Pension Reforms in the Nordic Countries and Germany: Conference Proceedings of the 2024 Annual Meeting of the German Society for Demography (DGD) by the Working Group on Demographic and Social Developments
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Wilke, Christina Benita (Ed.); FOM Hochschule für Oekonomie & Management, KompetenzCentrum für angewandte Volkswirtschaftslehre (KCV) (Ed.) Proceedings Pension Reforms in the Nordic Countries and Germany: Conference Proceedings of the 2024 Annual Meeting of the German Society for Demography (DGD) by the Working Group on Demographic and Social Developments KCV Schriftenreihe der FOM, No. 8 Provided in Cooperation with: KCV KompetenzCentrum für angewandte Volkswirtschaftslehre, FOM Hochschule für Oekonomie & Management Suggested Citation: Wilke, Christina Benita (Ed.); FOM Hochschule für Oekonomie & Management, KompetenzCentrum für angewandte Volkswirtschaftslehre (KCV) (Ed.) (2024) : Pension Reforms in the Nordic Countries and Germany: Conference Proceedings of the 2024 Annual Meeting of the German Society for Demography (DGD) by the Working Group on Demographic and Social Developments, KCV Schriftenreihe der FOM, No. 8, ISBN 978-3-89275-387-2, MA Akademie Verlagsund Druck-Gesellschaft mbH, Essen This Version is available at: https://hdl.handle.net/10419/307058 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/
KCV KompetenzCentrum für angewandte Volkswirtschaftslehre der FOM Hochschule für Oekonomie & Management KCV Schriftenreihe Vol. 8 Pension Reforms in the Nordic Countries and Germany Conference Proceedings of the 2024 Annual Meeting of the German Society for Demography (DGD) by the Working Group on Demographic and Social Developments Christina Benita Wilke (Ed.)
Matthias Diermeier / Martin Drees / Ilari Ilmakunnas / Jari Kannisto / Satu Nivalainen / Ruth Maria Schüler / Mika Vidlund Pension Reforms in the Nordic Countries and Germany Conference Proceedings of the 2024 Annual Meeting of the German Society for Demography (DGD) by the Working Group on Demographic and Social Developments KCV Schriftenreihe der FOM, Vol. 8 Essen 2024 ISBN (Print) 978-3-89275-386-5 ISSN (Print) 2701-9403 ISBN (eBook) 978-3-89275-387-2 ISSN (eBook) 2701-9411 Dieses Werk wird herausgegeben vom KCV KompetenzCentrum für angewandte Volkswirtschaftslehre der FOM Hochschule für Oekonomie & Management gGmbH Verlag: MA Akademie Verlagsund Druck-Gesellschaft mbH, Leimkugelstraße 6, 45141 Essen [email protected] Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliographie; detaillierte bibliographische Daten sind im Internet über http://dnb.d-nb.de abrufbar. Dieses Werk ist lizenziert unter CC BY 4.0: Creative Commons Namensnennung 4.0 International. Diese Lizenz erlaubt unter den Voraussetzungen der Lizenzbedingungen, u. A. der Namensnennung der Urheberin oder des Urhebers, der Angabe der CC-Lizenz (inkl. Link) und der ggf. vorgenommenen Änderungen die Bearbeitung, Vervielfältigung und Verbreitung des Materials in jedem Format oder Medium für beliebige Zwecke. Die Rechte und Pflichten in Zusammenhang mit der Lizenz ergeben sich ausschließlich aus dem Lizenzinhalt: CC BY 4.0 Deed | Namensnennung 4.0 International | Creative Commons | https://creativecommons.org/licenses/ by/4.0/legalcode.de. Die Bedingungen der Creative-Commons-Lizenz gelten nur für Originalmaterial. Die Wiederverwendung von Material aus anderen Quellen (gekennzeichnet mit Quellenangabe) wie z. B. von Schaubildern, Abbildungen, Fotos und Textauszügen erfordert ggf. weitere Nutzungsgenehmigungen durch den jeweiligen Rechteinhaber.
Christina Benita Wilke (Ed.) Pension Reforms in the Nordic Countries and Germany Conference Proceedings of the 2024 Annual Meeting of the German Society for Demography (DGD) by the Working Group on Demographic and Social Developments Matthias Diermeier / Martin Drees / Ilari Ilmakunnas / Jari Kannisto / Satu Nivalainen / Ruth Maria Schüler / Mika Vidlund Contact Information Prof. Dr. Christina Benita Wilke FOM University of Applied Sciences Professor of Economics Scientific Director of the Competence Center for Applied Economics (KCV KompetenzCentrum für angewandte Volkswirtschaftslehre) Head of Academic Studies, FOM University Center Bremen [email protected]
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany III Foreword by the Chairs of the Working Group on Demographic and Social Developments of the German Society for Demography (DGD) Dear readers, This volume documents excerpts from our session on pension reforms in the Nordic countries and Germany at the Annual Meeting of the DGD at the University of Hamburg in March 2024. Pension systems in Germany as well as the Nordic countries have been subject to substantial pension reforms in the past decades, foremost in order to respond to the demographic challenges these nations face. Both regions are experiencing aging populations, which puts pressure on public pension systems and requires innovative reform strategies to ensure sustainability. Although Germany and the Nordic countries share a history of strong welfare states, their approaches to pensions vary – offering valuable lessons in policy design, from the Nordic countries’ rather flexible pension ages to Germany’s evolving multipillar system. Looking forward, there is a need for further reforms that adapt to evolving demographic trends, ensure intergenerational fairness, and maintain fiscal sustainability, while also addressing new challenges such as digitalization and changing work patterns. Empirical research has received many new impulses from debates on demographic challenges like those on pension systems. Our Working Group on Demographic and Social Developments of the German Society for Demography (DGD) is aimed at experienced scientists, doctoral students, and practitioners from administration, politics, and business. If you are interested in joining us, please have a look at our website: https://dgd-online.de/arbeitskreise/demografische-und-gesellschaftliche-entwicklungen/. We are always happy to welcome new members. We would like to thank the FOM University as well as the Competence Center for Applied Economics (KCV KompetenzCentrum für angewandte Volkswirtschaftslehre) for the opportunity to publish the conference contributions to our session in this anthology. A special thank you goes to the FOM Publication Team and in specific to Ms. Sarah Berndsen for the thorough formal revision of all papers. We wish you a stimulating and exciting read! Bremen and Cologne, October 2024 Prof. Dr. Christina Benita Wilke (Editor) Dr. Philipp Deschermeier DGD Working Group Chair DGD Working Group Chair FOM University of Applied Sciences, German Economic Institute, Essen and Bremen Cologne
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany IV Table of Contents Foreword by the chairs of the working group on demographic and social developments of the German Society for Demography (DGD): .................... III About the Editor ................................................................................................ V About the Authors ............................................................................................ VI 1 Expected Effective Retirement Age and Exit age in the Nordic Countries Jari Kannisto / Mika Vidlund ........................................................................... 1 2 Labor Market Effects of Increasing Statutory Retirement Age: The 2017 Pension Reform in Finland Satu Nivalainen / Ilari Ilmakunnas ............................................................... 25 3 Reforming the Pension System in Germany – An Empirical Study of Reform Aversions Matthias Diermeier / Ruth Maria Schüler .................................................... 61 4 Nonfinancial Defined Return (NDR) Pension Framework and a New Perspective on Pension System Sustainability Martin Drees ................................................................................................ 79
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany V About the Editor Prof. Dr. Christina Benita Wilke has been Professor of Economics at the FOM University of Applied Sciences since 2016. She is also Head of Academic Studies at the FOM University Center Bremen and Scientific Director of the KCV Competence Center for Applied Economics. Previously, she worked as a senior researcher and managing director at the Mannheim Research Institute for the Economics of Ageing (MEA) as well as senior expert and managing director of the Bremen branch of the Hamburg Institute of International Economics (HWWI). Her research focuses on demographic change, social and labour market policy and health economics.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany VI About the Authors Dr. rer. pol. Matthias Diermeier is head of the research unit Democracy, Society, Market Economy since 2022, and since 2024 managing director of IW Gesellschaftsforschung gGmbH. He obtained his Bachelor’s degree in economics at the University of St. Gallen and the Universidad de San Andrés, Argentina. He completed his Master’s in Economics at the University of Zurich and the Sciences Po Paris. From 2015 to 2022 he was personal assistant to the director at the German Economic Institute. He completed his Doctorate at the Institute of Political Science of the University of Duisburg-Essen (NRW School of Governance) in 2021. Martin Drees started his PhD in Mathematics at the University of Bonn in the area of Chip Design in 2022. He has studied mathematics at the University of Bonn. As a private project, he is working on pension system design with a theoretic focus. Dr Ilari Ilmakunnas is currently working as a senior researcher at the Finnish Centre for Pensions. His current research focuses on the evaluation of pension reforms, partial retirement, the adequacy of pensions, and the measurement of poverty. He obtained a PhD from the University of Turku in 2019. Jari Kannisto (Lic. Phil.) works with statistics at the Planning Department of the Finnish Centre for Pensions (ETK). He started in ETK in 1986. For the last 25 years he has worked as a development manager, and before that as a statistician. The focus has always been on examining pensioners, retirement, and working careers. Dr Satu Nivalainen is currently working as an economist at the Finnish Centre for Pensions. She has a long and many-sided experience in pension-related research. Her areas of expertise include retirement on an old-age pension, continued working, working careers, partial old-age pension, and behavioral effects of pension reforms. She obtained a PhD from the University of Jyväskylä in 2011.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany VII Dr. rer. pol. Ruth Maria Schüler is economist for social security systems and income and wealth distribution with a research focus on pension security at the German Economic Institute since 2021. She holds a Master’s degree in Economics from the University of Münster and a Master’s degree in Economic History from the University of Lund, Sweden. She obtained her Bachelor’s degree in Governance and Public Policy at the University of Passau. From 2012 to 2018 she was researcher at the ifo Institute Munich Centre for Educational Economics. She obtained her Doctorate in Economics at the Ludwig Maximilian University of Munich in 2016. From 2018 to 2021 she worked as an economist for education and political participation at the German Economic Institute. Mika Vidlund (Lic.Soc.Sc.) works as team leader of the International Analysis Team within the Planning Department at the Finnish Centre for Pensions (ETK), which produces services needed in the implementation and development of earnings-related pensions. He has worked at the ETK since 1999, first as a Researcher and Special Adviser focusing on comparative pension research. He has also worked as an expert for Finland supporting the work of the European Commission DG Employment, Social Affairs, and Inclusion in 2010-2014. He has graduated (M.Soc.Sc) from the University of Turku in 2000 and has a Licentiate degree on Social Sciences from 2006.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 7 1.2 Frames for retirement in the Nordic countries Retirement age is the single most important factor in retirement. Changes in pension acts have, among other things, raised the retirement age and closed early exit routes in an attempt to postpone retirement, even though reforms may have long transition periods. The statutory earning-related old-age pension systems in Finland, Norway, and Sweden are flexible in terms of the retirement age, and the system gives individuals more choice in their retirement decisions. Individuals have a right to choose when they will retire on an old-age pension, after they have reached the lowest possible retirement age (Figure 1). Possibility to retire flexibly on the earnings-related pension was established in Sweden in the 1999-2002 structural pension reform and in Finland in the 2005 pension reform (see e.g., Barr, 2013a; 2013b). In Sweden the lowest retirement age was then set at 61 and in Finland at 63 years of age. The process of increasing the retirement ages within the Finnish pension system was initiated in 2017 and in the Swedish pension system in 2020. Both countries have linked retirement age to life-expectancy (e.g., OECD, 2023; Andersen, 2021b). In Norway the 2011 pension reform introduced a flexible withdrawal age between ages 62 and 75. In the old system the withdrawal age was fixed at 67 years. Retirement at the age of 62 is an option for those with pension entitlements at least as high as the minimum pension. Before the reform only certain groups had access to early retirement from age 62, and one had to withdraw completely from the labour market to receive an early retirement pension (e.g., Andersen 2021a; European Commission, 2024). After 2010 one could continue working full-time and still withdraw a pension at age 62. This has turned out to be a popular option. One goal of the reform was to provide good work incentives for pensioners. Forthcoming reform in 2026 will link the lowest retirement age to the development of life-expectancy (Ministry of Labour and Social Inclusion, 2023a). In Denmark the most important reform has been to link the retirement age of 67 to life expectancy in 2011. Early retirement is provided by a specific voluntary early retirement scheme (i.e., VERP, efterløn). The retirement age for the VERP was raised from 2013 and onwards, and the length of time that it was possible to receive VERP before the retirement age for old-age pension was reduced from five to three years. Another important reform was the reform of the disability pension scheme in 2012 (Kannisto & Vidlund, 2022).
