The economics and politics of retirement incomes policy in Australia

The process of adjustment to the changing demographic balance in Australia over recent years has resulted infrequent and complex changes in Australia's retirement income arrangements. Many people have found great difficulty in understanding how these new arrangements are supposed to work. This article describes some of these recent changes and the factors that triggered them. It also examines what the elderly's reactions to these changes indicate about the nature of the "politics of ageing". Beginning with an overview of population ageing in Australia, it then briefly outlines the major features of the country's retirement income system. This is followed by an examination of the factors that triggered the recent changes in retirement income arrangements. The last section describes the political response of Australia's elderly to these changes.     

Back at the Crossroads: The Slippery Fish of Australian Retirement Income Policy

Australia's retirement income arrangements had reached a policy crossroad by the early 1980s. Not unlike the proverbial slippery fish, the goals and roles of its constituent elements were very difficult to grasp. The ensuing reforms of the 1980s and 1990s brought increasing coherence to these arrangements. Some of the more recent changes, however, have once again introduced policy slipperiness through creating a system that is at odds with the intent of the earlier reform efforts. Indeed, Australia's retirement income arrangements have morphed into a system whose function is no longer simply to protect workers from the loss of earned income arising from retirement. The ‘zenith’ of this situation was reached in July 2007 when the major changes in superannuation announced in the 2006 federal budget took effect. Thus, Australia is once again back at a policy crossroad as far as her retirement income arrangements are concerned.     

The Retirement Provisions in China,Hong Kong,Singapore and Taiwan: Perspectives on Policy Inputs and Social Outputs

This paper aims to develop an integrated policy index system using a Surface Measure of Overall Performance (SMOP) approach to comprehensively evaluate and compare the policy input and social output of the retirement payment system in urban and rural China, Hong Kong, Singapore and Taiwan. With this, a tool may be developed to help insightfully examine the old‐age income policies and appropriately, and perhaps theoretically in the future, categorize the types of retirement provisions or social security policies as a whole in the East and West. The results indicate that, particularly in urban China, Hong Kong, Singapore and Taiwan, a low level of de‐familization and medium and high levels of gender equality are the common features of these five pensions in China, Hong Kong, Singapore and Taiwan. Furthermore, it is found that the retirement provisions in China, Hong Kong, Singapore and Taiwan can well be divided into two groups based on the level of pension right protection and illustrate different characteristics between them accordingly. In addition, policy implications and suggestions for further reforms of these retirement payment schemes are elaborated in the light of the findings of this policy index system.     

The interaction of pillars in multi‐pillar pension systems: A comparison of Canada,Denmark, Netherlands and Sweden

Canada, Denmark, the Netherlands and Sweden have advanced multi‐pillar pension systems. Using micro‐simulations, this article presents a close examination of the interaction of pillars in these countries. The relative importance and the role of the different pension pillars vary from country to country, and according to age, income, gender and socio‐economic dimensions as well as between generations. A further area of investigation is the mitigation capacity of the four pension systems. On the one hand, adverse labour careers lead to lower life‐time earnings and lower private pension accruals. On the other hand, these effects are mitigated through the design of pillars and their interaction. Mitigation is important to income security and stability in retirement and to post‐retirement income distribution. However, mitigation mechanisms come at the cost of incentives. Moreover, in many countries, the generosity of public benefits is set to decrease – increasing the importance of private pensions. This will shift risk and uncertainty from employers and pension institutions to individuals. Thus, risks and uncertainties related to private pensions will become more important, raising questions about the division of responsibilities between public and private pensions, and about the potential of mitigating such risk through pillar interaction. These concerns are further reinforced by labour market changes. Although a pension system free of distortions is inconceivable, this article seeks to contribute to addressing how mitigation should be designed, and how mitigation and risk sharing should be balanced against incentives, challenges which are as much political as technical.     

The Revolution that Faltered: Two Decades of Reform of Australia's Retirement Income System

In the 1980s, Australia's retirement income system became the subject of ongoing reform. A number of the reform objectives were quite revolutionary but some remain much further from realization than was expected, with major consequences for future retirees. In this sense, Australia's retirement income revolution has faltered. This paper (1) outlines the main features of Australia's retirement income system prior to the 1980s, (2) presents the reform objectives and explains the sense in which they were "revolutionary", (3) describes some of the major changes, their achievements, and how and why a number remain further from realization than expected, (4) considers two more recent objectives and (5) outlines the challenges that remain.     

Can complementary pension plans help improve retirement income in the Dominican Republic?

In the 1990s, following the earlier example of Chile, pension system reforms were implemented in a number of Latin American and other countries. These reforms focused on introducing models of pension provision that were fully‐funded and privately managed. Although aspects of these reforms have been positive, for many persons covered by these systems retirement income is not adequate. The development of occupational pension plans may offer an alternative, complementary mechanism to help improve pension adequacy. This article discusses different complementary pension plan models and examines the case of the Dominican Republic. It argues that complementary occupational pension plans may be a viable policy option for this developing country.     

