Human rights in Ukraine 2009 – 2010. 15. Socio-economic rights
International Covenant on Economic, Social and Cultural Rights provides that the ideal of free human beings may only be achieved if conditions are created whereby everyone may enjoy his/her economic, social and cultural rights, as well as his/her civil and political rights.
Unfortunately, Ukraine is still far enough from the conditions under which everyone could implement their socio-economic rights in full. European standards in the field of socio-economic rights provision remain inaccessible for Ukraine so far.
Over the last two years living standards of the majority of people in Ukraine have decreased. There are many reasons for it, in particular, real income reduction for the population, rise in prices and rates on food, likewise transportation and housing and utilities services. And although the State has taken some measures to overcome these phenomena, they were unsystematic and ineffective.
Thus, the improvement by the State of subsidy system for housing and utilities aimed at socially vulnerable groups of population has not become yet an efficient response to a considerable growth of rates in this sector due to a number of formal, as well as subjective reasons.
There remains a problem with inadequacy of subsistence minimum set below minimal requirements for survival of a human being. Up to date, this index, fundamental for the whole social security system is being calculated on the basis of consumer basket of goods (list of food, goods and services) approved back in 2000.
In Ukraine there is still in use such an index as “a guaranteed level of subsistence minimum” which contradicts Ukrainian legislation and illegally restricts the level of social assistance payments. The use of this “surrogate” index reflects the State’s inability to implement basic social standards and ensure the increase of living standards for the population.
The right to adequate housing is not realized at a proper level, since the state has not been able to provide housing for the most vulnerable groups of people for many years. Nowadays there are above 1, 3 million people waiting in the housing queue who have illusory chances to ever get a flat.
Social security system is ineffective in Ukraine, in particular, due to a declarative character of many benefits established by the legislation, lack of a system in its establishment and also in many cases of their full budget financing. It is also worth noting the absence of division between legal norms establishing social guarantees and legal norms granting privileges. As a result, there is an actual impossibility to carry out efficient state regulation in this field.
Reforming of the pension system has been one of the most urgent aspects of safeguarding social security for the elderly people for many years. Certain activity is carried out constantly in this field but, unfortunately, up to date it has not found implementation in specific measures aimed at making indispensable legal and organization changes. In particular, implementation of a contribution rate to the mandatory funded pillar within a multi-pillar pension system has been delayed once again.
2. The right to an adequate standard of living
2.1. Safeguarding the right to an adequate standard of living
Global financial and economic crisis, together with domestic political and legal discrepancies, economic collapse, price growth have caused a decline in living standards of the Ukrainian citizens.
It is obvious that poverty is not an exclusively Ukrainian issue but is global in nature (from figures of the international experts, about quarter of all population of the planet eke out a miserable existence). But poverty in Ukraine is characterized by the following peculiarities:
low living standards of the population in general;
excessive social and property differentiation;
poverty widespread amid working population;
high share of people who regard themselves as poor.
In recent years there have been elaborated and implemented certain measures to overcome and prevent poverty among the population. It is proved by a range of legal documents adopted by the Verkhovna Rada of Ukraine and the Cabinet of Ministers of Ukraine. One of them is the long-term (until 2010) Poverty Reduction Strategy (approved by the Decree of the President of Ukraine dated August 15, 2001 р. № 637) determining principal directions of politics of struggle against poverty by means of:
– creation of economic and legal conditions for raising household incomes;
– enhanced economic activity of working citizens;
– enhanced efficiency of social assistance by reforming the social security system.2
The analysis of data on assessment of poverty rates in Ukraine, carried out by the National Security and Defense Council of Ukraine in order to follow the implementation of Poverty Reduction Strategy and other measures against poverty taken in 2001-2009 proves that there remains a range of unsolved issues. Quantitative indexes of poverty monitoring prove that Ukraine belongs to a group of countries with consistently high level of poverty. Thus, as of 2008 the level of poverty in Ukraine was 27, 0 %, that is 11, 0 % more than in the EU countries (10.0-16.0 %). The poverty severity index increased by 0, 3 % in 2008 and was 23, 4 %. The President of Ukraine, Victor Yanukovych, also said that Poverty Reduction Strategy was not being implemented in 2009-2010.3
High rates of poverty in Ukraine are accompanied by increase of regional discrepancies in this socio-economic phenomenon as proved by the ILO surveys. Thus, the level of poverty is 38% in the Lviv region4 and it is also high in Crimea.5
The issue of poverty of the Ukrainian population acquires even more severity under financial and economic crisis which has had a considerable impact on social and economic conditions in Ukraine. Economic issues inevitably lead to wage reductions, rise in wage arrears and in a number of feeders due to the fired and unemployed that all results into household incomes reduction and increased share of the poor.
It is further supported by the figures from a survey conducted by the Razumkov Centre, according to which 83, 2% of Ukrainians believe they have been affected by the economic crisis. Only 13, 2% of the respondents said they were not affected by the crisis and 3, 6% could not answer this question.
According to the same survey, the principal manifestation of the crisis has become price and rates rise. Its impact was experienced by 82, 3% of responders. 53, 9% of the polled stated their incomes reduction, 52, 5% became less confident in the future, 47, 3% ascertained deterioration in the quality of food which their family can afford, 21, 4% claimed wage or pension arrears6
All the above mentioned proves actuality and severity of the poverty issue, the Decree of the President of Ukraine “On Urgent Measures to Overcome Poverty” № 274/2010 dated February 26, 2010 is an official recognition of it.
To implement this Decree, the Draft Law of Ukraine “On Adoption of the State Poverty Reduction and Prevention Program 2010-2015 in Ukraine” has been elaborated.
Among goals of this Program are the following: to develop a system of measures aimed at poverty reduction, overcoming chronic poverty, poverty among those who work and among households with children, in particular, with many children.
Among the principal trends of the Program are revival and stipulation of the economic growth. Main tasks set for this trend are the following: to implement new mechanisms for production revival; encourage economic growth and social progress; create conditions for provision of the consistent development of industries. These aspects are crucial for solving the issue of poverty, since it is possible to exert an effective impact on poverty only on the basis of economic growth.
At the same time it should be noted that general economic growth will not result automatically in poverty reduction as it was proved by discrepancies between growth of the Ukrainian economy and dynamics of basic poverty indexes during previous years. As experience of other countries has demonstrated, no one manages to solve the poverty issue without appropriate measures and reforms in the field of distribution relations, without well-founded politics in social and labor sectors.
In order to resolve the issue of poverty in Ukraine, it is necessary to develop a system of integrated, scientifically based approaches which should take into consideration poverty’s profile, specificity and particularities of its origins and expansion7.
According to many experts, the main problem is not even the amount of the poor. Last public poll by the Ukrainian Centre for Economic and Political Studies named after O. Razumkov shows that over half of the respondents relate themselves to a middle class by income level and 31% called themselves poor.8 The key problem is the widening gap between the rich and the poor.
It is obviously almost impossible to find out real sizes of salaries and bonuses of our high-level officials or executives of domestic companies and banks. According to the controversial data which appear in the media from time to time, one can make only an indirect analysis. Besides, amounts of bribes taken not exclusively by the officials cannot be calculated even approximately. However, almost nobody argues today that there isn’t such a gap.
And regarding the gap between the rich and the poor, one can remember the events of 2005. Then, according to the resolution of the Cabinet of Ministers of Ukraine, rates of work remuneration for high-level officials and regular employees of public institutions instantly increased almost tenfold. Since that time ministers earn almost 15 thousand UAH with different charges and fees. The rate of work remuneration for the Prime Minister and President has exceeded 20 thousand UAH. People’s deputies earn about the same. And it is without taking into consideration allowances of many thousands, annual as well, as retiring payouts9
It is while basic social standards and norms such as subsistence minimum, minimum wage and minimum pension do not meet European standards. According to the regulations of the European Social Charter (revised), minimum wage is to be no less than 2, 5 out of subsistence minimum. Obviously, people do not have it in Ukraine.
At the same time, the fact that at last, in 2010 the size of minimum wage in Ukraine was set equal to the size of subsistence minimum should be considered among the state’s achievements.
However, this fundamental index set by the State for the whole social security system is calculated on the basis of basket of goods standards (list of food, goods and services) approved yet in 2000. But in accordance with Article 3 of the Law of Ukraine “On Living Wage”, minimum set of food and non-food products and services necessary for an individual is determined not less than once per 5 years.
The need to determine a renewed set is also envisaged in the Resolution of the Cabinet of Ministers of Ukraine “On Approval of the Action Plan to Implement Poverty Reduction Strategy in 2009” dated February 18, 2009 №192-р. But up to date the situation has not changed and as a result there is an illusion of growth in social standards which pretend growing but indeed do not provide a minimum, necessary for survival.
