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Legislation Publications Pension models About project Statistics
Legislation Publications Pension models About project Statistics

1. Introduction

2. Fundamentals of Moldova’s Pension Legislation
2.1. General Principles
2.2. Insurance Contributions and the Tax Base
2.3. Types of Pensions and Terms and Conditions of Their Assignment
2.3.1. Old-age Pensions
2.3.2. Invalidity Pensions
2.3.3. Survivor’s Pensions
2.3.4. Pensions to Specific Categories of Population
2.3.5. Social Pensions/Benefits
2.3.6. Pensions Paid at the Account of the State Budget
2.4. The Minimal Pension and Guaranteed Minimum
2.5. Pension Indexing

3. The Present-Day Demographic Setting
3.1. General Population Changes
3.2. Fertility
3.3. Mortality and Life Expectancy
3.4. Population Growth and Migration
3.5. The Base Demographic Forecast

4. Demographic Trends in the Economic Activity of the Population
4.1. Demographic Factors Affecting the Number of Population at the Economically Active Age
4.2. The Profiles and Dynamics of the Economic Activity of the Population
4.3. Projection Scenarios for the Economic Activity of the Population

5. General Employment Issues

6. Payers of Pension Contributions
6.1. The Profile and Number of Pension Contribution Payers
6.2. Projection Scenarios for Insurance Contribution Payers

7. Recipients of Pensions/Benefits
7.1. Profile of Pension Recipients
7.2. Old-Age Pensioners
7.3. Invalidity Pensioners
7.4. Recipients of Pensions for Survivors
7.5. Recipients of Social Pensions/Benefits
7.6. Forecast of Pensioner Numbers

8. Present-Day Macroeconomic Environment
8.1. Historical Background
8.2. Base Macroeconomic Forecast

9. Software Complex
9.1. Mission and Structure of the Software
9.2. Computation Scenario Block
9.3. Demography Block
9.4. Macroeconomics Block
9.5. Receipts Block (Calculation of Contributions)
9.6. Expenditure Block
9.7. Output and Reports

10. Approbation of the Model
10.1. Modelling Scenarios
10.2. Simulation Output
10.3. Computations on the Pension Calculator

Annex 1. Base scenario




Development of the Analytical Model of the Republic of Moldova’s Pension System

5. General Employment Issues

The number of persons engaged in the national economy is one of the most important macroeconomic indicators which reflects the aggregate demand for labor. Given the labor productivity figures, this indicator largely determines the gross industrial output of a given country and, therefore, directly affects other major macroeconomic indicators. That is why an analysis of the basic trends and processes in the field of employment is the necessary prerequisite for developing an adequate socio-economic policy regarding social insurance and pension provision.

As noted above, the level of employment in the USSR was artificially overreported due to a number of political and ideological reasons. After the dismemberment of the Soviet Union, the aggregate demand for labor began to decrease. At the same time, the supply of labor also displayed a downward trend which had a negative impact on employment as well. This resulted in plummeting employment in the 1990s in all CIS and Baltic countries; however, the magnitude of that process substantially varied from one country to another.

The dynamics of employment in the Republic of Moldova has a number of specific peculiarities, one of which is poor correlation with the dynamics of the GDP (see Figure 5.1), partly because the personal incomes of illegal labor migrants are taken into account when calculating the country’s GDP, which is automatically reflected in the official statistics. There was a significant decrease in employment in the 1990s along with a corresponding rise in unemployment. For example, the official statistics indicated two sharp decreases in the level of employment after 1996 – one in 1998 and the other in 2002. In the first case, the number of employed persons decreased from 1,642 thousand to 1,495 thousand, and from 1,505 thousand to 1,356 thousand in the second case. Consequently, the level of employment fell by 8.6%, constituting 37.5% in 2003. Remarkably, the growth in the GDP for the aforementioned years was reported at 32% and 3%, respectively.

Fig. 5.1. Dynamics of the GDP growth index and of the level of employment.

Another peculiarity of the employment trends in the Republic of Moldova in recent years is substantial diversification of employment patterns and a departure from the forms of employment that had been considered standard during the Soviet period, including employment at large government-owned enterprises and organizations. There have been gradual shifts in employment: from large enterprises to small enterprises, from government-owned enterprises to private-sector companies, from hired labor to self employment, from the formal sector to the informal sector, et cetera. The structure of employment by industry and occupation is also changing. The number of employees hired by sole proprietors has increased, as well as the number of persons engaged in various forms of self employment (sole proprietorships, farming, private self-supporting homesteads, or household production of goods and services for sale).

Table 5.1, for example, shows the dynamics of the number of employed persons by industry/ sector. Similar data, given in Table 5.2, are presented as a percentage of the corresponding number of persons employed in 1996, adjusted for the downward employment trend observed in the Republic of Moldova. As seen from these tables, the changes in the employment patterns have resulted in a greater share of the services sector in total employment, with the exception of trade and the hotel and restaurant business. There had been a 40 per cent decline in the number of employed persons from 1997 to 1999 which was only by half compensated for by the rise in employment in the subsequent years. Also, there had been a certain decrease in employment in the industrial sector and construction (up to 15%), but owing to a sharp rise in employment in agriculture in 2002 – 2003 the relative level of employment in the industrial sector almost returned to its 1996 level, and in construction it exceeded the 1996 level by more than 18 per cent. A significant portion of persons employed by self-employed persons belong to the informal sector, including illegal labor migration, the size of which is difficult to estimate.

Table 5.1: Dynamics of employment by industry/sector (in thousands of persons)


Industry/ sector

1996

Changes

1997-1996

1998-1997

1999-1998

2000-1999

2001-2000

2002-2001

2003-2002

Agriculture

711

-27

66

-19

35

-2

-17

-164

Industrial sector

195

-4

-9

-22

1

4

6

-7

Construction

55

-3

6

-14

0

-1

3

7

Trade, hotel and restaurant business

271

4

-68

-58

13

1

9

1

Transportation and communications

66

6

3

-7

-6

0

-2

6

Public administration, health care, and education

279

11

-2

-22

-16

-9

2

3

Other activities

83

-2

-2

-5

-7

-9

3

5

Total

1660

-15

-6

-147

20

-16

4

-149

Table 5.2: Dynamics of employment by industry/sector, as a% of the number of persons employed in 1996


Industry/ sector

1996

Changes

1997-1996

1998-1997

1999-1998

2000-1999

2001-2000

2002-2001

2003-2002

Agriculture

100.0

97.1

106.8

114.4

118.3

119.2

116.3

100.8

Industrial sector

100.0

98.8

94.5

91.3

90.6

93.9

97.0

103.3

Construction

100.0

95.4

106.8

89.0

87.8

86.8

92.6

118.4

Trade, hotel and restaurant business

100.0

102.4

77.4

61.2

65.6

66.7

70.2

78.4

Transportation and communications

100.0

110.1

115.1

114.6

103.1

104.2

100.6

122.9

Public administration, health care, and education

100.0

104.9

104.5

106.1

98.4

95.8

96.4

108.3

Other activities

100.0

98.5

96.4

99.2

88.6

77.5

81.3

97.7

Total

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

It should be noted that the scale and rates of the abovementioned changes in employment may well serve as an indicator of the structural changes in the economy. Besides, various changes in the employment patterns have a direct impact on the efficacy and financial sustainability of the pension system as they affect the number and profile of the pension system contributors. Employment studies, therefore, should be regarded as a high priority task and an important input to an analysis of the country’s pension system.


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