New Social Security papers from the Social Science Research Network

SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME eJOURNAL

"Universal Minimum Old Age Pensions: Impact on Poverty and Fiscal Cost in 18 Latin American Countries" World Bank Policy Research Working Paper No. 5292

JEAN-JACQUES DETHIER, World Bank
Email: jdethier@worldbank.org
PIERRE PESTIEAU, University of Liege - Research Center on Public and Population Economics, Centre for Economic Policy Research (CEPR), CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Email: p.pestieau@ulg.ac.be
RABIA ALI, World Bank
Email: rali1@worldbank.org

Alleviating poverty for the elderly requires a different approach from other age groups, and a minimum pension is likely to be the only viable option. This paper examines the impact on old age poverty and the fiscal cost of universal minimum old age pensions in 18 Latin American countries using recent household survey data. First the authors measure old age poverty rates for these countries. Then they discuss the design of minimum pensions schemes -- means-tested or not -- as well as the disincentives they introduce for the economic and social behavior of households including labor supply, saving and family solidarity. Finally, the authors use household survey data to simulate the fiscal cost and the impact on poverty rates of alternative minimum pension schemes in the 18 countries. They show that a universal minimum pension would substantially reduce poverty among the elderly (except in Argentina, Brazil, Chile and Uruguay where minimum pension systems already exist and poverty rates are low). Such schemes have much to be commended in terms of incentives, spillover effects and administrative simplicity, but they have a high fiscal cost. The latter is a function of the age at which benefits are awarded, the prevailing longevity, the generosity of benefits, the efficacy of means testing, and the fiscal capacity of the country.

"Back to the Future: A Long Term Solution to the Occupational Pensions Crisis" CHARLES SUTCLIFFE, University of Reading - ICMA Centre
Email: C.M.S.Sutcliffe@rdg.ac.uk

In the UK and elsewhere, defined benefit (DB) schemes are being replaced by defined contribution (DC) schemes. However DC schemes have some substantial weaknesses, and a continuation of current policies will probably lead to another pensions crisis in a few decades. There is an alternative which avoids the major defects of DC schemes. It is proposed that, if UK employers wish to replace their DB schemes, they should do so with something that looks like a career average revalued earnings (CARE) DB scheme to the members, but is funded by single premium deferred annuities (SPDAs) and looks like a DC scheme to the employer. Pension provision is outsourced to specialist providers (insurance companies), with the risk (and the decisions that must be made by members of a DC scheme) managed by insurers, not the employer or members.

"Through the Doughnut Hole: Reimagining the Social Security Contribution and Benefit Base Limit" Administrative Law Review, Vol. 62, No. 2, p. 367, 2010

PATRICIA DILLEY, University of Florida Levin College of Law, National Academy of Social Insurance (NASI)
Email: dilley@law.ufl.edu

The Obama campaign proposal to address Social Security's future financing shortfalls by increasing the Social Security tax base limit only for those making more than $250,000 per year raises the broader question of the function of the base limit from a Social Security program perspective. The public supports increasing the wage base above all other possible avenues for solving long term financing issues, but the problems with the Obama "doughnut hole" proposal are substantial from several perspectives. In this article, the author suggests that the function of the base limit be reconsidered, and the benefit accrual function of the earnings base be considered separately from the revenue function of the tax base. The little recognized fact that Social Security benefits are based on earnings, not on taxes, should be the central organizing principle in a reconsideration of the base limit and of options for future revenue sources for Social Security.

"Used and Foregone Health Services among a Cohort of 87,134 Adult Open University Students Residing throughout Thailand" Southeast Asian Journal of Tropical, Medical, Public Health, Vol. 40, No. 6, pp. 1347-58, 2009

VASOONTARA YIENGPRUGSAWAN, Australian National University (ANU)
Email: vasoontara.yieng@anu.edu.au
LYNETTE L.-Y. LIM, Australian National University (ANU)
SAM-ANG SEUBSMAN, Australian National University (ANU)
ADRIAN SLEIGH, Australian National University (ANU)

There are limited data on the frequency of foregone health service use in defined populations. Here we describe Thai patterns of health service use, types of health insurance used and reports of foregone health services according to geo-demographic and socioeconomic characteristics. Data on those who considered they had needed but not received health care over the previous year were obtained from a national cohort of 87,134 students from the Sukhothai Thammathirat Open University (STOU). The cohort was enrolled in 2005 and was largely made up of young and middleage adults living throughout Thailand. Among respondents, 21.0% reported use of health services during the past year. Provincial/governmental hospitals (33.4%) were the most attended health facilities in general, followed by private clinics (24.1%) and private hospitals (20.1%). Health centers and community hospitals were sought after in rural areas. The recently available government operated Universal Coverage Scheme (UCS) was popular among the lower income groups (13.6%), especially in rural areas.

When asked, 42.1% reported having foregone health service use in the past year. Professionals and office workers frequently reported 'long waiting time' (17.1%) and 'could not get time off work' (13.7%) as reasons, whereas manual workers frequently noted it was 'difficult to travel' (11.6%). This information points to non-financial opportunity cost barriers common to a wide array of Thai adults who need to use health services. This issue is relevant for health and workplace policymakers and managers concerned about equitable access to health services.