The Cabinet of Ministers of Ukraine has not abandoned the term “a guaranteed level of subsistence minimum” which contradicting the Constitution of Ukraine, the Law of Ukraine “On State Social Standards and Social Guarantees” and illegally restricting the level of social assistance. The use of this “surrogate” index reflects the State’s inability to implement basic social standards and ensure the increase in living standards of the population.
2.2. The quality and safety of food items
It should be mentioned that the current system of state control over safety of food items in Ukraine does not correspond to the European and international practice in general, in particular, to the World Trade Organization requirements. There is no clear organizational structure at the national level (due to duplication of controlling authority functions), fragmented and inconsistent legislation. The efficient and comprehensive system for tracking products has not been created in Ukraine yet and the system of safety regulation of food items does not guarantee high health indexes of Ukrainian citizens.
As an example, one can take the situation with monitoring for the presence of antibiotics in food products. According to food safety expert from the IFC Ukraine Food Safety Project, Yuriy Zvazhenko, nowadays there are two valid documents which regulate the content of antibiotics in products of animal origin: “The Medical and Biological Requirements and Sanitary Norms of Quality of Raw Food Materials and Food Products” and “Minimum list of raw materials, products of animal and plant origin, mixed feeds and component raw, vitamin medicine, etc. subject to mandatory inspection”. The first is used by State Sanitary and Epidemiological Service, the second – by the State Committee of Veterinary Medicine. But these “dogmas of the law” are morally outdated: the first document was approved yet in the USSR and the second indeed duplicates the first one.
Nowadays Ukrainian legislation defines 5 antibiotics (penicillin, streptomycin, tetracycline, grizin, zinc bacitracin) its content is being inspected, although the number of such medicines in Europe exceeds 20.
Though, the chemical industry is developing. “Nowadays producers can use antibiotics of new generations, not regulated in the indicated documents, consequently, they cannot be controlled efficiently”, underscored Y. Zvazhenko.
Concerning bringing Ukrainian standards in line with European ones, according to the IFC Senior Legal Analyst, Kateryna Onul, the harmonization process of national legislation on food safety is slow. The integrated approach “from field to table” has not been implemented in Ukraine yet … “The efficiency of producer’s self-control system raises doubts due to a lack of clearly defined responsibility for producing dangerous products”, states K. Onul.10
The problem with safety and quality of food items has been also recognized by public authorities. In particular, the First Deputy Head of the Administration of President, Iryna Akimova, informed that Ukrainian legislation on technical regulation, products safety and certification would be considerably improved soon.
According to her, an appropriate package of bills has already been prepared by the Committee on Economic Reforms. Akimova specified that three bills are planned, in particular, the bill on general products safety describing how the products safety inspection would be made. According to Akimova, it includes criteria of inspection and rules for application of these criteria, extent of safety information and mode of access to it.
The second bill – “On Market Surveillance and Border Control of Imported Goods Entering Ukraine” – also will regulate products safety control without reinforcing administrative obstacles for business.
The third bill deals with amendments to the laws on standardization and mandatory certification. It is planned to divide the technical regulation system and the system of State regulation and safety control of products, mainly food items11
At the same time, none of these bills has been submitted to the Verkhovna Rada of Ukraine.
As regards using GMO (genetically modified organisms) in food, on December 17, 2009 Verkhovna Rada of Ukraine introduced an obligatory marking of food items for GMO content having adopted correspondent amendments to the Law of Ukraine “On Quality and Safety of Food Products and Food Raw Materials”.
The adopted law bans circulation of food items where the label does not contain any information on GMO content or its absence. Thus, a product label must display an inscription “with GMO” or “without GMO” appropriately. Before that the Verkhovna Rada of Ukraine had introduced a penalty of 10-50 non-taxable minimum incomes of citizens for false information concerning GMO content in food items. According to the Resolution of the Cabinet of Ministers of Ukraine dated July 1, 2009 the content level of genetically modified organisms in food items obligatory for marking was risen from 0, 1% to 0, 9%.
At the same time, experts consider an absurd the decision of obligatory “with GMO” or “without GMO” marking of absolutely all products, even those which cannot contain these components in the main, such as mineral water, beer and other products without proteins.
Ukraine is the first European country which has introduced “without GMO” marking as obligatory. In the EU such a label is a kind of privilege and only some manufactures, which have passed a specified certification, have the right to mark their packages with this label. It means a very high level of raw materials and factories control. There is no such a thing in Ukraine. In our country this label has just become a marketing strategy for some companies.
The introduction of additional GMO analyses caused a rise in products price – producers passed corresponding expenses on to consumers. However, the nutrition has not become more comprehensible for Ukrainians. Food items whose labels would indicate transgenic content often cannot be found on the shelves. Producers might not seek to exhibit such information. Apparently the law does not function if one has an impression that all our products are without GMO. But indeed it is not so. According to Director of scientific-research centre for products testing of SE “Ukrmetrteststandard”,
Semenovych Volodymyr, genetically modified organisms were detected in 101 out of 154 tested food products. They tested confectionary, sausages, biological active additives, food mixtures, etc. Genetically modified soy was detected even in flour and powdered milk.12
2.3. Ensuring proper quality of water
The issue of drinking water provision is one of the crucial issues in ensuring the right to appropriate living standard. Experts in this field state that there is a serious problem with quality of drinking water supply. Its solution belongs to the sector of public administration13, 14 – modernization of water supply infrastructure, rate policy and adherence to the criteria of quality of water supplied to the population are to be done.
In Ukraine there is an adopted law on drinking water based on the State Program “Drinking water of Ukraine” but it is not being observed. By quality of water sources Ukraine has occupied last positions among European countries due to a lack of appropriate quality control of basins, water intakes and irredeemably outdated water supply networks. Not only in the European countries and USA, but also in Russia the question of quality of water supply is ranged among primary state tasks.15
The solution to the problem with drinking water quality requires a complex approach with the participation of different departments of the central government, bodies of local self-government and public organizations. It is important to direct the efforts towards elaboration of a complex program showing the ways out of this problem but also taking into consideration political and economic realities of Ukraine, lobbying of budget financing to ensuring the quality of drinking water, questions of rate-formation for the population and water utility enterprises and the technological solution of rising drinking water quality up to European and world standards.
2.4. The right to adequate housing
In accordance with Article 47 of the Constitution of Ukraine every citizen has the right to housing. Citizens in need for social protection are provided with housing by the State and bodies of local self-government, free of charge or at a price affordable for them, in accordance with the law.
Citizens on social housing register have a right to social housing and wait in the queue to get it. They are provided with social housing free of charge on the basis of the contract for rent for a certain period of time and without the right to its privatization.
Also Ukraine has assumed obligations concerning the right to adequate housing as these are defined in the International Covenant on Economic, Social and Cultural Rights, European Social Charter (revised) and other international agreements.
In Ukraine there is a range of varied programs for provision of housing to certain groups of citizens adopted by the Cabinet of Ministers of Ukraine: State Program for Provision of Housing to Youth in 2002-2012; State concessional lending of individual rural developers (program “Own house”); Complex program for provision of housing to military servicemen, command staff and junior enlisted
of internal affairs bodies, criminal-executive system, customs employees and their family members: those transferred to the reserve or in retirement; citizens who suffered from Chornobyl catastrophe; judges; people with hearing disabilities and visually impaired; resettlement and rehabilitation of the deported Crimean Tatars and other nationalities who returned to live in Ukraine; scientists of the National Academy of Sciences of Ukraine.
But even public authorities acknowledge that the above indicated measures do not provide a solution to the problems of improvement of housing conditions for those who need it according to the legislation. Small number of the population provided with housing remains one of the most urgent issues in Ukraine.16
Inefficiency of some programs is further confirmed by the Accounting Chamber of Ukraine. In particular, this public authority has acknowledged that the Ministry of Finance and the Ministry of Economy did not ensure the commitment of effective management actions to implement the Complex program for provision of housing to military servicemen approved by the Resolution of the Cabinet of Ministers of Ukraine № 2166 of 29.11.99.
The Accounting Chamber further states that the existing system of provision of housing to military servicemen and law enforcement officers requires improvement and attraction of additional funding sources (besides budget financing). Spending by force agencies of budget funds of 1433, 6 million UAH over last three years has been ineffective and has not allowed to come nearer to the solution of an urgent social issue, that is provision of housing to military servicemen and law enforcement officers17.
In Ukraine, in general, there are above 2, 5 million households, out of above 14 million households, living in difficult material conditions. To great extent it is due to the notorious “flat issue”. According to official figures, 1, 3 million Ukrainians wait in the housing queue, 400 thousand have the right to accommodation from the housing fund for social purposes. About the same number of Ukrainian citizens are ready to independently solve the flat issue in case there is a supply of affordable accommodation on the real estate market. The dimensions of housing issue in Ukraine are too striking to continue ignoring it or using as a pretext for empty political debates18.
