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.     

Australia's retirement income revolution: a Finnish system "down-under"

Most advanced industrial societies are confronting serious economic recession, and governments are seeking ways to stimulate economic growth and reduce government expenditure. For many countries these problems are compounded by aging populations and demographic changes. There are fewer people in the workforce, and more people in older age groups live longer and have increased expectations for retirement lifestyles. The result has been that many governments are radically transforming their systems of retirement income provision, often causing political, economic and social upheaval and widespread public anxiety. Australia is one country in which there have been huge changes in the retirement income system in the past 5 years. The system has been substantially privatized, and future retirement income will come from statutorily enforced earnings-related individual savings accumulated in decentralized private funds. Australia's new retirement income regime bears extraordinary similarities to the Finnish system of employment-related pensions, yet there was no reference to the Finnish system in the evolution of the new Australian system. There are lessons for Australia and for other countries in the long and successful operation of the Finnish pension system. This article first examines Australia's retirement income system, recent government policy changes and likely implications of these retirement policy changes for the future of Australia's traditional welfare state. Cross-national comparisons of the retirement income regimes in Finland and Australia, identifying international best practice in each country, comprise the second half of the article. Such comparisons will be of interest to policy-makers seeking new policy directions.     

Redefining Welfare: Australian Social Policy and Practice

The present paper outlines and analyzes Australia's welfare reform policies as they have been implemented over the past decade. While there have been numerous social policy initiatives over this period, welfare reform provides an interesting site for analysis and review. This suite of policies and programs is of particular importance from several standpoints. First, its target groups – those needing income security assistance, including the unemployed, people with disabilities, and single parents – are historically and traditionally of concern to social work and social welfare. Second, welfare reform policies have had significant impact on social welfare agencies, and the social workers and welfare workers employed in them. Finally, welfare reform has had a wider impact on inequality in Australia and our attitudes to those in need. This paper first provides a brief overview of the context of Australian social policy and welfare, its origins and current situation. It then outlines the key operational elements of welfare reform and how it has been implemented. The third section of the paper offers a critical analysis of these policies and programs and finally poses some questions and issues requiring further discussion and research.     

The challenge of pension reform in Georgia: Non‐contributory pensions and elderly poverty

Georgia's national social security system offers almost universal non‐contributory basic pension coverage. The basic pension has, to date, proved effective in dealing with old‐age poverty. But Georgia's fiscal constraints and ageing population also highlight the importance of improving the pension system, in order to ensure its sustainability. This article presents policy reform choices, which suggest that, in Georgia, pension reform might include increasing the statutory retirement ages and reducing the generosity of benefits through means testing. The case of the Georgian non‐contributory basic pension might hold value for some low‐ and middle‐income countries that are considering the implementation of, or expanding coverage under, a non‐contributory pension programme.     

Restructuring Australian retirement incomes: Implications of changing work and retirement patterns

Work and retirement patterns among older Australian women and men are changing. In this paper, the interactions between these patterns and social security policies are contrasted with the desirable direction of work and retirement later in life. The change in Australia's retirement incomes system towards the "three pillar model" described by the World Bank poses particular issues for late life employment and retirement, especially for older women.     

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.     

Youth Allowances: Incentive & Reform

Australia's income support arrangements have come under increasing scrutiny lately reflecting a growing concern about high levels of youth unemployment and about low levels of full-time education participation. This paper aims to explore the relationship between education participation and financial incentives and to assess as a possible direction for future reform, the concept of a single and universal youth allowance. The paper begins by outlining the major forms of income support available to young people and illustrates some of the complexities in the youth income support structure. The evidence on the importance of financial factors conflicts, particularly between economists and non-economists. This is in part explained by the different conceptual frameworks used. Other possible reasons are canvassed as to why studies have so far not thrown much light on the role of financial factors in the education participation decision. The paper also outlines specific directions of distortion contained in current payment relativities. Several difficulties with the proposal for a single youth allowance as a means of increasing education participation are discussed and alternatives briefly outlined. The concluding section of the paper summarises the issues relevant to the future debate on youth income support and identifies areas for further research.     

