in the old system and the number of winners in the new system, especially among younger generations.

We calculate the numbers of winners and non-winners for each birth cohort. Do winners outnumber non-winners in 1999, which was the year of the Swedish pension reform? Would there have been differences if the reform had come into force in any other year? We used the same values for economic growth rate (g) and return rate of individual accounts (r) as did the pension commission when it described its main alternatives. To simplify, we assumed that everyone reaches age 85.

Why Sweden’s pension reform was able to be successfully implemented, Jan Selén and Ann-Charlotte Ståhlberg, 2007

To give us an idea of the pension amounts in other countries, in Japan for example the full basic pension in 2012 was 4,342 Euro a year or 16% of average earnings of 26,433 Euro a year. In Philippine Peso, 4,342 Euro annually translates to 4,703 pesos weekly. This is an OECD country figure of course, but my point is such is the rational policy making process the people expect from their government. For all we know, PHP2,000 (or, any other amount for that matter) across the board increase standard for all pensioners is not proportionate to each member’s realities in way of their contributions owing to varied salaries and wages. Furthermore, the reality is that there’s a significant number of people outside of the system who should be in otherwise and benefiting, and these are the poor: tenant farmers, workers in shadow or underground economies like maids (who are paid, what, three thousand pesos monthly?), plantation workers on day-to-day employ, peddlers, etcetera) hence even if the One Thousand Peso-increase is legislated these population groups will gain nothing from this purported early Christmas gift. How do we bring these groups into the system (in short, the economy)? It’s jobs, proper salaries and wages, and lifting off for some time (akin to giving preferred companies tax holidays) onerous taxes such as VAT that murder workers before they’re even able to save for the future- the crucial elements in the design of social welfare systems.

Sixth: GSIS retirement fund. In light of news about the agency’s insolvency, fear has resurfaced among government workers, especially public school teachers, that their retirement funds will go kapoot. Philippine Star Jarius Bondoc’s article, GSIS members: watch your bank, reminds us of the agency’s irreputable past:

Presidents played with their retirement mutual fund like personal cash. Political appointees invested those billions in worthless companies. Two of those were banks of business cronies that were bailed out of insolvency on Malacañang’s behest. That resulted in the pointless establishment decades ago of a thrift bank owned 99.6 percent by GSIS. It was, in short, a mere cash cow.

As with any depository run by political stooges, the GSIS Family Bank came short of cash several times. Each time, the parent GSIS had had to recapitalize it with multibillion pesos. Supervision by the new bureaucratic Governance Commission on Government Corporations only led to sloppier operations. As the financial bleeding couldn’t be stanched, the Bangko Sentral placed GFB under receivership last May. Two months later the Philippine Deposit Insurance Corp. (PDIC), as receiver, invited private financial institutions to buy up the GFB.

The ailing GFB still had some value: P2.4 billion in assets, P500 million in cash, intact deposits, and a network of 22 branches. Yet no one bit, as the PDIC suddenly changed the rules midstream and doubled the asking price. Last Nov. the PDIC announced to just close the bank and liquidate the assets.

It’s fine for entities or corporations to make investment decisions here and there, because money’s just right there and what’s being passed around, the money, is just a thing but do they for one moment see the faces and warm bodies behind those contributions, ordinary civil servants working hard and long in order to save up for old age? It’s criminal how people’s money are just going to pigs. Something must be finally done about GSIS.

(I was going to mention here the RH law as the seventh, but the President has just signed Executive Order No.12 (Attaining and Sustaining Zero Unmet Need for Modern Family Planning Through the Strict Implementation of the Responsible Parenthood and Reproductive Health Act, Providing Funds Therefor and for Other Purposes) which now okays full implementation of the national reproductive health program. Hurray! I was going to say The human body (including the mind) is not State property hence has no hold over it, and that cutting off contraceptives supply is like going around rooms in the hospitals unhooking people off from their life support systems. But these are now moot statements.)

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