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 8 In Iceland general retirement age has been fixed for decades to 67 with a possibility to retire early at the age of 65. However, under the act-regulated mandatory occupational pension scheme early retirement rules may vary between funds. The normal retirement age is 67 but the supplementary pension savings can be claimed earliest from the age of 60 (see e.g. IPFA 2024; Danielsson et al. 2023). Retirement age is 60 years also for seamen if they have been working in this occupation for at least 25 years. In all the Nordic countries retirement age for minimum pension sets a kind of norm for retirement. Many social insurance benefits are also paid up to this age. For example, in Sweden there has been a strong tendency to claim pension at age 65 regardless of the flexibility in the reformed earnings-related pension system. In Finland and Sweden retirement age for minimum pension was 65 whereas in Iceland, Norway and Denmark it was 67 in 2022. These ages are linked to the development of life-expectancy in Sweden, Finland and Denmark. Figure 1: Retirement ages and life-expectancy in 2022 Source: Finnish Centre for Pensions; Lifeindenmark; Norwegian Labour and Welfare Administration; Social Insurance Administration Iceland; Swedish Pensions Agency. 60 62 62 64 64 80 68 75 69 67 50 55 60 65 70 75 80 85 90 Iceland Sweden Norway Finland Denmark Lower limit Higher limit Life-expectancy at age 50 67 Norm 65 Norm 67 Norm 65 Norm
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 9 1.3 Data and methods 1.3.1 Definition of employment rates The employment rate is the percentage share of employed persons in the population of the same age. The review is based on the annual average values of the labour force survey by Eurostat covering years 2013-2022. A person is considered employed, when, during the survey week, they received a monetary salary or fringe benefits or profit for at least an hour of gainful employment, or someone who has been temporarily off work. More detailed definitions are available from the workforce research of Eurostat (2024). 1.3.2 Definition and calculation of the labour market exit age The labour market exit age measures the average age of exit from the labour market. The calculation is based on individuals who are in the labour force at the age of 50. The calculation is made by comparing the labour force participation for every following age group after the age of 50 with the labour force participation at 50 years of age. By doing so, an expected exit age from the labour force is obtained. 50-year-old individuals are used as a baseline for the calculations because of the assumption that the labour force participation is at its peak at the age of 50. The calculation of the exit age is performed by using a static method that includes data for only one year rather than comparing two years. The basis of the calculation is the changes in labour force participation between successive ages in the given year. A static method says nothing about the average age when a certain cohort withdraws from work; it shows a snapshot given the current characteristics of the labour market. The result from the static method shows the age at which people who are 50 years old would exit the workforce if the labour force patterns remained the same as in the given year. The data is based on Eurostat employment statistics (Labour Force Survey). A minimum of one hour of work per week is required to be included in the labour force. The labour force also consists of persons who are unemployed but available for employment. In these statistics pensioners are also employed if they do a little work. Exit age measures the endpoint for work. Therefore, the retirement age in calculation of exit age usually rises higher than effective retirement age,
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 10 because it also includes the working time at retirement. It also makes comparisons between countries more difficult, as the importance of work in the livelihoods of pensioners varies from country to country. Results are obtained by interpolating labour force participation rates in one-year age groups from five-year age groups data. If we used one-year age groups instead of interpolation, the random variability in the results could be greater. The mathematical description for the calculation of exit age can be found from the Appendix 1.1. 1.3.3 Definition and calculation of expected effective retirement age The expected effective retirement age is calculated in a way that is similar to the method used in calculating average remaining life expectancy. The indicator describes the effective retirement age, assuming that the retirement risk and mortality for each age group remains at the level of the year of observation. A key point is that the indicator is not affected by the age structure of the population. The expected effective retirement age can be calculated for persons at any age. This article presents the estimated effective retirement age in each country for 50-year-olds based on coherent data. The data for the expected effective retirement age has mainly been obtained from the employment data of each country’s statistics office, and they include the statutory (or public) pensions for the persons resident in the country. For Norway, the data has been obtained from the Norwegian Labour and Welfare Administration (NAV). Mode of calculation is presented more detailed in the Appendix 1.2. 1.4 Results 1.4.1 Employment rate of 55-64-year-olds has progressed favourably A common target in pension policy for at least 20 years or more has been to increase employment rates of those aged 55 to 64 years. Employment rate for the younger part of this age group, meaning 55 to 59-year-olds, has already successfully increased to the same level as general employment rate. Employment has also improved significantly among the 60 to 64-year-olds. Iceland has the highest employment rate in the Nordics (Figure 2). Denmark has clearly approached the level of the leading countries but not as rapidly in 2022 as before. At the same time, Finland has narrowed the gap to Denmark.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 11 The employment rates in these two countries are still clearly below Sweden and Iceland. In general, the level in the Nordic countries is higher than the EU-average. Figure 2: 55-64-year-olds employment rate in the Nordic countries and EU Source: Eurostat, Employment, Labour Force Surveys At present, the focus should be increasingly on the over-60-year-olds. The over60s are even more interesting because they are often the target of current pension policy measures and there is still more to be achieved. The employment rate among the 60 to 64-year-olds is lower than for younger age groups but a positive trend can be observed here as well (Figure 3). Pension reforms have been one of the key drivers contributing to the increased labour force participation of ageing people. Of course, it is important to realize that the reforms of pension policy are only one enabling factor to encourage longer work careers. Much depends on the economic growth but also on the reforms in working life and quality of work life. 60 61 62 63 64 65 66 67 68 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Age Iceland Norway Sweden Denmark Finland EU27
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 12 Figure 3: 60-64-year-olds employment rate in the Nordic countries and EU Source: Eurostat, Employment, Labour Force Surveys Employment rate for men is generally higher than for women. Women can be seen to be at the level at which men were a decade ago (Figure 4). In general, men have a five to ten percentage points higher employment rate than women. This difference has slightly decreased in last ten years. However, there is one exemption in comparison. In Finland older women have higher employment rate than men which is also globally quite exceptional. The employment rate of older men in Finland is hardly at the level of EU-average and much lower than in the other Nordic countries. Figure 4: 55-64-year-olds’ employment rates by gender in the Nordic countries and EU Source: Eurostat, Employment, Labour Force Surveys 30 40 50 60 70 80 90 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 % Iceland Norway Sweden Denmark Finland EU27 30 40 50 60 70 80 90 2013 2016 2019 2022 % Iceland Sweden Norway Denmark Finland EU27 2013 2016 2019 2022 Females Males
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 13 1.4.2 Labour market exit age is highest in Iceland The exit age has risen in the Nordic countries and throughout the EU (Figure 5). Only in Iceland the exit age has not increased in the 2010s, but there the exit age has been clearly higher than in the other countries already a decade ago, and still is. Although the differences between countries are still clear, they have narrowed. Denmark and Finland belong to a group with a lower exit age than the other Nordic countries. But they are still more than one year higher than the EU-average. Between 2011 and 20222 Finland has experienced the largest increase in the exit age of more than two years, followed by Denmark with an increase of almost two years. In Norway the rise has been 1.2 years and in Sweden less than a year. The average increase in the exit age for the whole of the EU has been two years. Figure 5: Labour market exit age for 50-year-olds Source: Own computation The exit age has increased during the period under review for both men and women. Exit age is clearly higher for men than for women. In Iceland exit age is very high, especially for men – it is even higher than general retirement age 67. In 2022, the average difference in favour of men was more than one year. In Denmark, it was almost two years and in Iceland and Norway a year and a half. In Sweden the difference was one year and in Finland less than a year. 60 61 62 63 64 65 66 67 68 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Age Iceland Norway Sweden Denmark Finland EU27
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 14 Figure 6: Difference of the exit age between males and females Source: Own computation 1.4.3 Expected effective retirement age – Sweden at the top Three main points can be observed when focusing on the expected effective retirement age for 50-year-olds. First, Sweden has remained on a high level with minor changes and has the highest effective retirement age. Secondly, Denmark and Finland have a significant rise in this indicator in 15 years. Thirdly, in Norway and Iceland the expectancy has decreased; in Norway mainly because of the 2011 pension reform which decreased the retirement age. However, after that it has increased. In Iceland, there is a high degree of fluctuation, which is partly explained by a comparatively small size of population and the yearly statistics on mortality and number of pensioners may therefore undergo substantial random variation. However, the state of the economy is strongly reflected in the effective retirement age. In addition to the 2008 financial crisis, Iceland suffered from an internal bank crisis in the early 2010s, which is seen in the swaying figures depicting the country’s effective retirement age. The consequences of the fall of the banks were more or less immediate in late 2008, and people could either retire immediately or stay on unemployment benefits for up to two and half years (see also Danielsson et al., 2023). 60 61 62 63 64 65 66 67 68 69 70 Age Iceland Norway Sweden Denmark Finland EU27 Females Males
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 15 Recent decline after COVID-19 is related to the fact that senior citizens have started taking payments earlier from pension funds before they start receiving a pension from social security system. Figures from Statistics Iceland (2024) show an increase in the number of old-age pensioners who claim early pension instead of normal retirement age 67. For example, about a quarter of people aged 65-66 had started drawing a pension in 2007, but this proportion had risen to 43% in 2022. The figures also show that the majority of this group only draws pensions from pension funds, and there are indications that many who do so are still in the labour market (see also Danielsson et al., 2023). Figure 7: Expected effective retirement age for 50-year-old* * Finland: provisional data for 2021-2023. Source: Own computation 1.4.4 Difference between the effective retirement age and the labour market exit age When we compare the labour market exit age to the effective retirement age, we notice that the difference between these two indicators varies greatly between the compared countries. In this respect, the Nordic countries are divided into two groups. In the first group, Finland, Sweden, and Denmark, the difference is small: only around half a year. In the second group, Norway and Iceland, there is a clear gap between indicators, about two years or even more. This means that in the first 60 61 62 63 64 65 66 Age Sweden Denmark Finland Norway Iceland
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 16 group working in retirement is not as common as in the second group. In Finland, Sweden and Denmark work ends usually when you retire, but in Norway and Iceland it is usual to continue working after retirement. Figure 8: Labour market exit age and expected effective retirement age for 50-year-olds in 2011-2022 Source: Own computation In general, the exit age is higher than the expectancy, though in Denmark the situation has been somewhat different. There are probably several underlying reasons for the difference between the exit age and the expectancy, and the phenomenon can be approached from different directions. Different reasons underly the various behaviour in the countries of comparison, including flexible labour markets, pension levels, and other safety nets, as well as employment opportunities for retirees. As a rule, pension in the Nordic countries secure a basic income for retirees, meaning people are not forced to work in retirement. Traditionally, part-time working has been extensive in Sweden. This has helped people continue working until their retirement age. Pension legislation also plays a central role. The pension reforms in Finland and Denmark have reduced the opportunities for early retirement and raised the retirement age. In Norway the new, flexible retirement age allows for retirement at an earlier age than before. Many have taken this opportunity to retire at an earlier age although they have continued working. It is common, especially among men, to withdraw the mandatory pension as soon as possible (at age 62) and still continue working. According to statistics from NAV (2024) over 60 per cent of new old age pensionSweden Denmark Finland 60 61 62 63 64 65 66 67 68 Iceland Norway Dashed line = exit age Solid line = effective retirement age Sweden, Denmark, Finland Age Iceland, Norway
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 23 IPFA, Icelandic Pension Funds Association (2024): Old-age pension. https://www.lifeyrismal.is/en/qa/old-age-pension Lifeindenmark (2024): The official guide to life in Denmark. https://lifeindenmark.borger.dk/ Ministry of Labour and Social Inclusion (2023a): Et bedre pensjonssystem med en styrket sosial profil. Meld. St. 6 (2023-2024). https://www.regjeringen.no/no/aktuelt/et-bedre-pensjonssystem-med-en-styrket-sosial-profil/id3018783/ Ministry of Labour and Social Inclusion (2023b): Arbeid, pensjon og inntekt i den eldre befolkningen. Rapport fra Pensjonspolitisk arbeidsgruppe 30. mai 2023.https://www.regjeringen.no/contentassets/f1094d6dda2f44fab02f24d8 3c34e454/ppag-endelig-rapport-2023.pdf Norwegian Labour and Welfare Administration (NAV) (2024): Alderspensjon – Statistikknotater. https://www.nav.no/no/nav-og-samfunn/statistikk/pensjonstatistikk/relatert-informasjon/alderspensjon-statistikknotater OECD (2023): Pensions at a Glance: 2023. OECD and G20 Indicators. OECD Publishing, Paris. https://doi.org/10.1787/678055dd-en Social Insurance Administration Iceland (2024): https://island.is/s/tryggingastofnun Statistics Iceland (2024): Percent of old age pension beneficiaries by type of payment, financers, residence, gender and age in December 2007-2022. https://px.hagstofa.is/pxen/pxweb/en/Samfelag/Samfelag__felagsmal__lifeyristhegar/FEL02000.px/ Swedish Pensions Agency (2024): https://www.pensionsmyndigheten.se/ Vidlund, M. (2017): Flexible retirement – a model for the future? Lessons from Sweden, Norway and Finland. Finnish Centre for Pensions. Helsinki. https://urn.fi/URN:ISBN:978-951-691-276-2 Vidlund, M. (2023): Partial old-age pension gaining ground in Finland – more early old-age pension recipients in Finland than in Norway or Sweden. https://www.etk.fi/en/blogs/partial-old-age-pension-gaining-ground-in-finland-more-early-old-age-pension-recipients-in-finland-than-in-norway-orsweden/
Labor Market Effects of Increasing Statutory Retirement Age: The 2017 Pension Reform in Finland Satu Nivalainen / Ilari Ilmakunnas Contact Information Dr Satu Nivalainen Economist at the Finnish Centre for Pensions, Helsinki, Finland E-Mail: [email protected]