Handicapped by old and new traps: Hungary's health care reform

Since the early 1980s, grave challenges have faced Hungarian health policy. The health status of the population stagnated between the mid-1960s and mid-1970s, and has dramatically deteriorated since then. In the 1980s the multidimensional crisis of the health care system deepened. Its overhaul must embrace every component: policy-making, ownership, financing, management, service structure, patient rights, medical education, etc. The main purpose of this paper is to describe how health policy has (or has not) responded to these challenges. First it summarizes the inheritance of the state-socialist regime, then it outlines the recent changes in social insurance legislation, and finally it compares official goals with the way the reform is actually proceeding. The paper is intended to discuss the connection between health care reform and the historic transformation of the political regime and the economy.     

Behavioral responses and the distributional effects of the Russian ‘flat’ tax

This paper simulates the distributional impact of the Russian personal income tax (PIT) following the flat tax reform of 2001 using data from the Russian Longitudinal Monitoring Survey. I decompose the change in the distribution of net income into a direct (tax) effect and an indirect effect. The indirect effect is further decomposed into evasion and productivity effects using existing estimates of these respective elasticities. As expected, the direct tax effect increased net income inequality. Changes in the pre-tax distribution (indirect effect), on the other hand, had a large negative impact on inequality thus leading to an overall decline in net income inequality. I also find that the tax-induced evasion response increased reported net income inequality while reducing consumption inequality. To the extent that consumption approximates actual income, these results demonstrate that the flat tax reform had a much smaller effect on actual income inequality than on reported income inequality. More importantly, relative to non-tax factor, the reform had little overall effect on income inequality. This suggests that objection to flatter tax schedules on the grounds of income inequality is mostly misguided, especially in transitional countries with high levels of evasion.     

Social security reforms in China: issues and prospects

The phenomenal success of China's market-oriented economic reforms since the 1980s has rendered the traditional employment-based social security system increasingly inadequate and inefficient. For decades, the Chinese government has been trying to develop a more pluralistic, effective and affordable social security system which will be compatible with both a thriving market economy and a flagging socialist political structure. While the emerging system is still struggling with a variety of operational problems, the entry of China into the WTO is looming as a formidable challenge to this social security system. This presentation outlines the recent reforms of the social security system undertaken by the Chinese government, and assesses the effectiveness of the results in meeting the challenge. Here, social security reforms focus on the retirement and unemployment insurance schemes and the social assistance program.     

Defamilization/familization measures and women's pension income—The case of Taiwan

This paper examines how defamilization and familization measures can affect women's capacity to accumulate pension income and their subsequent standard of living after retirement. Firstly, it highlights the concepts of defamilization and familization and discusses the potential of these measures in assisting women to save pension income through the “commodification” and “decommodification” of labor. Secondly, it examines the major pension policies and examples of defamilization and familization measures in Taiwan. It shows how the current limited provision of such measures could create “double jeopardy” for women, affecting access to paid employment or resources to enable women who wish to undertake caring responsibilities to do so, ultimately impacting their capacity to accumulate pension income. Thirdly, it suggests ways to strengthen defamilization and familization measures in order to enable women to accumulate sufficient retirement income on the basis of three preconditions: policy attention to the reciprocal relationship between familization/defamilization measures and pension schemes for women; a recognition of differences between women in their preferred strategies to accumulate pension income; and an emphasis on a life course perspective to understand the double jeopardies faced by women in saving for retirement.     

The limits of parametric reforms in sustaining the Algerian retirement system in a context of population ageing

Accelerated population ageing in Algeria threatens the financial sustainability of its pay-as-you-go retirement system. Reform is a necessity, with options ranging from simple parametric reforms to important systemic changes. Prior to undertaking systemic reforms, it is worthwhile to investigate whether parametric reforms can place the system on a financially sustainable footing. In this article, we used a multi-scenario analysis that crosses the possible reform actions with possible socioeconomic scenarios. The results show that when using the most favourable scenarios, the financial balance of the Algerian system will remain negative in the short and long term. Implementing major parametric reforms can only help reduce the deficit and make it stable over time. Thereafter, systemic reforms will have to be implemented.     

