Ageing and welfare reform in the Nordic Countries, 1990-2010 ...

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Figure 2. Old Age Dependency Ratio in Japan, 2010-2055.90Japan. Old Age Dependency Ratio 2010-2055. Per cent80706050403020100201020122014201620182020202220242026202820302032203420362038204020422044204620482050205220542. Ageing, pensions and retirementEven though long-term demographic problems are small, comparatively speaking, the Nordiccountries have been proactive in changing their pension/retirement systems (NOSOSCO, 2009a,b;NOSOSKO 2009; Kangas, Lundberg & Ploug, 2010). Formally speaking, at least, this hashappened in highly different ways. All Nordic countries departed from an old flat rate people’spension model, but in different directions.In the 1960’s Sweden, Finland and Norway added a second, earnings-related tier to the people’spension. The Danish labour movement was divided on the issue, however, and Denmark insteadcontinued to improve the people’s pension (Albrekt Larsen & Goul Andersen, 2004). Like other”laggards” failing to introduce a public earnings-related pension during the ”golden age” of thewelfare state (Myles & Pierson, 2001), Denmark moved directly to a multipillar system (resemblingAustralia, Switzerland, and to some extent the Netherlands and UK).In Denmark, the transformation of the pension system was carried through without any formalpension reform, in fact without any legislation. Instead, a layer of fully funded labour marketpensions were introduced via collective negotiations. In principle, Danish labour market pensionsare completely private pensions unlike the public pensions in Sweden and Norway, but due to ahigh union density, collective negotiated arrangements typically have the same impact asarrangements adopted by legislation. At least, this is a very collective form of privatization, inpractice semi-public. In Denmark, furthermore, the classical people’s pension (and other first pillarstate pensions) were maintained, albeit in a more targeted version (Goul Andersen, 2007a, 2008,2011); see also below.4
In the other countries (Norway to be implemented by 2011) the two-tier people’s pension (withdefined benefit 2 earnings-related supplement) was replaced by (partly funded) defined contributionschemes with social minima (Figure 3). Arguably, these countries moved closer to a Bismarckiansystem, from a mixture of defined contribution/defined benefit principles towards more strictdefined contribution systems. This strengthening of the defined contribution principle – strictlyrelating pensions to contributions and thus providing unmodified incentives to work – is similar towhat is found in most countries. The defined contribution principle is also embodied in the fundedDanish labour market pensions.Figure 3. (A) Defined contribution pensions with a social minimum pension. (B) Multipillarsystem with people’s pension and labour market pension.In practice, the difference between the Danish system (Figure 3.B) and the other Nordic ones(Figure 3.A) is not extremely big. In some instances, a targeted people’s pension and a minimumpension, combined with a defined contribution pension scheme are equivalent. The difference inoutcomes depend mostly on the size of the minimum pension. With appropriate settings of theminimum pension, the Nordic systems may produce roughly the same outcome. In practice, theminimum level in Denmark is higher than in Sweden if the preferential rules for pensioners’housing benefits are taken into account (Hatland, 2011). The after tax value of pensions and otherbenefits for a single pensioner without any other income is equivalent to maximum unemploymentbenefits (Goul Andersen, 2007a)2 Pension entitlements can either be based on the principle of defined benefit or on defined contribution. The lattermeans that entitlements are directly determined by contributions (also labelled actuarial fairness). Defined benefitmeans that entitlements are politically defined in a way, that modifies or eliminates the strict calculation of pensionsfrom contributions. Typically, such pensions have been defined as a fixed proportion of the wage over a certain numberof years, provided that some minimum requirement is fulfilled (for instance, 30-40 years of contributions).5
Page 1 and 2: Ageing and welfare reform in the No
Page 3: employment incentives as well as in
Page 7 and 8: pensions, early retirement and work
Page 9 and 10: As regards sustainability, the Dani
Page 11 and 12: levels. The latter measures were ad
Page 13 and 14: were largely limited to measures ai
Page 15 and 16: 2007). However, the impact of such
Page 17 and 18: for average taxes, and even more fo
Page 19 and 20: Table 5. Marginal tax rates for wor
Page 21 and 22: References:Agell, Jonas, Peter Engl
Page 23 and 24: Goul Andersen, Jørgen (2011a). “
Page 25 and 26: Work? Experiences with Activation S

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