Gó a, Ma ek
A icle
Poli ical economy o pension e o ms: Selec ed gene al
issues and he Polish pension e o m case
IZA Jou nal o Labo & De elopmen
P o ided in Coope a ion wi h:
IZA – Ins i u e o Labo Economics
Sugges ed Ci a ion: Gó a, Ma ek (2013) : Poli ical economy o pension e o ms: Selec ed gene al
issues and he Polish pension e o m case, IZA Jou nal o Labo & De elopmen , ISSN 2193-9020,
Sp inge , Heidelbe g, Vol. 2, pp. 1-31,
h ps://doi.o g/10.1186/2193-9020-2-2
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/92291
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ORIGINAL ARTICLE Open Access
Poli ical economy o pension e o ms: selec ed
gene al issues and he Polish pension e o m case
Ma ek Gó a
Co espondence: ma ek.go a@sgh.
waw.pl
Wa saw School o Economics,
Wa saw, Poland and IZA
Abs ac
The ins i u ional s uc u es o he a ious ypes o Eu opean wel a e s a e we e
es ablished a ound ex a e enues called he "demog aphic di idend" ha used o
be easily a ailable h oughou he decades o he 20s cen u y. They, howe e ,
ceased o be a ailable a he end o ha cen u y. The challenge socie ies ace oday
is how o manage he ins i u ions ha ing ela i ely less esou ces a ailable o hei
inancing.
In his pape I analyse selec ed poli ical economy issues ela ed o pension e o ms,
such as he wo ke - e i ee con lic o in e es , dis ibu ion by age o he cos s o he
loss o demog aphic di idend, and key goals behind pension e o ms. The ocus o
his pape is on pension e o ms in Poland, which ac ually was an implemen a ion o
a ho oughly new pension sys em. I s design is analysed and discussed om a
poli ical economy iewpoin . Fu he mo e, analysis o he Polish pension sys em is
p esen ed in a b oade Eu opean con ex .
Jel codes: H55; I31; J11; J18.
1. In oduc ion
Th oughou Eu ope, pension sys ems as well as public inance in gene al a e s ongly
exposed o he challenges o he 21
s
cen u y. This applies o he mo e a luen EU15
as well as o he less a luen new EU membe s a es (Alesina & Glaese 2004). In bo h
cases he eason is he same: popula ion changes lie a he oo o he p oblem, as he
ins i u ional s uc u es o he a ious ypes o Eu opean wel a e s a e o Eu opean Social
Model we e es ablished a ound ex a e enues called he “demog aphic di idend” ha
used o be easily a ailable h oughou he decades o he 20s cen u y. They, howe e ,
ceased o be a ailable a he end o ha cen u y when mos , i no all, Eu opean socie ies
eached s age ou o hei demog aphic ansi ion (A kinson 1995).
Pension sys ems a e deeply oo ed in he public pe cep ion o socie ies. This applies no
only o de eloped coun ies bu also o hose a ious coun ies ha we e his o ically
linked o he Eu opean ins i u ional adi ion. Pension sys ems belong o co e ins i u-
ional sys ems ha a e expec ed o be e y s able and eliable. Tha pe cep ion has been
de eloped o e many decades when consecu i e gene a ions o ci izens pa icipa ed and
bene i ed om ha pa icipa ion. O e ime, he link be ween wel a e and wo k e o has
weakened. The public in e nalised ha si ua ion and began o pe cei e wel a e as being
g an ed, solely on he p emise hey we e he ci izens o a luen and well o ganised
coun ies.
© 2013 Gó a; licensee Sp inge . This is an Open Access a icle dis ibu ed unde he e ms o he C ea i e Commons A ibu ion
License (h p://c ea i ecommons.o g/licenses/by/2.0), which pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in any medium,
p o ided he o iginal wo k is p ope ly ci ed.
Gó a IZA Jou nal o Labo & De elopmen 2013, 2:2
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Eu opean coun ies s ill y o manage hese pension ins i u ions as i he di idend
was s ill a ailable. Go e nmen s ocus mos ly on he ine i able iscal cu s om such a
si ua ion, e en hough i is deep social e o ms ha a e needed. Eu ope is less a luen
han Eu opean ci izens end o assume. Wi h smalle esou ces a ailable, hey need o
e hink he way hese may be dis ibu ed wi hin socie ies. Pension sys ems a e p obably
mos di ec ly exposed o he p oblems s emming om he loss o he “demog aphic
di idend”. A he same ime, in e ms o GDP, pension sys ems in Eu ope a e la ge o
e y la ge. Consequen ly, hey in luence he economic and social si ua ions he mos .
Va ious pension e o ms a e on he op o policy agendas h oughou Eu ope. These
e o ms a e e y o en con es ed by socie ies. Managing he disillusion is he challenge.
I should be s essed he e ha I do no e e o he discussion on whe he he wel a e
s a e is in gene al a he a good idea (Ba 2001), o a he an idea leading o p oblems
(Bodo & Ru kowski 2012). In his pape I ocus on he a ious consequences o he
si ua ion, when esou ces needed o inancing wel a e s a e ins i u ions a e g owing
(in e ms o GDP) due o popula ion changes, i espec i e o whe he he ins i u ions
a e good o bad.
In his pape I analyse selec ed poli ical economy issues ela ed o pension e o ms,
such as he wo ke - e i ee con lic o in e es , dis ibu ion by age o he cos s o he
loss o demog aphic di idend, and key goals behind pension e o ms. The ocus o his
pape is on he pension e o m in Poland, which ac ually was an implemen a ion o a
ho oughly new pension sys em. I s design is analysed and discussed om a poli ical
economy iewpoin . Fu he mo e, analysis o he Polish pension sys em is p esen ed in
a b oade Eu opean con ex .
2. The young, he old and he no -ye -old
Economic li e a u e on pensions is as . I do no e e o any pa icula pa o his. Ra he ,
I e e o hose basic ea u es o pension sys ems ha a e c ucial o he poli ical economy
o ien ed analysis p esen ed in his pape .
F om he mac o pe spec i e he pension sys em is a way o di ide he cu en GDP
be ween he wo king gene a ion ha has p oduced i , and he e i ed gene a ion ha
has no con ibu ed o ha bu ecei es a pa o he GDP as a pension ans e (gi en
o he ans e s). Tha can be illus a ed as in Figu e 1.
Popula ion ageing has led o a subs an ial inc ease in he sha e o GDP spen on pen-
sion ans e s T
2
>T
1
which implies R
2
<R
1
. This means he nex gene a ion o wo ke s
(2) is, in e ms o GDP, mo e poo ly emune a ed o hei ac i i y and p oduc i i y
g ow h han he p e ious gene a ion (1). The igu e abo e ocuses exac ly on he con-
lic o in e es be ween he gene a ions.
