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Tens of thousands of Palestinians on verge of retirement, but why?

Government employees having served 15 years on the job are now grappling with the prospect of being forced into early retirement, as part of large-scale austerity measures in Palestine.

A draft resolution amending civil service and retirement laws has raised the ire of Palestinian public sector employees over the added financial burden it would force them to endure. Bassam Zakarneh, president of the Public Sector Employees Union, told local Radio 4 on Aug. 12 that the Palestinian Authority (PA) Cabinet had submitted a proposal to President Mahmoud Abbas on Aug. 4 to amend current laws to release 70,000 employees as part of an early retirement scheme. The changes stipulate mandatory early retirement for those employees who have served 15 years or more and are over 50 years of age. Employees of the Ministries of Education and Health would be exempt under the amendment. The measure apparently falls within the framework of planned austerity policies.

Zakarneh said the plan was designed to decrease current expenditures by reducing the number of PA employees in Gaza and the West Bank from 150,000 to 80,000 and had been prepared in cooperation with the World Bank. It also includes the elimination of some ministries as well as forced retirements without the appointment of replacement employees for three years. Retired employees would be paid between 50% and 56% of their monthly wage. New appointment mechanisms were to be examined, especially for the Ministries of Health and Education. 

The plan follows on the European Union’s April 30 announcement that it would no longer provide financial assistant to pay government employee salaries in Gaza if they continued to fail to report to work, which has been a problem since 2007. After Hamas took control of Gaza that year, the PA called on employees it had hired there in government and security institutions to stop working.

Mohamed Khaled, an employee of the National Economy Ministry, told Al-Monitor, “The idea of early retirement, which comes to the forefront from time to time, is prejudiced against employees who have complied with decisions taken by the central authorities.” He added that the austerity policy contained many other items, so it should not be implemented at the expense of employees.

Aziza Kahlout, a worker at the Ministry of Social Affairs, said that the Fatah-Hamas political division is exacerbating the situation in general and pointed to "overemployment" in particular. Based on repeated government statements about cutting a large amount of Gaza employees, Kahlout believes the law is specifically targeting Gazans. In her eyes, the biggest problem is that the Palestinian government in Ramallah does not recognize the legitimacy of Gaza employees and had therefore refused to disburse their salaries and entitlements for more than two years. She explained, “I have not been paid, and my only sin was to be employed under an [intra-Palestinian] state of division. I am not affiliated with either party and receiving my rightful dues is all that matters to me.” 

Al-Monitor met with a number of employees who said the new scheme will increases their suffering at a time when their current salaries are not enough to meet their needs. Should their chance of receiving a full salary be eliminated, it would worsen their financial situation.

On the other hand, Rami Louh, an employee of the National Security Service, said that the plan could have positive ramifications for some employees who operate private enterprises, because the retirement salaries could be supplemental to possible additional income generated from focusing more on the businesses they own.

Mahmoud Sabra, an economist and lecturer at Al-Azhar University, told Al-Monitor, “Mismanagement, lack of transparency, corruption, budgetary burdens engendered by appointments, unjustified borrowing and disproportionate security spending have led to a significantly inflated budget that forced the government into developing an austerity plan, which, unfortunately, always comes at the expense of employees.” He pointed out that such a step can only be discussed in the Legislative Council and that the government is not permitted to take such a step without the council's approval.

Sabra further indicated that such a move, predicated on the early retirement of a large portion of government employees, could lead to the collapse of social safety nets and the inability of the Palestinian Pension Agency (PPA) to pay out those employees’ retirement pensions.

Mazen Ajala, an economic analyst, explained that objections to the early retirement law are in part the result of it being viewed as an affront to employees’ rights to continue to receive their salaries. He said the retirement of employees with 15 years of government service would affect around 25% of public sector employees, who under the plan would receive half of their regular wage, potentially causing major problems for them. He suggested that the proposal be reconsidered to better serve employees as well as address budgetary requirements.

Chapter 5, Article 27, of the Palestinian Retirement Law (2005) provides that all employees who have reached the age of 60 and having worked 15 years and paid all dues are entitled to a retirement pension. The law stipulates early retirement in two instances: as a disciplinary punishment and if the employee has served for a long enough period of time entitling him or her to early retirement. The administrative party, the state, does not have the right to make a unilateral decision to force employees into retirement. Thus, the proposed amendments would undermine entire articles of the original law should it be amended by approval of the Legislative Council.

A decision to alter the retirement law based on the proposed plan could result in thousands of employees losing their only source of income and the displacement of their families as a result of the difficult economic conditions the Palestinians are currently experiencing. In that regard, Fatah parliamentary bloc parliament member Ahmad Abu Hawly warned of the consequences of forced early retirement without the consent of the concerned employees.

“Terminating the employment of public sector staff would lead to the loss of the PA’s backbone and failure at the administrative and security levels,” Abu Hawly said. He added that the decision would negatively impact the Retirement Fund, from which pensions are paid, and lead to additional financial problems for retirees if the government finds itself unable to cover the expenses incurred by the fund. In addition, the decision would result in an onslaught of court cases and disputes and contraction in the employment sector.

Minister of Women’s Affairs Haifa al-Agha told Al-Monitor also believes that a decision to amend the law would be gravely detrimental to the Retirement Fund. Forcing such a large number of employees into early retirement would exhaust the fund because it receives large amounts of money on a monthly basis from deductions to employee salaries. Part of the deducted amount is pooled in each employee’s retirement account. Should the plan be approved, the number of retirees will be greater than the actual number of employees, which would result in a deficit in the fund, preventing it from paying entitlements and retirement pensions.

The Public Sector Employee Union, through Zakarneh, rejected the proposed amendments Aug. 26 and expressed its willingness to discuss austerity measures while also demanding that the government conduct further consultations before it moves to approve amendment of the labor law. The government rejected Zakarneh’s approach, deeming it unfounded.

Ahmed Majdalani, PPA president and former labor minister, told Al-Monitor, “A decision was never discussed in the council of ministers, and the president and prime minister were informed that such a move would cause great harm to the Palestinian Pension Fund.” Majdalani also said that the PPA had presented the Cabinet with a proposal to amend some of the articles of the retirement law aimed at safeguarding the rights of employees and retirees, but it has not yet responded to the proposal.

A review of the austerity plan suggests that it is incompatible with Palestinian development plans, as it would complicate matters by causing additional economic burdens instead of reducing them. Consequently, if the purpose is to streamline expenditures and bolster the budget, then it would perhaps be better served by reducing other expenses, such as those earmarked for ministerial transportation, bodyguards, petty cash and travel, while promoting the principles of transparency and honesty.

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