Courting the grey vote

Prime Minister Jarosław Kaczyński has announced that the government will change the mechanism of pension and disability payment indexation, starting next year. According to government's plan, the pensions will not only be adjusted to the inflation index, but will also be increased by 20 percent of average wage growth.

Changes in terms of timing have also been introduced. "The indexation will take place annually," Kaczyński declared. Annual indexation of pensions and other social payments was conducted in the past, but the practice was abandoned by the previous government in 2004. Today it takes place only once the inflation index reaches five percent. With 2006 inflation at the level of 1.6 percent, under the current rules the next indexation wouldn't take place until 2009.

Kaczyński claims that the presently healthy economic situation enables the government to increase pensions. "This should ensure that the pensioners and the disabled take part in the economic growth," said Romuald Poliński, Deputy Minister of Labor and Social Policy.

But employers are not thrilled by the new proposal. "We can't afford indexation in relation to the wage increase," said Jeremi Mordasewicz of the Polish Confederation of Private Employers (PKPP) Lewiatan, adding that the organization supports adjusting pensions in relation to the inflation rate. He explained that, contrary to popular belief, pensioners are relatively well off in Poland in comparison with the average wage earner.

Mordasewicz also draws attention to another issue. The zł.2 billion the government is to spend on the wage-increase-related adjustment of the pensions is approximately the same as the cost of introducing tax-breaks for newborn babies - one of the pillars of a set of pro-family reforms proposed by the government. It might be difficult to find the money for both pension and family reforms.

"Pensioners, not children are the government's priority," Mordasewicz sums up.