Figu e 1 also illus a es ano he c ucial ea u e o popula ion ageing: P oduc i i y
g ow h, being essen ial o social wel a e, does no sol e he c ucial p oblem caused by
he ageing, namely changing p opo ions in which GDP is di ided be ween he wo king
and he e i ed gene a ion
5
. The p oblem we y o sol e is ela ed o he p opo ions
o he di ision, no o he scale o GDP. The same p oblem o he sh inking emune -
a ion o p oduc ion ac o s applies o he mo e a luen coun ies as well as o he less
a luen . The pension p oblem is how o keep s able p opo ions o GDP spen on
emune a ions as well as on ans e s. I he sha e o GDP spen on pensions is
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inc easing, hen he emune a ion o labou and capi al is dec easing is-à- is p oduc -
i i y g ow h, which seems unsus ainable in he pe spec i e o a pension sys em based
on he alloca ion o income o e ime. The sh inking (in e ms o GDP) emune a ion
o p oduc i i y g ow h will end o supp ess p oduc i i y g ow h.
The demog aphy d i en change in p opo ions o emune a ion o p oduc ion ac o s
and social (no only pension) ans e s indica es a e y deep change in he s uc u e o
in e es wi hin socie ies. The con lic o in e es be ween labou and capi al has been
supplemen ed wi h ano he con lic , namely he con lic o in e es be ween he ac i e
( inancing ans e s) and inac i e ( ecei ing ans e s) ci izens. The scale o his la e
con lic is g owing oge he wi h he g owing sha e o GDP spend on inancing ans-
e s. Howe e , he con lic o in e es has no been ully ecognised publicly ye
6
. The
pension sys em is he mos di ec ly exposed o he consequences o ha si ua ion.
The pension sys em is an ins i u ional s uc u e o in e gene a ional exchange
be ween he wo king gene a ion (wo ke s) and he e i ed gene a ion ( e i ees)
7
.The
amewo k can be s anda dised, based on uni e sal co e age, hence public, o based on
indi idual decisions and esponsibili y, hence p i a e. In bo h cases, e i ees exchange
hei pension igh s o a pa o he p oduc ion o he wo ke s. These pension igh s
can be exp essed in a ious ways om well-de ined owne ship igh s o uzzy poli ical
p omises. Popula ion s uc u e by age is he c ucial ac o behind he exchange.
The ollowing simple model illus a es he demog aphic backg ound o any pension
sys em
8
. The demand side o he ma ke is de e mined by he numbe o wo ke s, hei
p oduc i i y and he con ibu ion a e. The numbe o e i ees and hei expec a ions
de e mine he supply side. This can be p esen ed as a simple model, shown in
Equa ions 1a and 1b.
D¼c
weLWð1aÞ
S¼z
wLRð1bÞ
whe e Dis he demand o pension igh s (a pa o GDP spen by he wo king gene -
a ion on acqui ing pension igh s), Sis he supply o pension igh s (pension expec a-
ions o he e i ed gene a ion in e ms o p oduc i i y o he wo king gene a ion), cis
he eal con ibu ion a e (including subsidies ou o gene al e enues), zis he
Figu e 1 GDP p oduced by consecu i e gene a ions (1 and 2) di ided be ween emune a ion o
p oduc ion ac o s (R) and pension ans e (T). No e: O he ans e s in his igu e equal ze o.
Gó a IZA Jou nal o Labo & De elopmen 2013, 2:2 Page 3 o 31
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eplacemen a e
9
,w(ba ) is he a e age wage, L
W
is he numbe o wo ke s, eis he
employmen a e and L
R
is he numbe o e i ees.
In equilib ium, he eplacemen a e is gi en by Equa ion (2)
z¼ce
dð2Þ
Whe e dis he demog aphic dependency a io (d = L
R
/L
W
).
Gi en he demog aphic s uc u e, he employmen a io and he ins i u ional ame-
wo k ( e i emen age and so o h), he eplacemen a e depends on he con ibu ion
a e alone and does no depend on he ype o pension sys em o i s design. The
pension ma ke de e mines he sha es o GDP alloca ed o each gene a ion.
A key conclusion s emming om he simple model abo e is ha he way pension
igh s a e exp essed does no ma e o he a e age le el o pensions as measu ed by
he eplacemen a e
10
. In o he wo ds, nei he poli icians no inancial ma ke s can
make a wiza dly ick and pe manen ly gene a e a eplacemen a e on a e age la ge
han z, as i is p esen ed in Equa ion 2
11
. This conclusion b ings us back o he c ucial
ade-o wi hin he pension sys em: whom shall he policy measu es p o ec –wo ke s
o e i ees? Figu e 2 helps o answe ha ques ion.
The s o y behind he igu e is as ollows. Ini ially z
1
was es ablished based on he
consump ion needs o he e i ees. Then, c
1
equi ed o inance pension ans e s was
imposed. I e lec s he en i e cos o he wo king gene a ion. I does no ma e he e
whe he he cos is well de ined and explici ly paid as a con ibu ion, o he cos is
hidden in gene al e enues spen on subsidisa ion o he pension sys em
12
. The goal o
he sys em designe s was o keep he a es s able o o ine une hem i needed. Tha
would ha e been he case i he popula ion s uc u e by age had s ayed s able (d
1
). The
ini ial dependency a io de e mining he ela ion o he eplacemen a e and he
con ibu ion a e has been inc easing o se e al pas decades and i is expec ed o keep
inc easing in he decades o come (d
2
,d
3
). In o de o keep he eplacemen a e a he
le el p omised o e en legisla ed, he con ibu ion a e has o be subs an ially
inc eased, and/o la ge open and/o hidden deb s ha e o be made (c
2
,c
3
). Gi en he
demog aphic p ojec ions, i is e y likely, ac ually su e, he eplacemen a es will –
soone o la e –be educed (z
4
).
Figu e 2 Con ibu ion a e s. eplacemen a e.
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The si ua ion as p esen ed abo e can be modi ied when, on op o he coun y’s GDP,
he pension sys em is inanced ou o e enues om in es men s ab oad. Tha op ion
is a ailable when he sys em is based on asse s aded in inancial ma ke s ( he so-
called unded sys em). I he a es o e u n ha can be ea ned ab oad a e la ge han
domes ic a es, hen eplacemen a es can be la ge han “z”as de ined in equa ion (1).
This si ua ion can be called “exploi a ion”o “exchange”o capi al o labou . Ne e -
heless, his op ion p obably also canno subs an ially inc ease “z”in he long un. In
any case, in e na ional in es men can p o ide pension sys ems wi h mo e isk
di e si ica ion.
Aiming a an unchanged eplacemen a e means p o ec ing he e i ees a he
expense o he wo ke s. Tha has been he dominan policy op ion h oughou Eu ope.
