The increase in the average old-age pension from 1.11 euros in 1990 to 410.97 euros in May this year does not mean that the welfare of pensioners has increased hundreds of times.
The average size of pensions and the rate of their increase needs to be assessed in relation to two other indicators.
First, the increase in the nominal size of pensions must be compared with the increase in prices. Secondly, the inequality between all people who are called pensioners must be taken into account.
The inequality of old-age pensions in Latvia deserves special attention. In March of this year, 4,510 pensioners received up to 20 euros, but 3,548 pensioners received over 1,500 euros, of which at least some particularly diligent users of the pension system received over 15,000 euros. If all these pensions are added together and divided by the total number of pensioners in both groups, then the average pension seems mostly in line with the general situation in Latvia, where not every salary exceeds the average pension. If we continue to look at the groups of recipients of small or only symbolic old-age pensions that are not sufficient for survival, then it turns out that 1,130 pensioners have received from 20 to 30 euros, a numerically smaller group of 678 people from 30 to 40 euros, etc. 7,832 pensioners must fit their monthly expenses between 90 and 100 euros.
In total, 100 thousand of the 440 thousand elderly people in Latvia continue to live in 2021 as this group of people lived in the 1990s. At that time, their survival had no practical connection with their pensions, although the Republic of Latvia never formally refused to take over the Soviet Union's obligations to these people.
The Republic of Latvia took over obligations together with property located in the territory of the country, but without pension savings in cash. The efficiency of the management of these properties is characterized by the fact that since the mid-1990s and the second half of the 1990s, when comparisons of price changes became possible at all, prices have risen three times and pensions five times. Once again, on both the price side and the pension side, these averages are similar to changes in the average temperature of patients in a hospital, where patients who have already recovered are about to go home, while others are being piled up to be sent to the morgue.
In the early 1990s, subsistence farming, barter and the shadow economy accounted for so much of the people's food and other subsistence expenses that it did not make much sense to look at prices in shops.
The Central Statistical Bureau started the longest price series for the same product in 1995. During that year, the average price of milk was calculated at 33 eurocents per liter. Last year's average price was 86 eurocents per liter. At the moment, it would be difficult to find a store and a store shelf with such a milk price, but let's assume that last year's average price was dragged down by the coviddeflation, which has now turned into covidinflation. In this case, last year should be used instead of this year's spring to compare pensions and price changes. Thus, the increase in milk prices 0.86/0.33=2.6 times corresponds to the increase in pensions 364.32/42.93=8.5 times. There are definitely pensioners in Latvia who can drink if not eight times as much milk for their pension, but at least four times than they or their parents drank at their current age in 1995, but this happy news does not apply to large groups of pensioners.
For some pensioners, milk in the store in 2021 is as unavailable with pension money as it was in 1995, while others do not start drinking tons of milk just because their multi-thousand euro pensions allow for such milk consumption.
The LETA agency maintains its own price line, which is not subject to any suspicion of not noticing price increases that are addressed to state-employed statisticians. LETA has been informing about fuel prices day by day since February 13, 1998, when diesel fuel in Statoil gas stations cost 0.284 lats and E95 petrol 0.30 lats per liter. When changing lats to euro at the rate of 0.702804=1, 0.404 and 0.461 euros are obtained for comparison, respectively. It remains to note that Statoil is now Circle-K and that the prices on July 2 this year were EUR 1.244 and EUR 1.344 per liter of the fuel in question. Simple arithmetic shows that prices have tripled, while pensions have more than quintupled between 1998 and today (410.97/72.94=5.6). The average purchasing power of pensions against fuel has grown by 1.5. There are definitely retirees who really drive a car and enjoy an increase in their purchasing power relative to fuel. In other cases, more money is left for families, where someone drives a car or does not even drive a car at all, but inevitably buys goods, the increase in prices of which also includes an increase in transport costs.
It is practically impossible to compare the prices of medicine because the old, ineffective and even harmful drugs are being replaced year after year by new, progressive, effective, etc. drugs, the prices of which are sometimes able to drain the income of pensioners receiving even thousands of euros a month.
The statistically average increase in welfare in the decades since the restoration of the Republic of Latvia seems self-evident to society as a whole and to pensioners as well. At the same time, this increase has coexisted with growing public debt and welfare inequality. Nowhere in the world are there any methods of telling in advance how long all this growth can continue without destroying each other.
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