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Raiffeisen Bank official: Serious labor market problem – excess of special pensions collected at very young ages

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Romania’s labor market is faced with a serious problem of a structural nature, represented by too little participation in the economic activity, as well as an excess of special pensions collected at very young ages, argues Raiffeisen Bank chief economist Ionut Dumitru, according to Agerpres.

„We have too little participation in economic activity. Labor incentives are weak. We have over-the-top spending with special pensions at very young ages, people who retire too early, and for whose training the state has spent significant resources, but allows them to retire at virtually the peak of their professional life, at 45 – 50. We have too few wage earners and many other more tax-advantageous forms of income – see in this regard the self-employed individuals, freelancers, royalties, wage income disguised as dividends in micro-enterprises. We also have a lot of undeclared work, many workers paid with the minimum national wage. It’s unbelievable that you have 1.7 million or more minimum wage workers out of 5 million or so tax-paying employees. Why do we have this high share of minimum wage earners, probably also because many of them receive additional black payments from dividends the company withdraws at a much lower tax cost than if it paid them on the payroll. Solving the labor market issues, not necessarily in order of importance, would mean a serious overhaul of the pension system in general and stimulating the extension of active life, the fundamental rethinking of the special pensions system, which today is an abuse from many points of view, and rethinking fiscal incentives,” Ionut Dumitru declared.

The economist participated on Thursday in the debate on the volumes ‘Economy. Selected Works’ which bring together a suite of works dealing with topics from the sphere of economy and economic politics.

Ionut Dumitru also believes that the tax burden on remunerated work must be reduced, but taxation must be increased on other forms of income that are currently much cheaper and where aggressive tax optimization is being done. In this context, Dumitru explained that many forms of income actually conceal salary income.

In addition to this, he emphasized that financial discipline in Romania is very low, as there are companies whose financial figures „look pitiful”, but whose shareholders are highly well-off individuals.

According to the economist, the population aged 15-64 accounts for about 65 percent of the total, similar to other European states, but the share of this category in the country’s economically active population is 65 percent, which is the second smallest such share in the EU after Italy, 10 percentage points below the European average.

Agerpres

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