In Ukraine the concepts of “social” and “affordable” housing are often confused. Whereas social housing is legally defined by the Law of Ukraine “On the Housing Fund for Social Purposes”, the status of affordable housing has not been settled yet. The term “social housing” should be understood as housing premises of all types of ownership from the housing fund for social purposes that are provided free of charge to Ukrainian citizens who require social security based on the contract for rent for a certain period of time.
From the practical point of view, affordable housing means residential houses and apartments built or being built with the state support. The state partially compensates the construction of affordable housing or provides individuals with concessional loans on mortgage agreement from a delegate bank for its purchase. People who require the improvement of their living conditions have the right to this kind of housing.
Nowadays social housing is hardly being built in Ukraine. There is a single mechanism when an apartment house is built on commercial basis and then 15-20% of flats are taken from the developer and given free of charge to the people on social housing register. It is often called rather pompously “the housing fund for social purposes”. Local authorities are responsible for distribution of social housing and cases aren’t rare when corruption “levers” are involved in this process.
Over last five years real data have not been collected concerning the current state of social and affordable housing construction by the state, effective variants of problem solution have not been elaborated at the level of state and local authorities. Instead, during this time legislative work was in full swing: laws and government resolutions with declarative promises were cloned. The Presidential Decree “On measures for construction of affordable residential housing in Ukraine and improvement of provision of housing to the citizens” was adopted. Then the Law “On Preventing the Impact of the Global Financial Crisis on the Development of the Construction Sector and Residential Construction”, “Procedure for state aid granting aimed at provision of affordable housing to the citizens” were adopted and, at last, the Law “On Amendments to Some Legislative Acts of Ukraine concerning Provision of Housing to the Citizens”. The general content of the above indicated legislative acts could be reduced to the following “sweet” promises:
annually 0, 5 % of GDP will be dedicated to the construction of affordable housing;
buyers will be granted one-time state aid;
to those who are unable to buy housing straight away, this will be leased for a period of time up to 30 years with the right to purchase;
developers must be chosen exclusively on a competition basis and land for building will be provided free of charge.
But good-looking legislative norms have remained only on paper. Instead, the favorite method to solve the “flat issue” and, concurrently, local and state officials’ PR has remained a fragmentary distribution of flats into property of those on the social housing register.
As it has already been indicated, as long ago as in 2006 the Law of Ukraine “On the Housing Fund for Social Purposes” was adopted. In 2008 Procedure to realize the rights of socially vulnerable groups of people to get housing from this fund was approved by the Resolution of the Cabinet of Ministers. This right is granted to the citizens whose average monthly income (per family member) does not exceed the size of subsistence minimum established by the legislation. But the unique effort to implement the above indicated Law and the Government Resolution has become the approval of the decision of Kyiv City Council “On Creation of the Housing Fund for Social Purposes” in early March, 2010. This document states that the Fund of social housing will be filled with apartments and hostel rooms which are not liable to privatization. Queues for getting flats will be formed by district state administrations. But it just points to the same corruption driving force. The temptation of the district state administration officials to enlist their relatives or straw men as those who require social housing is too high. Besides, Kyiv officials report happily that social housing will not be liable to privatization, citing that such a practice is widespread in many countries. But foreign experience is directly the opposite. Most European countries allow the residents of social housing to purchase it in the future with discount and on condition of having lived in it for a certain period of time. This practice is very successful but the Kyiv authorities ignore it.
So far, the draft bill of Ukraine “On Provision of Affordable Housing to the Citizens” passed on the first reading. It was introduced to the Parliament in early 2010 during presidential fights. Unfortunately, this draft bill has a completely declarative character and in its present form cannot solve the problem of construction of affordable housing.
There remains an urgent problem of eviction of hostel residents. This group is among most socially vulnerable groups of the population whose right to housing is safeguarded by the Constitution of Ukraine but is constantly ignored in real life. Especially it happens if a businessman or an important official puts his eye on the hostel. As an example, one can cite the eviction of residents of the hostel in 132 Zabolotnogo Str. On May 24, 2010 right in broad daylight. People who did not have where to stay had to spend the night in the street. This situation has been given publicity in the media.
Circumstances of this case strike by a number of changes of ownership, abound in infringements of legislation and, as a consequence, present day owners acting along with The National Complex “Expocenter of Ukraine” and with the support of the State Affairs Department have actively begun to evict residents of the hostel: people were turned off heat, electricity, water and gas supply19.
5 residents who had worked at the company over 20 years were offered to move into the hotel in 101 40-richcha Zhovtnya (40th anniversary of October) Avenue but just for a time they kept working for The National Complex “Expocenter of Ukraine”. Moreover, into the rooms already occupied by other people. It is known that hotels do not belong to the housing fund and these people can be evicted at any time. Residence in them does not permit neither residence registration, nor assignment of a living space to the residents. And it was offered only to 5 people and only for a time they kept working for The National Complex “Expocenter of Ukraine”. At the same time, their family members who had been living in the same hostel for many years (inclusively with their minor children and grandchildren who were born in this hostel and did not have nor had ever had any other housing) were offered to leave the hostel without provision of any other accommodation. That is, to remain without any residence.
On May 24, 2010 the owner took advantage of the situation when all residents were outside and changed the guards, brought about two dozens of huge guards of criminal appearance who just did not allow them and their children back in, so the residents became homeless and spent the night in the street dressed in what they had on.
Besides, there are considerable difficulties with safeguarding the right to adequate housing for vulnerable groups of people, in particular, for children.
To perform a juristic act concerning the real estate owned or in use by children, it is required to have a prior agreement from the bodies of guardianship and custody. Officials from the bodies of guardianship and custody bear personal responsibility for protecting the rights and legitimate interests of children when they grant their agreement to perform a juristic act concerning the real estate which belonging to children (Article 12 of the Law of Ukraine “On the Fundamentals of Social Protection of the Homeless Citizens and Homeless Children”).
However, the reality is slightly different. According to data provided by the prosecutor’s office in Odesa region, during the inspection of implementation of the legislation of Ukraine on protection of rights of minors, it was detected that the heads of boarding institutions did not perform their statutory functions of guardians and custodians as regards social security of the pupils appropriately. It was established that heads of some institutions did not control inherited property of the pupils and did not take measures to formalize the inheritance20.
For instance, a minor pupil, 1996 year of birth, whose father died in 2006 has been in Fontan Comprehensive School since 2006. After his father’s death the minor inherited a flat situated in the town of Artsyz. However, the school officials have not taken any measures to formalize the inheritance over the two years while the child stays in this institution.
In Odesa boarding school No. 5 there lives a 13-year-old child on full state maintenance. In 2009, after the mother’s death, which had been deprived of parental rights by court, a legacy was opened in reference to the child– housing in the city of Odesa. But there is no data as regards obtaining a certificate of inheritance or the child’s representative appeal to a notary office.
In Izmayil Boarding School there stay five children-orphans from the Tarutyn district. During the inspection it was revealed that those children have the right to the inheritance of land parcels with total area of 2, 93 hectares which remained after their parents’ death. But at the time of insppection an application to state authorities to formalize the ownership by inheritance or the state acts on land were not submitted by the boarding school administration.
The Office of Children’s Issues of Odesa City Council sent a disabled 6-year-old girl to the infant home “Perlynka”. However, any documents which confirmed this child’s ownership of real estate are not provided. Only a reference about the lack of housing is given from the Office of Children’s Issues, although the child’s mother deprived of parental rights has residence registration in the city of Odesa. Inspection of the status of this a housing is not accomplished, measures to assign it to the child in case of inheritance fact in order prescribed by Article 17 of the Law of Ukraine “On Protection of Childhood” are not taken.
Officials do not exercise an appropriate control of accommodation assigned to children. The prosecutor’s office cites a crying fact. The prosecutor’s office of the Cominternivskyy district detected that in 2002 three minors of age – two sisters and a brother – were sent to a state boarding institution by decision of the Novomykolayivka village council, by the same decision the right of residence in a house in the village of Novomykolayivka was confirmed. Though, in 2006 this house was written off as unsuitable for living by decision of the same village council and further sold to a citizen for construction of a grocery. Only after the district prosecutor’s office injunction the children’s rights to housing were restored by the village council and another accommodation was assigned to them21.
The Accounting Chamber of Ukraine confirmed existing problems in this field. It noted that at the moment there remains such an urgent social issue as homeless children. Moreover, under economical crisis there appeared a new category of children in the children’s social security institutions – children from families that do not have means for subsistence.
In 2006 the Government approved the State Program on overcoming children’s homelessness for 2006-2010. The State Department on Adoption and Protection of Children’s Rights was created under the Ministry for Family, Youth and Sports.
The audit of efficiency of state budget funds usage aimed at overcoming children’s homelessness conducted by the Accounting Chamber showed that the Ministry for Family, Youth and Sports and the above indicated State Department did not provide an appropriate performance of these measures which were implemented unsystematically and with violations of statutory requirements which regulate the usage of budget funds on these purposes in 2006-2009. It had a negative impact on accomplishment of the State program and solution of the issues of children in difficult living conditions.
