Category: Ramblings

The future of pension funds (source)

NOTE: As crni noted in the comments, Slovenia does not have a pension fund as such, but rather a pas-as-you-go system. So, do me a favour and in the entire post for “pension fund” read “pension system”.

As I promised to my favourite moose yesterday, I have a thought or two on how to keep the pension fund system solvent for the forseeable future.

The situation in Slovenia today is, that statstically 1,1 employed persons support one pensioner. Only twenty years ago this ratio was 1,7:1, which shows that the population is a) rapidly getting older and b) that there is not nearly enough employment to support the pension fund. The government(s) is (are) trying to cope with this huge problem basically in two ways: One, cutting down on pensions (mostly by trying to keep them for rising together with inflation), and two, by making people work longer with a prospect of a much lower pension.

Which is all fine and dandy, with the slight exception that these measures only postpone the problem and do not slove it at all. Because, on the other hand, we have an increasing number of graduates who cannot find a job, which means that they cannot get a credit line to, say, buy an appartament, which in turn means that they cannot start a family, which in turn means a slow but steady drop in child-birth, which finally brings us to out starting point of an ever older population which needs those who are employed work longer for less pay to support both students and pensioners.

What few people seem to take into account is, that today, when people retire, they are still fit – both mentally and physically. Which of course means that they could still work. So there I was, one fine Tuesday morning, thinking what if we forced these people to retire with a more or less full pension, but then re-hired them part time, just like students.

I know this sounds like a crack-pot idea, but think about it for a second: If you force people to retire at a certain age, you spin the wheel of the labour market a bit faster, perhaps freeing a job or two (or a couple of thousand), making room for young people to get their first job. It needn’t be a glorious job, just something to get them started and allow them to start accumulating work-experience.

At the same time, we need to create another parallel labour market – like the student labour market, but this one exclusive to pensioners. The trick would be that the pensioners could keep all the benefits of a pension, but still work as much (or as little) as they would like to and would not get taxed for it – unless of course their income from this source would surpass a certain census – this tax would have to be quite heavy, because we need to destimulate employers hiring only pensioners and students. Thus, the pensioners would still generated added value, but inside a different labour market, freeing up space in the “real” labour market for young people, who had just left the student labour market.

Of course all this is just a set of nifty ideas, not based on a single calculation or a model. I’m not an economist and I don’t have the foggiest how to do this. I basicallly suck at math 😀

So, what I need…. Scratch that… What this country needs is somenoe to throw numbers at these ideas of mine, to see if they are economically viable. Because if they are, it could be really fun. And if they’re not…. well they still are nifty ideas 😆

Any candidates?