Economic crisis and social policy reform in Korea

The economic crisis that broke out in Korea in December 1997 has had a chilling impact on social development in the country. Today unemployment is the highest that Korea has experienced in the past thirty years. This paper aims to examine the impact of the economic crisis on social development and the role of public policy to mitigate the problems caused by the crisis. The economic crisis has hit vulnerable groups harder, increased the proportion of part-time and daily workers, and reversed the trend of steady improvement of income distribution. The economic crisis along with the trend of aging population, globalization, and competition calls for an expanded role of social policy, which the Korean government has neglected for a long time. The main targets of social policy reform in Korea include the expansion of government programs and safety nets for the unemployed and redesigning the national pension and health insurance scheme to provide adequate income security as well as to improve the system sustainability.     

Just deserts? ‘Privatisation’ and the history of deservingness in Australia's retirement incomes system

Over the last few decades, changes in Australia's retirement incomes policy, including the introduction of compulsory superannuation, have seen governments encourage individuals to provide for their own old age from private means. This process has been described as ‘privatisation’ of retirement incomes. However, beyond the ‘privatisation’ thesis, there has been little critical examination of what these changes have meant for the nature and relative importance of the different principles underpinning Australia's retirement incomes system. This paper aims to provide such an examination. Drawing on the principles of deservingness and need, the paper provides an historical analysis of the development of Australia's retirement incomes system, tracing how these two principles underpinned the first age pension and subsequently contributed to the emergence of compulsory superannuation. This approach provides a deeper understanding of how contemporary policy changes have altered the structure of Australia's retirement incomes system, arguing that there are important historical continuities as well as changes. It argues that the phrase ‘state‐supported private saving’, rather than ‘privatisation’, captures the nature of this contemporary reform process.     

The Care of Older People: Australia and the United Kingdom

Australia and the United Kingdom have tried various ways to contain the growth and cost of institutional care for older people. The Australian government adopted central planning strategies from the mid-1980s that succeeded in limiting nursing home places and increasing community services. The United Kingdom government in the mid-1990s required local governments to adopt quasi-market strategies but with less success in containing the growth and cost of institutional care. The two countries changed political direction later in the 1990s but both the Australian Liberal (conservative) government and UK "New Labour" want people to pay more for their care in old age. Each country has something to learn from the policy experiences of the other, including the contentious issue of who should pay for aged care.     

Generational equity and the reformulation of retirement

Starting from an examination of the essential components of the long-established contract between the generations, the analysis moves on to examine public policy responses to the aging of populations. Observing an international inclination to panic at the growth of old age and to restrict expenditure on services to older people, the article addresses practical questions of political economy within the generational contract. On the one hand, cuts to pensions and services are seen not to be economically inevitable. On the other, it is argued that modern retirement breaches the compact between the generations and will need to be reformulated, enabling more people to earn income well beyond current retirement ages.     

Doctrine and Practice in Social Security Pension Reforms

This article describes the debate taking place about the most appropriate way for States to provide for retirement income for their citizens. The main doctrinal approaches reflected in this debate are analysed in relation to the actual outcomes of state practice. The key issue is argued to be one not of economic or social policy but of political culture. Reform efforts are surveyed on the basis of the starting points and paths followed in particular countries. The critical problem is found to be how to build a pension system that is realistically based on the actual economic, social, and political conditions of a country.     

Pension policy design changes in EU countries since the mid‐1990s

Recent decades have been characterised by significant pension reforms. This article reviews this process, focusing on five policy design issues that have concerned policymakers: optimising poverty alleviation effectiveness; redefining the state's role in smoothing incomes over the life‐course; balancing contributions to benefits; adjusting the system to respond to demographic, economic and social changes; and ensuring that reforms will be long‐lasting. While the role of state pensions is diminishing, there is a growing realisation of the need to ensure that they remain adequate, reigniting interest in minimum pensions and contribution credits. The expanding role of private pensions has led governments to intervene more in their operation. Policymakers have shown interest in automatic adjustment mechanisms to bring about required economic changes. However, there is greater understanding that for these to happen, the state has to engage more with its citizens.     

British and European Influences on the "Australian Way" from the 1980s

Commonwealth countries share their British social policy legacy in a variety of ways. Autstralia attempted to adopt the postwar "new Fabian" welfare state model at the very time when international economic circumstances undermined its Keynesian foundation. With Labor governments in power from 1983 to 1996, Australia diverged significantly from the neo-liberal reform path adopted in the United Kingdom. Australian governments looked increasingly to European social democracies for alternative social policy models. In a manner anticipating the "Third Way", the tendency was towards mixing neo-liberal economics with social democratic welfare. The Australian "Third Way" which resulted proved unstable. Current social reformers, the paper proposes, ought to revisit a neglected but characteristically British emphasis on the need for a measure of "socialization of investment" to underpin redistributive strategies.     

