Just Generational Welfare Contracts and Poverty

Citizens in affluent countries face a great number of social and economic risks, from birth until the very end of their lives. Many of these risks are associated with specific phases of the human life cycle when the earnings potential of households decreases. How are these age-related poverty risks linked to the often “implicit” generational welfare contracts that are embedded with social policy making? Such generational welfare contracts may seem just in their institutional design if rights for income protection are equally distributed across age groups. We argue, however, that a generational contract cannot be considered to satisfy important demands of fairness if it fails to substantially reduce poverty among citizens in different phases of life. In this paper we link the idea of generational welfare contracts to poverty outcomes in 18 affluent countries. We combine new comparative data on social rights from the Social Policy Indicator Database (SPIN) and micro–level income data from the Luxembourg Income Study (LIS). For some countries we have income data stretching from the 1960s until 2010, something that provides possibilities to analyze long term trends in policy developments and outcomes. The empirical analyses show that there is considerable degree of correspondence between the design of generational welfare contracts and age related poverty risks, particularly in terms of financial vulnerability. Higher welfare state generosity for a particular age related social risk is generally linked to less poverty in the specific target group.