The political economy of pension reform in Europe

KOHLI, MARTIN; ARZA, CAMILA

Handbook of ageing and the social sciences

Elsevier

Año: 2011; p. 251 - 264

Since the end of the Second World War, 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 the even higher ones projected for the coming decades, have now become a key issue of concern throughout Europe. At stake are the basic options not only for the welfare state but also for fiscal and labour market policy, and more generally, for economic growth and social cohesion. Thus, pension systems (both public and private) 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 (or individual income smoothing) over the life course, they may also aim at redistribution across population g groups, such as lifting the low-income elderly out of poverty. But beyond these income goals, pensions 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 favoring or impeding the accumulation of funds and of personal savings, (3) they regulate labor 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 attach citizens to a public community of solidarity, and thus play a part in nation-building, (8) they produce new social and political cleavages by creating large groups of actual and potential beneficiaries, (9) they structure the agenda of corporatist conflict and negotiation, (10) they offer opportunities for administrative offices and jobs, (11) they weigh in on election outcomes. Through all these issues, pension systems form a major part of the political economy of current societies. In this chapter we will not be able to touch on all issues, let alone cover them adequately, but will go into some of them as we discuss the institutional changes that have come to be known under the label of pension reform. This chapter is structured as follows. In the next section, we study the origins and expansion of pension policy and the different trajectories that have shaped pension regimes across Europe. In section three we look at the challenges that European pension schemes have faced by the end of the century including demographic change, transnationalization, the shift from Fordist to post-Fordist production regimes, and the parallel changes in labor markets and family structures. Section four analyses reform processes in more detail. It deals with the options chosen by different countries to change, sometimes structurally, existing pension systems. By rebalancing the public-private mix and adding new pillars and layers with varying designs, countries have tended to reconfigure pension policy in the direction of a multi-pillar model which partly maintains and partly reshapes inherited pension arrangements. Section five deals with the politics of pension reform, including the policy legacies and the constraints they pose on the one hand, and the political strategies used by politicians to pass unpopular reforms, on the other. Finally, section six closes the chapter with some final remarks on the future of pensions.