12. Stasis amidst change: Canadian pension reform in an age of retrenchment (original) (raw)
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Stasis Amidst Change: Canadian Pension Reform in an Age of Retrenchment
Ageing and Pension Reform Around the World, 2005
Faced with aging populations and especially heightened fiscal constraints, large scale pension reforms were implemented in many affluent democracies during the 1990s. Canadian reforms, by contrast, were quite modest and old age security benefits emerged largely unscathed. Drawing on the comparative experience of other OECD nations, we highlight four characteristics of the Canadian pension system and the policy environment to account for this relative stability:(1) the comparatively modest scale of Canadian public sector pension expenditures; (2) relatively greater reliance on general revenue as opposed to payroll taxes to finance these expenditures; (3) the availability of other expenditure targets, notably health care, post-secondary education and social assistance, that could be cut with less political backlash; and (4) a pension design that allocates the public sector share disproportionately to the bottom end of the income distribution, precluding the emergence of the oppositional politics that fueled public debate elsewhere.
Some Perspectives on Changing the Pension System
Canadian Public Policy, 2008
This paper addresses the perceived difficulties in making changes to the retirement income system as a whole. We focus on public system reforms and observe some of the changes that have taken place in Canada and in a number of OECD (Organisation for Economic Co-operation and Development) countries. Reforming social institutions is never easy. We examine some of the preconceived notions or “myths” that create public resistance to reform. Further, the complexity of the retirement income system in Canada makes consensus difficult to achieve. Nonetheless, we argue that pension reforms can and should be made to ensure the delivery of promised benefits, and we demonstrate the efficacy of smaller-scale reforms.
Public and private policy change: Pension reform in four countries
Policy Studies Journal, 2007
This article offers a comparative, qualitative analysis of the changing nature of-and relationship between-public and private old age pensions in the United States, Canada, Britain, and Japan. Stressing the impact of institutional legacies on policy change, the article explains why these countries have taken contrasting paths toward the restructuring of public and private pension policies. The study finds that the four countries fall into two distinct clusters. On the one hand are Canada and the United States, which have essentially witnessed policy drift toward a greater reliance on private savings. On the other hand are Britain and Japan, which have reshaped their pension systems largely through legislative revision. The last section explains the differences between and within these two country clusters. The article concludes that institutional forces explain the distinctive policy patterns between the two country clusters but that it is necessary to bring in other factors (i.e., demographic aging, union density, and the role of ideas) to account for differences within each of these clusters.
Pension Systems and Reform: Country Experiences and Research Issues
1999
June 1995Country experiences of old-age social security arrangements, and 15 research and policy design issues not addressed in the literature.Pension reform is spreading around the globe, from Latin America to the OECD countries, and major reform projects are being discussed in many other developing, transition, and OECD countries.Arrau and Schmidt-Hebbel survey current research issues and country experiences related to old-age
The new pension reform as global policy
2005
Abstract This article analyzes the emergence and spread of the new pension reforms, a set of privatizing reforms that is part of a broader neoliberal agenda for global economic policy. The new pension reforms are significant both because they revolutionize the post-war social contract and because global policy actors have been involved directly in their implementation in more than 25 countries around the world. In this sense, the new pension reforms are a case of global policy.