Consequently, nowadays there are no records of homeless and derelict children, monitoring of their problem solutions is not being conducted and an optimal network of social security institutions for such children has not been created. Although solving of these issues was among principal goals of the State program.
Another goal of the State program – to complete the establishment of a network of social security institutions for children – has not been met either. It was expected to reorganize orphan asylums into centers of social and psychological rehabilitation of children during accomplishment of the State program. The optimal network of institutions for children deprived of a possibility to live in a family of full value has not been created. Orphan asylums for minors are occupied by 56-76 per cent. However, the need of children who found themselves in difficult living conditions for services of centers of social and psychological rehabilitation of children is not being met, especially that of the rural children22.
Data from the prosecuting authorities also indicates to non-accomplishment of “State Program on overcoming children’s homelessness and dereliction for 2006-2010”. In particular, the Prosecutor’s Office of Odesa region says that this Program, envisaging temporary solution to housing issues of the youth from the number of children-orphans and children deprived of parental care, graduates of boarding institutions is not being implemented in the region.
Up to date there have been created only two such hostels, in the Kotovsk and Tarutyn regions, with the capacity of 15 and 28 children respectively.
At the same time, only on the housing register there are 83 children-orphans and children deprived of parental care who do not have accommodation. There are even more children from this category who graduate from educational institutions in 2009-2010 academic year and require being enrolled on the housing register.
However, as inspections of the prosecutor’s office proved, children are not being enrolled on the housing register on time against the requirements of Article 25 of the Law of Ukraine “On Protection of Childhood”.
Such events take place on the territory of some village councils of the Lubashivka, Ivaniv regions, of district state administrations of the Bilgorod-Dnistrovskyy, Suvorovskyy districts of the city of Odesa23.
There are also problems with provision of physical accessibility to buildings for the disabled. The Law of Ukraine “On the Fundamentals of Social Security of the Disabled in Ukraine” envisages that planning and building of settlements, forming of living districts, development of project decisions, building and reconstruction of houses, constructions and their complexes without adaptation for use by the disabled shall not be permitted.
Also this law envisages that living buildings, occupied by the disabled or families with a disabled person, porches, staircases of a building where the disabled live have to be equipped with special facilities and devices according to the individual program of rehabilitation, likewise with telephone communication. The equipment of the above indicated living buildings is carried out by bodies of local self-government, enterprises, institutions and organizations under whose jurisdiction the housing fund is.
In case of inadequacy of the disabled’s accommodation to requirements set by the conclusion of the medical and social expertise and impossibility to adjust it to the disabled’s need, a change of living area can take place. It should be noted that new building standards are defined as regards buildings for living purposes which envisage consideration of the disabled’s needs. But the majority of existing living buildings where the disabled live do not meet these standards.
The legislation envisages free of charge access of the disabled to state housing but it is not provided. Thus, in particular, the Conception of the Complex State Program “Housing to the disabled”, approved by the Resolution of the Cabinet of Ministers of Ukraine № 994-р dated December 31, 2004, expected by the end of 2010 to have provided with housing about 75 per cent of the disabled of all categories who were on the housing register as of January 1, 2004. Since 2005 the financial support of the Program has been minimized or totally absent, that is, it bears an exclusively declarative character. Besides, Programs of social housing construction for the disabled do not function at all in the regions of Ukraine.
Moreover, any guarantees to get different kinds of state crediting or loans on mortgage by the disabled are not set. The principal reason for credits unavailability lies in a lack of financial opportunities24.
3. The right to social protection
3.1. The system of benefits and privileges.
The Constitution of Ukraine, adopted on June 28, 1998, declares our state as social. But the current economic situation in Ukraine, the lack of balance and not sufficient development of the present system of social protection do not allow making the declaration a reality.
Not transparent system of privileges and social payments remains dominating both in social protection sphere and in social security. Instead of real social security for the population a bulky network of state and municipal bodies of social protection and social services is being maintained. At the same time to support the most socially unprotected groups the system for social protection and social security provides numerous privileges and social guarantees according to professional identifiers. In accordance with valid legislation in Ukraine there are about 120 categories of people entitled to benefits, out of those only 45 categories are entitled privileges according to social criterion, and 57 – according to professional one.
Often such social protection measures and social security measures for the representatives of certain professions are absolutely not justified, because the employment in certain branch should be stipulated not through granting some privileges but through increase of wages for the employees as it happens in the developed countries.
A dominant feature of valid legislation in social protection and social security area is its lack of system together with inconsistency. Thus, in certain legislative acts there is an influence of radically different concepts and approaches, among those the soviet model is the dominant one (social service and social work domination aimed at support of the most vulnerable categories and persons who are in difficult conditions). Even after the approval of the Law of Ukraine “On Social Service”, declaring in fact changeover to European model, the lawmakers repeatedly turned back to traditional soviet methods and approaches, introducing new types of privileges and social payments.
Introduction of privileges, social and compensation payments in several cases is out of constitutional standards, as far as on the level of laws of Ukraine the list of categories for those who receive various forms of social assistance has considerably increased. It results in diffusion of social function of the state and in loss of addressness of social protection, premises for which are provided on the level of Constitution of Ukraine.
The majority of constitutional social standards remain mere declarations because of obsolescence and non effectiveness of current mechanisms for social protection, non addressness, leveling character and non correspondence with the real needs of Ukrainian society of the current social protection and social security system and also due to non effectiveness and non transparency of the system for budget financing of state social payments.
A considerable problem in implementing of the constitutional right to social protection and other social rights of citizens is an absence of the unique codified act (the code or basic legislation). In the act general approaches to regulation of social protection and social security system would be established together with comprehensive list of criteria and backgrounds providing a right for social protection from the state and defining character and volume of state social guarantees.
Another important aspect is that one of important constitutional guarantees of rights and freedoms of person and citizen is non-admission of their abolition or narrowing its content and volume by adopting new laws or while making amendments to valid laws. According to legal position of the Constitutional Court of Ukraine, as far as for most of Ukrainian citizens privileges, social and compensation payments and other social guarantees provided by current legislation are additional to basic means of subsistence, the necessary component of constitutional right for provision of sufficient level of life (that at least may not be lower than the minimum of subsistence established by the law), it is not allowed narrowing of contents and volume of the right by means of new laws adoption or through making amendments to current laws. Its stoppage is possible only under introduction of state of emergency.
Unfortunately the Verkhovna Rada of Ukraine for several times infringed the principle during consideration of the Laws of Ukraine on state budget for corresponding year. It obliged the Constitutional Court of Ukraine in different years to acknowledge as non constitutional several norms of the Law of Ukraine “On State Budget of Ukraine for 2001” and of the Law of Ukraine “On State Budget of Ukraine for 2004” and also many clauses of the Law of Ukraine “On State Budget of Ukraine for 2007” and of the Law of Ukraine “On State Budget of Ukraine for 2008”.
And, although the Law of Ukraine “On State Budget for 2009” and the Law of Ukraine “On State Budget for 2010” do not contain amendments to the laws establishing social guarantees for people, until present we still experience the consequences of previous violations of the legislation. Thus, to date there are some legal clauses providing certain social guarantees, as far as their limitation is acknowledged as non-constitutional. But to protect one’s right a person is obliged to defend it in the court. And even having obtained the positive resolution in the case, such ruling remains not fulfilled due to lack of budget funds for these purposes and due to lack of correspondent procedure.
But the backgrounds of social protection and social security system emerge not only from the legislative acts of Ukraine but also from its international legal commitments. Ukraine is a participant of several basic international agreements in area of social rights.
Here the serious problem is the implementation of international legal commitments of Ukraine in national legislation. In most cases the laws on ratification of international agreements are adopted without simultaneous amendments to the laws of Ukraine, adoption of new or cancellation of valid laws not corresponding to the international commitments of the state.
The practice of application of international agreements norms (that, according to the Constitution of Ukraine are equal and even have the priority over laws of Ukraine) as direct action norms has not been established yet. Also the court practice based upon the international agreements is almost not present too. Together both of these issues could become the background for the creation of additional mechanisms for implementation and protection of social rights for Ukrainian citizens.
A considerable obstacle for further integration of Ukraine to European Union may become its mostly declarative joining to European system of social standards and its rejection to acknowledge even formally (ratification) of the most part of European law concerning social human rights, in particular several provisions of the European Social Charter (revised).
The complete transition of Ukraine to European model of the development of social protection and social security system depends upon resolution of these problems.
The analysis of the legislation in area of social protection and social security, carried out by the Center of Civil Expertise determined that different privileges, social payments and social services in Ukraine are directly provided in 58 laws and in more than 120 by-laws legal acts. In different periods of Ukrainian independence the law-makers applied to the development of the national system of social protection and social security different approaches and models, thus legal acts adopted in different times have considerable contradictions and provide different dominating forms and types of social protection.25
Complex analysis of valid legislation in area of social protection and social security confirms that higher state bodies do not apply single concept while adopting new legislative acts and trying to fill existing gaps.