Remune a ion o p oduc ion ac o s e lec less and less he supply and p oduc i i y
g ow h ac o s because o he g owing cos o pension ans e s. Mo eo e , his si u-
a ion leads o labou ma ke p oblems, and in gene al social p oblems aced by he
younges gene a ion ying o en e he labou ma ke . They ail o s a hei adul li e
enjoying he same le el o wel a e hei pa en s did. So as he “occupy mo emen ”, hey
exp ess hei ange in he s ee s o Eu opean ci ies. They blame u hless poli icians
and banke s o hei si ua ion. Those blamed a e in many cases guil y o i esponsibili y,
g eed, sho -sigh edness and s upidi y. Howe e , hey a e no guil y o he loss o “demo-
g aphic di idend”. Reduced esou ces (no di idend any mo e) a e spen on hose who a e
al eady in, while hose who a e s ill ou , namely he young, ha e li le chance o join since
he esou ces a e spen .
The di icul si ua ion o he young Eu opean gene a ion can be seen ia da a on un-
employmen as well as ia da a on he isk o po e y by age. These a e young Eu opeans
who ha e been hi by he cu en di icul si ua ion. Table 1 and Table 2 p o ide da a on
he isk o po e y by age di e ence be ween 2005, he p e-c isis imes, and 2010 when
he e ec s o he c isis we e e ealed. The ables p o ide da a on he la ges six EU coun-
ies and addi ionally G eece and Po ugal, belonging o he g oup o coun ies acing he
la ges p oblems in he pe iod analysed on one side, and Sweden being in a ela i ely good
si ua ion on he o he . Sweden is also impo an in his pape because o he pension
issues discussed below.
Table 1 A - isk-o -po e y a e by age (pe cen age change be ween 2005 and 2010 a e
ans e s (2005 le el = 100%); selec ed coun ies)
To al 65+ 50-64 25-49 18-24 -18
EU (27 coun ies) 100% 85% 101% 104% 108% 103%
Eu o a ea (17 coun ies) 106% 80% 105% 114% 119% 114%
Ge many 128% 105% 135% 131% 127% 143%
Spain 105% 74% 110% 118% 140% 108%
F ance 102% 65% 83% 110% 128% 124%
I aly 96% 73% 90% 109% 104% 105%
Poland 86% 195% 101% 76% 84% 77%
Uni ed Kingdom 90% 86% 92% 95% 85% 89%
G eece 103% 76% 95% 117% 129% 113%
Po ugal 92% 76% 94% 97% 117% 95%
Sweden 136% 153% 137% 133% 116% 128%
Sou ce: Eu os a [ilc_li02], own calcula ions.
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In he ables an inc ease (Table 1) o a high le el (Table 2) o exposu e o he isk o
po e y is ma ked in bold, while he opposi e is ma ked in i alic. The ables p esen a
gloomy pe spec i e o young Eu opeans. In he coun ies p esen ed in bo h ables, he
e i ees a e p o ec ed, while he si ua ion o he young is bad and also wo sening.
The e a e wo exemp ions, namely Poland and Sweden (discussed la e in his pape ).
P o ec ing he e i ees a he expense o he young is no only a p oblem o he la e
g oup bu also a gene al social ap. Socie ies ace an asymme ic choice. P o ec ing he
old con ibu es o he weake g ow h o wel a e p oduced by he young, whe eas
p o ec ing (o a leas aking in o accoun ) he in e es s o he young con ibu es o he
s onge g ow h o wel a e o bo h he old and he young.
T adi ional pension sys ems, as hey s ill domina e in Eu ope, ocus hei a en ion on
he old while he in e es s o he wo king gene a ion (which is emune a ion o hei
wo king ac i i y) is esidual in hose sys ems. The old a e assumed o be weak while he
ac i e gene a ion is assumed o be s ong. So, he old should be suppo ed by he ac i e
gene a ion. Tha was co ec in he pas when li e expec ancy was much lowe and people
e i ed a ound he age o 70 anyway
13
. The e is much less a ionale when people a e li ing
much longe and e i e a a ound he age o 60. Those who e i e a e no -ye -old (NYO).
Financing hei pensions educes esou ces a ailable o he emune a ion o p oduc ion
ac o s p o ided by he wo king gene a ion, as well as con ibu ing o he g owing expos-
u e o he young o he isk o po e y, as p esen ed in Table 1 and Table 2. Redis ibu ion
channels should be adjus ed o he change. P obably hey should be pa ially e e sed. I
no , hey will be c ea ing social p oblems a he han mi iga ing hem.
3. The old pension sys em in Poland
A ypical adi ional con inen al Eu opean pension sys em exis ed in Poland un il he end
o 1998. The sys em applied a de ined bene i (DB) egime. Expendi u es on pensions we e
high by Eu opean s anda ds (one o he highes ). Acco ding o p ojec ions, pe spec i es
o he u u e we e gloomy.
The old sys em was non- anspa en . People did no unde s and i s ules and did no
ca e abou hei own pa icipa ion in he sys em (see nex sec ions). The sys em did
Table 2 A - isk-o -po e y a e by age as compa ed o he isk o he en i e socie y
(selec ed coun ies)
To al 65+ 50-64 25-49 18-24 -18
EU (27 coun ies) 16.4 98% 82% 90% 129% 125%
Eu o a ea (17 coun ies) 16.1 96% 84% 91% 130% 124%
Ge many 15.6 90% 109% 90% 121% 112%
Spain 20.7 105% 87% 90% 112% 127%
F ance 13.3 80% 62% 89% 177% 135%
I aly 18.2 91% 72% 97% 126% 136%
Poland 17.6 81% 93% 91% 119% 128%
Uni ed Kingdom 17.1 125% 84% 80% 122% 119%
G eece 20.1 106% 86% 90% 137% 114%
Po ugal 17.9 117% 90% 83% 104% 125%
Sweden 12.9 120% 46% 82% 229% 102%
Sou ce: Eu os a [ilc_li02], own calcula ions.
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no know people un il he momen hey came in and claimed a bene i . Con ibu ions
we e inc easing e y apidly, con ibu ing o g owing ax dis o ions on one hand and
g owing labou cos s and/o declining ne emune a ions on he o he .
Howe e , he key p oblem o he sys em was he e y low e i emen age. Ea ly e i e-
men schemes exis in many coun ies. His o ically hey e lec he special p e e ences
gi en o selec ed g oups, such as ailway wo ke s o mine s, which we e pa icula ly
impo an du ing he p ocess o indus ialisa ion. Thei p i ileges a ied ac oss coun-
ies. In Poland, he ea ly e i emen scheme o ailway wo ke s da ed om he ea ly
wen ie h cen u y. The p i ilege o mine s was based on he c ucial ole coal mining
used o play in he economy o Poland.
The ea ly e i emen schemes became a pa o he wel a e s a es du ing he pos Sec-
ond Wo ld Wa p ospe i y pe iod. People we e g an ed e i emen a ages ea lie han
becoming eally old. Tha d ama ically changed he ole o pensions. Ini ially hey we e
o suppo he e y old. As a pa o he wel a e s a e hey become a “gi ” o he no -
ye -old. The demog aphic di idend gene a ed enough esou ces o pay o ha . Pa a-
doxically, du ing he same p ospe i y pe iod, li e expec ancy subs an ially inc eased.
