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Welfare Reform on the Web (August 2000): Pensions - overseas

AMERICAN CLAIM THEIR SHARE OF SOCIAL SECURITY

A. Shlaes

Financial Times, May 23rd 2000, p. 23

Americans today are increasingly dissatisfied with the returns the government is getting on its investment of Social Security funds. They are increasingly keen to gain control of their own contributions to Social Security for private investment in stocks and shares.

DECLINING PUBLIC PENSIONS IN AN ERA OF DEMOGRAPHIC AGEING: WILL PRIVATE PROVISION FILL THE GAP?

R. Disney

European Economic Review, vol. 44, 2000, p. 957-973

Paper addresses the question of whether, as public pension programmes come under pressure, private retirement saving can fill the gap. It provides evidence of substitution between pension wealth and private saving, with the 'experiment' of the 1992 pension reform in Italy giving some grounds for suggesting that there might be a positive saving response to public pension cutbacks. It is also suggested that when governments offered new funded retirement saving plans, individuals were able to differentiate the incentive structures of different plans well enough to make sensible choices. Article finally asks if individuals would voluntarily save enough for retirement. The UK and US evidence casts doubt on this. Reforming governments may have to mandate adequate rates of contribution to funded schemes.

REFORMING OUR PENSION SYSTEM: IS IT A DEMOGRAPHIC, FINANCIAL OR POLITICAL PROBLEM?

H. Cremer and P. Pestieau

European Economic Review, vol. 44, 2000, p. 974-983

Argues that economic and demographic factors play a relative small role in the crisis of the ageing population; political factors are far more important. Social security systems are in reality established and reformed through the political process (majority voting and lobbying). Consequently the outcome is not likely to be socially optimal. Majority voting typically results in overspending on social security, but also in rapidly phasing it out in the face of unexpected shocks. Then the entrenched interests of retired people that oppose drastic cuts in benefits can be socially desirable.

SOCIAL SECURITY PROVES NEW HOLY GRAIL FOR PRESIDENTIAL CANDIDATES

D. McGregor

Financial Times, June 20th 2000, p. 12

Compares the different proposals for the federal pension scheme put forward by the presidential candidates, George W. Bush and Al Gore, in the run-up to the presidential elections in America. Mr Gore's plan would encourage individuals to save as much as $1.500 tax free per year in accounts that would be managed by private financial institutions. Mr Bush would let employees invest a slice of their Social Security payroll taxes in the stock market.

SOCIAL SECURITY, ECONOMIC GROWTH, AND THE RISE IN ELDERLY WIDOWS' INDEPENDENCE IN THE TWENTIETH CENTTURY

K. McGarry and R. F. Schoeni

Demography, vol. 37, 2000, p. 221-236

The percentage of elderly widows living alone in the US rose from 18% in 1940 to 62% in 1990, while the percentage living with adult children declined from 59% to 20%. Study found that income growth, particularly increased Social Security benefits, was the single most important determinant of living arrangements, accounting for nearly one half of the increase in independent living.

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