2008
If you are fortunate enough to write something that people actually read, you may find that the message you think you are sending and the message readers receive are quite different. What you have written becomes part of the public domain and you cannot control how it is interpreted and used after that. Twelve years after Averting the Old Age Crisis was released (WB 1994), and after much controversy about its recommendations, I would like to dispel some of the myths about what Averting the Old Age Crisis said, what it did not say, and what it all means. The basic message of Averting the Old Age Crisis and the reasons behind the message still hold. In fact, many more people accept this message today than when the book was published in 1994; it seems almost self-evident and uncontroversial now. In essence, the book says that old-age security plans should have two mandatory parts. One component is responsible for handling workers' savings, resulting in income smoothing over their lifetimes. This part should be funded, with the funds privately managed, and would usually be a DC system. The second component has a redistributive and poverty-prevention objective, transferring lifetime income from high earners to lifetime low earners who cannot save enough in prime age to support themselves in old age. This part would be PAYGO or tax-financed and publicly managed, and would usually define the benefit in such a way as to set a floor on old-age income. This division of responsibility provides fiscal sustainability and national savings that result from shifting away from a complete reliance on PAYGO as populations age, as well as a labor market advantage by establishing a close link between contributions and benefits, for the consumption-smoothing objective. It also addresses the empirical evidence that governments are not very efficient at allocating a country's 06-Kay-and-Sinha-c06 OUP137-KAY-and-Sinha (Typeset by spi publisher services, Delhi) 165 of 184 August 20, 2007 17:39 6 / Reflections on Pension Reform in the Americas 165 capital and that the private sector has no motivation to provide a safety net to keep people out of poverty. Aside from stating these fundamental principles, Averting the Old Age Crisis does not provide a precise blueprint for how countries should set up their systems. Rather, it provides several options about how the public and private pillars (the funded and tax-financed pillars) could be organized. It was up to each country's policymakers to determine which variation to implement. Although many have accused the book of directing policymakers to copy Chile's plan, those who have read Averting the Old Age Crisis know that this is not the case. Many countries have adopted multipillar systems over the years that have passed since the publication of Averting the Old Age Crisis. Their experiences have clarified some implementation issues. A sequel to Averting the Old Age Crisis would concentrate on these issues, particularly low coverage, high administrative costs and fees, payout issues, and pitfalls in financing the transition. I address these issues below.
La réforme des pensions: principes, erreurs analytiques et orientations générales
Revue Internationale de Sécurité Sociale, 2009
This article, based on two books (Barr and Diamond 2008, forthcoming), sets out a series of principles for pension design rooted in economic theory: pension systems have multiple objectives, analysis should consider the pension system as a whole, analysis should be framed in a second-best context, different systems share risks differently, and systems have different effects by generation and by gender. That discussion is reinforced by identification of a series of widespread analytical errors -errors that appear in World Bank work, but by no means only in World Bank work: tunnel vision, improper use of first-best analysis, improper use of steady-state analysis, incomplete analysis of implicit pension debt, incomplete analysis of the impact of funding (including excessive focus on financial flows, failure to consider how funding is generated, and improper focus on the type of asset in trust funds), and ignoring distributional effects.
Pension systems in East Asia and the Pacific: Challenges and opportunities
2000
With the recovery from the recent crisis, countries of the East Asia and Pacific region are rethinking their financial and social policy, including old-age protection. Population aging, in combination with ongoing urbanization and economic transformation, will place increasing pressure on traditional family care arrangements. Coverage under formal pension systems is generally low, and the absence of social safety nets for the needy elderly poses risks in the face of breaks in the economic growth path. In addition to common systemic challenges, formal old-age income support systems confront issues specific to their design type: (i) The national provident fund and social security-style systems with reserve funds have demonstrated problems with investment policy and performance, governance and management. (ii) In the established market economies, social security-type systems are fiscally unsustainable in the long run and often have a weak benefit-contribution link. (iii) These types of systems encounter additional problems in transition economies, including low contribution collection from previously socialized enterprises and rising benefit take-up, partly as a consequence of the policy response to labor market disequilibria. Despite the formidable reform agenda, countries have abundant opportunities to address these issues, and the low level of coverage, predominance of retirement schemes still in evolution and existence of funded provisions in many countries provide an environment conducive to reform. Options involve (i) avoiding mistakes (adopting an integrated view on retirement income provision, balancing individual equity and social equity with efficiency considerations, averting fiscal unsustainability and integrating public and private sector pensions); (ii) being innovative (moving toward a multipillar structure, prudently extending coverage, trying new approaches to reduce administrative costs and extending social risk management through informal support and safety nets); and (iii) fostering financial markets (decentralizing pension fund management; reviewing governance, regulation and supervision; and creating or supporting the provision of new instruments).
2014
Pension systems need to be redesigned to accommodate demographic changes. Postponing adjustment simply increases the economic and social costs. The interests of workers (deductions from wages) and retirees (receipt of benefits) differ. Governments need to make pension systems more transparent and make adjustments to reduce the burden on workers, returning the pension system to its social role, which is helping the very old without overburdening the young. Pension solidarity should not be confused with political discretion. Transparency and fairness are the key preconditions when adjusting pension systems for the 21st century. ELEVATOR PITCH