Consequen ly, he pe iod o ime spen on a pension inc eased om “bo h ends”:
wo ke s s a ed e i emen ea lie and enjoyed i ill la e ages.
In Poland ha p ocess was weake . Pe manen sho ages in he labou ma ke
p e en ed pushing wo ke s ou o jobs oo ea ly. Also li e expec ancy did no inc ease
o he le els obse ed in Wes e n Eu opean coun ies. Howe e , jus a e ma ial law
(1981), a speci ic ac o s ongly changed he pension landscape. In o de o p e en so-
cial un es in ha e y poli ically u bulen pe iod, au ho i ies in oduced a massi e
ea ly e i emen scheme o many g oups o wo ke s. The o icial explana ion o ha
was o acknowledge hei ha d wo k. In p ac ice, he scheme was a ailable o a la ge
numbe o wo ke s i espec i e o he ype o wo k. Al hough he legally obliged public
sys em e i emen age s ayed unchanged, he ac ual a e age e i emen age s a ed
d opping yea by yea ollowing he ageing o coho s en i led o he ea ly e i emen
14
.
The low e i emen age oge he wi h he popula ion ageing led o a d ama ic
inc ease in pension sys em expendi u e. Up o 1981 he con ibu ion a e was 15.5 pe
cen o he en i e social secu i y. In he mid 1990s he a e was 45 pe cen and was
insu icien .
4. A wo- old challenge o Poland: ansi ion owa ds a ma ke -based econ-
omy, and wel a e ca ch-up du ing he imes since he demog aphic di idend
was los
Poland s a ed he ansi ion om a cen ally planned economy owa ds a ma ke based
economy a ound 1989
15
. The ansi ion was success ully comple ed by he la e 1990s
16
.
The ansi ion p ocess u ned smoo hly in o he Eu opean Union p e-accession p ocess
which was also success ully comple ed in 2004. Since ha momen (being s ill less a luen
han mos o he Eu opean coun ies) Poland has aced uni e sal challenges simila o
hose aced by he en i e EU.
In oducing a ma ke -based economy o ally changed economic and social li e in
Poland. A sha p social and economic upg ade o he coun y was achie ed. Howe e , ha
success was di icul o people. They had o adjus o a new en i onmen . In oducing
Gó a IZA Jou nal o Labo & De elopmen 2013, 2:2 Page 7 o 31
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ma ke -based policies was he ask, while he in oduc ion o Wes e n ype wel a e ins i u-
ions was an expec ed ewa d. I was an a ac o , a d i ing ac o behind he ansi ion
e o s.
Ac ually, he p e- ansi ion wel a e ins i u ions in Poland, as well as in o he coun-
ies o he o me So ie bloc, we e less de eloped ye simila o hose in he Wes .
Only he o e all low p oduc i i y did no allow o any gene ous ou comes om hei
exis ence. Ne e heless, people expec ed no only an inc ease in wel a e bu also an
easy way o achie e ha a e joining he Wes , whose wel a e egime was ypically
pe cei ed as he kind o policy ha p o ided wel a e wi hou wo k - as i wel a e was
g an ed o Wes e n Eu opean ci izens jus because hey we e EU ci izens. Ac ually, ha
pe cep ion is, o an ex en , also common in he Wes e n pa o con inen al Eu ope
17
.
A he end o he 20s cen u y he demog aphic/ inancial py amid wen bank up
h oughou Eu ope. The di idend uelling he Eu opean Social Model was los . E en
e y a luen coun ies became less a luen han hei ci izens ended o assume. On
op o ha , o me ansi ion coun ies los hei p e iously clea and commonly
accep ed di ec ion o de elopmen . A e comple ing one ansi ion (in a na ow sense)
hey had o pass a second. The ansi ion om a demog aphic di idend based wel a e
s a e o a wo k e o based egime will be coped wi h alongside he es o he EU.
Howe e , in his la e case, he e is no clea p esc ip ion o a success ul economic
and social policy.
Pension e o ms a e on he op o policy agendas h oughou Eu ope. Coun ies ha e
ei he implemen ed e o ms, a e in he cou se o e o ms, o a e a leas planning
e o ms o hei public pension sys ems. Poland is in he g oup ha ha e al eady
implemen ed a adical pension e o m. This e o m was based on he documen
“Secu i y h ough Di e si y”and was implemen ed in 1999. Figu e 3 indica es selec ed
c ucial momen s o he e o m.
The wo challenges, namely he ansi ion and he pension e o m ( oge he wi h o he
s uc u al e o ms no discussed in his pape ), we e no di ec ly connec ed. Ra he , hey
we e wo di e en pa hs. Howe e , he ime coincidence c ea ed a unique oppo uni y o
Figu e 3 Time pe spec i e o he yea s since 1989
a
.
a
No e: Figu e 1 p esen s selec ed momen s in he
ecen his o y o Poland. The uppe po ion o he igu e e e s o he pension e o ms. Blue a ows indica e
success ul ou comes o he e o m p ocess, while he ed a ows deno e ailu es (see la e in he ex ). S D –
“Secu i y h ough Di e si y”–a bluep in o he pension e o m design (see Gó a and Ru kowski 1997).
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The simila i y o he new sys ems in oduced in Poland and Sweden is no ob ious as
in public deba e he pension sys em issues we e ypically mixed up. The e a e h ee
le els a which pension sys ems can be discussed (see Figu e 4). The i s e e s o he
mos gene al issues such as social goals and undamen al economic p inciples. Exam-
ples: alloca ion o income should co e he en i e li e o each pa icipan ; expendi u e
on pensions canno g ow as e han GDP; a pension sys em is public i i co e s he
en i e popula ion and applies he same s anda d ules ac oss all pa icipan s, while i is
p i a e i i co e s indi iduals o g oups whose pa icipa ion is based on indi idual
decisions and esponsibili y. The second le el e e s o he me hods applied wi hin he
pension sys em. Me hods should e lec he si ua ion and jus be e icien . A he hi d
le el, egula ions should se e he me hods and should be logical, clea and
anspa en .
A good design o pension sys em should be p epa ed on all h ee le els. They a e all
impo an . Howe e , hey should be subo dina ed acco ding o he pa e n: goals ➔
me hods ➔ egula ions. Discussions can lead o a a ional conclusion i hey ollow ha
Table 4 Manda o y con ibu ions in Poland be o e and a e implemen a ion o he new
pension sys em
To al NDC indi idual
accoun
FDC indi idual
accoun
O he elemen s o
he sys em
be o e 1-Jan-1999
Manda o y con ibu ion 36.59
a
–– 36.59
since 1-Jan-1999
Manda o y old-age (OA) con ibu ion
[un il Ap il 2011]
19.52 12.22 7.3 –
Manda o y old-age (OA) con ibu ion
[since May 2011]
19.52 17.22
b
2.3 –
O he manda o y social wel a e (NOA)
con ibu ions
17.07 –– 17.07
a
Equi alen o 45 pe cen (a e g ossing-up o labou income).
b
In ac since 2011 pa icipan s ha e had wo NDC accoun s. Con ibu ion (17.22) is spli be ween hem: 12.22 and 5.00
pe cen age poin s. La e in he ex an addi ional explana ion is p o ided.
