PROGRAMS WITHOUT ALTERNATIVE: PUBLIC PENSIONS IN THE OECD

Life expectancies in industrialized economies have grown, and birth rates have fallen. The number of those who pay for public pensions is shrinking, while the number of beneficiaries is growing, which supposedly puts public pensions in crisis. The question thus is whether we can still afford to pay for public pension programs in industrialized countries. Most industrialized countries introduced public pensions to avert old age poverty. Because lifetime earnings and savings are unpredictable, public pensions offer an income guarantee to retirees of sufficient income for life out of poverty. Without Social Security in the U.S., an additional 39 % of Americans over 65 would have lived in poverty in 1998. Even though countries are still committed to provide public support for workers to reduce old age poverty, this promise seems to have hit a stumbling block. The argument is that because of demographic changes – more old people, and less young people – public pensions have to scale back their promises or raise taxes to unrealistic levels. The impediments, however, to paying for public pensions are caused more by political decisions than by economic realities in seven OECD countries. By and large, public pensions may encounter a willingness-to-pay crisis, but not an ability-to-pay crisis