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 26 Abstract We study the labor market effects of the 2017 pension reform in Finland. The statutory retirement age of the studied cohorts increased from 63 years for the 1954 cohort to 63 years and six months for the 1956 cohort. Using total register data recorded at a monthly level and a differences-in-differences approach, we estimate the effect of this reform on retirement, employment, unemployment, disability, sickness, and inactivity. We find an increase in the employment rate of 19 percentage points between the old and the new retirement age, but also a notable increase in unemployment, inactivity, and disability. For the most part – but not entirely – this is explained by the persistence of the previous labor market state. There are no large gender differences, but the effects vary considerably by education and employment sector.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 27 Table of Contents List of Figures .................................................................................................... 28 List of Tables ..................................................................................................... 28 2.1 Introduction ................................................................................................ 29 2.2 Institutional setup and the 2017 pension reform ........................................ 32 2.3 Data and empirical methodology ............................................................... 37 2.3.1 Data ................................................................................................. 37 2.3.2 Empirical methodology .................................................................... 39 2.4 Descriptive evidence .................................................................................. 41 2.5 Regression results ..................................................................................... 44 2.5.1 Main results ..................................................................................... 44 2.5.2 Passive or active substitution? ........................................................ 47 2.5.3 Heterogeneity of effects by gender and socioeconomic group ....... 50 2.6 Conclusion ................................................................................................. 55 References ........................................................................................................ 58
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 28 List of Figures Figure 1: Share of retired individuals in different cohorts by age, %. Vertical lines indicate the SRA of different cohorts. ........................ 41 Figure 2: Share of employed individuals in different cohorts by age, %. Vertical lines indicate the SRA of different cohorts. ........................ 42 Figure 3: Share of unemployed, disabled, sick and otherwise inactive individuals in different cohorts by age, %. Vertical lines indicate the SRA of different cohorts ............................................... 44 List of Tables Table 1: Changes in pension rules in 2017 pension reform ........................ 34 Table 2: Number of individuals in each cohort and total number of observations in data ..................................................... 38 Table 3: Descriptive statistics by cohort ...................................................... 39 Table 4: Average effect of increase in SRA on different labor market states, percentage points .................................................. 45 Table 5: Sensitivity tests for the employment effect of the increase in SRA ............................................................................................... 47 Table 6: Average effect of increase in SRA on labor market transitions from employment, unemployment, disability and sickness, percentage points ......................................................................... 48 Table 7: Employment rate just before the SRA, bunching at the SRA and the hazard rate by subgroup, cohort 1954 ............................. 50 Table 8: Average effect of increase in SRA on different labor market states by gender, percentage points ............................................. 51 Table 9: Average effect of increase in SRA on different labor market states by education, percentage points ........................................ 52 Table 10: Average effect of increase in SRA on different labor market states by sector, percentage points .................................. 54
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 29 2.1 Introduction In response to rapidly aging populations, many countries have reformed their pension systems in recent decades. In most cases, the reforms have included rising pension eligibility ages. The aim has been to secure the financial sustainability of pension systems by extending working lives and increasing the employment rate of older persons (Hinrichs, 2021). Finland is no exception: the Finnish pension system underwent a reform in 2017. There are no early retirement ages (ERA) in the Finnish pension system, and before the reform the statutory retirement age (SRA; often referred to as the Normal Retirement Age, NRA), the minimum age at which full pension benefits could be claimed, was 63 years. It was believed that financial incentives would encourage people to continue at work after reaching their SRA. However, the financial incentives did not have the desired effect (e.g., Gruber et al., 2022). Therefore, in the 2017 reform it was agreed that the SRA will increase by three months for each birth cohort until it is at 65 years. The first cohort affected was that born in 1955. For those born in 1962-1964, the SRA is 65 years, after which it will be linked to changes in life expectancy. Only if the reform succeeds in postponing retirement and extending working lives can the sustainability of the pension system be secured. Understanding individuals’ behavioral response to pension reforms raising the eligibility age for the old-age pension is crucial for determining their success. In this study, we investigate the effects of the rising SRA on employment and other labor market outcomes of older individuals in Finland. We utilize the cohort-based changes in retirement age resulting from the 2017 pension reform and study the cohorts born in 1954–1956. For those born in 1954, the SRA was 63 years (control group), and for those born in 1955 and 1956, it was 63 years three months and 63 years six months, respectively (treatment groups). We exploit the exogenous variation that the reform has induced in the retirement age and identify the impact of the rising retirement age on labor market outcomes by comparing cohorts who face different retirement ages. We use a differences-in-differences design, which allows us to isolate causal effects that manifest between the old and new statutory retirement age. Our analysis relates to the literature examining behavioral effects of changes in the retirement age on labor market outcomes. Due to numerous pension reforms in Europe and other countries in recent decades, the research interest towards the effects of pension reforms has increased. First studies investigated the effects
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 30 of rising NRA in the US and mainly focused on the retirement decision (Mastrobuoni, 2009; Behagel & Blau, 2012), but nowadays a growing literature especially in Europe has evaluated the effects of the rising retirement age on employment and other labor market outcomes (e.g., Staubli & Zweimüller, 2013; Atalay & Barret, 2015; Manoli & Weber, 2016; Cribb et al., 2016; Rabaté & Rochut, 2020; Atav et al., 2019; 2021; Geyer et al., 2020; Geyer & Welteke, 2021; Soosaar et al., 2021; Morris, 2021; 2022). The overall conclusion is that the rising retirement age postpones retirement and positively affects the employment rate, but the size of the effect varies greatly between studies. This is due to, for example, differences in age limits for the old-age pension, financial incentives of the pension system, pre-reform employment rates and bunching at the ERA/SRA. We build on previous studies in several ways. Many of them have focused on changes in the ERA, and due to the nature of the reforms, the effects have been estimated among women (Atalay & Barret, 2015; Cribb et al., 2016; Geyer et al., 2020; Geyer & Welteke, 2021; Morris, 2021; 2022). Therefore, examining the impacts separately for men and women has not been possible. We provide an evaluation of the labor market impacts of the rising SRA in a Nordic welfare state – Finland – where men and women have the same retirement age. Finland makes an interesting case since, unlike in most European countries and the US, the employment rate of 55-64-year-old Finnish women is as high as that of men (66 per cent vs 67 per cent), and older women are significantly more often highly educated than men (50 per cent vs 36 per cent) (Eurostat, 2024). While many existing studies have relied on samples or surveys, we use individual-level total population register data including all Finns born in 1954–1956. Information on retirement and several other labor market outcomes is available at a monthly level, and we can precisely follow individuals’ labor market trajectories from the month they turn 60 until the month they turn 64. Hence, we can isolate the effect of increasing SRA on different labor market outcomes more comprehensively and with greater accuracy than most previous studies. We are also able to investigate the effect of increasing SRA on the use of alternative pathways to retirement. In addition to gender differences, our rich data allows us to study socioeconomic differences in the effects of increasing SRA, an issue disregarded in most studies analyzing the effects of pension reforms. We estimate the effect of the reform on multiple labor market outcomes: retirement, employment, unemployment, disability, sickness, and inactivity. By focusing on several labor market outcomes, we can gain insight into these effects in more detail than most previous studies. Even though the aim of the reform is to
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 31 extend working lives and increase employment, it is also likely to impact the use of alternative pathways to retirement, as all individuals are not able or willing to work until the higher retirement age. In that sense the reform has some potential adverse effects, which are called substitution effects (e.g., Rabaté & Rochut, 2020; Geyer & Welteke, 2021). Importantly, substitution effects may stem from passive or active substitution. Passive substitution effects occur, for example, if individuals who are already out of employment stay longer in their current labor market state due to the increased retirement age. On the other hand, as the retirement age increases, the time window during which transitions between different labor market states are possible extends. For example, someone who is employed may become unemployed before reaching their new retirement age. These transitions are called active substitution effects. We inspect the reforminduced persistence of the previous labor market state as well as transitions between labor market states. Our study hence also relates to the strand of literature which investigates the substitution between social insurance programs (e.g., Duggan et al., 2007; Karlström et al., 2008; Staubli, 2011; Inderbitzin et al., 2016). A general finding in these studies is that tightening the criteria of one pathway leads to substitution effects into alternative early exit pathways such as unemployment, disability, or sickness benefits. In the context of rising retirement age, the use of alternative routes to retirement has rarely been thoroughly examined (see however Rabaté & Rochut, 2020). Our study also contributes to the literature concerning socioeconomic inequalities in the labor market. We investigate the effect heterogeneity not only according to gender, but also by level of education. When designing and reforming the pension system it is important to understand how different groups respond to these reforms. In case of rising retirement age, the possibilities to work until old-age pension depend on the employment opportunities and individual abilities to continue to work longer (Ebbinghaus & Hofäcker, 2013; Oude Hengel et al., 2021). As mentioned earlier, Finland makes an interesting case for studying gender differences. Moreover, it is known that there is a social gradient in the labor market exit: low-educated workers leave the labor market earlier than high-educated workers, and often this is involuntary (Mäcken et al., 2022). This is not only due to more demanding working conditions and weaker health which increase the risk of disability, but also to unemployment (Polvinen et al., 2013; Robroek et al., 2015; OECD, 2015). As a result, low-educated workers are likely to have more difficulties in reaching their new retirement age, which may lead to increasing social and economic inequalities between different socioeconomic groups. Earlier evidence on the effects according to gender or education is limited. Atav et al.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 32 (2019) found a larger employment effect for men, and Geyer et al. (2020) found that for women with low or medium education, the employment effect of the ERA increase was accompanied by equally large substitution effects to other labor market states. Our results show that the SRA increase resulted in a large employment effect of 19 percentage points between the old and the new retirement age. Employment response is quite substantial, as the employment effect represents 60 per cent of the decrease in the retirement rate induced by the reform. We also find a large increase in unemployment, inactivity and disability, and a smaller increase in the use of sickness benefits. For the most part, this is due to passive substitution, but we also evidence active substitution from employment to other labor market states. Even though transitions from unemployment and sickness to employment also occur, the transitions out of employment clearly outweigh the transitions towards employment. There are practically no differences in the effects according to gender. For the low-educated individuals, the substitution effects to labor market states outside employment are larger than for the high-educated individuals, which means that the increase in the SRA is less efficient in terms of employment for this more vulnerable group in the labor market. The remainder of this paper proceeds as follows. Section 2 describes the institutional setting and the reform of 2017. The data and the empirical methodology are presented in section 3. Section 4 provides descriptive evidence on how employment and other labor market states developed at the time of the reform. The regression results are presented in section 5, and section 6 concludes. 2.2 Institutional setup and the 2017 pension reform The Finnish pension system consists of three pillars. The statutory pension system (first pillar) includes the employment-based earnings-related pension and residence-based national and guarantee pensions. The national and guarantee pensions aim at ensuring a basic income security. The earnings-related pension system is a defined benefit system where the pension level is determined by the length of work history and the amount of past earnings. The earnings-related system is mandatory and covers all workers and virtually all earnings. Pension accrues throughout working life with contributions paid by employees and employers. Statutory pensions are broad in scope, and there is no ceiling to the pensionable earnings or the pension amount. Contrary to what is the case in many other countries, the role of second-pillar or third-pillar supplementary pensions is minor
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 33 in Finland. In the private sector, earnings-related pensions are mainly provided by pension insurance companies. The public sector has its own pension provider. The Finnish earnings-related pension system was reformed in 2017. Before the reform, the statutory retirement age (SRA) was 63 years for all, independent of cohort. Like the US and a couple of other countries, Finland has a flexible retirement age, which means that an individual can take out their pension within a certain age range. The SRA is the minimum age at which the full pension benefits can be claimed (often referred as the NRA). There are no ERAs in the Finnish pension system.1 In the 2017 reform, it was agreed that the SRA will be increased by three months for each cohort. The first cohort affected by the reform was that born in 1955. Its SRA increased to 63 years and three months. Those born in 1956 had an SRA of 63 years and six months, and so on. The retirement age increases by three months until it reaches 65 for the cohort born in 1962. For those born in 1963–1964, the threshold is also 65 years. As of those born in 1965, the old-age retirement age will be linked to life expectancy. After that, the rise in the retirement age can be two months per cohort at most. The key aspects of the Finnish pension system before and after the 2017 reform are given in Table 1. 1 Partial old-age pension allows to take out 25 per cent or 50 per cent of accrued earnings-related pension at age 61 (with an actuarial adjustment).
