Carl Barnekow: Institute for Futures Studies, Postal: Institute for Futures Studies, Box 591, SE-101 31 Stockholm, Sweden
Abstract: The purpose of this paper is to examine previous criticism concerning the state pension system and clarify unintended effects of the system, partly from an age perspective and partly from a perspective concerning the relation between low and high income earners. According to previous studies the state pension system generates an incentive for the employer to discriminate older workers as pension costs increase with age. However, it has not previously been focused abound that individual pension costs are not directly observed in the employer´s budget. The same tax applies to all workers, in spite of the fact that the pension costs for younger workers are much lower than for older workers and in spite of the fact that older workers gain more credits through the pension system. As the costs for younger workers can seem higher than they actually are, there is less room for increasing the salary or employment for younger workers, compared to if the charge on the salary corresponded to the actual individual pension costs. The above argument could be applied to high and low income earners as pension costs strongly increase as the salary exceeds 26 500 Swedish crowns a month. Several commissions have also criticised the state pension system for creating a cost uncertainty for the employer as the expected pension cost is not identical to the actual one. A conclusion from this report is that the cost uncertainty is highest for state employers that have an older working force, which implies that the generational shift that is about to take place may be beneficial in this respect.
29 pages, August 2004
Price: 25 SEK
Note: ISSN 1652-120X ISBN 91-89655-50-8
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