Harsh occupations, life expectancy and social security

We study the optimal design of a social security system when individuals differ in longevity and occupation. Both occupations yield the same wage and the occupation is given. Longevity is private information but it is publicly known that there is a higher proportion of short-lived workers in the harsh occupation. We show that there is a case for differentiating the pension policy by occupation. The short-lived workers in the safe occupation are however often made worse-off, even when the social objective incorporates weights to redress the implicit redistribution from short- to long-lived individuals that the unweighted utilitarian objective entails. In the maximin solution all short-lived workers achieve the same utility with those in the safe occupation consuming the most when young and retiring the earliest. This is achieved by taxing � often quite heavily � their savings and their earnings from prolonging activit