Photographer: Bartek Sadowski/Bloomberg

Polish Lawmakers Approve Budget-Bulging Retirement Age Reduction

  • Law to push retirement age back to 65 for men, 60 for women
  • Cost seen at 10 billion zloty in 2018, near 20 billion in 2021

Poland’s parliament voted to overturn a four-year-old increase in the country’s retirement age, putting pressure on an aging labor market and adding strain to public finances.

Making good on a pledge that was central to its victory in general elections a year ago, the ruling Law & Justice party approved a bill Wednesday to roll back an increase in the retirement age that was approved by the previous administration in 2012. The legislation, which requires approval by the Senate and President Andrzej Duda, both allied with the government, will reverse the rise in retirement age to 67 from 65 for men and 60 for women as of October next year.

While aging populations and longer lifespans have forced forced most EU countries to raise retirement ages despite public outcry, Poland’s government is pushing measures including increases in minimum wage and pensions, benefits for families with more than one child and free medicine for the elderly. With unemployment at 8.3 percent, the lowest in a quarter of a century, and millions working in richer European Union states, some employers in the country of 38 million people worry about the availability of workers in the future.

“Lowering the retirement age in tandem with a boost to minimum pensions will weaken employment and deepen the fiscal deficit,” employers lobby group Lewiatan said in statement before the vote.

Budget Pressure

The lower retirement threshold will cost the budget an estimated 10 billion zloty ($2.4 billion) a year starting in 2018, with costs set to approach 20 billion zloty a year by 2021, according to government estimates. Lawmakers voted 262 to 149 with 19 abstentions to pass the legislation.

Poland’s government sees its public finance deficit falling to below 2.6 percent of gross domestic product this year, Deputy Finance Minister Leszek Skiba said this week. The European Commission predicts it will rise to the EU’s 3 percent ceiling in 2017 and exceed it a year later. Meanwhile, the yield on Poland’s benchmark 10-year local bond jumped to 3.57 percent on Wednesday, the highest since June 2014, amid a global debt selloff.

“The retirement age cut, if implemented without additional conditions such as minimum years of work, will be a significant burden for the state budget from 2018 onward, making any fiscal policy adjustments more difficult,” said Maciej Reluga, chief economist at Bank Zachodni WBK SA in Warsaw. “It also reduces workforce availability, which, with already low unemployment, may hinder potential for economic growth in long run.”

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