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 40 due to the rising SRA, one cohort has already reached the SRA at a certain age while the other cohort has not. We estimate the following differences-in-differences model: 𝑦𝑦𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖=𝛽𝛽0+𝜆𝜆𝑖𝑖+𝜃𝜃𝑖𝑖+𝛾𝛾𝑖𝑖+𝛽𝛽1𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖+𝑋𝑋i′𝛽𝛽2+𝜀𝜀𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 (1) where 𝑦𝑦𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 is a labor market state dummy equal to 1 if the individual i, at age a, from cohort c, at time t is in the relevant state. The labor market states under inspection are “retired”, “employed”, “unemployed”, “on disability pension”, “on sickness benefit”, and “otherwise inactive”. In this specification, 𝜆𝜆𝑖𝑖 are cohort dummies, 𝜃𝜃𝑖𝑖 are age dummies (age in months) and 𝛾𝛾𝑖𝑖 are time effects. 𝑋𝑋𝑖𝑖 includes a set of individual controls (gender, education, sector, length of career and type of municipality). The key explanatory variable is a dummy, 𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖, which is equals to one if the individual is below the SRA applicable within their cohort, and zero otherwise. Because the increase in the SRA affects individuals at different ages depending on their cohort, the value of this variable changes with age, cohort, and time. For those born in 1954, this variable is equal to one until age 63, and zero after that. For those born in 1955, it is equal to one until age 63 years three months, and zero after that. For those born in 1956, it is equal to one until age 63 years six months, and zero after that. The main parameter of Interest is 𝛽𝛽1 which captures the SRA increase-induced difference in the probability of being in a certain state between different cohorts. In practice we compare the probability of a certain state at the same age for persons belonging to different cohorts with a varying SRA. The central identifying assumption is that, without the increase in the SRA, the probability to be in a certain state at the same age would be similar across cohorts, controlling for the cohortand age-fixed effects, individual-level variables, and time effects (socalled common trends assumption). If this assumption holds, 𝛽𝛽1 can be interpreted as the causal effect of the SRA increase. We estimate this parameter with a linear probability model and, as a result, 𝛽𝛽1 can be interpreted as a percentage point difference in the probability that an individual is in a certain state in the cohort that has not yet reached its SRA (treatment group) compared to the cohort that has already reached its SRA (control group). The reform of 2017 has affected different cohorts at different ages, and different cohorts reach a certain age at different points in time. Therefore, we also want to control for the time effects (or the business cycle) to minimize their impact on
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 41 labor market states. To circumvent the identification issue of perfect linearity between age, period, and cohort, we use different time steps in each. We measure cohort at a yearly level and age at a monthly level, and we control for the business cycle at a quarter-year level. This means that we assume that the business cycle effects are the same for individuals observed in the same quarter. 2.4 Descriptive evidence Figures 1 and 2 present the share of retired and employed individuals from the month the individuals turned 60 to the month they turned 64. The SRA for the control cohort 1954 was 63, and the SRAs for the treatment cohorts 1955 and 1956 were 63 years and three months and 63 years and six months, respectively. This means that individuals born in 1954 can claim their pension in the month after they turn 63 and those born in 1955 and 1956 in the month after they turn 63 years and three months and 63 years and six months, respectively. The vertical lines in the Figures mark the SRAs of the different cohorts. Figure 1: Share of retired individuals in different cohorts by age, %. Vertical lines indicate the SRA of different cohorts. Source: calculations based on register data of the Finnish Centre for Pensions.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 42 Figure 2: Share of employed individuals in different cohorts by age, %. Vertical lines indicate the SRA of different cohorts. Source: calculations based on register data of the Finnish Centre for Pensions. We observe a clear parallel trend in both retirement and employment before age 63. Due to occupational retirement ages in the public sector, some individuals have retired before age 62. There is also a small jump in the retirement rate at age 62, partly due to the occupational retirement ages in the public sector, and partly due to the entitlement of the long-term unemployed to a full old-age pension at age 62. After age 63 we see a considerable increase in retirement and decrease in employment among individuals born in 1954. For individuals born in 1954, bunching at the SRA is around 22 percentage points (hazard rate, the drop in the share of employed persons at the SRA over the share of employed persons just before the SRA, is 0.43). It should be noted that the share of retired individuals increases right after age 63 also among those born in 1955–1956. This is for the most part due to disability pensions where the disability has started before 2017, as these pensions automatically transition into an old-age pension at age 63 (see Figure 3). Furthermore, there is a small drop in employment at age 63 also among those born in 1955–1956. This is mainly due to two factors: some
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 43 public sector employees have a personal retirement age of 63 years, and a small number of private sector employees have an SRA of 63 years due to collective labor agreements. After age 63 the development in cohorts facing different retirement ages diverges. The increase in retirement and the drop in employment shift to the right corresponding with the increase in the SRA, that is, by three months for the cohort of 1955 and again by three months for the cohort of 1956. In Figure 3, we also observe a rather parallel trend in the proportion of individuals in unemployment, disability, sickness, and inactivity before age 63, and a clear drop after this age for those born in 1954. There are small differences in the share of unemployed around age 62 and thereafter especially between those born in 1956 and other cohorts, but these differences are fairly small, at most 2 percentage points. In case of disability, due to pre-reform disability pensions, there is a considerable drop after age 63 also for those born in 1955 and 1956. It should be noted that after age 63, the share of individuals on disability pension reflects those disability pensions where the disability has started in 2017 or later. The period from 2017 to the new SRA is shorter for those born in 1955, and the share on disability pension among those born 1955 has only increased modestly. The share among those born in 1956 has increased more. Otherwise for those born in 1955, the largest drop in these states occurs after age 63 years and three months, and for those born in 1956, after age 63 years and six months.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 44 Figure 3: Share of unemployed, disabled, sick and otherwise inactive individuals in different cohorts by age, %. Vertical lines indicate the SRA of different cohorts Source: calculations based on register data of the Finnish Centre for Pensions. The Figures give an initial idea of the effects we aim to analyze. They also support the assumption of common trends for different cohorts before the increase in retirement age, which is at the center of our identification strategy. 2.5 Regression results 2.5.1 Main results Table 4 presents linear regression estimates of the impact of the increase in SRA on retirement, employment, unemployment, disability, sickness, and inactivity using equation (1). We only present the differences-in-differences coefficients. All estimates are significant at the 0.1 per cent level. We observe that the SRA increase has decreased retirement by 32 percentage points on average for the months between the old and new SRA. Before the reform 64 per cent were re-
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 45 tired. The SRA increase is accompanied by a rise in employment of 19 percentage points. Compared to the pre-reform baseline (29 per cent), the relative increase in employment rate amounts to nearly 70 per cent. At the same time, the SRA reform has increased unemployment by 6 percentage points on average. This is a large effect given that the proportion of unemployed individuals before the increase in the SRA was under 5 per cent. Likewise, there has been an increase in disability pension recipiency of 2 percentage points. The fraction of otherwise inactive persons has increased by over 4 percentage points, which means that this share has almost tripled because of the reform. Sickness plays a minor role as it has increased by only 0.5 percentage points (but again, compared to the pre-reform baseline, the increase is quite large). Table 4: Average effect of increase in SRA on different labor market states, percentage points Retirement Employment Unemployment Disability Sickness Inactivity Under SRA -32.13*** 19.37*** 6.01*** 2.06*** 0.48*** 4.20*** (0.205) (0.149) (0.069) (0.075) (0.029) (0.096) Pre-reform, % 63.66 29.08 4.80 0 0.30 2.16 Observations 10,465,567 10,465,56 7 10,465,567 10,465,56 7 10,465,567 10,465,56 7 Pre-reform: those born in 1954 at age 63 years and one month. Linear regression including cohort dummies, age dummies, quarter dummies and sociodemographic and regional controls (gender, education, sector, career lengths, region), standard errors clustered by month of birth. Robust standard errors in parentheses. Coefficients and standard errors are multiplied by 100 and should be interpreted as percentage points. ***p<0.001 Source: Own computation Employment represents 60 per cent of the decrease in the retirement rate (19.4/32.1), which means that this share of those individuals who delay claiming pension benefits as a response to the SRA increase are working. At the same time, 19 per cent of those who would have already retired in the absence of the SRA increase are unemployed and 7 per cent are on a disability pension. In total, 15 per cent are on sickness benefits or otherwise inactive due to the reform.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 46 The SRA reform has hence increased employment considerably but, at the same time, it has generated large substitution effects from retirement to other labor market states. We can expect that part of these effects is due to passive substitution: when the SRA increases, individuals that would have otherwise retired, stay longer at their respective states, for example unemployed. Another part of the effects may derive from active substitution, which means that, for example, some employed individuals may end up as unemployed before reaching the new retirement age. We will investigate substitution effects in more detail later in Section 5.2. Next, we will present robustness tests for our results. We first test the sensitivity of the employment effects to alternative specifications. The results are presented in Table 5. In the first specification there are no controls and no clustering of standard errors. In the second specification, the standard errors are clustered by month of birth. The third specification includes quarter dummies to control for the business cycle. In the fourth specification, sociodemographic and regional control are added to the model. This is the preferred specification that was used in Table 5. The fifth specification presents the employment effect only for the first increase in the SRA, that is, when only those born in 1954 and 1955 are included. The estimated effects of the change of the employment rate remain very similar independent of the specification used. A further test of the validity of our model is to conduct a placebo test – that is, to test whether there is an effect when we would not expect to see one. Therefore, we estimate the same specification as in column 4 using those born in 1953 and 1954 and assume (incorrectly) that the increase in the SRA started from the cohort of 1954 (specification six). The estimate of this pseudo reform is negative and very small in magnitude.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 47 Table 5: Sensitivity tests for the employment effect of the increase in SRA No controls, no clustering (1) No controls, clustering by month of birth (2) 2+ Quarter dummies (3) 3+ Sociodemographic and regional controls (4) 4+ Only those born in 1954 and 1955 (5) 4+ Pseudo reform (6) Under SRA 20.18*** 20.18*** 19.39*** 19.37*** 18.58*** -0.89*** (0.094) (0.203) (0.148) (0.149) (0.234) (0.162) R2 0.077 0.077 0.077 0.222 0.224 0.219 Observations 10,465,567 10,465,567 10,465,567 10,465,567 6,976,130 5,462,939 Coefficients and standard errors are multiplied by 100 and should be interpreted as percentage points. Pseudo reform includes those born in 1953 and 1954 and assumes that the SRA started to increase from the cohort of 1954. ***p<0.001 Source: Own computation 2.5.2 Passive or active substitution? As mentioned earlier, the employment and substitution effects shown in Table 4 can result either from the persistence of a certain labor market state (passive substitution) or from a transition between states (active substitution) due to an increase in the SRA. To investigate this issue in more detail, we estimate equation (1) conditioning by the initial labor market state at age 62 years and six months. At this age, 54 per cent of the study population was employed, 11 per cent unemployed, 17 per cent on a disability pension and 1 per cent on sickness benefit. Linear regression results are presented in Table 6. To inspect the sensitivity of the choice regarding the initial state, we estimated the models measuring the initial state also at age 62 years and nine months. The results are very similar to those reported here.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 48 Table 6: Average effect of increase in SRA on labor market transitions from employment, unemployment, disability and sickness, percentage points Retirement Employment Unemployment Disability Sickness Inactivity Employment Under SRA -39.42*** 34.53*** 1.58*** 0.46*** 0.70*** 2.14*** (0.253) (0.188) (0.074) (0.040) (0.026) (0.076) Pre-reform, % 44.54 53.90 0.68 0 0.43 0.45 Observations 2,210,859 2,210,859 2,210,859 2,210,859 2,210,859 2,210,859 Unemployment Under SRA -44.82*** 1.97*** 40.17*** 0.22*** 0.39*** 2.07*** (0.413) (0.089) (0.388) (0.039) (0.043) (0.265) Pre-reform, % 60.76 2.34 35.81 0 0.16 0.92 Observations 462,498 462,498 462,498 462,498 462,498 462,498 Disability Under SRA -5.95*** 0.05 0.01 5.90*** 0.00 -0.01 (0.449) (0.034) (0.011) (0.454) (0.004) (0.006) Pre-reform, % 99.98 0 0.01 0 0 0.02 Observations 691,923 691,923 691,923 691,923 691,923 691,923 Sickness Under SRA -67.72*** 20.02*** 4.54*** 35.76*** 5.37*** 2.04*** (1.662) (0.940) (0.283) (1.240) (0.978) (0.413) Pre-reform, % 81.45 12.29 1.81 0 3.98 0.48 Observations 50,160 50,160 50,160 50,160 50,160 50,160 Pre-reform: those born in 1954 at age 63 years and one month. Original status measured at age 62 years and six months. Linear regression including cohort dummies, age dummies, quarter dummies and sociodemographic and regional controls (gender, education,
