Reflections on intergenerational solidarity – a policy perspective

1. Reflections on intergenerational solidarity – a policy perspective Pekka Sinko, CES Finland The Hague, November 9th 2011

2. Contents • Pension insurance as intergenerational contract • Nordic model for intergenerational solidarity • Finnish PMO project on defining and evaluating intergenerational equity

3. Some definitions • An intergenerational contract is an assumption that future generations will provide a service to a generation that has previously done the same service to an older generation • In policy context, intergenerational equity requires actions taken not to overly discriminate between individuals born at different times • If an intergenerational contract is not considered fair, an intergenerational conflict is likely to rise Pekka Sinko, CES Finland

4. Pensions as intergenerational contract • Maybe the most obvious manifestation of an intergenerational contract is a statutory pension insurance where pension for the retired generations is provided through payments made by the working generations • It is also an example of a contract which is not equitable but - at least in Finland - implies an considerable income transfer from those born later to those born in the 40’s and 50’s. Pekka Sinko, CES Finland

5. Rate of return of Finnish pension insurance by year of birth Year of birth 15.7.2014 Source: Finnish Centre for Pensions

6. Old-age dependency ratio in 2010 and 2020 15.7.2014

7. Old-age dependency and ratio of pension recipients to employed workers in Finland 2010, 2020 and 2030 15.7.2014 Source: Finnish Centre for Pensions

8. Eurobarometer : Nordic model in intergenerational solidarity? • Clearly a Nordic (DEN,FIN,SWE) consensus in • readiness of the working aged population to finance the age related costs through taxation • no acceptance to cuts in benefits by the elderly • More mixed opinions regarding the existence of intergenerational interest conflict and bias in the political decision making • In Sweden people see a potentially large interest conflict, but do not expect a bias in the political decisions in favour of the elderly • In Denmark and Finland people do expect a bias in the political decision making, but do not regard the interest conflict as evident as the Swedes Pekka Sinko, CES Finland

9. Generational Finland • Project launched by former Prime Minister Mari Kiviniemi • Focused on defining and evaluating intergenerational equity • Comprised of a limited number of work shops and seminars; produced only scarce and preliminary results • Owing to the change in government coalition has not been extended so far Pekka Sinko, CES Finland

10. Some conclusions of the project 1/2 • It is often far from clear how generation and generational impact are defined in a policy context • To avoid saturation, evaluation of generational impact should be confined to policies with obvious and potentially large differentiated effects on different age groups such as fiscal, educational, environmental and energy policies • When designing public policies the impact of private sector acts - in particular intergenerational transfers within families - should be taken into account Pekka Sinko, CES Finland

11. Some conclusions of the project 2/2 • Independent evaluation organs or “watch dogs” may prove useful in promoting generational perspective and equity • Evaluation should not be based on cross-sectional data only but allow for a life cycle view • To provide a firmer basis for evaluation a related academic research programme should be established • Research and other institutional information should be supplemented by more fragmented and tacit knowledge provided by e.g. social media Pekka Sinko, CES Finland

12. End of presentation Thank you! Pekka Sinko, CES Finland