Tackling Inequalities. Vertical Redistribution in Old Age Pension Schemes

A large literature has convincingly argued about growing income inequalities as well as the risk of welfare dualization and institutional maladjustment between labour market and welfare arrangements in advanced economies.

Redistributive mechanisms such as welfare schemes may in principle constitute effective tools to tackle increasing inequality. Nevertheless, this ultimately depends on the vertical redistribution capacity of the former. As the largest redistributive mechanism in most advanced welfare states, pension schemes are a case in point. However, most of redistribution they produce is between generations and not necessarily across income groups.

The paper therefore focuses on the vertically redistributive elements contained in the pension schemes of a number (around 6 or 7) of countries, and their changes in the last two decades. The analytical focus will mainly be on social insurance and mandatory private schemes, since means-tested schemes are by definition about income redistribution and purely private schemes are non-compulsory non-redistributive. The objective of the paper is twofold. First, we aim at mapping the different elements of vertical redistribution – i.e. progressive calculation formulas, differential access to retirement, etc.. - included in the schemes covered. Second, we aim at accounting for the observed variation.

Countries and schemes will be selected in order to be representative of the main types of pension provision, and they will include countries belonging to different welfare regimes, as well as fully public schemes, schemes based on social partnership and private mandatory schemes.

To the best of our knowledge, there is no comparative research on this specific topic. The paper will therefore be of an exploratory nature. Possible independent variables are the power resources and political orientation of key actors instrumental in design of the scheme; the governance of the scheme (e.g. state governed or parity governance); the position of the scheme within the overall pension system.