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 49 sector, career lengths, region), standard errors clustered by month of birth. Robust standard errors in parentheses. Coefficients and standard errors are multiplied by 100 and should be interpreted as percentage points. ***p<0.001 Source: Own computation We notice that the rising SRA has increased employment persistence on average by 35 percentage points. This means that about 88 per cent (34.5/39.4) of those employed individuals who would have retired given the option continue to work due to the reform. At the same time, active substitution has also taken place, as we see an increase in transitions from employment to inactivity (2.1 pp) and unemployment (1.6 pp) and, to a smaller degree, to sickness (0.7 pp) and disability (0.5 pp). The share of originally employed individuals who are outside work has increased in total by 5 percentage points between the old and new SRA. This means that, due to the reform, in total around 12 per cent (4.9/39.4) of employed individuals who would have already retired were it not for the SRA increase are inactive, unemployed, on sickness benefit, or on a disability pension. In the case of unemployment, the decrease in the retirement rate induced by the reform has mostly translated into continuation of unemployment. As a result of the SRA increase, unemployment persistence has grown by 40 percentage points. This indicates that 90 per cent (40.2/44.8) of those unemployed who delay claiming pension benefits due to the SRA increase stay unemployed longer because of the reform. A small portion of unemployed have returned to employment or become inactive. The increase in the SRA has also impacted disability pension or sickness enrolment among unemployed individuals to some degree. Disability is a very absorbing state, as there are practically no transitions from a disability pension to any other labor market states following the reform. Receiving sickness benefits, on the other hand, seems to be a less absorbing state; the increase in persistence in this state due to the rising SRA is only less than 6 percentage points, which accounts for 8 per cent (5.4/67.7) of the decrease in the retirement rate. Then again, a considerable part (53 per cent) of those on a sickness benefit who would have retired without the reform end up on a disability pension. Due to the SRA increase, 30 per cent of individuals on sickness benefit return to employment instead of retiring. Since the number of employed individuals is significantly larger than the number of individuals that are unemployed or on sickness benefit, transitions from employment to other labor market states clearly outweigh the transitions from unemployment or sickness to employment. This means that the SRA increase results in more negative (out of work) than positive (towards work) active substitution.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 56 Further analyses showed that the observed substitution effects are mostly caused by passive rather than active substitution. That is, those facing a higher SRA stay longer in their respective labor market states rather than retire. Sickness forms an exception: majority of those on sickness benefits transition to other labor market states, most frequently to disability pension but also to employment. As a whole, the results indicate that for a considerable part of the population, the increase in SRA means that unemployment or disability persists. Increased employment thus comes with the social cost of those in a weaker position remaining in that position for an extended period. However, we also found increased entry to inactivity, unemployment, sickness benefits and disability pension among originally employed individuals. In other words, there has been some active program substitution from employment to other labor market states due to the increase in the SRA. In total, 12 per cent of employed individuals who would have retired were it not for the reform exited work before reaching their new retirement age. The result indicates that in the case of rising SRA some employed individuals end up using alternative pathways to retirement. This can be voluntary or involuntary. Even though transitions from unemployment and sickness to employment also occurred, the transitions out of employment clearly outweigh the transitions towards employment. The ability to work longer may vary according to, for example, socioeconomic status. To reveal potential heterogeneous behavioral effects, we examined the effect of the SRA increase separately by gender, education, and sector. We did not find large differences between men and women. This is a new finding in the literature and most likely reflects gender equality in employment rates in Finland. In addition, we found that, for the low-educated individuals, the substitution effects to labor market states outside work were larger than for the high-educated. The same applies to the private vs the public sector. The results indicate that, among the low-educated, the SRA increase is less efficient in terms of employment in that employment represents less of the decrease in the retirement rate induced by the reform. The low-educated individuals use unemployment and disability as alternative pathways to retirement more often. This may lead to rising social and economic inequalities between the lowand high-educated individuals via negative effects on their financial position, their pension accrual and, consequently, their old-age security, not to mention potential adverse effect on their mental wellbeing (e.g., Barschkett et al., 2022). It is also worth pointing out that when the SRA increases, individuals who die earlier lose a higher proportion of
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 57 their lifetime pensions. This effect is particularly pronounced among individuals with a lower socioeconomic status, as their life-expectancy is shorter. Our results reveal important information on the effects of the rising SRA and complement the existing literature on this subject. It is worth pointing out, however, that a limitation is that in this study we investigated the short-term effects of the SRA increase, that is, a situation in which the SRA has not yet increased much. Then again, the largest effect of the SRA increase seems to manifest itself exactly at the point when the SRA increases so, in this sense, even a short-term inspection provides relevant insights into the effects of the 2017 pension reform. Keeping that in mind, it seems that in Finland, raising the SRA has generated an employment effect that is among the largest found in the literature, and has also so far been a more efficient way to improve employment than in many other countries. However, it should be noted that the reform-induced decrease in the retirement rate in Finland has been until now attenuated in the cohorts under inspection because disability pensions where the disability had started before 2017 automatically changed into an old-age pension at age 63, the pre-reform SRA. This means that the proportion of employment over the reform-induced decrease in retirement will most likely decrease in the future. This effect will be pronounced in the groups where the incidence of disability is high: among individuals in lower socioeconomic position.
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Reforming the Pension System in Germany – An Empirical Study of Reform Aversions Matthias Diermeier / Ruth Maria Schüler Contact Information Dr. Ruth Maria Schüler Economist for Social Security Systems and Income and Wealth Distribution at the German Economic Institute in Cologne E-Mail: [email protected]
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 62 Abstract The German pension system is under enormous pressure to reform due to demographic change. Despite considerable concern, no reform of insurance system mechanisms enjoys majority support among the German population. In a factorial survey experiment conducted as part of a population survey by the German Economic Institute (IW) 2023, contribution rate, pension level and retirement age are examined in relation to each other, and potential reform adjustments are simulated. Even the explicit presentation of reform scenarios is unable to overcome the existing aversion to reform. The status quo receives major support, but in theory it would only be financially sustainable by increasing tax subsidies, which would place a considerable burden on the state budget. In a direct comparison of reform options, an increase in contribution rates is opposed the least. Pension cuts are seen as the most painful. Delaying retirement by one year is viewed as negatively as an increase in the contribution rate of around three percentage points or a reduction in pension levels of around 4 per cent. The lowest acceptance of reforms was to be found among those whom they would least affect: the over-50-year-olds. Among those under the age of 50, who are most concerned about their pensions, the rejection of all reform options is considerably weaker. The fact that the visible pressure on the pension system is pushing younger people in particular to be more flexible should serve as an argument to target the over-50s and highlight the consequences of inaction for society as a whole. Failure to act would either require a greater commitment to occupational and private pension provision or, while guaranteeing a constant level of pensions, lead to an immense burden on the state budget. Delaying the reform further risks reinforcing the public’s expectation of a constant level of pensions without their having to contribute, reducing the scope for manoeuvre and intensifying the debate on pensions.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 63 Table of Contents Abstract.............................................................................................................. 62 Table of Contents .............................................................................................. 63 List of Figures .................................................................................................... 63 List of Tables ..................................................................................................... 63 3.1 Ageing and pension insurance .................................................................. 64 3.2 Pension reform preferences according to a population survey ................. 64 3.3 Factorial survey experiment ....................................................................... 67 3.4 Aversion to impositions in the pension debate .......................................... 70 3.5 Strong status quo bias ............................................................................... 72 3.6 Inevitable cuts ............................................................................................ 74 References ........................................................................................................ 77 List of Figures Figure 1: Ranking of dimensions of pension reform in Germany, percentage of respondents ......................................................... 66 Figure 2: Example for a vignette ............................................................... 68 Figure 3: Coefficient plots for reform satisfaction ..................................... 73 List of Tables Table 1: Dimensions and levels of the factorial survey experiment on pension reforms ..................................................................... 69 Table 2: Ranking of reform options considering the German pension system ........................................................................................ 70
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 64 3.1 Ageing and pension insurance The statutory pension insurance system in Germany is organised as a pay-asyou-go system. This means that today’s contributors finance the pensions of current pensioners. However, due to the ageing of German society, there are increasingly fewer contributors compared to the number of pensioners. This is reflected in the development of the old-age dependency ratio. In 2021, there were 32 people aged over 67 for every 100 people in the typical working age group of 20-67 (Statistisches Bundesamt, 2023). In 2035, the old-age dependency ratio will exceed 40 for the first time. This means that the pension system’s expenditure will not be covered by its revenue under current conditions. In the German pay-as-you-go system, three inherent mechanisms are designed to balance the pension system’s revenues and expenditures: • Increasing the contribution rate can generate more revenue. • Lowering the pension level can reduce pension insurance expenditure. • Raising the retirement age means that people retire later and therefore receive a pension for a shorter period and contribute for a longer period as they remain in the labour force longer. However, all these inherent reform options are not supported by the majority of the German population (Forschungsgruppe Wahlen, 2018; Boeri et al., 2002). The fierce debate on pension reform and the strong protests against the recent increase in the statutory retirement age from 62 to 64 in France illustrate the social tensions inherent in such reforms. To identify a reform option for the German pension system that has a realistic chance of being implemented within the German political system, it is important to understand the attitude of the German population towards these three mechanisms. This involves explicitly explaining to respondents the interrelationship between these three mechanisms and the consequences of inaction, and motivating them to weigh up the three options. This study analyses a factorial survey experiment conducted as part of a population survey by the German Economic Institute (IW) in 2023 (for information on the survey and the sample, see Diermeier et al., 2023). 3.2 Pension reform preferences according to a population survey As part of a population survey by the German Economic Institute 2023, respondents were asked in which of the three dimensions a change would be most or
