How can we explain the pattern of pension reform in Europe?

Résumé du document

The pattern of pension reform in Europe can be better explained by reference to politics than to demography. Explain and evaluate this statement.

Extraits

[...] Conversely, the pattern of French pension reform appears to have been shaped more by adversity and controversy. The issue has been a source of worry for four consecutive governments since 1993. Moreover, the French pension system can be characterized as a complex, fragmented one, with generous schemes for civil servants and public sector employees. However, as Martin Rhodes points out, a consensus among major political parties began to emerge in the early nineties. While political parties, including the governing socialists under the premiership of Michel Rocard, agreed on the need to tackle the deficit by increasing the period for calculating the reference salary and introducing less generous indexation formulae, the majors unions did not share this concern and claimed that the main source of the pension system's financial problems was unemployment, and insisted that a solidarity fund, financed from taxation, be created[19]. [...]

[...] For some scholars, the pattern of pension reform in Europe is part of a shift from a Keynesian Welfare Regime to a Schumpeterian Competition State, according to the terms coined by Bob Jessop. For Jessop, the Schumpeterian regime is characterized by an increasing subordination of social policy to economic policy and seeks to enhance competitiveness, which depends on developing the individual and collective capacities to engage in permanent innovation. Increasing labour market participation is part of this strategy, in order to decrease social spending and finance sustainable pensions[3]. [...]

[...] pattern of pension reform in Europe can be better explained by reference to politics than to demography”. Explain and evaluate this statement. Since the beginning of the nineties, welfare politics in Western Europe have been marked by growing concerns about pensions. In a context of low economic growth and high unemployment for the majority of European economies, policymakers began to worry that public pensions might become financially unsustainable, especially when they would have to face massive retirement from baby-boomers, due to start in the first decade of the next century. [...]

[...] After the reform, pension contributions are now evenly divided between employer and employees[13]. According to one study[14], two thirds of those studied loose financially from the reform, whose biggest winners are those who will receive the new higher guaranteed pension. A partial privatisation has also been conducted, but it will be carried out under public regulation[15]. Sweden has converted its defined-benefit scheme into a defined-contribution one, implemented partial privatisation and ensured the financial sustainability of its pension, but without it seems creating greater inequality, as a redistributive mechanism, through the minimum guaranteed pension, has been provided for. [...]

[...] We shall now look at the patterns of pension reform in Sweden, then in France to evaluate how politics has shaped those movements. Historically, Sweden has been home to a strong social democratic tradition, where the Swedish social democratic party, the SAP, has been in power for 62 of the past 71 years. The old system of Swedish pensions was a comparatively very generous one. A flat-rate pension was provided in full to everyone with at least 40 years of residence in Sweden between the ages of 16 and 65 (or 30 years of contribution), according to an earnings- related, pay-as-you-go scheme. [...]