Ending poverty in all its forms everywhere is part of the 2030 Agenda for Sustainable Development, which is generally taken for a benchmark by all UN member-states [UN DESA, 2015]. Recognizing and addressing old-age income insecurity and fighting poverty among the elderly is viewed as one of the goals to be reached within this framework. It should be said that poverty among elderly people is different than it is among other age groups. Normal economic measures like reduction of unemployment, investments in education, and additional training programs are not applicable in the elimination of poverty among elderly people. Instead, retired people rely on pensions to sustain a certain level of consumption and this simply requires direct money transfers. Hence, the welfare of elderly people often directly depends on economic development and mainly on the average per capita income level of the country.
It is worth mentioning that over the last several years Central Asian states did rather well in terms of economic development and income growth. Despite the instability on primary commodity markets, two years of the COVID-19 pandemic and disruptions in global supply chains the Central Asian economies managed to stay above the global average GDP growth. Between 2015-2020, the GDP of Tajikistan has grown on average at 6.7% per year. In Turkmenistan, this figure stood at 6.3%, in Uzbekistan 4.6%, in Kazakhstan 2.3%, and in Kyrgyzstan 1.8% [World Bank data, 2022a]. Relatively stable economic conditions in these countries have allowed the central governments to fulfill their social obligations without any major difficulties, including state pensions. Currently, Kazakhstan has the highest average pension of $196.6 among Central Asian states, followed by Uzbekistan ($119.2), Turkmenistan ($85.0) Kyrgyzstan ($59.0) and Tajikistan ($24.3). This means that Kyrgyzstan ($1.97) and Tajikistan ($0.81) are below the poverty line of $2.5 per day applied for developing countries [Visar.by, 2021; Stat.kg, 2022; Stat.tj, 2022]. In this light, the current rapid depreciation of the national currencies of Central Asian states and associated inflationary pressure is posing serious risks to the welfare of retired people.
Currently, the total number of retired people in Central Asian countries is slightly over 8 million, which is nearly 10.7% of the population of the region [UN DESA, 2022]. Raising the retirement age has become a hotly debated issue in many countries around the world. Significant progress in the health of older people and increases in average life expectancy are presented as primary reasons for increasing the retirement age. Regardless of the arguments, however, such unpopular decisions often cause ardent debates and discontent in society. Nevertheless, this strategy can be viewed as one of the ways of reducing poverty rates that the majority of the countries have opted for over the last couple of decades, including most of the Central Asian states. Uzbekistan is the only Central Asian country that did not yet change the retirement age for its people since the collapse of the USSR and has currently the lowest retirement age of 60 for men and 55 for women. In Turkmenistan, men can start receiving state pension as early as they reach 62 years and women at 57 years of age. Kazakhstan, Kyrgyzstan and Tajikistan have the same retirement age, which is 63 for men, 58 and for women[1] [Visasam.ru, 2022]. The most compelling argument against the raising the retirement age is that life expectancy change in Kazakhstan do not match with the decrease of number of years that an person live after retirement. Men in Central Asia indeed live much less after retirement compared to most other countries. For instance, men in OECD countries live 14 years after retirement on average. The extreme case is that of Turkmenistan, where men live only 2.7 years after retirement. In Kyrgyzstan, this is 4.6 years, 5.8 years in Tajikistan and 9.6 years in Uzbekistan. Women in OECD countries on average live 19.9 years after retirement. In Kazakhstan this number is 19.2, in Uzbekistan – 18.8, in Kyrgyzstan – 17.8, in Tajikistan – 15.4, in Turkmenistan 14.7 [World Bank data, 2021].
The low financial literacy in Central Asian countries is another factor that contributes to poverty among elderly people. Lack of knowledge and skills to manage personal finances makes most of the elderly people in Central Asia highly dependent solely on state pension schemes putting them in a vulnerable position. According to the S&P’s Global Financial Literacy Survey, only 41% of people in Turkmenistan and 40% in Kazakhstan have been found to be financially literate. This indicator much lower in Uzbekistan (21%), Kyrgyzstan (19%) and Tajiksitan (17%) [Gflec.org, 2018].
