The Austrian Severance Pay Reform: Toward a Funded Pension Pillar |
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Authors: | Reinhard Koman Ulrich Schuh Andrea Weber |
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Institution: | (1) Institute for Advanced Studies, Stumpergasse 56, 1060 Vienna, Austria |
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Abstract: | With the beginning of 2003 a new severance pay scheme was introduced in Austria. The reform extends the coverage of the scheme
to all employees, and moves it to full and enterprise external funding, but average payments will be lower than previously.
This paper provides some evidence on two explicit aims of the reform, namely to generate more fairness in the distribution
of severance payments among employees and the creation of a basis of the underdeveloped second pillar of the Austrian pension
system. The empirical analysis based on a cross section of completed job spells of different durations indicates that differences
in payments among groups will be stronger in the new scheme compared to the old system. Based on retirement income projections
and simulations of a multi-pillar pension reform for the blue and white collar workers’ pension system, we conclude that,
an increase of the contribution rate would be necessary to achieve a sufficient second pillar retirement income.
Helpful comments by Milan Vodopivec and an anonymous referee are gratefully acknowledged. |
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Keywords: | Severance pay non-wage labor benefits public pensions |
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