Regular Adjustment of Financial Parameters of Social Protection Systems in Volatile Inflationary Environments

This paper addresses the problem of periodical adjustments of financial parameters which govern the revenue side of social protection systems and adjustments of social benefits-in-payment in a volatile visionary environment: in short, the indexation problem. It attempts to provide an insight into this problem by focusing on cyclical wage movements, usually ignored in economic and actuarial projections. Preliminary results are drawn from two numerical examples, showing impacts on social security finances, equity and consumption. Some general conclusions are drawn, notably the problem affects both pay-as-you-go and funded systems. Essentially, in terms of adjustment as in other spheres, when it comes to addressing problems in the present, past experience is not necessarily the best basis for constructing a rational future.