The political economy of pension reform

ARZA, CAMILA; KOHLI, MARTIN

Pension Reform in Europe: Politics, policies and outcomes

Routledge

Lugar: Londres; Año: 2008; p. 1 - 22

In current accounts of pension policy, and of the welfare state more generally, there is something of an implicit consensus that emphasizes path dependence and obstacles to reform. This article takes issue with such accounts. By focusing on the most recent reform experiences, it observes a trend towards some convergence between different paths and towards substantive change. It offers several approaches to explain this process. The idea of a limited number of welfare regimes in terms of specific patterns of institutions, and of path-dependence in terms of change processes that would deepen rather than flatten this specificity, has been a powerful corrective to the earlier assumption that the dynamics of capitalist modernisation would eventually make all countries converge on a single institutional model. But the new consensus has in its turn decreased our capacity to observe and make sense of what is going on today, by unduly limiting our attention for changes that do not fit the assumed paths, and our tools and concepts for giving them form. The decades since the end of World War II have throughout been a period of major transformation in pension policy. Pension reform has become central to the European social policy agenda ? first in terms of construction and expansion, then increasingly in terms of consolidation and retrenchment. The high levels of pension expenditures experienced in the past few years, and projected for the coming decades, have become a key issue of concern for fiscal and labour market policy and economic growth. This article argues that pension systems need to be viewed in a broader political economy framework. Their major purpose is to provide income security to retirees. In addition to such redistribution across the life course, they may also aim at redistribution across population groups, such as lifting the low-income elderly out of poverty. But beyond these goals, they are linked up with a range of other issues: (1) they are typically the largest public transfer programs, and thus the source of major fiscal pressures (and sometimes opportunities); (2) they influence financial markets by creating or impeding the accumulation of funds and the rate of personal savings; (3) they regulate labour markets by facilitating an ordered transition out of employment; (4) they enable employers to manage their work force by offering instruments for the shedding or replacement of workers; (5) they contribute to the institutionalization of the life course by creating a predictable sequence and timing between work and retirement; (6) they provide workers with a legitimate claim to compensation for their ?life-long? work, and thus with a stake in the moral economy of work societies; (7) they produce new social and political cleavages by creating large groups of actual and potential beneficiaries; (8) they structure the agenda of corporatist conflict and negotiation; (9) they offer opportunities for administrative offices and jobs; (10) they weigh in on election outcomes. Through all these issues, they form a major part of the political economy of current societies. The article analyses what the implications of these features are for the reform processes taking place in Europe, as well as for the welfare research literature more generally.