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

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Automatic adaptation of retirement to longeivityIn addition, all Nordic countries have been heading towards automatic adaptation of retirement tolongeivity. The models are different, however. In Sweden, Finland and Norway, contributions arefixed, and pensions are adjusted downwards according to life expectancy by a special formula. Thismeans that people from the younger generations have to work longer if they want to maintain thesame pension as previous generations.In Denmark, the same happens automatically for the labour market pensions as they are fullyfunded. As regards public pensions, age brackets of pension and early retirement are fully indexedto life expectancy for 60 years olds, taking 1979 as baseline (this was decided in a broad politicalcompromise over the 2006 welfare reform; in 2011 the early retirement was nearly abandoned). Iflife expectancy of Danes in 2023 is equivalent to life expectancy of the French around 2005,pension age in Denmark will be 70 years for people born after 1971. It is projected to increase evenfurther later on.According to a new political agreement in 2011, voluntary early retirement in Denmark is to bereduced from five to three years, and substantial deductions for pension assets makes the schemeunattractive in the future. Accordingly, people can have their contributions paid back in 2012.Hence, in practice, the voluntary early retirement scheme introduced in 1979 in order to provide animproved outlet and reduce youth unemployment, has been almost abandoned. Like in Sweden,people face a choice between relatively early retirement and lower annual pensions, or lateretirement and higher annual pensions.Social inequalityProvided that health conditions improves roughly in accordance with life expectancy, and that thereare no social differences of importance, these reforms are ”natural” adaptations to higher lifeexpectancy. At least in Denmark, however, the problem is that social differences in healthconditions and life expectancy are increasing, with very modest improvements at the lower level ofthe social or income ladder.In short, the Danish reforms constitute a social problem since health improvements are not equallydistributed across social classes. In this respect, the Danish reforms are tantamount to a privatizationof social risks that aggravate class inequality. Almost inevitable, although perhaps not to the samedegree, similar problems seem inevitable also in the other Nordic countries. If there were no classdifferences in health and longeivity, there would be a free choice between duration of retirementand annual pension; but unfortunately, this choice is not free for those who experience a certaindeterioration of health before pension age if this deterioration is not serious enough to obtaindisability pension.In short, the Nordic countries have acted quite radically on the challenge of ageing. Increasinglongevity will affect the size of pensions, retirement age, or both. There is uncertainly about theeffects as there are many pathways to retirement, but in order to avoid deterioration of retirementincome, people will have to work longer if they are able to do so.8
As regards sustainability, the Danish pension system is in an exceptionally good situation. By mid-2011 the accumulated value of fully funded state, labour market and individual pensions amount to3.100 Bill Dkk. This is exactly equivalent to the value of the assets accumulated in the oil fund ofthe Norwegian state. 73. New target groups for employment effortsAs indicated in the introduction, the discussion about ageing and the declining labour force, relativeto the population, has catalyzed more general efforts to increase the labour force. Such efforts goway beoynd the issue of retirement. Employment efforts have successively been extended to all thegroups that were previously given low priority: The disabled, the sick, and long-term socialassistance clients. Besides, special exemptions for elderly unemployed and other difficult-to-placeworkers have been removed. Finally, the Nordic countries have also put much more emphasis thanpreviously on the labour market integration of immigrants.As elsewhere the number of disability pensioners has grown in the Nordic countries. This wasparticularly outspoken in Norway where figures increased from 236.000 in 1995 to 339.000 in 2008(NOSOSCO 2009a: 171; Øverbye, 2006). But figures close to 10 per cent of the working agepopulation (OECD, 2010:103,134,145,162; http://dx.doi.org/10.1787/786611566183) has been asource of concern everywhere, and solutions have been difficult. A large number of measures havebeen applied in the attempt to reverse the trend. All Nordic countries have underlined that disabilitypension should only be granted on the basis of medical criteria, and only as a last resort. Allcountries have experimented with enabling people to take a job and have a ”sleeping pension”meanwhile, or with granting disability pension on a temporary basis. In Sweden, the name”disability benefit” was even formally abolished by a reform (2003) in favour of an ”activity-andsickness benefit” (NOSOSCO, 2004; Riksrevisionen, 2005).Comprehensive changes in rules and procedures were introduced in Denmark in 1998 and onwardsalongside the idea of an ”inclusive labour market” (OECD, 2003: 129; Bengtsson 2009; Bredgaard,2004), and of ”corporate social responsibility”. Besides, the instrument of ”flexible jobs” wasintroduced as an alternative to disability pension for people with reduced work capacity. 8 From1998, application for disability pension should only take place after all possibilities of treatment,activation and rehabilitation had been considered. This was embodied in a disability pension reformadopted in 2001 and implemented in 2003, based on the principle of focussing on remainingresources rather than on lost capacities. These programmes have enjoyed some success, and after aslow start the number of people working in permanently subsidized ”flexible jobs” has grown7 There are pension funds in Norway as well, but their accumulated assets are less than8 Flexible jobs typically allow people to work shorter hours and/or with less demanding tasks while still maintaining anordinary wage following collective agreements, and in principle maintaining the same rights as ordinary employees.The subsidy is normally 50-66 per cent.9
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Page 3 and 4: employment incentives as well as in
Page 5 and 6: In the other countries (Norway to b
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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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