The Future of Retirement Protection in Southeast Asia

This paper analyses the formal retirement protection systems in five economically successful, rapidly industrializing, and globalized economies of Southeast Asia: Indonesia, Malaysia, the Philippines, Singapore, and Thailand. It finds that while there are major differences in the formal retirement protection systems of the five countries in terms of coverage; contribution rates; scope and nature of preretirement schemes; investment patterns, practices and performance; replacement rates; administrative and compliance efficiency; and regulatory structures, the main common feature (with the exception of the Philippines) is aversion to social insurance and predominant reliance on individual provision through publicly mandated and managed provident funds. While these systems do minimize the fiscal burden on the State and thereby help maintain international competitiveness, they provide socially inadequate levels of retirement protection and are weak in ensuring efficiency of the saving-investment process. Moreover, several design and institutional features prevent full realization of many of the advantages of the provident funds found in these countries. They may, therefore, benefit by following the worldwide pension reform debate more closely, particularly concerning design and institutional and regulatory structures for mandatory defined-contribution schemes.     

Reforming Supplementary Benefit: The impact on claimants

The Government bill to reform social security will become an Act in 1986, and is planned for implementation in April 1987. One of the most significant areas for change will be the supplementary benefit scheme, which now has some four million claimants, and supports over seven million people. It will be replaced by the income support scheme, which will differ in important respects from the current provision. The review of the SB scheme, set up by Norman Fowler, was the second major review of the scheme in less than a decade. The first review was set up by the Labour Government in 1976 and culminated in major changes introduced by the Conservative Government in the Social Security Act 1980. This article examines what impact the 1980 scheme had on claimants, on their standard of living, on their understanding of the scheme and on the extent to which the scheme meets their needs. It then goes on to examine whether the Fowler Act will meet some of the criticisms of the 1980 reforms and, in particular, if it will improve the position of claimants.     

Targeting Social Expenditure in New Zealand: An Evaluation of the Current Policy Regime

This paper provides a brief account of how social expenditure in New Zealand has been targeted (i.e. means-tested) since the late nineteenth century, outlines the policy framework at the dawn of the new millennium, and assesses the strengths and weaknesses of the current targeting regime. It is argued that the existing policy settings are open to challenge on a number of counts. In particular, they are complex, inconsistent and relatively intrusive, they impose significant administrative and compliance costs, and they generate considerable incentive problems. Nor has the greater reliance on targeting since the mid-1980s prevented an increase in relative poverty and inequality. Given this situation, the paper outlines some possible reforms.     

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.     

Demographic Transition,Developmentalism and Social Security in China

This article studies the current demographic transition in China and its implications on the country's social welfare reform, particularly its Old Age Social Security (OASS) development. The developmental approach is analyzed to examine how developmentalism affects China's social welfare reform. Reviewing the historical development of the OASS system after the 1980s, this article discusses the major issues and concerns under the current system and the challenges it faces for future development. Further studies are called upon to address these issues in order to build a financially sound and socially equitable welfare system in China.     

The development of some characteristics for equitable national retirement income systems

The objective of this paper is to establish and apply a set of characteristics or benchmarks for a nation's total retirement income system to be considered equitable. It must be stressed that the suggested characteristics do not, by themselves, design a national retirement income system. Indeed, it is recognized that the political, historical, economic and cultural context of each country will always influence such designs. However, this paper will demonstrate that different designs of national retirement income systems are not equally effective when subjected to these equity criteria. Hence, in putting forward these characteristics, the aim is to develop clear distinctions between equitable and inequitable national retirement income systems.     

‘MUSIC WHILE YOU WORK’: TEENAGE WOMEN IN THE AUSTRALIAN LABOUR MARKET, 1947 TO 1992

Teenage women have been particularly disadvantaged by the collapse of the youth labour market over the last 20 years. This article outlines the dimension of that problem, comparing the position young women held in the teenage labour market in the late 1940s with their position today. While the 1950s and 1960s saw growth in some areas of paid work for teenage women, the 1970s marked a watershed. With the major exception of saleswork in the retail industry and clerical work in banking, teenage women saw their place in the labour market dramatically shrink during that decade. Nearly 30,000 full-time jobs disappeared during the 1970s, to be replaced by nearly the same number of part-time jobs. The 1980s has seen these developments reach crisis proportions. In the late 1980s, nearly 40,000 clerical jobs were lost to teenage women, and again the only significant employment growth was in casualised service sector jobs, such as cashiers and sales workers. This article concludes by exploring the structural reasons behind these dramatic long-term changes.