Also it is stated that valid legislation in area of social protection and social security is not systemic and not consecutive: adopting new legal acts concerning introduction of new types of privileges, establishing new social and compensational payments often already valid regulation is ignored, and coordination of the act with already valid acts in other fields of legislation is not made.
Considerable part of valid legislation acts regarding social protection and social security or certain clauses in present are outdated of have never been applied in practice, but remain formally valid.
According to the analytical report of the Center of Social Expertise the majority of privileges, social and compensation payments provided by the current legislation do not reduce negative consequences of economic transformations in Ukraine for the most socially unprotected categories of population, but they are introduced on the backgrounds of political declarations and are aimed at introduction of additional social guarantees and preferences for certain social groups.
Among all forms of social protection applied today in Ukraine the dominant ones are privileges and social payments. Such measures of social protection are recreated from one legislative act to another, but mostly are not targeted and do not fulfill the function of social protection and social support to the most socially unprotected categories of population.
The majority of the privileges, social and compensation payments established by the current legislation are merely declarative and it’s financing from the state budget or from the state non budget funds have either never been made or it was made in not sufficient volume or not systematically.
It is needed to mention that the general amount of Ukrainian citizens who have a right to use certain privileges established by the valid legislation is about 15 million people. According to various experts estimates general value of the privileges declared in valid legislation varies from 3, 8 to 5, 8 billion USD a year, but in reality only small part of those is funded.
In many cases it provides backgrounds for a person to protect his or her rights to social payments provided by the law but not fulfilled by the government. As an example it is possible to mention the case on acknowledgement as non legal of several provisions of the resolution of the Cabinet of Ministers of Ukraine depriving the Ukrainian fire fighters a compensation for the uniform not received, provided by other laws.
The case on the cancellation of certain provisions of the resolution by the Cabinet of Ministers of Ukraine № 319, dated April 08, 2009.26
The Cabinet of Ministers of Ukraine deprived illegally the Ukrainian firefighters a compensation for the uniforms not received. Such a ruling was approved by the District Administrative Court of Kyiv,
To protect the rights violated the former sergeant of the civil protection service went to the court.
From 1992 to 2009 the firefighter was obliged to buy the uniforms at his expense. When according to health conditions he was dismissed and went for compensation of his expenses, he obtained the answer that he would not receive money. Because the Cabinet of Ministers in order to save funds on firefighters adopted the resolution # 319 dated April 08, 2009.
There it was indicated that for personnel of rank and file and command staff of the civil protection dismissed under health conditions the uniforms not received to the moment of dismissal were not granted and the monetary compensation was not to be paid. As a result the purchase of the uniforms turned out to be private expenses of a person receiving small salary above all.
The resolution was acting about for a year in spite of the fact that its provisions contradicted to the Code of Labor Laws, to the Law of Ukraine “On Legal Backgrounds of Civil Protection”, the Law of Ukraine “On Social and Legal Protection of Military Servicemen and their Family Members”.
In July 2010 the court annulled the resolution mentioned. According to the lawyer Vyacheslaw Yakubenko representing the interests of fire fighters in the court: “A desire of the authorities to save budget funds may not be an argument for infringement regarding firefighters who buy for years military jackets, service caps, boots. Although the resolution appealed had been adopted by Tymoshenko’s government, the present Cabinet of Ministers defended it in the court as their own” – the lawyer said.
Authors of the research come to the conclusions that:
- within the valid legislation related to social protection and social security some citizens groundlessly use certain types of privileges and receive social payments as far as it is complicated for the state to control provision of social assistance while there are so many its types and receivers. Such non transparency of the current system allows citizens to abuse some types of state social protection with impunity without having sufficient backgrounds;
- Social needs of the most socially non protected categories of population in Ukraine are satisfied in a non sufficient manner: high poverty level, especially in families with children and families with disabled persons or with not working persons of the able-bodied age, gives evidence of non sufficient efficiency of social support mechanisms by the state to the most socially not protected categories of the population;
- The system of privileges provided by the current legislation, of social and compensation payments, social services is mostly not correlated to the valid system of budget funding, based mainly upon the “formula” approach, not taking into consideration the real need for material provision of socially unprotected categories of citizens and also the real value of privileges and services.27
3.2. Housing and communal privileges and subsidies as element of social protection
Recently in Ukraine housing and communal services rates have considerably increased. Thus gas price for population in Ukraine grew 50%, heating and water supply rates in Kyiv grew 30-40%, also prices for housing and communal services in other regions increased.
State authorities that, according to the legislation are responsible for prices and rates management in housing and communal area in fact do not control issues of rates formulation. That is why there are considerable fluctuations of cost and level of its compensation through rates approved – maximum index of one type housing service cost exceeds the minimal in Ukraine 2, 5 - 4 times. It proves different approaches to definition of service cost and determination of rates for the population often without taking into consideration solvency of citizens. To January 1, 2010 the cost of heat energy in Uzhgorod was 3, 7 times bigger than in Kyiv; the cost of water draining in Poltava was 4, 2 times higher than in Simferopol.28
In such a way it is possible to put a question on fairness and good reasons for establishing rates for housing and communal services.
All these circumstances have considerably influenced on the fact that level of life in Ukraine for the period decreased. The arrears of payments for housing and communal services increased and keep on growing constantly. In particular to January 01, 2008 the arrears consisted of 7, 2 billion UAH and to July 1, 2010 – 10, 5 billion UAH.
In connection with that it is of crucial importance the protection of socially vulnerable groups that are unable to pay for housing services. Provision of subsidies from the budget for payment of housing and communal services is rather effective element of social reaction to the challenge in many countries.
In 2010 the Cabinet of Ministers of Ukraine introduced simplified order of receiving subsidies compensating a part of expenses for communal services. Payment by the citizens for housing and communal services at appointing of housing subsidy was decreased from 20 to 15 per cent of average monthly total revenue.
At the same time, as the Accounting Chamber of Ukraine states, in Ukraine the mechanism for the provision of subsidies and privileges to population and of compensation to service providers for non received profits is not transparent and complicated. Also it was declared that the Ministry of Labor and Social Policy of Ukraine and the Ministry of Finance of Ukraine did not create the effective system of fund management for subventions from the state budget to local budgets for provision of privileges and subsidies for payment of housing and communal services, capable to secure social protection principles, equality at distribution of social welfare, provision of high quality services for population at reasonable rates.29
Many of those requiring social protection will not be able to obtain subsidies because of formal obstacles, in particular related to the non-transparency of the economics and also of incomes received by many Ukrainians.
Besides there are considerable problems with compensation for the services and subsidies for housing and communal services provided to population. In particular there is a problem in the city of Lviv. The arrears of Social Protection Department of Lviv City Council to the companies providers of communal services and the privileges, respectively, to June 2010 consisted of approximately 2 million 300 thousand UAH. At the same time the subvention that had come from the state budget for compensation was only 15 % out of the need.
Deputy Chair of Regional Social Protection Department N. Kuziak stated: “Mostly we receive monthly cash about 15-18% out of what we need. For the half of the year it was not more than 20 % out of the need.” She also commented: “I personally made phone calls to the directions of social protection in different regions – to Kharkiv, Odesa, Donetsk, Rivne, Vinnytisa to clear up the situation with the compensation of privileges and subsidies. It turned out to be the same everywhere. It is all over the state. About 10-20% out of the need for the compensation is received”.30
The problems with funding are also mentioned by the Chair of Budget Commission of Rivne Region Council, the member of Rivne Executive Committee Oleg Khomych. “The government officials say that there would not be any issues on subsidies and privileges and instead no financial support in regional budget on subventions is provided, and also probably soon we will face the rates increasing”.31
And although lack of funding affects by now the companies, service-providers of housing and communal services, the arrears is being formed, it is clear that in case if the problem is not resolved, it will affect in future people directly receiving subsidies and privileges.
The simplified order of obtaining subsidies does not work always as well. Thus back in the beginning of mass subsidies to the population the officials told that it would be the most simple for the retired, they would not even need to leave homes. But even there problems appeared. It is not easy to teach every potential subsidy receiver, especially in the age of the retired to fill out the documents correctly. For example, almost one thousand of envelopes received by the retired of Rivne region for the processing of subsidies were already sent back to the direction of labor and social protection and the majority of those contain inaccuracies.
Even the representative of the authorities, the Deputy Chair of Rivne Regional State Administration Yuriy Kichatyy stressed that it was necessary to approach the process attentively and to think over the information requested to write down in each column.32
It is important to mention the problems appearing while providing privileges on payment of housing and communal services. In particular for many categories of the privileged there is no regulation that would determine provision of the privileges within the established (average) norms for services consumption. As far as privileges are not limited to objective consumption norms, it results in the fact that a privileged person consuming more housing and communal services (as a result of bigger family, apartment area, utility rooms’ availability, etc.) is subsidized by the state in a bigger scale.