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 65 least acceptable from a social perspective. Respondents were asked to rank the three mechanisms – higher contribution rate, higher retirement age and lower pension level – according to their perceived “acceptability”. In the introduction to the experiment, respondents were informed about the financing difficulties of the pension system in the context of demographic change. Via an online access panel provided by Bilendi & respondi, between 27 February and 6 March 2023, the survey received 4,899 valid responses from individuals aged 18 and over on their preferences regarding pension insurance. The survey was representative and stratified by gender, age (cross-tabulated), place of residence by federal state and net monthly household income (Diermeier et al., 2023). The number of respondents who identified themselves as pensioners in the statutory pension insurance system was 28.2 per cent and 3.1 per cent in civil service respectively. The percentage of pensioners was thus slightly lower than the percentage of people in Germany who receive a pension from the statutory pension insurance system, which is 30 per cent. The number of pensioners was 2 per cent. Overall, about 35 per cent of the adult German population expressed great concern over their own retirement provision. The descriptive analyses (Figure 1) also show a clear hierarchy in terms of which dimensions of the deterioration in the pension insurance situation are perceived as particularly painful. 52.7 per cent of respondents in Germany said that a lower pension level would be the least acceptable. 54.8 per cent of respondents considered a higher contribution rate to be the most acceptable. According to the extent to which it would affect them, 59.1 per cent of pensioners said a pension cut would be the least acceptable. The percentage of those who find a higher retirement age most acceptable is highest among pensioners not affected by this reform option, at 35 per cent. Interestingly, the views of those over the age of 50 who do not identify themselves as pensioners are only slightly different. However, those under the age of 50 have a very different perspective. They are more likely to accept a lower pension level. They are most opposed to a higher retirement age. An initial descriptive finding suggests that preferences vary according to generational affiliation and are thus partly related to individual concerns.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 72 3.5 Strong status quo bias A factorial survey experiment allows a direct comparison of different dimensions through the approval of reform scenarios, as well as a distinction of effects between different generations. It is true that results to date have indicated a clear prioritisation – increasing contributions is the least painful; cutting pensions is particularly unpleasant. However, they have not taken into account that the levels of the dimensions are expressed in different units – such as increasing the retirement age in two-year increments and reducing the pension level in 10 per cent increments. A regression with reform consent as the dependent variable and the three dimensions of retirement age, contribution rate and pension level as independent variables provides an insight into their relative importance. The most favourable level of each dimension is defined as the reference category and compared to the other two levels. As a large part of the variance can be explained by different response patterns among respondents, a multilevel model is estimated. The multilevel models are specified separately for pensioners, the group of non-pensioners over the age of 50 and those under the age of 50. Figure 3 shows the coefficient plots of the regressions. Overall, increasing the contribution rate and retirement at 67 meet with the least resistance. Pension cuts and retirement at 69 meet with the strongest resistance. On the agreement scale from 1 to 7, a 20 per cent reduction in pensions leads to the strongest rejection in all three groups, which is statistically significant. While the approval of reform decreases by more than 1.3 scale points for respondents over the age of 50 in the case of a 20 per cent reduction in pensions, the effect for those under the age of 50 is statistically significantly lower, at 1.17 scale points. It is noteworthy that raising the retirement age to 69 is the second most rejected option among the two groups over the age of 50, even though they would not be affected or only partially affected (non-pensioners over the age of 50). Of the three groups, the non-pensioners who have not yet reached retirement age are most opposed to retirement at 67 – for this group the standard retirement age is already at least 66. An increase in the contribution rate to 22 per cent is the least opposed of all age groups. Despite the greater impact on the younger age cohort, an increase in the contribution rate to 25 per cent also meets with the least resistance.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 73 Figure 3: Coefficient plots for reform satisfaction; Multilevel random effects (GLS) and clustered respondent-level standard errors A multilevel model controls the hierarchical data structure of a dataset – in this case, the nine vignettes rated by the 4,899 respondents. Such a model was specified because, at 38 per cent, a significant proportion of the variance can be explained by different response patterns between respondents (intra-class correlation coefficient: 0.38). Only 62 per cent of the variance can be explained within each respondent’s nine answers. Basis: 4,899 observations from a population survey by the German Economic Institute in February and March 2023. Source: German Economic Institute Comparisons of the effect sizes show that a retirement age of 69 would have a similarly negative impact on those under the age of 50 as a 10 per cent reduction in their pension. For older generations, however, a retirement age of 69 would be significantly worse. Assuming a linear relationship, an increase in the retirement age by one year would be rejected by all three demographic groups in a similar way as an increase in the contribution rate of around 3 percentage points or a reduction in pensions of around 4 per cent. This relationship remains consistent, with small variations, even when controlling for socioeconomic characteristics (education level, income, gender, children, age) and the residential location of the respondents (East vs. West). -1,50 -1,25 -1,00 -0,75 -0,50 -0,25 0,00 Retirement age of 67 (ref.: 65) Retirement age of 69 (ref.: 65) Contribution at 22% (ref.: 18.6%) Contribution at 25% (ref.: 18.6%) Pensions 10% lower (ref.: same) Pensions 20% lower (ref.: same) Pensioners Non-Pensioners above 50 years Under 50 years
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 74 3.6 Inevitable cuts People under the age of 50 are the most concerned about their pensions and at the same time the least resistant to pension reform. It is therefore important to determine how to use the window of opportunity for reform created by rising retirement concerns among younger people before demographic trends shift majorities further towards the older population. The majority of Germans remain opposed to any changes that would make the pension system more sustainable. The desire to maintain the status quo is deeply ingrained. Respondents are most willing to accept a higher contribution rate, while at the same time stressing the importance of maintaining a constant pension level. Specifically, delaying retirement by one year is about as painful as increasing the contribution rate by about 3 percentage points or reducing the pension level by about 4 per cent. This is a very uncomfortable situation for policymakers. While demographic pressures undoubtedly require a high price to be paid to satisfy the desire for high pension payments, any adjustment within the insurance logic of the statutory pension system would require the uncovered expenses to be financed from the federal budget or other sources. The current study shows that a reform would alienate various population groups. However, the least objectionable path of increasing the contribution rate may turn out to be misguided for several reasons. Firstly, it is unclear whether people reject an abstract increase in the contribution rate simply because it is less tangible than a later retirement age or a pension cut. Once the financial burden becomes tangible, rejection of the reform may follow. There is evidence that people who can precisely estimate the contribution rate are much more likely to reject its increase. Secondly, higher contribution rates also affect companies, some of which are currently operating at capacity. The resulting higher labour costs for employers could lead to negative employment effects and reduced investment activity by companies. For example, Beznoska et al. (2017) show that an equal division of additional contributions to statutory health insurance between employees and employers would lead to a decline in gross domestic product and an increase in the unemployment rate. Finally, demographic ageing will require not only an increase in the contribution rate to statutory pension insurance, but also an increase in contributions to health
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 75 and long-term care insurance. The implications of these indirect effects are probably not taken into account by most people in their considerations, but they hold considerable potential for disappointment. To some extent, the entitlement mentality of the German population has been reinforced by political promises. The introduction of non-deductible early retirement for particularly long-serving employees, the so-called “retirement at 63”, as well as the mothers’ pension and the often-voiced demands for fixing the pension level and the contribution rate – and their active implementation through the double stabilisation lines – gave the impression that the status quo could be maintained or even improved without additional financial burdens. This is not the case. If contribution rates and retirement ages are not adjusted, the German population’s priority wish for a constant level of pensions for the current generation of pensioners will lead to enormous burdens. It is necessary to explain to the public that this would result in reduced public services or higher taxes for the population as a whole, possibly at the expense of the net income development of younger cohorts. In addition, the pension guarantee ensures that pensions will not be cut. The priority wish of the German population is already enshrined in current law. It is therefore important to emphasise and clarify that decreasing the statistical pension level does not mean that the pensions paid will decrease. The statistical pension level simply compares the standard pension, i.e., the pension of a hypothetical pensioner who has received the average wage of all pensioners for 45 years and paid the corresponding contributions, to the current average wage of all pensioners. The statistical pension level thus only serves to compare the performance of the pension system over time. To promote understanding of the fundamental reforms of the German pension system, more emphasis should be placed on the multiple challenges of demographic change and the consequences for individuals should be illustrated with examples. This requires both clearly identifying the individual and collective burdens of reform and highlighting the trade-offs between different mechanisms in the pension system. In particular, the opportunity costs of inaction should be clearly highlighted (Enste et al., 2009). Maintaining the status quo would require higher tax subsidies, limiting opportunities for investment and other government functions. With regard to the retirement age, for example, it should be conveyed that later retirement benefits each individual in the form of a higher pension (Pimpertz, 2023). Finally, pension payments depend on the amount and duration of contributions. The current analyses suggest that the key to pension reform with majority support may lie in older people taking the preferences of younger people seriously. After
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 76 all, the latter are particularly affected but are nevertheless more willing to accept the cuts.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 77 References Auspurg, K., Hinz, T. & Liebig, S. (2009): Komplexität von Vignetten, Lerneffekte und Plausibilität im Faktoriellen Survey, in: Methoden, Daten, Analysen (mda), 3. Jg., Nr. 1, S. 59-96. Beznoska, M., Kolev, G. & Pimpertz, J. (2017): Makroökonomische Effekte einer paritätischen Beitragsfinanzierung: Eine Analyse aktueller Reformvorschläge für die Gesetzliche Krankenund die soziale Pflegeversicherung, IW-Policy Paper, Nr. 15, Köln. Boeri, T., Boersch-Supan, A. & Tabellini, G. (2002): Pension Reforms and the Opinions of European Citizens, in: American Economic Review, 92. Jg., Nr. 2, S. 396-401. DFPA – Deutsche Finanz Presse Agentur (2020): Studie: Deutsche um die 40 – Generation Rentenangst, 15.7.2020, https://www.dfpa.info/maerkte-studien-news/studie-deutsche-um-die-40-generation-rentenangst.html [20.7.2023]. Diermeier, M., Engler, J.F. & Schäfer, H. (2023): Zu viel oder zu wenig Reform?. Die öffentliche Verhandlung des Bürgergeldes, in: IW-Trends, 50. Jg., Nr. 1, S. 101-124. Enste, D.H., Haferkamp, A. & Fetchenhauer, D. (2009): Unterschiede im Denken zwischen Ökonomen und Laien – Erklärungsansätze zur Verbesserung der wirtschaftspolitischen Beratung, in: Perspektiven der Wirtschaftspolitik, 10. Jg., Nr. 1, S. 60-78. Forschungsgruppe Wahlen (2018): Politbarometer August II 2018, https://www.forschungsgruppe.de/Umfragen/Politbarometer/Archiv/Politbarometer_2018/August_II_2018/ [14.7.2023]. German Economic Institute (2023): Population Survey by the German Economic Institute (IW) 2023, Köln. Häusermann, S, Kurer, T. & Traber, D. (2019): The Politics of Trade-Offs: Studying the Dynamics of Welfare State Reform with Conjoint Experiments, in: Comparative Political Studies, 52. Jg., Nr. 7, S. 1059-1095. Pimpertz, J. (2023): Länger arbeiten lohnt sich im Alter, IW-Kurzbericht, Nr. 65, Köln.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 78 Statistisches Bundesamt (2023): Ergebnisse der 15. koordinierten Bevölkerungsvorausberechnung, Entwicklung der Bevölkerungszahl bis 2070 nach ausgewählten Varianten der 15. Koordinierten Bevölkerungsvorausberechnung, Wiesbaden.
