Social Welfare

Social Welfare

The Soviet system of social welfare, which remained in place in Kazakstan in the early 1990s, presupposed a very high level of public services. The 1993 constitution maintained most of the assumptions of the Soviet era without providing a clear mechanism for paying for "guaranteed" workers' benefits such as free education, medical care, pensions, and vacations. The constitution ratified in 1995 somewhat reduces the list and scale of guaranteed protections, but remaining guarantees include a minimum wage, pensions for the retired and the disabled, social benefits for orphans and for people who are elderly or infirm, legal assistance, housing, and what is called "social defense against unemployment."

In practice, social benefits have proven difficult to supply because of financial considerations and the lack of a firm organizational structure for service provision. For example, in the Soviet period housing was supplied by the state or by employers. In 1990 housing began to be privatized, a process almost completed by the mid-1990s. The result has been a healthy resale market for existing housing. In 1995 apartment costs in Almaty could exceed 15,000 tenge (for value of the tenge, see Glossary) per square meter, but there had been no corresponding boom in new housing construction, in part because privatization of the land on which such housing would stand remained a sensitive and unresolved issue. As a result, the republic's housing crisis, already acute in the Soviet period, has grown far worse. In the mid-1990s the housing shortage was especially serious in Almaty, where tens of thousands were on waiting lists. In 1995 housing construction decreased by about 25 percent.

Perhaps the biggest problems have emerged in the areas of pensions, aid to large families and other social assistance, and unemployment compensation. An independent pension fund was created in 1991 on the basis of a social insurance tax on enterprises (37 percent of wages in 1992) and contributions by employees (1 percent of wages in 1992). The national budget nominally covers remaining deficits in the pension fund. Pensions initially were set at 60 percent of average pay, with minimal pensions available even to elderly citizens such as housewives who never had drawn a salary. However, the high inflation of 1991-93 badly eroded existing pensions; the state has continually adjusted pensions upward in a futile struggle to keep pace (see Prices, Wages, and Currency, this ch.). In addition, the administration of pensions has been reconfigured several times, leading to lengthy delays in the payment even of the small sums pensioners are owed. Such delays have prompted numerous public demonstrations. Although the value of pensions has shrunk dramatically in real terms, by 1992 government expenditures on them were 4.7 percent of the GDP. In March 1995, the government had to divert 632 million tenge from the national budget to cover pension arrears.

Similar problems have occurred in other categories of allowances to citizens, especially lump-sum payments to newborns; child allowances to large families (those with four or more children) and abandoned children; assistance to single mothers; and assistance to the children of soldiers. In 1992 payments in these categories reached 5 percent of Kazakstan's GDP. Slow payment and the lag between inflation and cost-of-living adjustments have had a particularly severe effect on Kazakstan's poorer families, for some of whom government subsidies provide as much as one-quarter of total income. In 1994 about 2.1 million citizens received retirement pensions, and about 800,000 received other types of pension.

Unemployment is perhaps the most difficult category of social problem because it is a phenomenon that officially did not exist until 1991 and still carries a considerable social stigma. As of January 1, 1995, some 85,700 people officially were registered as unemployed, about 55 percent of them in rural areas. However, this figure is commonly assumed to be too low because many workers still are nominally employed, even though their salaries have been reduced or stopped altogether under a variety of cutback conditions. In January 1995, some 230 enterprises, with a normal work force of about 51,000 employees, were standing idle; by April 1995, the number had grown to 376 enterprises with more than 90,000 employees.

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