Pension Systems and Income Inequality Among the Elderly in Europe
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Pension Systems and Income Inequality among the Elderly in Europe Jörg Neugschwender Dissertation thesis written at the Center for Doctoral Studies in the Social and Behavioral Sciences of the Graduate School of Economic and Social Sciences and submitted for the degree of Doctor of Philosophy (Ph.D.) of the Faculty of Social Sciences at the University of Mannheim Academic Director: Prof. Dr. Edgar Erdfelder, Universität Mannheim First reviewer: Prof. Dr. Bernhard Ebbinghaus, Universität Mannheim Second reviewer: PD. Dr. Thomas Bahle, Universität Mannheim Committee Chair: Prof. Dr. Katja Möhring, Universität Mannheim Date of disputation: May 25, 2016. Pension Systems and Income Inequality among the Elderly in Europe Jörg Neugschwender Table of contents Pension Systems and Income Inequality among the Elderly in Europe Acknowledgements………………………………………………………….I Part I: Theoretical framework I. Introduction....................................................................................................1 II. Theoretical framework: varieties of pension systems..............................8 1. Pension systems – the public-private mix.............................................................................8 2. Pension reform processes and pension systems around the world................................16 3. Measurement of pension outcomes and inequality...........................................................21 4. Pension systems and social protection – a comprehensive perspective.........................25 III. Pensions and inequality: world-wide overview & research agenda....37 1. Living arrangements, labour market participation, and income mix of the elderly around the world using the Luxembourg Income Study (LIS) Database.......................37 2. Research questions..................................................................................................................59 3. Research agenda, country selection, and data....................................................................64 Part II: Country studies IV. The Beveridge path: occupational welfare policies in Denmark, Finland, and the United Kingdom.............................................................76 1. Introduction.............................................................................................................................76 2. Historical pension system development.............................................................................77 3. Inequalities in recipient rates and private income shares.................................................82 4. Inequalities in benefit levels..................................................................................................85 5. Inequalities among the elderly in relation to the whole society......................................88 6. Conclusion: Different paths to private pensions – different societal inequalities?......91 V. Bismarck vs. Beveridge: pension income inequality developments in Germany, Sweden, Denmark, and the United Kingdom....................93 1. Introduction.............................................................................................................................93 2. Historical pension system development.............................................................................94 3. Labour market attachment and pension system inclusion...............................................97 4. Inequalities in recipient rates and private income shares.................................................99 5. Adequacy of income and developments...........................................................................103 6. Conclusion: Different paths to private pensions – different inequality developments?.......................................................................................................................108 VI. A cohort study: pension income inequality in six European countries.......................................................................................................111 1. Introduction...........................................................................................................................111 2. Institutional overview and hypotheses.............................................................................112 3. Operationalisation...............................................................................................................116 4. Recipient rates and public-private mix by cohorts..........................................................121 5. Pension income developments by cohorts........................................................................128 6. Inequality and poverty development................................................................................138 7. Conclusion.............................................................................................................................141 VII. Conclusion and outlook............................................................................144 References....................................................................................................156 I Acknowledgements This monograph would not have been possible with the involvement of many people. Foremost, I would like to express my sincere gratitude to my advisor Prof. Bernhard Ebbinghaus who very patiently supervised and guided the development of this manuscript. His continuous support and expertise in social policy, industrial relations, and pension policies led to very fruitful discussions and ideas to approach and structure the study of income inequality among the elderly. Besides my first advisor, I would like to thank also my second advisor PD. Thomas Bahle, from whom I learned a lot on the relevance of living arrangements for the study of social outcomes. I also thank Prof. Katja Möhring who chaired the disputation, and who has enriched the discussion on future research objectives. It is also Bernhard Ebbinghaus who introduced me to the great work environment at the Mannheim Centre for European Social Research (MZES) at the University of Mannheim. First, as a research assistant during my studies of Social Policy at the Zentrum für Sozialpolitik (ZES) at the University of Bremen, and later, as research associate in the DFG project Governance of Supplementary Pension Systems across Europe (GOSPE). At the same time, I am grateful to the Graduate School of Economic and Social Sciences (GESS) at the University of Mannheim for the opportunity to further develop my methodological skills. Both the project work at the MZES and the enrolment in the GESS helped me immensely to be integrated in manifold interactive discussions across the disciplines of sociology, political science, and economics. I particularly would like to thank my co-workers in the project GOSPE, Mareike Gronwald and Tobias Wiss, who kind-heartedly welcomed me as colleague and friend. I thank also my colleagues in the Graduate School whose inspiration facilitated me to focus on my research; but I am also happy about the various joint social activities and the shared friendship beyond research-related discussions. Sincere thanks is also addressed to LIS: First, to Prof. Janet Gornick and Prof. Markus Jäntti who continuously advised me to efficiently structure the finalisation of my dissertation, while working full time on data harmonisation at LIS. Their suggestions, motivation, and encouragement to build up this monograph immensely helped me to keep up working regularly on the manuscript. Thanks a lot as well to Laurie Maldonado and Sarah Kostecki for carefully language editing most parts of this dissertation. Special thanks goes also to the data team at LIS; without their excellent work on data harmonisation, this research agenda would have ended up in hours and hours of data preparation from original surveys. I am additionally grateful to Piotr Paradowski who gave me valuable advice for the disputation. Last but not least, I like to thank my wife who continuously encouraged me writing up this monograph. Without her support this dissertation would not exist. 1 I. Introduction During the late 19th century, the state has taken on a much stronger role protecting those who have or had difficulties to provide for themselves during their life; various welfare state programmes for the sick, disabled, elderly and survivors, as well as for families have been introduced. Nowadays societies are characterised by a variety of public welfare state programmes and occupational welfare policies; these measures affect the well-being of individuals, families, and households in manifold ways. Sickness and family-related benefits mostly protect individuals during the working phase, disability benefits protect the temporarily or permanently disabled, survivor payments secure the family in case of loss of the main income earner, and old-age benefits maintain the standard of living for the elderly during the retirement phase. In advanced economies, such as Western Europe and the Anglo-Saxon countries, the elderly population is primarily secured by regular payments from institutionalised pension systems. A pension system can be defined as the complete set of individual public and private schemes within a country that provide institutionalised saving opportunities, regular annuities, or cash-sums for old age. Along these lines, it is common in scientific debates to describe the income situation of the elderly by the public-private mix of income (Rein and Rainwater 1986), referring to the idea that