For instance in regions of Dnipropetrovsk and Kharkiv while exceeding the level of pensions provision for the retired judges and prosecutor’s office investigators in relation to retired pedagogues and doctors 6 times, the categories mentioned are granted practically identical volume of privileges (table 1).
Comparative analysis of the provision of privileges to certain categories of citizens and the amount of pensions paid out in 2009
Judges retired (50% discount).
Retired prosecutor ‘s office investigators
Retired pedagogues in rural areas (100% discount).
Retired doctors in rural areas (100% discount).
Privileges provided per 1 person UAH
Average monthly pension UAH
Privileges provided per 1 person UAH
Average monthly pension UAH
3.3. Guarantees of social security for the elderly
We got used that the pension is a payment earned by the hard labor and the state is obliged to provide it on a level guaranteeing at the least to live one’s life with dignity. It is hard to deny such a statement in a civilized state in the XXI century. On the other hand all political research point out that the crisis of pension system gets worth, impacting all the state finance and creating a threat for economic development of Ukraine.
All the professionals coincide in opinion that domestic pension system is in critical condition and requires urgent reform. There are two complaints by the experts regarding the present pension system. First of all it is unable to provide decent level of life for the retired. Secondly even taking into consideration present miserable level of pensions it is an impossible burden for the state budget covering the deficit of Pension Fund. In other words the demands of the retired attract funds aimed at other social needs: education, science, healthcare, army, etc.
The generally adopted indicator of the pension level is the rate of substitutability, i.e. the relation of average pension to average wages. According to the norms of the International Organization of Labor it should be no less than 55%. For the last several years the rate in Ukraine was increasing in general and reached for example in 2009 49 %. To compare: in Italy and Spain it is 90 %, in Sweden and Germany – 65, in France, Japan and The USA – 50%. In other words, although Ukraine has a lower rate index, but it is absolutely comparable to other’s rate.34
But the retired are not too much interested in different rates. They are interested in real dimensions of pensions. While the average salary in 2009 was 1906, 0 UAH, the average retirement pension size was 942, 7 UAH. And even if it had reached say 1340, 0 UAH and the rate would become 70%, would it have changed the situation radically? For sure it would have not. Even if the notorious rate would have been made 100%, the Ukrainian retired would have not been able to consume the same amount of material welfare as, for example, the Swedish one.
The reason is in calculation mode. The level of official salaries is extremely low, and out of them the insurance payments are made. The problem of pension system is one and only: it is possible to pay shadow salaries, but it is impossible to pay shadow pensions. The nature of pension is transparent and official.
Most of experts do not have illusions related to eradication of shadow economy. Yes, it is possible. But the previous governments did not want to make it; the present government does not want it too. Probably the following governments will not want to make it either. There are too many interests involved in shadow sector. This specific branch was cultivated for two decades and has very deep roots. Correspondingly the efforts for its elimination should be enormous and supported by the respective amount of state will.
Also we have to indicate that the Pension Fund fullness under other equal conditions depends on the relation between the amounts of the retired and the payers of insurance contributions. Here the realities are sad in Ukraine. The aging of population in Ukraine, as in other countries result in systematic worsening of the relation between the able-bodied population and population in the age of retired. According to the present demographic forecasts of the Institute of Demography and Social Research of the National Academy of Science of Ukraine, all the population of Ukraine in able-bodied age that has not reached the age of retirement will decrease from 27, 2 million in 2009 to 22, 9 million in 2025 and 17 million in 2050.35
At the same time if there is no reform of the pension system the amount of the population in the age of retired will increase from 11, 7 million in 2009 to 14 million in 2050.
The practical amount of the payers of contributions is much less than the amount of the able-bodied and the amount of the retired is much bigger than the amount of people in the age of retirement. In 2009 per 100 people who paid superannuation contributions there were 88 people receiving pensions. In 2025 there will be 100 retired per 100 payers of the contribution and in 2050 there will be 125 retired per 100 payers of the contribution.
Out of demographic tendencies it results that without radical reforms of the pension system future retirees will be in much worse situation than the present ones. Average pension in 2009 consisted 40% out of average wage and in 2050 it will consist only 28%.
Both negative factors (low level of official wages and demographic situation) in present have become systematic, i.e. they can not be corrected by local measures. Problems of these factors removal are of different level of complexity and of different time limits. The turning point of demographic situation is the most complicated task and will bring results at the best after 20 years. But in any case it is necessary to realize that the radical solution of the problem of life level for the pensioners is out of the limits of the pension system.
Main ways of the reforms discussed in scientific, legislative, official, trade union and other circles are beyond any doubt. These are the modernization of the solidarity pension system, introduction of the accumulation system and stipulation of the voluntary component of the pension system.
As regard to solidarity system it is offered most often to remove the disproportions in size of pensions, eliminate pre-term and privileged pensions, introduce prohibition or limitation to receive pensions for the working pensioners, etc. There is no doubt that under present conditions all these measures are necessary and important at least because most of them consolidate the belief of the population in social justice. Although it is worth mentioning that at the best these would contribute to more fair (from the point of view of the majority of the population) “distribution of the pie”, not increasing its size in any manner. In other words those are capable only to decrease partially the deficit of the Pension fund. To decrease the deficit, meaning even no to make it one without the deficit.
Apart it is necessary to mention the problem of the increase of the retirement age. It is the requirement from the International Monetary Fund. Yes, it does correspond to the worldwide practice. But at the same time we should remember that this step has only one “pro” argument - partial decrease of notorious Pension Fund budget deficit. And temporary at that, taking into consideration scale of state policy.
The option proposed by the Program of Economic Reforms of Ukraine for 2010-2014 (increase of the retirement age for women up to 60 years gradually, half a year every year in 2012-2021) from the financial point of view is the less efficient out of all discussed among the experts. In case of its implementation Pension Fund budget deficit decrease even at the height of the reform will not exceed 20% of its dimension.36
The other argument in favor of retirement age increase (more complete implementation of labor potential, growth of life level for the pensioners, decrease of the lacking workforce problem, GNP growth, etc.) should be considered no more than putting a brave face on a sorry business.
So there is a logical question – is it worth doing at all? It is extremely hard to answer the question, what is more important for the state and for its citizens – partial decrease of budget deficit of Pension Fund or the entire complex of negative demographic, social and other consequences. Among those there is an inevitable growth of the disabled pensioners, additional pressure on a labor market. And all this without mentioning of the political consequences related to increasing retirement age.
Mostly, all the steps aimed at modernization of the acting solidarity system are aimed in all possible manners at postponing further decay of the Pension Fund and nothing else. So they are hardly to be considered a reform literally, because they do not change radically the principle of the system.
In general context a really breakthrough measure could be considered an introduction of the multi -pillar component. In the same way as solidarity system, the multi-pillar system is mandatory, contributions are made not optionally, they are mandatory. But there is a significant difference. Solidarity system does not provide the accumulation of funds on the individual account.
At the same time the introduction of mandatory multi-pillar system is constantly postponed by the government. This time it was postponed until 2012.
It is important to mention that to date there have been no legislative acts adopted implementing the tasks of the pension reform, so it is hard to analyze its efficiency or its lack of efficiency.
Unlike the solidarity system, the multi-pillar system provides personification of pension contributions that is individual accumulation of funds during working life on an individual account. These funds would be the principal source for pension in the old age.
Solidarity system provokes abstract-alienated attitude to it by the worker as to a certain tax. The multi-pillar system according to its economic nature is a postponed income. In fact it is an individual pension fund and a person may see direct relation between his/her wages in present and the amount of pension in the old age.
Here the ideology is radically different. Within the solidarity system a person is obliged to expect something from the future generation of his compatriots, whose amount is constantly reducing. And within the multi-pillar system a person may rely only on himself or herself: the amount of accumulation is determined by the legal wages, total length of service and the quality of pension assets management.
The multi-pillar system is transparent and clear. It has no sophisticated formulas, concepts of normative and over normative length of service and many other features of the solidarity system hard to understand. Besides, from the technical point of view its implementation is not a very complicated task.
But it has two peculiarities, caused by the fact that an employee makes contributions to the system during his or her entire labor activity, without opportunity to withdraw it before the age of retirement. Here there is a first peculiarity – a need for strict control over provision of duly management. Even if we assume that the retirement age remains on a level of 60 years, future generations will pay the contributions from the beginning of their labor activity. These contributions will be accumulated in the system during minimum of 35 years. And the contributions will have to be managed somehow.
So the requirement to the system is the strictest control by the state. The control based upon enhanced powers, accompanied with real and not declared responsibility. Keeping the pension assets in the multi-pillar system and impossibility of abuse by the authorities must be guaranteed by the state.
Another peculiarity comes out of a need to manage the funds accumulated during a long period of time. Even under condition of complete and total fairness of the authorities any investments may be under risks. Investments without risks do not exist by definition. That is why processes of pension savings management should be organized in a way to minimize risks and provide investment of funds in diversified finance instruments.