Figu e 4 Th ee le els o discussion on pensions.
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pa e n. In public deba e he opposi e pa e n is commonly a gued. Ra ional a gumen s
a e discussed wi h espec o egula ions wi h li le e e ence o he goals behind he
public pension sys em. Fo ins ance, is he e any sense behind manda ing people o
pa icipa e (pay con ibu ions) i hei pensions may no co e hei en i e li e (in he
case o a lump-sum paymen ). Regula ions a e easie o unde s and. They a e also
con enien o incon enien o he a ious ac o s ac i e in he a ea o pensions, so ha
egula ions a e in he cen e o public deba e as well as expe deba e, i espec i e o
hei ela ion o he me i s o he pension sys em i sel .
The Swedish and Polish sys ems a e almos iden ical a he i s le el. They a e simi-
la a he second. Di e ences a e mos ly loca ed a he hi d le el. This is opposi e o
he simila i ies be ween he Polish and he Chilean sys ems. Simila i ies can be ob-
se ed a he hi d le el while he sys ems di e s ongly a he second and especially
so a he i s le el.
In pension li e a u e wo app oaches a e dominan , namely he social policy based
and he inancial ma ke app oaches. Discussion be ween p oponen s o he wo
app oaches is p obably endless. Nei he o he dominan app oaches ocuses on eco-
nomics in a way ha would pe mi analysing he long e m ea u es and uni e sal
co e age o he pension sys ems oge he .
The ocus on he hi d le el o discussion, which domina es public deba e, causes
s ong misunde s anding o he essence and oo s o he Polish pension sys em. Table 5
highligh s key di e ences be ween he Secu i y h ough Di e si y and he h ee pilla
app oach o pension e o m (see also Gó a (2003)).
The idea behind he h ee pilla app oach is he pa ial p i a isa ion o pensions: he
second pilla is he same as he hi d one, i is jus manda ed. A pa o he public
sys em is pushed ou o he p i a e sec o . The idea behind Secu i y h ough Di e si y
is he opposi e. I is he di e si ica ion o isks wi hin he public sys em: p i a e asse
manage s a e hi ed o un a pa o he public sys em using inancial ma ke s. The sys-
em s ays public and is s ill ocused on unchanged social goals. Running a pa o he
pension sys em has jus been con ac ed ou o he p i a e sec o . This a angemen
can be called a kind o public-p i a e pa ne ship wi hin he pension sys em.
Table 5 Al e na i e app oaches o pension e o m
Typical “ h ee pilla ” e o m Secu i y h ough Di e si y
▸Downsized and possibly a ionalised old sys em, named
he “ i s pilla ”
▸Spli ing old sys em in o OA and NOA
▸Te mina ion o he OA pa o he old
sys em
▸New “ unded”sys em named “second pilla ”c ea ed in
he oom le a e he downsizing o he old sys em
▸C ea ion o en i ely new OA sys em
▸Ra ionalisa ion o NOA
▸Con ibu ion spli be ween wo accoun s
wi hin he new OA
▸Con ibu ion spli be ween he old and he new sys em ▸Fi s indi idual accoun –non- inancial; a e
o e u n de e mined by GDP g ow h
▸Swi ching p ocess based on indi idual p e e ences ▸Second indi idual accoun – inancial; a e o
e u n de e mined in inancial ma ke s
▸Va ie y o pay-ou me hods in he “second pilla ”▸Annui isa ion o bo h accoun alues
▸P omo ion o a ious o ms o addi ional
sa ings
▸P omo ion o a ious o ms o addi ional sa ings, named
he “ hi d pilla ”
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The ype o app oach applied in he Polish pension sys em is commonly
mispe cei ed. In he pension deba e bo h expe s and he gene al public a e hos ages o
he e minology used and assump ions in ui i ely made. The mispe cep ion leads o
public communica ion p oblems as well as economic p oblems s emming om he
s anda d accoun ing me hods applied.
6. Minimum gua an ee and he cap on con ibu ions
The en i e new old-age pension sys em is based on indi idual accoun s. This applies o
bo h he pa un by ZUS as well as he one un by PTEs. The way bo h ypes o ac-
coun a e managed is di e en . Howe e , in Poland he ole hey play in he public sys-
em is exac ly he same, namely hey p o ide people wi h a me hod o income
alloca ion o e hei li e cycle. The e is no o he ole he accoun s play; he e is no
o he elemen o he sys em o he han he accoun s. This means ha he income e-
dis ibu ion – ypically p esen in public pension sys ems –has been mo ed om he
pension sys em o he budge . The sole ole o he sys em is jus income alloca ion.
Shi ing edis ibu ion ou o he OA pension sys em o he budge ollows he demo-
g aphic changes. On op o ha , p o iding edis ibu ion ia he budge a y channel has
a numbe o ad an ages o e doing i ia he pension sys em. See Table 6.
In he OA sys em i sel a minimum bene i gua an ee does no exis . On he day o
e i emen accoun alues a e u ned in o annui ies i espec i e o he amoun accumu-
la ed and consequen ly i espec i e o he le el o co esponding bene i s. Howe e , i a
bene i is below a le el ha is cu en ly legally assumed oo low, hen a budge a y sub-
sidy comes in o inance a op-up paymen inc easing he bene i le el o he minimum
le el. This le el is le o poli ical disc e ion. Figu e 5 illus a es he idea o he op-up
pension bene i . This app oach has been implemen ed in a simila way in bo h Poland
and in Sweden.
The design o he Polish sys em in ol es a cap on con ibu ions. Sys em pa icipan s
pay con ibu ions based on s anda d ules bu only o a le el co esponding o 30 imes
he a e age wage in he economy. Income abo e ha le el is no subjec o con ibu-
ion. This leads o an imposed cap on u u e bene i s. Tha a angemen looks like a
p i ilege o he ich. This is no he case since he sys em is no ax-based any mo e.
Con ibu ions o bo h NDC and FDC accoun s a e indi idual sa ings. The ich can ake
ca e o hemsel es, addi ionally sa ing ou side he public sys em.
The cap helps o educe ax dis o ions e en u he han hey s em om using indi-
idual accoun s wi hin he sys em. The con ibu ions a e paid obliga o ily. I hey a e
oo high hen ax pe cep ion and consequen ly ax dis o ions will always appea . A
lack o edis ibu ion causes he addi ional con ibu ions o no help he less a luen
Table 6 Channelling edis ibu ion ia he budge e sus ia he pension sys em
Via he budge Via he pension sys em
Redis ibu ion base La ge Smalle
Who pays (1) Gene ally axes a e usually p og essi e –so
he ich pay mo e
Pension con ibu ions a e linea –no
p og ession
Who pays (2) Labou and capi al Labou
Adjus abili y o
changing needs
Rela i ely easy –each yea Rigid –long e m liabili ies
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pa icipan s. While no paying addi ional con ibu ions, he ich ha e o pay axes on
he addi ional income hey ea n.
