Tuesday, November 11, 2014

Cuba’s Retired Population Struggles With Economic Reforms

Cuba's Retired Population Struggles With Economic Reforms
Cuba's "updating" of the economic model may benefit some, but retired
persons face increasing difficulties as their social benefits are reduced.
David Strug

The institutional reform process begun by Raúl Castro in 2008 to
strengthen a weak Cuban economy has received considerable attention both
within and outside of Cuba. The government has established microcredit,
bank accounts, cooperatives, and wholesale markets for the non-state
sector. It has encouraged workers to move from state to private sector
employment and has issued almost 500,000 licenses for individuals to
start small businesses in the private sector. The government also
instituted a new taxation system in 2013 to raise revenue required by
the state. Experts on the Cuban economy consider these reforms a step in
the right direction.

Many Cubans, however, have not benefited from the reform process,
including Cuba's disproportionately large and fast-growing older population.

The reform process poses severe economic challenges for retired persons,
particularly those without relatives abroad to assist them financially.
Their pensions average about $11 per month, which is too low to provide
a minimum standard of living. According to Cuba's National Office of
Statistics, there will be more pensioners than workers in Cuba by 2025.
Addressing this impending crisis, one of the first reform measures
introduced by Raúl Castro in 2008 was to raise the retirement threshold
by five years—to 60 for women and 65 for men—as part of a larger effort
to reduce government expenditures given the country's dire economic

Certainly, some Cubans have benefitted from the reform process. The
government issues licenses to work in the private sector mostly to
service-sector workers who sell and prepare food, transport cargo and
passengers, and sell agricultural products on the street. Most private
sector employees make more money and have better living conditions than
those who work for the state. The government has also permitted the
growth of new worker cooperatives in which workers can retain a
proportion of their wages.

In January 2013, Cuba eliminated the requirement that its citizens
obtain exit visas before traveling abroad, which has made it much easier
for Cubans to travel outside the island and stay there for an extended
period of time. Increasing numbers of Cubans work while residing abroad
and send remittances to their families back home. These remittances have
helped some households to establish a small business in the private
sector, purchase or repair a home, or make some other private
investment. The Obama administration has lifted restrictions on how
often Cuban Americans can visit their relatives in Cuba and on how much
money they can send them. Remittances now reach 62% of Cuban households,
sustain about 90% of the retail market, and provide tens of thousands of

However, the government is still far from its goal of converting 1.5
million state workers to the private sector. Only about 9% of workers
are licensed small business owners. Many state employees have been
dismissed from their jobs and have not found work in the private sector.

The retired persons I have interviewed report they have not benefitted
from the reforms and say they have become worse off economically due to
the rising cost of food and services. Not only did the reform process
increase the age of retirement for both men and women, but it also
eliminated many items from the ration booklet that Cubans use to
purchase food and other necessities at subsidized prices, which is
hugely problematic for older persons on fixed incomes. Additionally,
government plans to end subsidies to state-run cafeterias, limit
contributions to social security, and reduce the budget for the health
care system will disproportionately affect retired persons.

However, the government still intends to retain a social safety net for
older persons and other high-risk groups and plans to maintain support
services for the elderly through increasing fiscal revenue through taxes
and improvements in the allocation of scarce resources.

The economist Carmelo Mesa-Lago reports that social security pensions
for retirees have significantly lost their acquisitive power at the same
time as food prices have soared. More than 20% of persons 60 years of
age or older carried out some type of work in according to a national
survey of older persons in 2010. Half returned to work after they had
retired. Sixty percent reported that they experience hardship living off
their income; 37% reported it is impossible to live off their income,
and half reported feeling fear or uncertainty concerning their future
economic situation. The vast majority of older persons depend on family
support, work done on the side, or on assistance by family living
abroad. But many Cubans have no family outside of Cuba. Furthermore, the
survey indicated that only 6% of older Cubans received economic
assistance in the prior month from family living abroad.

Adding to these economic pressures is the dual currency system. Most
Cubans receive salaries in Cuban pesos, as do retirees. However, they
must purchase an increasing number of food items, goods and services in
an alternative currency, the Cuban convertible peso (CUC), which is
worth approximately 25 pesos.

Elena, a 63 year-old woman living in Havana, is a retired person who has
felt the negative effects of the economic reforms. She lives in a two
bedroom walk-up apartment with her husband Rafael, 68, her 42 year-old
daughter Luisa, and Luisa's 11-year-old son, David, whose father Ramón
left Luisa and moved to Germany six years ago.