Is rather simple to establish investment priorities and the diversification – it is enough to provide corresponding restrictions within the legislation and control its fulfillment. But the first component (risks of the percentage rates, currency rates, rates of securities and other financial instruments) may be minimized only partially with a certain probability component by introduction of the required regulations and norms. But such regulations should be elaborated and introduced in practical management of the assets of pension system. The minimal index of management efficiency should be protection of savings from the inflation.
Apart a problem of transition period should be mentioned. The pension system operates today (in a good or bad way– it is another issue) in a quite understandable way. It will operate in an understandable way after the end of the transition period when people who start to contribute the system from the beginning of their labor activity retire. There are two categories of the employees left. One – are those whose age today is between 40 years and the age of retirement. These are pensioners to be.
According to the ideology of introduction of the multi-pillar system they do not have time to make sufficient savings, but its amount will be the more non sufficient the closer they are to 40 years. Thus the source of pensions for these people together with their own savings there should be funds from the solidarity system. Today, conditionally speaking all the pension to every employee is paid to the full out of the solidarity system. After ending of the transition period, each pensioner will have to be paid certain minimal pension out of the solidarity system. Its source should be the contributions to the solidarity system in the minimal dimension required.
It results in a problem of the Pension Fund incomes balancing during the transition period, or rather optimization of the correlation between the contributions to the solidarity and to multi-pillar systems.
Intuitively it is understood that as a result of demographic processes the correlation mentioned should change in favor of the multi-pillar system and be determined not by sight but using the corresponding multifactor mathematic model.
Obviously the accumulation system per se is not a universal cure. In the multi-pillar system, the same way as in solidarity one the deductions are applied not to all, but only to official wages. And when a newly made pensioner clears up that his personal savings are not enough to satisfy his ambitions, he will be able to blame only himself for that.
In this context it is of importance the system of non state provision of pensions. It has developed in Ukraine since 2004. In present in the area all the required infrastructure is created and the required competitive environment is formed. Although as before the aims declared at the system introduction remain not reached. In reality no more than 3% of the able-bodied population enjoys the non state pension benefits. Total amount of the funds attracted is below than UAH 1 billion. It is a modest result for the five years of development.
Expectations that voluntary savings may consist of an important share within the pension system are overstated for today. As far as a person decides on his own whether to enter the system of voluntary savings, the deductions for future pension start to compete with other expenses items (food, clothes, durable goods, education, healthcare, etc.) becoming more vital in some periods of life. In other words voluntary pension savings – is a toy for reach societies, Ukraine unfortunately not belonging to them.
Besides there are two reasons slowing down the development of non state pension provision system. First of all the population does not trust to financial institutions (with good reasons for it). The events of the end of 2008 another time destroyed any possible beginnings of trust to the policy of the National Bank of Ukraine.
Secondly the present stimuli are obviously not enough to create real interest for the employees and the employers. An additional motivation for the employers is needed that could be based exclusively upon the economic profit.
That is why the efforts by the experts should be concentrated on the elaboration of non money stimuli. For example in case of the increase of the retirement age within the solidarity system it would possible to apply to the participants of non state funds another rules for definition of the retirement age. The same mechanisms could be provided for the system of the education, healthcare, etc.37
Also many problems emerge related to the fulfillment of the valid pension legislation. In particular in 2009 the working pensioners were paid fewer funds than it was provided by the legislation.
Thus the resolution of the Cabinet of Ministers of Ukraine № 530 “Certain Issues of the Social Protection for Several Categories of Citizens” provides that in case of the recalculation of pension from the bigger wage taking into consideration the insurance length acquired after its appointment, the index of average yearly payment per one person should be applied prior the pension recalculation.
But the Ministry of Labor and Social Policy and the Pension Fund of Ukraine adopted the explanation (letter № 20/0/18-09/039 dated March 11, 2009) determining that the recalculation of pension in 2009 is applied using the index of wages for 2007.
That means that in 2009 we had a large amount of pensioners defrauded. They were paid fewer funds than provided by the law. It turned out to be somehow that the letter from the ministry was more important than the resolution by the Cabinet of Ministers of Ukraine.
For sure the issue requires regulation by means of making amendments to the laws regulating provision of pensions. The Ministry of Labor and Social Policy informed the Ukrainian Helsinki Human Rights Union on the matter. But prior its legislative resolution the state should act in correspondence with the legislation and not to look after ways to save on the pensioners.38
Later the Ministry of Justice of Ukraine addressed the Ministry of Labor and Social Policy and the Pension Fund with the demand to recall the letter from the places of its application and to revoke it. These two organizations with their decrees violated Ukrainian legislation.39
General Prosecutor’s Office of Ukraine also found in the actions of the authorities of the Ministry of Labor and Social Policy and the Pension Fund of Ukraine indications to components of crime. In an answer to the deputies’ address the General Prosecutor’s Office made a protest against the unlawful actions by the authorities of the Ministry of Labor and Social Policy and the Pension Fund of Ukraine.40
Also during a long period of time in Ukraine there were valid discrimination clauses of the pension legislation limiting people’s right to pension in case of the emigration to other countries.
The problem of Ukrainians right to pension violation when they move abroad existed for a long time. Many horns were locked in fight of the pensioners with the state authorities concerning their right to pension.
All of those dealt with the provision of the Law of Ukraine “On General Compulsory State Retirement Insurance” providing that pension payment is stopped for all the time of living a pensioner abroad. Only in case when there is a corresponding international agreement on social security with corresponding state, a pensioner gets a chance to obtain waht he had earned with his labor.
In fact pensioners’ right for receiving a pension was put under dependence on actions by the state signing international agreements with one or another country. Legally there was a situation created, when the citizens, working on the territory of Ukraine and paying the insurance contributions were deprived of possibility to obtain the pension.
Only after the adoption of the decision by the Constitution Court of Ukraine (25-рп/2009 dated October 07, 2009) on the acknowledgement as non constitutional of these provisions of the pension legislation, pensioners got a chance to defend their right to pension.
Besides the Constitutional Court in its resolution stated that that the Verkhovna Rada of Ukraine had to pay attention on the necessity to bring in correspondence with the Constitution of Ukraine the provisions of other laws regulating payment of pensions to the pensioners permanently residing in the states, Ukraine did not sign the corresponding agreements with. Until present the issue is not defined legally and the rights of such pensioners are still violated.
It is also important to state that the Constitutional Court of Ukraine explicitly put a question on the obligation of the State to adopt the law on compensation of material and moral damage, caused to physical and juridical bodies by acts and actions, acknowledged as non constitutional. But as far as the law determining the order and the conditions for such compensation is still absent by now, in fact it is impossible to obtain it.41
3.4. Introduction of a single social contribution
It is necessary to mention that in last two years there were more attempts to introduce single social contribution in Ukraine.
Thus, in the beginning of July, 2010 the Verkhovna Rada of Ukraine passed the Law of Ukraine “On Collection and Accounting of Single Contribution for Mandatory State Social Insurance” signed later by the President of Ukraine. The Document offered to implement in Ukraine the unique system of social contributions collection, its accounting and control over its complete and timely payment and also the single information system of social contribution payers and the people insured.
The Law states that the introduction of the single social contribution, offered to implement since January 1, 2011, will permit to simplify gradually the interaction of the payers with the funds of social security.
At the same time this legislative document did not avoid problems that might significantly reduce its value. It is proved by the analysis of the document carried out by the Main Research Expert Direction of the Verkhovna Rada of Ukraine as back as on the level of draft bill, adopted as background. It should be said that the conceptual remarks of that organization were not taken into consideration further.
In particular in opinion of Main Research Expert Direction the law is rather vulnerable from the conceptual point of view, as far as from the point of view of state management theory. It is not fully coordinated with patterns of any managerial activity (including ones related to mandatory state social security). According to its foundations the introduction of the single social contribution should be objectively accompanied by the creation of the single state of mandatory state social insurance, subject to single organizational management body.42
Instead the Law offers in contradiction to the patterns, the preservation of existing system of respective funds of mandatory state social security that are relatively separate, social security funds, managed by corresponding separate management bodies created especially to manage the funds. According to the contents of the draft bill those, together with the bodies of the Pension Fund of Ukraine would continue to fulfill part of management functions related to corresponding social security funds. It would objectively result in duplicating its managerial functions in corresponding areas of mandatory state social insurance of Ukraine, in emerging conflicts and misunderstanding between the Pension Fund of Ukraine and management bodies of the corresponding social security funds. In total the criteria above mentioned, in opinion of Main Research Expert Direction will influence negatively the efficiency of management in the area of mandatory state social security in Ukraine as a whole.