7. Implemen a ion o he new OA sys em
The new sys em eplaced he old one o people bo n a e 31 Decembe 1948. Tha
means ha many people we e s ongly ad anced in hei wo king ca ee s. D opping he
old sys em did no mean a loss o p e iously acqui ed pension igh s. They we e
ecalcula ed in o accoun alues co esponding o he discoun ed alue o hei u u e
pensions o be paid beginning om he e i emen age o 60 and 65 o women and men
espec i ely. Thanks o ha , he closu e o he old sys em was de ini i e.
Calcula ion o he ini ial capi al was ela i ely easy. This was done by ZUS. Howe e ,
he ewe ealo o p oblemss emming om heine iciencyo heoldsys em.In ad-
i ional sys ems people pa icipa ed anonymously. The sys em s a ed ecognizing hem
om he momen hey applied o a pension. Each coho o wo ke s p og essed
h ough ha p ocedu e be o e 1999. Howe e , hesewe epeoplewhowe eap-
p oaching e i emen age so hey we e p epa ed. Knowing he ules o he old sys em,
hey had all documen s eady. The pension e o m had suddenly exposed millions o
young people o a si ua ion hey we e no p epa ed o . They had o collec a numbe
o documen s heyhadno expec ed obenecessa y
35
. The new sys em will ne e
need any addi ional documen s in he u u e. So collec ing hem was no an addi ional
adminis a i e bu den, bu jus shi ing o he bu den in a li e ime.
Re o m o he pension sys em in Poland was in oduced on 1s Jan. 1999. The old
sys em ceased o exis o people bo n a e 31
s
Dec. 1948. They we e co e ed by he
new sys em au oma ically. Olde people did no ha e any op ion o swi ch o he new
sys em. Ac ually, he e was no swi ching a all, nei he o he young no o he old.
See Table 7.
The employed we e only o make a decision whe he o spli hei OA con ibu ion
be o e he end o Sep embe 1999. No decision was legally in e p e ed as he decision
o lea e he con ibu ion non-spli and consequen ly o ha e he en i e con ibu ion
managed by ZUS.
Figu e 5 Minimum gua an ee and he cap on con ibu ions.
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The choice o ha pa icula implemen a ion scheme by age was c ucial o he ol-
lowing easons:
▸A oiding gene al p o es s ypically aised by e i ees and people close o e i emen ;
▸A oiding speci ic p o es s agains inc easing he e i emen age;
▸A oiding a emp s o make a bi age by hose who could make a choice o swi ch o
no ;
▸A kind o choice was in oduced wi hin he new sys em o gi e people mo e com o .
I should be no ed ha he decision o spli o no spli he OA con ibu ion did no
ha e a s ong impac on u u e pensions. As discussed ea lie in his pape , in he
public pension sys em he eplacemen a e weakly –i a all –depended on he way
( ype o pension sys em) in which con ibu ions we e managed. The gain ollowing he
spli o con ibu ion was in isk di e si ica ion.
The dis ibu ion o he decisions sugges s he choices o ages as p esen ed in Table 7
co esponded well o indi idual p e e ences. The as majo i y o hose who in 1999 we e
only sligh ly o e 30 had decided o spli hei con ibu ions while he as majo i y o
hose who we e abou o each 50 had decided o ha e hei con ibu ion unchanged. Tha
dis ibu ion also sugges s ha he people had made qui e a ional decisions. Figu e 6
illus a es he dis ibu ion by age o hose decisions.
Decisions on he spli o con ibu ions wi hin he new OA sys em we e
in e p e ed by people, as well as he media and poli icians, as decisions “ o join
he new sys em”. Tha was a comple e misunde s anding as he decision e e ed
o wo a ian s o he new sys em. Lea ing he con ibu ion non-spli also mean
co e age by he new sys em. The e we e no pa icula consequences om his
Table 7 In oduc ion o he new sys em (age g oups)
New sys em (people bo n a e 31 Dec. 1948) Old sys em (people bo n
be o e 1 Jan. 1949)
People bo n a e 31 Dec. 1968 People bo n be o e 1 Jan. 1969
Au oma ically co e ed by he new
sys em; OA con ibu ion au oma ically
spli be ween wo accoun s [NDC
+FDC]
Au oma ically co e ed by he new
sys em; OA con ibu ion ei he spli
be ween wo accoun s o paid in o one
accoun [(NDC+FDC) o NDC]
S ay in he old sys em (no
possibili y o pa icipa e in
he new one); no accoun s
Figu e 6 Age dis ibu ion o OA con ibu ion spli in 1999 o hose who had he op ion o choose.
Sou ce: Chlon-Dominczak (2002).
Gó a IZA Jou nal o Labo & De elopmen 2013, 2:2 Page 19 o 31
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misunde s anding, i jus indica ed a s ong need o public educa ion o be o-
cused on he a ea o pensions.
Implemen a ion o he new sys em mean an inc ease in he e ec i e e i emen age
by a ound 5 yea s, as he esul o changing he o me s a u o y e i emen age o be-
come a minimum age. Pension p i ileges we e le ou side he new sys em. Acco ding
o new legisla ion he e was no way o e i e be o e eaching he new minimum age.
Mo eo e , e i ing ea lie would mean ex emely low pensions, which is he e ec o
he ac ua ially neu al way o hei calcula ion.
People in gene al we e in a ou o he new sys em, so hey implici ly accep ed he
e i emen age. These we e a he young people so hey had no s a ed hinking abou
hei own e i emen ye . People o e he age o 50 we e le ou o ha discussion. The
cos o such an app oach was in no iscal sa ing jus a e he new sys em was in o-
duced. Today he sa ing is la ge and is inc easing yea by yea , once new egula ions on
he e i emen age ha e become e ec i e.
8. B idging pensions
The inc ease in he e i emen age –e en i no con es ed in 1999 –was e y ab up .
In o de o a oid ex-pos p o es s, he concep o b idging pensions was de eloped. I
was pa o he en i e p ojec o e o m implemen ed in he la e 1990s. The e mina ion
o ea ly e i emen schemes was legisla ed oge he wi h he en i e e o m bill package.
Howe e , he legisla ion did no include egula ions on how he b idging pensions
would be o ganised and inanced. Tha legisla ion gap was no illed du ing he 10 yea s
a e adop ion o he basic law bills. Poli icians we e a aid o ouching ha issue again,
and his led o p oblems because he inal da e by which all ea ly e i emen schemes
we e o be e mina ed was 2006. Poli icians wice pos poned ha da e by one yea .
