The Risk of Social Security Benefit Rule Changes: Some International Evidence / John McHale.

Format:

Book

Author/Creator:

McHale, John.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7031.

NBER working paper series no. w7031

Language:

English

Subjects (All):

Generational accounting.

Social security--Finance.

Social security.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Risk of Social Security Benefit Rule Changes

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Cambridge, Mass. : National Bureau of Economic Research, 1999.

Summary:

Against a background of projections of sharply increasing elderly dependency rates, workers in the major industrial economies are apprehensive that their social security benefit entitlements will be cut before or after they retire, leaving them with inadequate retirement income. This paper looks at recent benefit rule changes in the G7 countries to see what can be learned about such political risk in PAYG pension systems. From this small sample, I find that projections of rising costs under current rules are inducing reforms, and that these reforms often have a major impact on the present discounted value of promised benefits for middle-aged and younger workers. Usually, however, the benefits of the retired and those nearing retirement are protected. The phasing in of benefit cuts raises the question as to why younger workers are willing to take significant cuts in their implicit wealth while protecting the currently old. One possible answer is explored through a simple model: these workers fear even larger cuts in their benefits if the tax burden on future workers rises too high.

Notes:

Print version record

March 1999.