Women and Retirement Pensions: A Research Review

Abstract

The links between women's caring work and access to economic resources are particularly critical in the context of widespread public policy debates about retirement and pensions, many of which neglect care as a key issue for analysis. However, among feminist economists it is widely recognized that women's patterns of care provision have adverse implications for their access to economic resources in later life. The feminist economics literature examines many of the interactions between women's caring roles and their access to resources, particularly women's capacity to access economic resources through publicly mandated or regulated pension schemes. This article reviews research that places women's patterns of work and care at the center of analyses of retirement pension policy in an effort to provide a summary of research on gender and pensions policy and to contrast the extent to which differing institutional and policy frameworks accommodate women's caring roles.     

The Henderson Question? The Melbourne Institute and 50 Years of Welfare Policy

I discuss selected research contributions of the Melbourne Institute of Applied Economic and Social Research to 50 years of welfare policy for those of workforce age and focus particularly on the policy focus of R. F. Henderson, the inaugural director. Following the spirit of his 1960s poverty research, in the mid‐1970s, government doubled unemployment allowances in real terms and increased pensions by approximately 40 per cent. Both income support payments were to be indexed by average wage increases. At the time, unemployment was typically around 1 per cent and the pension take‐up for those of workforce age was also limited. Today, income support take‐up rates have probably increased fivefold. In response, government has adopted a ‘make work pay’ policy over the last two decades and indexed allowances for Consumer Price Index increases and allowances have fallen by 25–35 per cent, relative to community living standards. Pensions continue to be indexed by average wage changes. I address a range of questions arising from this experience, including: Why has government abandoned the Henderson recommendations?; Is there any evidence that a ‘make work pay’ policy is working?

     

The role of personality traits in pension decisions: findings and policy recommendations

Many countries need to stimulate pension participation and contribution to ensure their citizens are prepared adequately for retirement. Identifying at-risk groups with tendencies of not joining pension plans will help governments target strategies to improve pension awareness and participation. This study investigates the role of personality traits in pension decision making using data from the UK Household Longitudinal Study. Our results demonstrate that Extraversion significantly correlates with non-participation in private pensions, including both employer run and personal pensions. Individuals who are high in Conscientiousness are more likely to participate and pay more into personal pensions. Openness to experience is negatively correlated with saving via personal pensions. Agreeableness and Extraversion correlate inversely with the amount contributed to personal plans. This paper discusses our findings in detail and offers policy implications which may help promote pension participation and ease the problem of old age poverty.     

CHANGING PENSION POLICY AND THE AGING OF AMERICA

The recently enacted Tax Reform Act of 1986 contains a number of pension policy provisions including faster vesting for private-sector, single-employer pension plans and imposing tax penalties on preretirement pension plan distributions that are not saved until retirement age. Since pensions are a long-term commitment, the impact of pension policy changes may not be fully realized for a number of years. For that reason, the effects of the Tax Reform Act's pension provisions are investigated using both short-run and long-run simulation models. Faster vesting would immediately entitle an additional 1.9 million pension plan participants to pension benefits at retirement. This increase would not, however, be translated directly into significant gains in pension recipiency for workers currently in their 50s. Nevertheless, by the time the baby boom generation retires, faster vesting and lump-sum penalties could provide more retirees with pensions and increase the standard of living of pension recipients.     

Uncertain Pension Income and Household Saving

This paper investigates the relationship between household saving and pensions, and estimates both the displacement effect of pensions on private saving and the precautionary saving effect due to uncertainty in pension income. I estimate the savings equation implied by a simple life‐cycle model featuring income uncertainty using survey data for Dutch households, with subjective expectations on pension benefits and uncertainty. Exploiting exogenous variation due to pension fund performance, I find that households save significantly more due to uncertainty in pension income. Not controlling for uncertainty biases the estimated displacement effect of pensions on private savings towards zero.     

Generational Accounting in the UK

This paper presents the first set of generational accounts for the United Kingdom. We find that under our baseline scenario, in which pensions are price indexed and health expenditure grows modestly, the imbalance in UK generational policy is small when compared with other leading industrial countries like the United States, Japan, and Germany. However, under an alternative policy scenario, where all social benefits are wage-indexed and health care spending is increased, there is a larger fiscal bill left for future generations to pay. In this case, achieving generational balance would require much stronger medicine.     

Innovation, embeddedness and policy: evidence from life sciences in three UK regions

This paper draws upon a survey of the life science and biotechnology regions of Oxford, Central Scotland and South West England to examine the innovation and embeddedness traits of the regions. The insights into the compositional weaknesses and strengths of the regions suggest opportunities and threats for the future development of the UK's life sciences and biotechnology. The discussion moves forward debates on biotechnology, regional innovation, regional economic development and policy by posing research questions relating to the gap of knowledge of two under-researched regions, the need for a differentiated view of regions and a public policy approach tailored towards them, as well as the prospects of 'engineering' high-tech regions. Some of the highlighted policy challenges are common to the three regions, while others are region-specific and reflect the variations of regional make-up and stage of development.     