It is needed to mention that at introduction of single social contribution it was important to carry on the systemic reform of all the bodies of mandatory state social insurance together with corresponding legislation. It would result in creation of the unique body, providing functions concerning the consolidation of collection, accounting and control over payment and application of the single social contribution for mandatory state social insurance. Unfortunately it has not been done.
Besides the experts have numerous criticisms concerning the law mentioned. For example the law makes amendments to the Law of Ukraine “On Mandatory State Social Insurance in the Event of Unemployment” not related to the topic of the draft bill. In particular the project excludes all the provisions concerning the voluntary participation in this type of security for the self-employed persons and physical bodies – subjects of entrepreneurial activity. Such persons are subject to mandatory insurance for the case of unemployment. Also the amendments to the law include the working pensioners among those subject to the mandatory insurance in the event of unemployment.
It is important that such amendments to the Law mentioned violate one of the acting principles of mandatory state social insurance as regard to mandatory insurance only for hired employees that is the social protection for this category of people, guaranteed by the state. And concerning people who provide employment for themselves (including doing work by civil agreements), physical bodies entrepreneurs – they have a right for material security according to this type of insurance under condition of payment of insurance contributions on voluntary basis. It is similar to insurance in the event of temporary loss of working capacity.
It is needed to mention at the same time that establishing mandatory insurance in the event of unemployment for working pensioners violates the logic of social protection of the citizens by the state, because this category of citizens already receives pension and does not require double protection.
Relating the categories mentioned to those subject to mandatory insurance in the event of unemployment, in the Law of Ukraine “On Collection and Accounting of Single Contribution for Mandatory State Social Insurance” it is provided respectively the amount of the single payment for its payers taking into consideration directing its part on mandatory state social insurance in the event of unemployment. Is such a way for this category of payers the dimension of the single contribution is increased.
Main Juristic Direction of the Verkhovna Rada of Ukraine in the analysis of the law declared that the provisions related to extension of persons subject to mandatory insurance in the event of unemployment and directing part of the single contribution paid by them to the insurance in the event of unemployment did not correspond to the requirements of Article 22 of the Constitution of Ukraine and require to be excluded from the draft bill.43 Despite the validity of the remark the Verkhovna Rada of Ukraine did not take it into consideration passing the law.
- Reform the system for social benefits, divide legal norms into those guaranteeing socio-economic rights and those granting certain privileges in connection with a particular position or special merits;
- Stop the practice of suspending the form or not implementing legal norms guaranteeing socio-economic rights;
- Allow for the full funding of guarantees of socio-economic rights enshrined in law;
- Improve the calculation of the subsistence minimum, approving a new subsistence basket of food items and goods and services; adopt new methods for calculating this indicator;
- renounce the use of indicator “a guaranteed level of subsistence minimum”, which unreasonably reduces the minimum social guarantees that are declared in the legislation;
- Improve regulation of the quality of food items, as well as the quality and safety of drinking water;
- Introduce measures aimed at providing housing affordable, prevent arbitrary eviction of homes (for example, dormitories), violation of rights to housing affordability for vulnerable groups;
- Ensure proper financing and understandable and effective mechanisms for implementing a programme providing social housing, as well as the development of a network of reintegration centres and social hotels for people who are homeless;
- improve work on social protection for vulnerable groups in response to increasing rates for utility services, including operation of a transparent and effective system of utility incentives and subsidies;
- Gradually reduce the percentage of direct State funding of social needs and increase the amount financed by the population on the basis of increases in all income, first and foremost, wages, pensions and other forms of social transfers;
- introduce a single form of targeted social assistance for unforeseen circumstances – the death of a relative, serious illness, natural disaster, social conflict, etc;
- ensure a strict link between social benefits provided and the sources and mechanisms for compensation of their value to those providing them;
- Introduce standardized approaches for determining the size of payments from the State Budget to compensate those providing benefit services;
- Continue reform of the pension system by introducing an accumulation level of this system and create the conditions for this;
- Avoid discrete increases in the minimum pension and introduce a rule for indexation according to which increases in the pension would be linked to the index for consumer prices calculated for groups in society with different incomes;
- Improve regulation and supervision over private pension funds taking international experience and consultations into consideration;
- Create mechanisms for implementing the judgment of the Constitutional Court regarding the non-compliance with the Constitution of the Law “On the State Budget for 2008”
- Improve legislation concerning a system of single social insurance and develop mechanisms for introducing it, and for preventing “corrupt schemes” in its functioning.
1 By Maxim Shcherbatyuk, UHHRU.
2 Syvak A. D. “Realities and perspectives to overcome poverty in Ukraine//Centre for Perspective Social Research
4 “Deficit of well-beng”. The problem of poverty in Ukraine
5 “Deficit of well-beng”. The problem of poverty in Ukraine
6 Survey: Above 30% of Ukrainians barely make both ends meet
7 Syvak A. D. “Realities and perspectives to overcome poverty in Ukraine//Centre for Perspective Social Research
8 “Deficit of well-beng”. The problem of poverty in Ukraine
9 The rich and the poor: world experience
10 ATTENTION, food! Our “strength” is in antibiotics…
11 Akimova promises three bills on products safety
12 Dangerous food products: not by GMO alone…
13 “The problem of ensuring the quality of drinking water is a question of national security and in Ukraine its solution belongs to the sector of public administration”, said Grygoriy Semchuk
14 HEALTHY DRINKING WATER – NEW APPROACH TO ITS PROVISION
15 “The problem of ensuring the quality of drinking water is a question of national security and in Ukraine its solution belongs to the sector of public administration”, said Grygoriy Semchuk
16 The conception of Nationwide program for provision of housing to the citizens in 2009-2012 (project)
17 ON THE RESULTS OF AUDIT ON EFFICIENCY OF SPENDING BUDGET FUNDS ON CONSTRUCTION (BUYING) HOUSING TO JUNIOR AND COMMAND STAFF, LIKEWISE TO LAW ENFORCEMENT OFFICERS AND MILITARY SERVICEMEN OF THE ARMED FORCES OF UKRAINE
19 Residents of a hostel were evicted into the street
20 State of implementation of the legislation of Ukraine on protection of the rights of minors is amid primary directions in the activity of prosecuting authorities of the region
21 State of implementation of the legislation of Ukraine on protection of the rights of minors is amid primary directions in the activity of prosecuting authorities of the region
22 “Homeless” tomorrow of Ukraine
23 State of implementation of the legislation of Ukraine on protection of the rights of minors is amid primary directions in the activity of prosecuting authorities of the region
24 Rights of the disabled. Report based on the results of public monitoring. National Assembly of Disabled of Ukraine. Kyiv 2008-2009.
25 Система соціального захисту та соціального забезпечення в Україні. Реальний стан та перспективи реформування. – К.: Центр громадської експертизи, 2009. – 104 с. –: с. 104.
26 The case was supported by the Foundation for Strategic Cases of the UHHRU
27 System of social protection and social security in Ukraine. Real condition and reform prospect.. – К.: Center of civic expertise, 2009. – 104 p. –: p. 104.
28 Stefaniuk I. Provision of housing and communal privileges – the need and the problems// Finance Control (Фінансовий контроль) № 7 (60) 2010. PP. 8-13.
29 Stefaniuk I. Provision of housing and communal privileges – the need and the problems// Finance Control (Фінансовий контроль) № 7 (60) 2010. PP. 8-13.
30 The government compensates only up to 20% of the subsidies granted to the residents of Lviv
31 Is it real to obtain the subsidy?
32 Is it real to obtain the subsidy?
33 Stefaniuk I. Provision of housing and communal privileges – the need and the problems// Finance Control (Фінансовий контроль) № 7 (60) 2010. PP. 8-13.
34 It is necessary to increase not the retirement age but the official wages. Pension reform through the eyes of an interested party. Koval O. // Dzerkalo tyzhnia (Дзеркало тижня) № 33 (813) September 11 — 17, 2010
35 Correction of the pension system. M. SVIENCICKI // Dzerkalo Tyzhnia (Дзеркало тижня) № 17 (797) April 30 — May 14, 2010.
36 It is needed to increase not the retirement age but the official wages. Pension reform through the eyes of an interested party. Koval O. // Dzerkalo tyzhnia (Дзеркало тижня) № 33 (813) September 11 — 17, 2010
37 It is needed to increase not the retirement age but the official wages. Pension reform through the eyes of an interested party. Koval O. // Dzerkalo tyzhnia (Дзеркало тижня) № 33 (813) September 11 — 17, 2010
38 The state defrauded the pensioners
40 Pensioners are under given 250-400 UAH monthly
41 Ukrainians abroad should be paid their pensions. But will the moral damage be compensated?
42 Conclusion of the Main Research Expert Direction of the Verkhovna Rada of Ukraine as regard to draft bill “On Collection and Accounting of the Single Social Contribution”. (№ 6525 dated June 15, 2010).
43Observation of the Main Juristic Direction of the Verkhovna Rada of Ukraine to the draft bill “On Collection and Accounting of the Single Social Contribution” (registration № 6525).