Housing policy and asset building: exploring the role of home ownership in East Asian social policy

Western societies promote home ownership in the belief that it provides a means to build up individual welfare and security, potentially offsetting the inadequacy of social security to meet needs in retirement. Some East Asian economies have long focused on advancing ‘asset building’ through housing policy. These efforts have two purposes: to use housing investment to drive economic development and to build family assets throughout life as a component of income protection for old age. These purposes work well in some countries but not as well in others. In policy terms, the common element among them is that governments promote home ownership as a component of social policy or as a complement to mainstream welfare. This article examines how home ownership fares as a form of asset-based welfare in selected East Asian countries (Singapore, Hong Kong and Japan) and considers the implications for understanding the role of institutions in development.     

经济转型时期收入分配实证分析

收入分配体现着人民的根本利益,对推动经济发展和社会进步至关重要。经济转型时期居民收入发生了剧烈变动,收入倾斜政策在破除平均主义的同时,也出现了贫富悬殊、两极分化的现象。保持收入差距,又要缩小贫富悬殊,是摆在我们面前的重要历史使命。实现共同富裕是我们的伟大目标,为此,必须加强政府公共政策导向和调控力度,使分配制度改革进入一个新的阶段。     

The effect of immigration in the retirement age reforms: learning from a numerical example

This article examines the role played by the low-skilled immigrant labour force in countries aiming to reform their public pension systems by postponing the pensionable age. With an overlapping-generations model in continuous time and a fully redistributive pension system, the results of this article suggest that immigration could imply a delay in the pensionable retirement age. Further, we find that the preference for a delay in retirement age increases with the labour productivity of both immigrants and native population.     

Social Security in Australia and New Zealand: Means-tested or Just Mean?

The social security systems of Australia and New Zealand have traditionally rejected social insurance in favour of a means-tested categorical safety net approach that provides considerable scope for targeting. The experience of both countries provides many examples of how targeting can be used to constrain social security spending, and these have attracted interest in other countries keen to contain the growth in their social security budgets. However, although there are many similarities between the two systems, there are also many differences and these have become greater as targeting has gathered momentum over the last two decades. This paper analyses how targeting has been used in each country as a way of illustrating the different approaches adopted. Attention is focused on how the retirement income systems of the two countries illustrate an increasing policy divergence, with the planned Australian transition to a "multi-pillar" approach in contrast to the constant (and continuing) reform of New Zealand superannuation. Household data on the pattern of receipt of transfer incomes and their impact on the distribution of income are then used to explore the impact of targeting since the early 1980s. This analysis suggests that, in practice, targeting has had a far smaller impact on income inequality in both countries than is often claimed.     

Social Policy Diffusion from the Perspective of Intergovernmental Relations: An Empirical Study of the Urban Subsistence Allowance System in China (1993-1999)

Universal access to China’s social welfare system involves a process of diffusion from localities to the whole country on the basis of social policy innovations in which intergovernmental relations play a key role as a facilitator. The rapid establishment of the urban subsistence allowance system in more than 200 cities throughout the country in seven years (1993-1999) serves as a case for our empirical analysis of the diffusion mechanism of social policy innovations at different levels of government. Our findings show, firstly, that in adopting a new social policy, city governments have to respond to the social desire of local citizens while keeping fiscal constraints in mind; at the same time, they are affected by administrative orders from higher-level governments and the vertical fiscal relations between governments at different levels, and are also subject to competitive pressures from other cities at the same level. Secondly, city governments’ policy innovations offer an opportunity for higher levels of government to learn from their experience. Thirdly, central government orders exert both a direct and indirect influence upon city governments, with provincial orders acting as intermediaries. And lastly, there is a clear difference in the time lag effect of orders from the central government and those at provincial level upon city governments’ policy adoption.     

Pension privatization in crisis: Death or rebirth of a global policy trend?

From 1981 to 2007, more than thirty countries worldwide fully or partially replaced their pre‐existing pay‐as‐you‐go pension systems with ones based on individual, private savings accounts in a process often labelled “pension privatization”. After the global financial crisis, this trend was put on hold for economic, ideational, and institutional reasons, despite a rise in critical indebtedness that has facilitated pension privatization in the past. Is the global trend towards pension privatization dead or in the process of being reborn, perhaps in a somewhat different form? Several recent trends point to rebirth as policy‐makers scale back public and private pension systems, attend to minimum pensions and “nudge” rather than mandate people to save for retirement.     

Ageing Baby Boomers in Australia: Evidence Informing Actions for Better Retirement

The first Australian baby boomers are starting to retire. Consequently, it is essential to develop and apply a strong evidence base to facilitate their successful retirement and ongoing wellbeing. This review focuses on recent literature on pre‐retirement baby boomers to identify available research findings and gaps to be filled on retirement preparation. A notable shortage of empirical literature was found on pathways to retirement and financial plans. A trend emerged towards an intention to retire at an older age, and the main source of retirement income was expected to be superannuation. Over half of Australian boomers expect their savings to be sufficient; however, 30–50% anticipate a decline in their standard of living. The majority want the responsibility for funding retirement shared between the individual, government and employers. Further research is needed on the varying plans and expectations of men and women, of low‐skilled workers, and those from culturally diverse backgrounds.