The p oblem was e en ually sol ed a he end o 2008 when he law on b idging
pensions was inally passed h ough Pa liamen . Passing he law h ough Pa liamen
was no easy bu inally success ul. The law had been e oed by he P esiden and sen
back o Pa liamen whe e i was o ed on again. Fo una ely one opposi ion pa y,
namely SLD, joined he uling coali ion causing he P esiden ’s e o o be o e uled.
The law became e ec i e om he beginning o 2009 and o ally changed he pension
landscape in Poland.
Key ea u es o he b idging pensions:
▸Based on labou medical g ounds. The e a e no o he c i e ia o selec ing he en i led
wo k pos s. Only occupying such a pos o a de ined pe iod en i les wo ke s o
b idging. No special a angemen s exis o any pa icula g oup o p o ession.
▸Bene i s a e p o ided only o he sho pe iod o ime be ween exi ing he en i led
wo k pos and eaching he minimum e i emen age. The pe iod is de ined as no mo e
han ( ypically) 5 yea s o less.
▸Financed (addi ional con ibu ion) by employe s who employ wo ke s in pos s ha
expose hei heal h o isks such as wo king unde g ound, unde wa e o hose equi ing
a special heal h s a us, such as an ai c a pilo .
▸Planned o a ini e pe iod. E en ually b idging pensions need o be exchanged o
equali ica ion p og ammes allowing people o wo k longe in o he pos s.
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The goals behind he concep :
▸P o ec ing wo ke s heal h –selling heal h o he p i ilege o e i ing ea ly should no
be possible
▸Elimina ion o hidden subsidisa ion o hose employe s who bene i om employing
wo ke s in pos s exposed o heal h isks – hose who bene i om his employmen
should co e he cos o he subsequen heal h isks
▸Inc easing employmen
The in oduc ion o he b idging pensions did no ex end he scale o ea ly e i emen
schemes. Ra he he opposi e. This was a way o p o ec he wi hd awal o he schemes.
The way b idging pensions we e de ined (labou medical) and hei clea cos mean
ha he numbe o po en ial cases was oughly 1/10 h o he p e iously possible ea ly
e i emen schemes
36
. Mo eo e , ea ly e i emen was condi ional on addi ional con i-
bu ions paid ea lie by employe s. The en i e scheme was empo al co e ing only hose
wo ke s who had s a ed wo king in special condi ions o in a special capaci y be o e
1999. The law on b idging pensions is commonly e e ed o as he mos impo an
achie emen o he go e nmen du ing he e m 2007-2011.
9. Replacemen a es and he dis ibu ion o income by age
As al eady p esen ed, he le el o OA pension bene i s (as exp essed by he eplacemen
a e) did no depend on he pa icula ype o pension sys em. The e was no public pen-
sion e o m ha could inc ease ha le el wi hou educing emune a ion o p oduc ion
ac o s and ans e s o he han OA bene i s. Ne e heless, people s ill pe cei ed pension
sys ems ia he bene i s hey paid –o ac ually p omised. Consequen ly, changing a sys-
em ha gene a ed in la ed pension expec a ions o one ha p o ided ue in o ma ion
on u u e pensions in ad ance caused social eelings ha he change was bad. E en young
people om whom he e o m eleased he pe spec i e o he highe con ibu ions and/o
axes el unhappy. In many cases hey e en p o es ed.
Pension expec a ions do ma e o social and economic de elopmen . I hey a e in la ed,
p oblems will a ise soone o la e . F om he indi idual’s iewpoin , adi ional DB pension
sys ems wo k ex pos , which means pension sys em liabili ies a e exp essed in mone a y
e ms, a e a pe son e i es. In his way, people may and do expec mo e han a pension
sys em –ac ually he wo king people –can and wish o pay. The indi idual’s pe cep ion
does no ake in o accoun equa ion 2 (ea lie in he ex ). The GDP cons ain on expend-
i u e is a mac o concep , while a he indi idual le el people s ill expec wha was p omised.
The new Polish sys em wo ks along an ex an e app oach: no p omises, jus well-de ined
sys em liabili ies as hey a e now. This con ibu es o he p e en ion o such in la ed
expec a ions. I he e en ual le el o pensions is gi en by he popula ion s uc u e and he
con ibu ion a e, hen i seems be e ha people expec wha hey will e en ually ecei e
a he han expec ing mo e. In o he wo ds, a educ ion o expec a ions seems be e han
cu ing ac ual bene i s down.
In a DC sys em, eplacemen a es addi ionally depend on he e i emen age. The
la e a pe son e i es, he highe he bene i . Mo eo e , in ac ua ially neu al sys ems,
each addi ional pe iod wo ked be o e e i emen adds mo e o he le el o he bene i
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han he p e ious pe iod. Consequen ly, he issue o eplacemen a es becomes mo e
complex. The le el o he pension is a unc ion o he e i emen age. So asking he
ques ion ‘wha will he le el o u u e bene i s be’is no p ecise. One should addi ion-
ally speci y he e i emen age co esponding o he ques ion.
I espec i e o he abo e, u u e pensions will be smalle han hose he p e ious gen-
e a ions enjoyed. This will jus be he e ec o he popula ion change. Pensions sys ems
can simply adjus o ha change o no . In he la e case demog aphy will be s onge
anyway and he adjus men will come anyway –jus mo e d ama ically and socially
pain ully. The ex an e a angemen s a e be e om ha iewpoin . They also p o ec
he young much mo e han he ex pos a angemen s.
Pos poning he ine i able adjus men leads o pain ul e en ual disillusionmen . The
ex an e app oach was implemen ed well in ad ance, allowing o a g adual educ ion
o pension expec a ions. People co e ed by he new sys em (bo n a e 1948) do no
ha e hei pension igh s simply educed. Thanks o he ini ial capi al ha ca ies o e
he igh s al eady acqui ed, he eplacemen a es will go down subs an ially bu
slowly, which means he ac ual le el o pensions will no subs an ially change yea o
yea
37
.
I is oo ea ly –and in gene al e y di icul – o measu e he e ec o he im-
plemen a ion o he new pension sys em on he change o dis ibu ion o he isk
o po e y by age (as p esen ed in Table 1 and Table 2) and o analy ically dis in-
guish his e ec om he e ec s s emming om o he possible easons. Howe e ,
a clea coincidence can be obse ed in he ables. The shi o ha isk om
younge o olde age g oups has been obse ed o Poland and Sweden –coun-
ies ha in oduced he same ype o pension sys em ha in ol es he in e es s
o he young. The o he coun ies in imes o c isis p o ec ed he olde gene -
a ion much mo e s ongly han he younge gene a ion. I should be s essed ha
he e i ees’exposu e o he isk o po e y is much smalle , e en a e he sha p
change we obse ed ecen ly.
Figu e 7 Pension expendi u e un il 2060. Sou ce: Eu opean Commission (2009).