Nonfinancial Defined Return (NDR) Pension Framework and a New Perspective on Pension System Sustainability Martin Drees Contact Information Martin Drees PhD student in mathematics at the University of Bonn E-Mail: [email protected]
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 80 Abstract We propose Nonfinancial Defined Return (NDR) as a novel abstract framework for pension systems, building upon the Nonfinancial Defined Contributions (NDC) scheme. NDC has been implemented in several countries, including Sweden. It shares key features with the German pension system. NDR emphasizes a direct link between contributions and benefits, with each unit of contribution corresponding to one expected unit of benefit. Participants accumulate index points according to specific contribution rules. These index points are then converted into annual pensions via an insurance mechanism. Balancing rules manage the difference between contribution revenues and pension expenses. NDR-GDP represents the special case where the indexation method is tied to GDP, balanced through government transfers by default. We further introduce the concept of delta-sustainability. A pension system is called delta-sustainable if the sum of unfunded liabilities relative to GDP remains constant over time, and government transfers reduce liabilities by the amount of the transfer. NDRGDP is delta-sustainable, justifying the balancing via government transfers. The NDR framework and the concept of delta-sustainability offer fresh perspectives on pension system sustainability, with NDR-GDP presenting a novel approach to address demographic challenges in pension reforms. Acknowledgements I would like to thank Meike Neuwohner, Bert Rürup, Christina Wilke, Christian Zimpelmann and many others for fruitful discussions and helpful comments.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 81 Table of Contents Abstract.............................................................................................................. 80 List of Figures .................................................................................................... 82 4.1 Introduction ................................................................................................ 83 4.2 Simplified description of NDC .................................................................... 85 4.3 Nonfinancial Defined Return framework .................................................... 88 4.3.1 Index points ................................................................................... 88 4.3.2 Separating the insurance mechanism .......................................... 89 4.3.3 Description of NDR ....................................................................... 90 4.3.4 Equivalence principle versus participation equivalence ............... 91 4.4 NDR-GDP .................................................................................................. 92 4.4.1 Description .................................................................................... 92 4.4.2 NDR-GDP and NDC within the context of NDR ............................ 93 4.5 Delta-sustainability ..................................................................................... 95 4.5.1 Definition ....................................................................................... 95 4.5.2 NDR-GDP is delta-sustainable ..................................................... 95 4.5.3 Comparison with similar notions of pension system sustainability ..................................................................... 96 4.6 High-level reform strategy: Invariants and flexibility .................................. 97 4.7 Crucial difference of NDC and NDR-GDP ................................................. 98 4.8 Conclusion and outlook ............................................................................. 99 References ...................................................................................................... 100 Appendix 4.1:Terminology of Nonfinancial Defined Return framework .......... 102
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 88 For this paper, a basic understanding of the concept of future contributions, as illustrated by the above example, is sufficient. The key point is that future contributions are conceptually integrated into the consideration of financial balance. Settergren and Mikula (2005) provide a comprehensive definition of the turnover duration and the future contributions. Rate of return and automatic balancing mechanism (ABM) By leveraging the concepts of liabilities and assets, an automatic balancing mechanism (ABM) can be implemented within an NDC scheme. When assets and liabilities are unequal, adjustments to the rate of return can restore equilibrium. In theory, one could directly manipulate the value of liabilities to maintain parity with assets, thereby implying a continuous change of values in individual accounts. However, in practice, an a priori choice of the rate of return is made — for instance, tied to changes in the wage sum. If the disparities between liabilities and assets become significant, the ABM intervenes to adjust the rate of return accordingly. In this paper, NDC refers to a scheme where the rate of return is determined by financial balance, similarly to what Palmer (2005) refers to as generic NDC. 4.3 Nonfinancial Defined Return framework Within this section, we present the novel abstract pension framework Nonfinancial Defined Return (NDR). Similar to the NDC scheme, the NDR framework employs the concept of notional individual accounts. However, unlike the NDC scheme, it does not require fixed contribution rates or a rate of return induced by financial balance; instead, it only necessitates the existence of what we call contribution rules and any rate of return. Before delving into the intricacies of the NDR framework, we will first introduce two fundamental components of abstraction: the concept of index points and the separation of the insurance mechanism. 4.3.1 Index points Instead of representing a notional value directly on individual accounts, the framework utilizes index points. These index points possess a fixed value at any given time. Rather than applying the rate of return directly to the monetary value
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 89 within individual accounts, it is applied to the value of an index point. While this approach is equivalent in outcome, the number of index points remains constant when the rate of return is applied. Consequently, this method captures what remains constant when no contributions are made. Subsequently, we will describe contributions noted on individual accounts as the process of buying index points. 4.3.2 Separating the insurance mechanism In a pension system, a key function is to insure individuals against the risk of outliving their savings by providing lifelong income upon retirement. It is worth noting that there exists the possibility to separate the accumulation of pension claims from this insurance aspect. Given that insurance naturally entails the possibility of generating surpluses or deficits, the idea is to segregate this aspect from the broader pension system. Rather than allowing for the conversion of value from the individual account into a lifelong annuity within the pension system, a dedicated pension insurance mechanism is introduced. The pension insurance is responsible for disbursing lifelong annuities, while any surpluses or deficits within the insurance mechanism are internally managed. For a visual representation of these mechanics, refer to Figure 2. The administration handles the buying and selling of index points, a process that may potentially result in imbalances, a topic we will explore further. Figure 2: Separating the insurance mechanism Source: Own computation Administration Buy index points Participants Pension insurance Sell index points Index points for insurance benefit
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 90 4.3.3 Description of NDR The NDR framework4 puts a strong emphasis on the contribution-benefit link, ensuring that every unit of contribution results in one unit of pension insurance benefit. These units are represented by index points, the value of which changes according to an indexation method. Contribution rules delineate how participants contribute to the system, involving the purchase of index points at their current value, which are then recorded on individual accounts. Through an insurance mechanism, participants have the option to exchange index points for pension benefits, such as a lifelong annuity. Subsequently, the pension insurance sells index points to cover the cost of these benefits. Similar to the NDC scheme, the revenue from contributions is not invested in financial market assets but is utilized to pay pensions for other participants, albeit indirectly through the pension insurance. The total revenue from contributions may differ from the expenses of the pension insurance, resulting in a discrepancy between the numbers of index points bought and sold, respectively. Balancing rules are employed to address such situations. Examples of balancing rules include the establishment of a reserve fund, the formulation of contribution rules and indexation methods, and the provision of government transfers. In summary, the NDR framework comprises the following components: • Contribution rules • Indexation method • Insurance mechanism • Balancing rules It is important to note that the NDR framework remains abstract, as it, for example, does not prescribe specific contribution rules. Rather, it mandates that any concrete pension system following this framework must define its contribution rules. 4 A discussion on the terminology of the NDR framework can be found in Appendix 4.1.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 91 Later on, we will delve into how NDC aligns with the NDR framework. Additionally, we will introduce NDR-GDP, which also conforms to the framework but implements different choices than NDC. 4.3.4 Equivalence principle versus participation equivalence The NDR framework operates on the core principle that one index point of contribution corresponds to one unit of (expected) pension benefit, a principle termed the equivalence principle. In contrast, the German pension system relies on the principle of (participation equivalence), where every unit of contribution at the same point in time must lead to the same expected pension claim. To illustrate the concept of participation equivalence within the NDR framework, we utilize the notions of index points and the separated insurance mechanism. Participation equivalence entails that at time 𝑡𝑡, a contribution of one index point leads to a pension benefit of 𝑥𝑥𝑡𝑡 index points, where 𝑥𝑥𝑡𝑡 is equal for all participants. Unlike the equivalence principle, 𝑥𝑥𝑡𝑡 may vary over time, and it may differ from 1. It is important to note that the equivalence principle directly implies participation equivalence. The call for the equivalence principle represents a stronger claim than advocating for participation equivalence. While the former demands an exact correspondence between contributions and benefits, the latter only requires proportionality, with the factor possibly varying over time. However, statements about the implications of participation equivalence are a stronger claim than those about the equivalence principle. This is because any statement implied by participation equivalence is also covered by the more specific equivalence principle. The possibility of changing 𝑥𝑥𝑡𝑡 over time can of course have effects on intergenerational redistribution. Furthermore, even if 𝑥𝑥𝑡𝑡 remains constant but differs from 1, there are effects on intragenerational redistribution. For instance, if 𝑥𝑥𝑡𝑡= 1.2 for all 𝑡𝑡, the total rate of return per year is higher for contributions held for shorter periods because the bonus of 20 per cent is spread over a shorter period of time. This redistributes income intragenerationally from early to late earners. Additionally, one can argue that a proportional factor different from 1 affects redistribution, irrespective of this temporal perspective. In the special case where 𝑥𝑥𝑡𝑡= 0 for all 𝑡𝑡, there are no pension claims at all and those with larger contributions pay more but receive nothing in return. Conversely, if 𝑥𝑥𝑡𝑡=1000 for all 𝑡𝑡, doubling the contribution has a significantly smaller impact than dou-
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 92 bling the benefit. These effects are much less pronounced but still present if 𝑥𝑥𝑡𝑡 is close to 1 but different. While both the equivalence principle and participation equivalence have implications for redistribution, the dynamic valuation over time and different life expectancies complicate assertions about redistribution under either principle. 4.4 NDR-GDP In this section, we will describe NDR-GDP, a pension scheme that adheres to the NDR framework, and compare it with the NDC scheme. 4.4.1 Description NDR-GDP adopts GDP as the indexation method, where the value of index points is determined by a constant factor times the current GDP. Unlike NDC, NDR-GDP offers complete flexibility in contribution rules and imposes no restrictions on the insurance mechanism. This flexibility extends to the ability to change contribution rules, making NDR-GDP particularly adaptable to evolving circumstances. Balancing within NDR-GDP is achieved through government transfers, where the government buys and sells index points to ensure the total number of bought and sold index points remains equal (see Figure 3). The administration thus never holds index points. An initial amount of index points is given by existing pension claims.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 93 Figure 3: Schematic of NDR-GDP Source: Own computation For simplicity, we assume that the government always holds a nonnegative balance of index points. This can be practically achieved by combining the system with a funded system or utilizing forced payout mechanisms. A fundamental characteristic of NDR-GDP is that the total sum of index points across participants, the pension insurance, and the government remains constant over time. This property ensures that the number of index points held by the government is bounded by the initial amount in the system, limiting the total transfers relative to GDP. The justification for government transfers is provided by delta-sustainability, which we will introduce in Section 5. 4.4.2 NDR-GDP and NDC within the context of NDR Figure 4 illustrates the different choices made by NDC and NDR-GDP for the core components of the NDR framework. Administration Buy index points Participants Pension insurance Sell index points Index points for insurance benefit Government Buy/sell index points
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 94 Figure 4: Choices of NDC and NDR-GDP Source: Own computation NDC typically employs a fixed rate of wages as its contribution rule, ensuring that contributions are set to allow for the computation of the contribution asset. In contrast, NDR-GDP offers flexibility in contribution rules. Regarding indexation, NDC relies on the automatic balancing mechanism, while NDR-GDP opts for GDP-based indexation. Long-term balancing in NDC is achieved through the automatic balancing mechanism, while shorter-term balancing is often facilitated by a reserve fund. Conversely, NDR-GDP relies on government transfers for balancing. In many descriptions of NDC, the insurance mechanism is portrayed as an integrated component, whereas in NDR-GDP, it is entirely separated and accounted for independently. It is possible to also separate the insurance aspect in NDC schemes. This comparison highlights the technical disparities between NDC and NDRGDP. In Section 7, we will delve into the critical conceptual difference between NDC and NDR-GDP, particularly focusing on the notion of pension system sustainability. NDR NDR-GDP NDC Flexible GDP Government transfers Separated Fixed rates of wages Induced by ABM Reserve fund, ABM Integrated Contribution rules Indexation Balancing Insurance
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 95 4.5 Delta-sustainability In this section, we introduce the central concept of this paper: deltasustainability. We begin by presenting its definition. Subsequently, we demonstrate that NDR-GDP adheres to the principle of delta-sustainability. Furthermore, we undertake a comparative analysis, contrasting delta-sustainability with other notions of pension system sustainability, in particular with the concept of financial balance prevalent in NDC schemes. 4.5.1 Definition A pension system is termed delta-sustainable if the sum of unfunded liabilities5 relative to an economic indicator does not increase over time. Additionally, any transfer of value 𝑥𝑥 into the system must lead to a decrease in the sum of unfunded liabilities by 𝑥𝑥. Similarly, in the case of a negative 𝑥𝑥, an increase by |𝑥𝑥| is permitted. When the economic indicator is not explicitly designated, it defaults to GDP, given its prevalence as the primary indicator for relative public debt. Delta-sustainability does not provide a snapshot of the current status but instead focuses on how the pension system’s status evolves over time. 4.5.2 NDR-GDP is delta-sustainable We will demonstrate that NDR-GDP, with an insurance mechanism that is separately accounted for, adheres to delta-sustainability. Recall that the total sum of index points held by the participants, the pension insurance, and the government remains constant.6 Without any transfers, as index points are indexed via GDP, the total value of index points of participants and the pension insurance relative to GDP remains constant. These index points represent the unfunded liabilities of the system. Thus, without transfers, the sum of unfunded liabilities relative to GDP remains constant. When the government makes a transfer of value 𝑥𝑥, it purchases an amount of index points of total value 𝑥𝑥. As the total sum of index points is constant, the 5 These are liabilities not backed by financial assets, for example index points that are not held by the government. 6 The administration does never hold index points in NDR-GDP.