Before retiring last year, Elena worked at a government tourism agency
for over 25 years. Rafael worked for 30 years as an accountant in an
office responsible for the quality control of manufactured items, and
retired seven years ago. He subsequently returned to this job on a
yearly contractual basis out of economic necessity. The biggest problem
that Elena and her family face is that their pension income, despite the
addition of Rafael's salary, is insufficient to meet the cost of food
and other necessities. Neither Elena nor Rafael has friends or relatives

Although she urgently needs to supplement her monthly pension of 430
pesos ($18), Elena does not want to take a state-run job that might pay
her less than she receives from her pension. She looks for work daily
and hopes to find employment at one of the many privately owned
paladares (restaurants), beauty parlors or other small businesses that
have opened in her neighborhood since the reform process began. Rafael's
pension of 305 pesos ($13) is even lower than Elena's, because he
retired before the government instituted a more generous social security
plan several years ago. Social security pensions for retirees increased
nominally in 2008 after Rafael retired, but the average pension adjusted
annually for inflation is less than 54% below its level in 1989 and, as
noted before, has significantly lost its acquisitive power according to
Mesa-Lago. Rafael also receives 385 pesos ($16) monthly from his job.
Luisa is currently not working and depends on the $50 a month that Ramón
sends from Germany, which covers little more than the cost of food for
David and his mother.

Elena and Rafael estimated basic household expenses to be $75 but their
combined income is only about $47. These expenses include but are not
restricted to the required installment on their refrigerator ($2.50),
telephone, electricity and water ($6), medicine ($3.30), vegetables
(over $5), other food staples like bananas and sweet potatoes ($3.60),
fruit ($4.75), hamburger, chicken and other food items ($24), cooking
oil ($2.50), bread ($4.50), and cleaning materials like soap and
detergent ($6.00).

The family faces a monthly shortfall of about $28, not accounting for
the occasional expense on clothing, shoes, toiletries, or house repairs.
They are restricted to spending money on only the essentials. And with
no remittance income from friends or relatives abroad, Rafael and Elena
lack the capital to start a small business. Elena tried selling small
packages of coffee outside the official system, but had to stop when she
no longer was able to obtain coffee from an intermediary. At 68, Rafael
lacks the motivation to start a small business. "Rafael and I try not to
think about our economic problems too much. I tell myself we are not the
only ones in this situation and I do not want to give myself a heart
attack, but it is hard not to worry," she said.

Rafael is frustrated that he has to work at his age, but he is resigned
to doing so. Elena said she worries that Rafael, an introvert, is
suffering emotionally, because he holds this emotions within, unable to
express his feelings about needing to work and about his growing
disappointment with the revolution for not providing a better life for
families like his.

The majority of pensioners, like Elena, has not benefitted from the
reform process and struggles economically. The dual economy is a
financial drag on countless households like hers and has contributed to
a decrease in the welfare of retired persons in particular. Moreover,
retired persons who do not have family living abroad to send them
remittances and who do not participate in the informal economy face
especially difficult economic challenges. And even if they do have
access to the private sector, many retired persons lack the will to
start a private business given their advanced age.

Cuba faces a particular challenge in finding ways to economically assist
its retired population that is only predicted to become more drastic
over time. Older retired Cubans like Rafael and Elena are forced to
return to work for their family to survive financially. The salary
earned from returning to work combined with pension income may be
insufficient to cover basic food costs, but not other necessities such
as clothing, as Elena's case illustrates.

Growing social inequality leads older persons to question the
significance of an institutional reform process that has not improved
their lives. Retired persons like Rafael who have long supported the
values of the revolution are questioning the relation of institutional
reform to long cherished revolutionary values of egalitarianism and
social justice. Government needs to recognize and respond to the
concerns of Rafael and others like him in order to sustain social
cohesion as it reforms the Cuban economy and reconfigures the social
contract out of economic necessity.

David Strug is Professor Emeritus of Social Work at the Wurzweiler
School of Social Work of Yeshiva University and a clinical social worker
in private practice. He co-edited Community Health Care in Cuba (Lyceum
2010) and Love, Loss and Longing: The Impact of U.S. Travel Restrictions
on Cuban-American Families (Latin America Working Group, 2009).

Source: Cuba's Retired Population Struggles With Economic Reforms |

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