Reforming Georgia's Social Welfare System

12 January, 2010

For a country like Georgia with some 50-55% of the population living below the poverty line and some 15% living in conditions of extreme poverty, the need for a coherent and sustainable social security policy is urgent. Georgia inherited the Soviet system of social security, which guaranteed a decent living for pensioners, the unemployed, the disabled, families with many children and people fitting countless other groups. Since the collapse of the USSR, however, Georgia has been unable to afford such lavish social spending, nor has it revised the existing model in a systematic and comprehensive manner. Unlike most East European countries, which in the early period of transition offered early retirement and assumed full responsibility for the provision of pensions, the Georgian government proved more pragmatic on account of its severe financial limitations. In 1995 Georgia replaced the Soviet-era system of differentiated pensions, according to which a pension was calculated based on an individual’s number of years of active work or on a previous salary, with a uniform sum for all pensioners. In 1996 the retirement age was increased from 55 to 60 for women and from 60 to 65 for men; in the case of early retirement, an individual would not begin to receive his/her pension until reaching this age. Another provision eliminated the practice of paying pensions to individuals of retirement age who were still working. According to the 2004 Global Corruption Barometer, the first Barometer conducted after the change of government in 2003, 99.2% of Georgians surveyed perceived poverty to be a very or fairly significant problem in Georgia; 99.3% reported that unemployment is a very or fairly significant problem. Nevertheless, the current administration moved more slowly on reform in the social welfare sector than it did, for example, in the areas of traffic police, education, and licensing and permits. More substantial changes began to take place in 2005, when the government started to develop a new system of social protection for the extremely poor. Subchapter 4.4 of the European Neighbourhood Policy Action Plan, entitled Economic and Social Reform, Poverty Reduction and Sustainable Development, takes the problem of social welfare into consideration. The Action Plan outlines steps to be taken for reducing poverty in the future. According to these provisions the Georgian government is to “introduce effective poverty reduction measures,” increase the sustainability and inclusivity of the system, “improve targeting and effectiveness of social protection measures,” and “undertake effective monitoring of service delivery.” This report considers recent developments in the sphere of social protection in Georgia, in particular the new system for protection of the extremely poor. The report provides an overview of the system and outlines its setbacks as demonstrated thus far.