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# Box 1: Are the Aging Poor in ECA?

Preventing the emergence of old-age poverty through a combination of forced savings and redistribuCon to the lifetime poor was one of the main motives for creating public pet,sion schemes. Howcver, as PAYG schemes mature and the fiscal cost mcunts, questions are increasingly raised as to how much of the active generation's income should be transferred on an entitlement basis to the old, given the needs of the younger poor, including public spending priorides such as transfers to the working poor or improved public education systems. The answer to this question depends in part on how poor the inactive generation is, reladve to the acdve, and what other resources the older generations have at their disposal to alleviate poverty.

It is difficult to get a good picture of poverty in EECA countries, as this was nct a focus ot public policy prior to the transition. A1tiough most countries do cond&et household income and -xpenditure surveys, coverage in these surveys is incomplete and biased towards those working in state enterprises. A few private surveys hove been conducted since the transition with more complete coverage, providing a complement to the official data.

All analyses of household incomes and expendiPlres in EECA i;ountries during the transition show an increase in poverty (Sipos, 1992). This is not surprising, given the enormous decline in GDP which has occurred. In all cases most of the Door are not pensioners. Although pensions have fallen in real terms, pensioners appear to have fared much better during the first years of the transition than other households, especially young household with children. In Hungary, pension-aged people are much less likely to be in poor households than active-aged or children (van de Walle, Ravallion, and Gautam, 1993). In Poland between 1989 anrl 1991, poverty rates went up in all social groups except pensioners (Milanovic, 1993). In Russia, a survey o ,ducted in the fall of 1992 showed that the pension-aged population is under-represented in poor households, while children under 15 were over-represented. 22 percent of the pension-age population live in poverty, compared to a poverty rate of 37 percent for the whole population. 19 percent of poor households were headed by a pensioner according to this survey; the rest were headed by an active-age person. (World Bank, 1993).

If pensions are so low (below subsistence in many countries), why aren't peneioners poor? Several factors account for this paradox. The main reason is many pensioners continue to work. In Belarus, 20 percent of pensioners continue to work in the same job. In urban Russia, 32 percent of the population over 60 has a full-time job, and 5 percent have two jobs! (Boeva and Shironin, 1992). Similar ratios hold in Hungary and Bulgaria (Sziracski and WindeVl 1992). Many pensioners have garden plots or access to agricultural land. In 1986, considering both formal and informal activity, Petkov and Minev (1989) found that only 20 percent of Bulgarian pensioners "ceased work entirely." The secnn"' factor is that most pensioners do not live alone, so intra-household transfers are also important in keeping pensioners out of poverty. 60 percent of those over 60 in urban Russia live in households where at least one member has a full-time job, and half live in households which have access to land on which they grow food. In Bulgaria, roughly half of pensioners live with their children. Studies in Hungary and Russia found that pensions are an important source of household income for households across the income spectrum. This is because pensions, being earrings-related, rise with household income. Although recent inflation has eroded significantly the real value of savings, nonetheless, 30 percent of the elderly in urban Russia reported living off of savings during 1992. Finally, private inter-household transfers probably play a key role, although we have no data on this yet.

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