SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME eJOURNAL
There is a strong consensus that social pensions can potentially play a significant role in reducing old-age poverty in Asian countries. This chapter examines the determinants of the short- and long-term fiscal costs of social pensions in Asia, and avenues for enhancing fiscal space for financing these pensions. The analysis suggests that in the short and medium term (3-5 years), additional fiscal space equivalent to 1%-1.5% of gross domestic product (GDP) will be needed, and 2%-2.5% in the longer run.
The long-run fiscal costs of social pensions will be influenced by factors such as demographic trends, behavioral responses, political economy, and public aspirations and expectations. The extent of the needed fiscal space can, however, be moderated by better design, implementation, and governance of social pensions, and their coordination with the rest of the pension system.
To enhance fiscal space, generating the requisite reallocation of budgetary expenditure and improving its outcome orientation, as well as obtaining additional revenue from conventional and nonconventional sources, are needed.
The chapter suggests that those Asian countries that find an appropriate balance between development and the fiduciary perspective of fiscal space are more likely to be successful in using social pensions as an important instrument for reducing old-age poverty.
IGOR FEDOTENKOV, Tilburg University
A. C. MEIJDAM, Tilburg University - Center for Economic Research (CentER), Tilburg University - Department of Economics
BAS VAN GROEZEN, Tilburg University, Tilburg University - Center for Economic Research (CentER)
The central question of this paper is how international trade and specialization are affected by different designs of pension schemes and asymmetric demographic changes. In a model with two goods, two countries and two production factors, we find that countries with a relatively large unfunded pension scheme will specialize in the production of labour intensive goods. If these countries are hit by a negative demographic shock, this specialization will intensify in the long run, which is contrary to the prediction of the classical Heckscher-Ohlin-Samuelson model. Eventually, these countries may even completely specialize in the production of those goods. The effects spill over to other countries, which will move away from complete specialization in capital intensive goods as the relative size of their labour intensive goods sector will also increase.
"Cultural Cognition Insights into Judicial Decisionmaking in Employee Benefits Cases: Lessons from Conkright v. Frommert"
American University Labor & Employment Law Forum, Vol. 3, Issue 1, Forthcoming
Marquette Law School Legal Studies Paper No. 12-20
Decisionmaking hubris with cognitive origins is present today in many labor and employment law cases in the United States. In two previous law review articles, I explored whether anthropological and psychological explanations of judicial decisionmaking could provide meaningful insights into how U.S. Supreme Court Justices decided some of the more controversial labor and employment law decisions.
Indeed, motivated cognition of the cultural variety, or “cultural cognition,” did robustly explain how Justices’ values in two different labor and employment law cases led to different perceptions of legally-consequential facts in those cases. Culturally-motivated cognition is “the ubiquitous tendency of people to form perceptions, and to process factual information generally, in a manner congenial to their values and desires.” The resulting opinions by the Justices in these cases suffered from “cognitive illiberalism,” which too readily discounted the views of dissenters in favor of the majority’s views of the case. Thus, in these same works, I considered potential social science and legal debiasing techniques for ridding these decisions of delegitimizing bias, while simultaneously making them more acceptable to a larger segment of society.
This article proposes to investigate how these opinion-writing and institutional debiasing strategies could work in practice in the particularly arcane and maddeningly complex area of employee benefits law under the Employee Retirement Income Security Act of 1974 (ERISA). The hope is that the professionalization of the judicial corps through the establishment of ERISA courts based on the bankruptcy court model might promote opinion-writing debiasing techniques that reduce the amount of cognitive illiberalism in employee benefits law opinions. Although no system of judicial decisionmaking will be completely free of the effects of cultural cognition, such debiasing strategies hold out the promise that employee benefit decisions will be more likely based on widely accepted perceptions of fact and evaluation of legal arguments, rather than based on the subconscious cultural biases of the sitting judge.
Whichever political party prevails in November 2012, it is likely that the next Congress will, of necessity, address issues of the federal deficit, entitlements, and tax policy -- specifically, proposals to modify or reduce existing tax preferences for health and retirement benefits. In that context, EBRI’s 70th policy forum focused on a range of topics, from tax policy and design incentives, to international trends and current drawdown rates, and how they might influence, and be impacted by, future events. This paper recaps the presentations and panel discussions at that event. Among the key points made at the policy forum:
As important as retirement and health benefits are to Americans’ short- and long-term economic security, the sheer size of their tax preferences makes them vulnerable in the battles over deficit reduction and tax reform. Private-sector health benefits alone rank as the largest single “tax expenditure” in the federal budget.
Retirement benefits are a tax deferral rather than an exclusion from income -- meaning the federal government will eventually recoup the forgone revenue. This distinguishes retirement plan deferrals from other tax exclusions.
Because the tax expenditure on 401(k)-type plans is a deferral, rather than an exclusion, reducing the tax expenditure in the current period also reduces the positive stream of revenue in the future.
The biggest difference between tax-expenditure estimates and revenue estimates for scoring tax reform is that the latter incorporates taxpayer behavior; tax expenditure estimates do not.
Ten percent or fewer of those ages 55-60 are making withdrawals from their IRA, compared with 80 percent of those 71 and older.
On a historical basis, depending on the period measured, pre-retiree balances in defined contribution retirement plans double about every eight to nine years.
Employer match levels seemed to have a bigger impact on older workers, but automatic enrollment seems much more significant in terms of getting younger employees to participate in retirement plans.
Common challenges for underfunded retirement systems worldwide include the need to increase the state pension age and/or “normal” retirement age for full benefits; to promote higher labor-force participation at older ages; to encourage or require higher levels of private saving; to increase retirement coverage of employees and/or the self-employed; and to reduce savings “leakage” prior to retirement.
This article is designed to provide an overview of the U.S. retirement income security system from a comparative law perspective. Like many countries, the U.S. has a three tier pension or retirement income system, with the three tiers consisting of (1) Social Security, (2) employment-based pensions, and (3) individual savings. Thus, superficially, the U.S. retirement income security system resembles that of many around the world. Yet, in other ways, such as its focus on individual rights and responsibility, the U.S. system is unique.
The article begins by discussing the nine guiding principles of the U.S. Social Security system as identified by the late Robert Ball. It then describes the principal elements of employment-based pension plans in the U.S and provides a brief overview of individual savings. The article then turns to the values reflected in the U.S. retirement income security system. It discusses how the U.S. system does, and does not, reflect the European values of (1) responsibility, (2) protection, (3) solidarity, (4) nondiscrimination, and (5) participation.