Income Provision in Old Age

Few areas of public policy impinge more directly on individual lifetime welfare than those directed at retirement income. While policy initiatives implemented since the start of the 1970s fall short of major reform, there have nevertheless been substantial changes in the real value of pensions, the coverage of pensions, and the tax treatment of various forms of retirement income. The objective of this article is to catalogue these changes in policy, and to identify the combination of political philosophy and socio-economic pressures underlying them. It also analyses some of the economic consequences of these policies and examines the question of national superannuation. The article concludes that, for the present at least, any reforms in the area of retirement income provision seem likely to be limited to the refinement of the status quo.     

Innovation,embeddedness and policy: evidence from life sciences in three UK regions

This paper draws upon a survey of the life science and biotechnology regions of Oxford, Central Scotland and South West England to examine the innovation and embeddedness traits of the regions. The insights into the compositional weaknesses and strengths of the regions suggest opportunities and threats for the future development of the UK's life sciences and biotechnology. The discussion moves forward debates on biotechnology, regional innovation, regional economic development and policy by posing research questions relating to the gap of knowledge of two under-researched regions, the need for a differentiated view of regions and a public policy approach tailored towards them, as well as the prospects of ‘engineering’ high-tech regions. Some of the highlighted policy challenges are common to the three regions, while others are region-specific and reflect the variations of regional make-up and stage of development.     

A young EU member’s ageing: budgetary and macroeconomic consequences of Slovenia’s demographic prospects

In this paper, we simulate a macroeconometric model of Slovenia over the period 2012–2060, using the projected demographic development as input, and determine time paths for budgetary and macroeconomic variables under alternative assumptions about Slovenian policy instruments so as to limit budgetary pressures stemming from population ageing. The main macroeconomic indicators (growth, employment, price stability, sustainable public finances) are shown to depend on the assumed long-run policy options followed. It is demonstrated that the ageing of the Slovenian population projected in the demographic forecast leads to severe budgetary problems unless increases of the retirement age, rising social security contributions or reductions of state financed pensions are implemented. A reduction of the pension replacement rate turns out to be the most effective measure to cope with the budgetary implications of population ageing. However, none of the analysed policy measures is sufficient to stabilise the debt ratio.     

Is an unfunded social security system good or bad for growth? A theoretical analysis of social security systems financed by VAT

This study investigates how unfunded public pensions financed by value added tax (VAT), as discussed in Japan, affect economic growth and whether payroll tax (PT) or VAT is the more growth‐friendly tax structure for financing public pensions. We examine these issues using overlapping generations models with parental altruism and find that a public pension system financed by VAT may increase economic growth when bequests are operative. By contrast, when bequests are inoperative, public pensions hinder growth unless agents are sufficiently patient. Finally, public pensions financed by VAT are more growth‐friendly than those financed by PT.     

An inter-temporal general equilibrium analysis of the Australian age pension means test

The Australian age pension is somewhat unusual among developed countries in that it is means tested against both the claimant’s income and assets. While means testing of age pensions facilitates the aims of directing public pensions to those senior individuals most in need and of containing pension expenditures by governments, it also has the effect of changing the incentives of individuals to work and save. This paper examines the implications of the Australian means tested age pension for incentives of individuals to save and work, for government financial commitments and for the welfare of individuals. To this end, we develop an overlapping generations model of the Australian economy that incorporates the essential features of the Australian pension, superannuation and taxation policy settings and use it to explore the implications of several hypothetical policy changes that relax the means test of the age pension. Our results confirm that the existing means-tested, age pension represents a disincentive for some older Australians to work.     

Pension Plan Funding,Technology Choice,and the Equity Risk Premium

In this paper, the impact of Lazear contracts with defined‐benefit pensions on aggregate technology composition and the aggregate risk premium is examined. In the presence of capital market constraints affecting workers, defined‐benefit pensions bias the economy towards risk‐free production. Leveraging the risky technology relaxes the constraints and results in more risky production and a fall in the aggregate risk premium. This effect holds with risky debt and low pension shortfall risk but breaks down with high pension shortfall risk. A key prediction is that as Lazear contracts become less common, risky production will increase and the aggregate risk premium will fall.     

Marketization and Poland's transfer payments

This study will examine the effects of Poland's transition on structural and policy changes in the primary categories of central government transfer payments, family assistance programs, pensions, and unemployment benefits. In this paper, changes in the structure of transfer payments for 1990 through 1997 will be quantified, and the relevant programs are described. This paper also examines the regulatory and policy framework of transfer payments. The welfare effects of transfer payment changes on Poland's different societal groups will be calculated, and certain policy recommendations are presented.     