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P o ec ing he in e es s o he young can also be de i ed om p ojec ions o u u e
pension expendi u e
38
. Figu e 7 illus a es he p ojec ions. No going in o de ail, one
can see he p ojec ed e ec o Poland is di e en om all o he cases
39
. Poland will
enjoy a dec ease ins ead o smalle o la ge inc eases in pension expendi u e in he de-
cades o come. This do no mean a educ ion in pensions – his means emune a ion
o p oduc ion ac o s will be able o g ow as e han p oduc i i y g ow h wi hou mon-
e a y in la ion, which in u n will con ibu e o s onge long e m economic g ow h.
10. Missing elemen s o he new pension sys em, ailu es in he e o m, and
a piece o unexpec ed p og ess
E en hough he ini ial design o he new pension sys em has almos en i ely been
in oduced, a numbe o ailu es can be poin ed ou . Mos o hem a e he ic ims o
poli ical p ocess; some mino ones a e ela ed o he design i sel as i was d awn.
Co e age ailu es - g oups s ill ou side he public sys em
The public pension sys em should, by de ini ion, co e he en i e popula ion. The sys em
so named ‘public’in Poland (as well as in many o he coun ies) has le se e al special
g oups ou side. So he new sys em does no co e he en i e popula ion. The excep ions
a e:
▸Ag icul u al wo ke s (ac ually peasan s)
▸Judges and p osecu o s (exemp ed om 1999; judges because o he cons i u ion;
p osecu o s by poli ical ac ion)
▸Uni o med se ices (a my, police, i emen and simila ; exemp ed om 2002; by
poli ical ac ion)
▸Mine s (exemp ed om 2005; s ee io s jus be o e elec ions)
Each o he excep ions has a di e en his o y and backg ound.
Ag icul u e –lagging s uc u al adjus men
The la ge sha e o ag icul u e in o al employmen is a sign o s uc u al unde de elop-
men
40
, and has pension sys em consequences. Be o e 1972 ag icul u al wo ke s we e no
co e ed by any pension sys em. Ins ead o co e ing hem in he public sys em, a special
sys em was es ablished o his g oup (KRUS). Tha sys em is in ac a mix u e o a ype o
social assis ance o he poo li ing in he coun yside, and a me hod o no paying con i-
bu ions. Mo e han 90 pe cen o KRUS expendi u e is co e ed by a budge a y subsidy, so
i is a me hod o edis ibu ion om non-ag icul u al wo ke s o ag icul u al wo ke s. The
mos impo an p oblem s emming om ha is he mo i a ion o ag icul u al wo ke s o
s ay in ag icul u e ins ead o lowing o non-ag icul u al sec o s o he economy. A e age
p oduc i i y in ag icul u e is e y low –many imes lowe han in non-ag icul u al
sec o s.
S aying in ag icul u e is a loss o he ag icul u al wo ke since e en a low income
ou side ag icul u e would be highe han wi hin i . Mo eo e , he en i e economy
would bene i om he shi o a la ge olume o ag icul u al wo ke s o non-
ag icul u al sec o s. Such a shi would no be easy and would depend on hei
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adap abili y. Howe e , poli ical obs acles p e en he p ocess om s a ing on a sub-
s an ial scale
41
.
S ong g oup p essu e
Judges and p osecu o s we e s ong enough o s ay ou side he sys em om he e y
beginning (1999) and ecei e gene ous paymen s o he en i e ime a e s opping hei
ac i i y, which hey may do ela i ely ea ly.
Misuse o he pension sys em
Uni o med se ices we e ini ially co e ed by he new sys em unde s anda d ules. The
only di e ence was ha only he newcome s since 1999 we e co e ed. The es s ayed
in hei own p e ious sys em. Tha was changed in 2002 o easons s emming om
hei commande s’s ong willingness o ha e he “pension”sys em as a de ice o
implemen s a policy.
Mine s and s ee io s
Mine s we e also co e ed by he new sys em in 1999. The mine s wen on s ike o
p e en being co e ed, bu we e no success ul. Tha was a g ea achie emen . In 2005
he mine s ac ed again and chose a e y delica e momen . Two elec ions we e sched-
uled o he same yea (e en he same pa o ha yea ), namely he p esiden ial elec-
ions and pa liamen a y elec ions. Mine s’ io s in Wa saw igh ened poli icians
enough o e en ually accep all hei demands. The mos impo an was o wi hd aw
hem om he public sys em. The key a gumen he mine s s essed was he absence
o he p omised law on b idging pensions.
Poli icians will ha e o cope wi h hese ou di e en challenges. Each will ha e o be
deal wi h in a speci ic way. One good addi ional ou come o he anspa en ules
wi hin he public sys em is ha he es o he popula ion knows and unde s ands mo e
on pensions, so is less keen o accep special a angemen s o g oups emaining
ou side o he sys em.
Design ailu es
The NDC pa o he sys em plays a c ucial ole. Implemen a ion o FDC was mo e
isible and unde s andable o he people so i played an addi ional ole as an
a ac o . I was ac ually he implemen a ion o NDC ha was he essence o he
e o m. The ins i u ional s uc u e behind he NDC pa o he sys em has no ye
been de eloped well enough. The e should be a specialised ins i u ion unning his
pa o he sys em. I would also be good i p ope y igh s o accoun alues we e de-
ined and gi en o pa icipan s. By no ha ing in place hese elemen s o he ins i u-
ional in as uc u e, he NDC pa is s ill unde de eloped and no ully unde s ood by
i s pa icipan s.
An illogical a angemen has been adop ed o beques s. They may be le wi h e-
spec o he FDC pa , while hey may no wi h espec o he NDC pa o he sys em.
The same a angemen should apply o bo h o hem.
Too lean incen i es and egula o y mechanisms o educe he cos s o unning he
pension sys em. The newly in ol ed PTEs ha un he open pension unds began wi h
Gó a IZA Jou nal o Labo & De elopmen 2013, 2:2 Page 24 o 31
h p://www.izajold.com/con en /2/1/2
O ens ein MA (2008) P i a izing Pensions: The T ansna ional Campaign o Social Secu i y Re o m. P ince on Uni e si y
P ess, P ince on and Ox o d
Palme E (2002) “Swedish Pension Re o m: How Did I E ol e, and Wha Does I Mean o he Fu u e?”. In: Felds ein M,
Siebe H (eds) Social Secu i y Pension Re o m in Eu ope. Uni e si y o Chicago P ess, Chicago
Van de Kaa DJ (1999) Eu ope and i s popula ion: he long iew. In: an de Kaa DJ, Le idon H, Gesano G, Okólski M (eds)
Eu opean Popula ions: Uni y in Di e si y. Kluwe Academic Publishe s, Do d ech
Wo ld Bank (1994) A e ing he Old Age C isis: Policies o P o ec he Old and P omo e G ow h. Wo ld Bank,
Washing on D.C.
doi:10.1186/2193-9020-2-2
Ci e his a icle as: Gó a: Poli ical economy o pension e o ms: selec ed gene al issues and he Polish pension
e o m case. IZA Jou nal o Labo & De elopmen 2013 2:2.
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