It should be noted, however, that state pensions in most cases are not the only livelihood of retired people in Central Asia. Due to traditional social norms and presence of extended families, most elderly people in Central Asia can rely on their younger relatives in case of a shortage of means of subsistence and acute economic challenges. This type of complex social bonds are mostly prevalent in densely populated rural areas of the most economically vulnerable counties like Kyrgyzstan, Tajikistan and Uzbekistan. Another factor that helps retired people find additional sources of subsistence is the shadow economy which is very significant in Central Asian countries. For instance, a report by the Kazakh National Academy of Sciences has found the shadow economy to be as large as 17-19% of the GDP in Kyrgyzstan; 22-27% in Kazakhstan, Tajikistan and Turkmenistan; and 29-33% in Uzbekistan. Most of the shadow economy is concentrated in agriculture and services [Bekzhanova and Temirova, 2019].
Consumption trends change with age. It is well-known that consumption increases over with age reaching its peak at 45-50 years and starts to decline after that. However, it is a misperception to think that consumption simply decreases quantitatively at older ages. Besides a reduction in income upon retirement, elderly people also experience an increase in time available for consumption. Although there is a general decline in consumption at older ages, some of the components of consumer spending (e.g. recreation, medical care, insurance, etc.) actually rise. Unlike, people from younger age groups though, elderly people might often find themselves in a situation of urgent need of specific expenditure (e.g. acute medical care) that they cannot postpone and might be critically important. Hence, in certain aspects, the elimination of poverty risks among elderly people and securing their welfare is more important than it might seem at first glance.
References
Bekzhanova, T.K. and Temirova, A.B. (2019). Non-observed economy as a part of the developing economy. Reports of the National Academy of Sciences of the Republic of Kazakhstan 2 (324): pp. 215 – 222.
Gflec.org (2018). Financial literacy around the world: Insights from the Standard & Poor’s Ratings Services global financial literacy survey. Retrieved from https://gflec.org/wp-content/uploads/2015/11/3313-Finlit_Report_FINAL-5.11.16.pdf?x28148. Accessed on 20.03.2022.
Stat.kg (2022). Wage rate. Retrieved from http://www.stat.kg/ru/statistics/trud-i-zarabotnaya-plata/. Accessed on 15.03.2022.
Stat.tj (2022). Macroeconomic indicators. Retrieved from https://www.stat.tj/ru/macroeconomic-indicators. Accessed on 15.03.2022.
United Nations Department of Economic and Social Affairs (2015). An emerging development priority. Retrieved from https://www.un.org/esa/socdev/ageing/documents/PovertyIssuePaperAgeing.pdf. Accessed on 15.03.2022.
United Nations Department of Economic and Social Affairs (2022). Population by broad age groups – both sexes. De facto population as of 1 July of the year indicated. Retrieved from https://population.un.org/wpp/Download/Standard/Population/. Accessed on 15.03.2022.
Visar.by (2021). Standard of living, prices, pensions and salaries in Turkmenistan in 2020-2021 Retrieved from https://visar.by/zarplata/uroven-zhizni-tseny-pensii-i-zarplaty-v-turkmenistane-v-2020-2021-godah.html#:~:text=Средняя%20зарплата%20в%20Туркмении%20в,рубли%20РФ%20дает%2024%20920. Accessed on 20.03.2022.
World Bank data (2022). GDP (constant LCU). Retrieved from https://data.worldbank.org/indicator/NY.GDP.MKTP.KN. Accessed on 18.03.2022.
[1] The retirement can be different for some specific occupations, mothers with many children, people living in bad environmental conditions etc.
Note: The views expressed in this blog are the author’s own and do not necessarily reflect the Institute’s editorial policy.
Kanat Makhanov
Senior Research fellow
Kanat Makhanov is a research fellow at the Eurasian Institute of the International H.A Yassawi Kazakh-Turkish University. He holds a BA in Business Economics from the KIMEP University from 2012. In 2014 he earned his Masters degree in Economics from the University of Vigo (Spain), completing his thesis on “Industrial Specialization in autonomous regions of Spain and Kazakhstan”. His main research interests are Spatial Economics, Economic Geography, Regional Economics, Human and Economic Geography.