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 96 number of index points held by participants and the pension insurance decreases by that amount. Consequently, the value of unfunded liabilities decreases by 𝑥𝑥. In summary, NDR-GDP fulfills both conditions of delta-sustainability. Note that NDR, when employing an arbitrary indexation method alongside government transfers as a balancing rule, maintains delta-sustainability relative to the chosen indexation method. Consequently, NDR-GDP holds a distinct position, with GDP assuming a fundamental role in assessing relative debt levels. 4.5.3 Comparison with similar notions of pension system sustainability Various notions of pension system sustainability exist in the literature, each offering a unique perspective. We will focus on a comparison of deltasustainability with the closest ones suggested before and to financial balance. Devesa-Carpio and Devesa-Carpio (2010) provide a comprehensive overview of notions of pension system sustainability for typical PAYG pension systems that are not NDC. An important concept related to delta-sustainability mentioned in their paper is the sum of unfunded liabilities, often referred to as implicit debt. For instance, Herd and van den Noord (1993) have computed implicit debt for several large economies. However, Devesa-Carpio and Devesa-Carpio (2010) note that solely measuring implicit debt does not provide a comprehensive definition of pension system sustainability, as it remains unclear what the maximum level of implicit debt should be. To address this, they introduce the concepts of actuarial imbalance and unitary pension cost. These concepts compare the total benefits received by a group of participants to their total contributions. This idea resembles the notion of delta-sustainability in that the sustainability of the running system is considered. Nevertheless, their approach assumes a closed system and does not directly account for changes in unfunded liabilities. Holzmann et al. (2004) emphasize the importance of measuring implicit debt and suggest assessing pension reforms by considering explicit debt and implicit debt jointly, but do not provide an explicit tool to do so. The notion of deltasustainability constitutes a way to implement this suggestion. Financial balance, as defined within NDC schemes, is a critical metric used to evaluate pension system sustainability. It reflects the equilibrium between future contributions and pension benefits. More precisely, the notion of financial balance suggests that the system, under predetermined contribution rates, can
KCV Schriftenreihe, Vol. 8, Wilke: Pension Reforms: Nordic Countries and Germany 97 potentially operate autonomously without necessitating transfers. In essence, achieving financial balance indicates that contributions are projected to sufficiently cover pension benefits over the long term. Financial balance, however, does not imply that having a pension system in financial balance absolves the state from overall liabilities. A state lacking such a pension system could introduce one and effectively allocate the resulting unfunded pension claims to itself. Hence, having the pension system in financial balance at least represents an “opportunity liability”. Indeed, the liability can also be understood as the obligation to maintain the set contribution rates. Additionally, assuming no funded reserves, proportionally increasing pension benefits and contribution rates does not alter whether an NDC scheme is in financial balance. This scenario effectively generates additional pension claims without increasing financial assets. In contrast, delta-sustainability offers a different perspective. It does not treat the pension system as a closed entity and explicitly permits government transfers. Delta-sustainability considers the holistic liabilities of the pension system and focuses solely on changes over time. When transitioning from a legacy pension system to a new one, delta-sustainability does not hold the new system accountable for existing liabilities. Instead, it evaluates whether the new system introduces further liabilities over time. In summary, financial balance and delta-sustainability address distinct aspects of pension system sustainability. While financial balance pertains to the selfsufficiency of the system given predetermined contribution rates, deltasustainability offers a broader evaluation, considering the system’s evolution over time and its impact on overall liabilities. 4.6 High-level reform strategy: Invariants and flexibility In this section, we explore the overarching reform strategy implied by the NDRGDP scheme. As previously mentioned, the implementation of NDR-GDP involves converting existing pension claims into index points. However, the specifics of this process are complex and contingent upon the nuances of the current pension system. Determining existing pension claims involves political considerations, such as whether they should be computed based on past contributions or promised benefits.
Volumes Published in the KCV Schriftenreihe: Volume 1 (2020) P. an de Meulen / T. Christiaans / M. Drewes / S. Frohwerk / M. Göke / P. Hennecke / T. Holtfort / K. Obermann / L. Rebeggiani / A. Spermann / C. Thielscher / A.-K. Voit / C. B. Wilke / M. Wohlmann Was kostet uns Corona? Volkswirtschaftliche Auswirkungen einer globalen Pandemie ISBN (Print) 978-3-89275-168-7 ISSN (Print) 2701-9403 ISBN (eBook) 978-3-89275-169-4 ISSN (eBook) 2701-9411 Volume 2 (2021) A. M. Prasuhn / C. B. Wilke Reformoption Bürgerversicherung? Eine Nutzwertanalyse vor dem Hintergrund aktueller und künftiger Herausforderungen des deutschen Krankenversicherungssystems ISBN (Print) 978-3-89275-172-4 ISSN (Print) 2701-9403 ISBN (eBook) 978-3-89275-173-1 ISSN (eBook) 2701-9411 Volume 3 (2021) C. Fritsche On Migration and Immigration Policy in Europe ISBN (Print) 978-3-89275-220-2 ISSN (Print) 2701-9403 ISBN (eBook) 978-3-89275-221-9 ISSN (eBook) 2701-9411 Volume 4 (2022) L. Rebeggiani / C. Roppel / F. Schrickel Gibt es in Deutschland zu viele Krankenkassen? Eine Analyse der Wettbewerbsintensität in der gesetzlichen Krankenversicherung Deutschlands ISBN (Print) 978-3-89275-254-7 ISSN (Print) 2701-9403 ISBN (eBook) 978-3-89275-255-4 ISSN (eBook) 2701-9411
Volume 5 (2022) L. Rebeggiani / M. Drewes Wettbewerb und Wettbewerbspolitik im Sport: Booklet zur 25. Jahrestagung des Arbeitskreises Sportökonomie ISBN (Print) 978-3-89275-272-1 ISSN (Print) 2701-9403 ISBN (eBook) 978-3-89275-273-8 ISSN (eBook) 2701-9411 Volume 6 (2022) E. Großpietsch Challenges for Nursing Schools due to Digitalisation ISBN (Print) 978-3-89275-296-7 ISSN (Print) 2701-9403 ISBN (eBook) 978-3-89275-297-4 ISSN (eBook) 2701-9411 Volume 7 (2023) S. Bär / C. Benkel / T. Bezold / P. Biebl / M. Breuer / O. Budzinski / S. Chatrath / F. Daumann / S. Faulstich / A. Feddersen / B. Frick / F. Gassmann / J. Hell / L. M. Hoang / I. Hugaerts / A. Kladroba / T. Könecke / P. Kunz-Kaltenhäuser / M. Kurscheidt / K. Lindt / L. Mortsiefer / G. Nufer / L. Rebeggiani / B. Römmelt / H. Schunk / V. Spindler / A. Stickel / L. Thieme / G. Trosien Wettbewerb und Wettbewerbspolitik im Sport: Sammelband zur 25. Jahrestagung des Arbeitskreises Sportökonomie ISBN (Print) 978-3-89275-364-3 ISSN (Print) 2701-9403 ISBN (eBook) 978-3-89275-365-0 ISSN (eBook) 2701-9411
Mehr als 50.000 Studierende, 25 Forschungseinrichtungen und 500 Veröff entlichungen im Jahr – damit zählt die FOM zu den größten und forschungsstärksten Hochschulen Europas. Initiiert durch die gemeinnützige Stiftung BildungsCentrum der Wirtschaft folgt sie einem klaren Bildungsauftrag: Die FOM ermöglicht Berufstätigen, Auszubildenden, Abiturienten und international Studierenden ein qualitativ hochwertiges und fi nanziell tragbares Hochschulstudium. Als gemeinnützige Hochschule ist die FOM nicht gewinnorientiert, sondern reinvestiert sämtliche Gewinne – unter anderem in die Lehre und Forschung. Die FOM ist staatlich anerkannt und bietet mehr als 50 akkreditierte Bachelorund MasterStudiengänge an – im Campus-Studium an 35 Hochschulzentren oder im einzigartigen Digitalen Live-Studium gesendet aus den Hightech-Studios der FOM. Lehrende und Studierende forschen an der FOM in einem großen Forschungsbereich aus hochschuleigenen Instituten und KompetenzCentren. Dort werden anwendungsorientierte Lösungen für betriebliche und gesellschaftliche Problemstellungen generiert. Aktuelle Forschungsergebnisse fl ießen unmittelbar in die Lehre ein und kommen so den Unternehmen und der Wirtschaft insgesamt zugute. Zudem fördert die FOM grenzüberschreitende Projekte und Partnerschaften im europäischen und internationalen Forschungsraum. Durch Publikationen, über Fachtagungen, wissenschaftliche Konferenzen und Vortragsaktivitäten wird der Transfer der Forschungsund Entwicklungsergebnisse in Wissenschaft und Wirtschaft sichergestellt. Forschungsstark und praxisnah FOM. Die Hochschule besonderen Formats Alle Institute und KompetenzCentren unter fom.de/forschung FOM Hochschulzentrum Düsseldorf
Mit rund 50.000 Studierenden ist die FOM eine der größten Hochschulen Europas und führt seit 1993 Studiengänge für Berufstätige durch, die einen staatlich und international anerkannten Hochschulabschluss (Bachelor/Master) erlangen wollen. Die FOM ist der anwendungsorientierten Forschung verpflichtet und verfolgt das Ziel, adaptionsfähige Lösungen für betriebliche bzw. wirtschaftsnahe oder gesellschaftliche Problemstellungen zu generieren. Dabei spielt die Verzahnung von Forschung und Lehre eine große Rolle: Kongruent zu den Masterprogrammen sind Institute und KompetenzCentren gegründet worden. Sie geben der Hochschule ein fachliches Profil und eröffnen sowohl Wissenschaftlerinnen und Wissenschaftlern als auch engagierten Studierenden die Gelegenheit, sich aktiv in den Forschungsdiskurs einzubringen. Weitere Informationen finden Sie unter fom.de Das KCV KompetenzCentrum für angewandte Volkswirtschaftslehre deckt ein breites Spektrum von der mikrozur makroökonomischen sowie von der theoretischen zur empirischen Forschung ab. Besondere inhaltliche Schwerpunkte liegen in den großen Herausforderungen unserer Zeit: dem demografischen Wandel, der Globalisierung, dem Klimawandel sowie der Digitalisierung. Neben dieser inhaltlichen Ausrichtung übernimmt das KCV eine Querschnittsfunktion im Bereich der Methodik und Data Literacy an der FOM Hochschule, indem fächerübergreifend vernetztes, analytisches Denken gefördert und sowohl für die Forschung als auch für die Lehre nutzbar gemacht wird. Weitere Informationen finden Sie unter fom-kcv.de FOM Hochschule KCV KCV KompetenzCentrum für angewandte Volkswirtschaftslehre der FOM Hochschule für Oekonomie & Management ISSN (Print) 2701-9403 ISSN (eBook) 2701-9411ISBN (eBook) 978-3-89275-387-2 ISBN (Print) 978-3-89275-386-5 Der Wissenschaftsblog der FOM Hochschule Der Wissenschaftsblog der FOM Hochschule bietet Einblicke in die vielfältigen Themen, zu denen an der FOM geforscht wird: fom-blog.de