Unemployment dynamics in an OLG economy with public pensions

Pension benefits in old age establish a disincentive to save in youth, thereby yielding lower levels of capital stock and the wage rate. As a result, the trade union has an incentive to change the composition of its two targets: employment and the wage rate. This paper develops a model that includes employment effects of public pensions via capital accumulation and union wage setting. Within this framework, we consider how contribution rates to the pension system influence the level and time path of the unemployment rate. It is demonstrated that (1) a higher contribution rate results in a lower unemployment rate, and (2) the economy with a high (low) contribution rate experiences monotone convergence towards (oscillatory convergence towards or a period-2 cycle around) the steady state. The author would like to thank an anonymous referee, Kazutoshi Miyazawa, and seminar participants at Osaka University for their useful comments and suggestions, and Masako Ikefuji and Hiroaki Yamagami for their research assistance. Financial support from the Japan Society for the Promotion of Science (JSPS) through a Grant-in-Aid for Young Scientists (B) (No.17730131), the Asahi Glass Foundation, the Japan Economic Research Foundation and the 21st Century COE Program (Osaka University) is gratefully acknowledged. All remaining errors are mine.     

Behavioural Economics,Hyperbolic Discounting and Environmental Policy

This paper reviews some recent research in “behavioural economics” with an application to environmental issues. Empirical results from behavioural economics provide a reminder that human behaviour is context-dependent, implying that policy may go awry if based upon models of behaviour which are inappropriate to the contexts in which decisions are made. Recognizing that agents may, in some contexts, systematically make mistakes raises challenging questions about the role of “paternalism” in government policy. The paper considers the research into hyperbolic discounting, and examines the implications for environmental policy. We develop a model of resource management under hyperbolic discounting, which shows that if a planner is unable to commit to a policy, the temptation to re-evaluate the policy in future could lead to an inadvertent collapse in the stocks of a natural resource.     

FROM MARGINALISM TO INSTITUTIONALISM: DISTRIBUTIONAL CONSEQUENCES OF THE TRANSFORMATION OF THE FINNISH PENSION REGIME

This study offers a longitudinal scrutiny of the development of pension policy in Finland and evaluates the impacts that the shift from a "marginal" to an "institutional" welfare state imposed on economic well-being among the elderly. The data that are used stem from household budget surveys from 1966 to 1990. During that period, average income of the elderly doubled in real terms, legislated pensions replaced other sources of income, the traditional cycle of poverty, where the elderly had a higher risk of poverty, disappeared, and income differences between the elderly diminished.     

Governing the commons: future directions for the Ostrom Project

Now, when longitudinal data are available or soon will be, it is important to carefully consider research strategies for the second phase of the Ostrom Project. I recommend a problem oriented approach aimed at answering questions and solving puzzles that have emerged in the last 25–30 years and a focus on the political dimensions of the commons. Reading Lin’s paper in this issue, I found her proposal valuable but too narrow. I suggest that the longitudinal phase of the Project should deal explicitly with institutions and mechanisms for solving conflicts among local participants over how to divide the costs and benefits of using common resources. I offer, as an illustration, a number of research questions that emphasize institutions in the policy and constitutional spheres rather than in the operational one.     

The use of Delphi methodology in agrifood policy development: Some lessons learned

Developing policy in the agrifood area is an inexact process, usually relying upon effective integration of opinions from multiple experts from different disciplines, organisational types, and regions/countries. Delphi would appear to have the potential to overcome some of the typical limitations related to soliciting expert opinion and identifying consensus on future activities or options, particularly where relevant experts are dispersed geographically, and international consensus is required, as is the case in this domain. Three case studies, focused on the application of Delphi to emerging policy needs in international or European agrifood policy, are presented here to exemplify the utility of the technique. A number of practical recommendations are drawn from these case studies that may be applicable to other major policy making arenas. Among these recommendations are; that an exploratory workshop to refine round one Delphi questions is essential; that the implementation of “cascade” methodology (utilizing the personal contacts of researchers or members of existing policy networks) appears to increase response rates in subsequent Delphi rounds; and that the policy issue under discussion should be particularly relevant to stakeholders in order to increase participation rates. Further research might usefully focus on developing ways to incorporate measurements of uncertainty associated with stakeholder judgement into quantitative responses, and on establishing how best to utilise such information in feedback in subsequent Delphi rounds. Ensuring how best to inform policy uptake of the outputs of Delphi merits further research in particular.     

On the Effectiveness of Monetary Policy and of Fiscal Policy

There has been a major shift within macroeconomic policy over the past two decades or so in terms of the relative importance given to monetary policy and to fiscal policy in both policy and theoretical terms. The former has gained considerably in importance, with the latter being rarely mentioned. Furthermore, the nature of monetary policy has shifted away from any attempt to control some monetary aggregate (prevalent in the first half of the 1980s), and instead monetary policy has focused on the setting of interest rates as the key policy instrument. There has also been a general shift towards the adoption of inflation targets and the use of monetary policy to target inflation. This paper considers the significance of this shift in the nature of monetary policy. This enables us to question the effectiveness of monetary policy, and to explore the role of fiscal policy. We examine these questions from the point of view of the "new consensus" in monetary economics and suggest that it is rather limited in its analysis. When the analysis is broadened out to embrace empirical issues and evidence the clear conclusion emerges that monetary policy is relatively impotent. The role of fiscal policy is also considered, and we argue that fiscal policy (under specified conditions) remains a powerful tool for macroeconomic policy. This is particularly an apt conclusion under current economic conditions.