Approaching Retirement in Poverty

Zsuzsa Szeman

No 141, Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: Despite the reform of 1997, numerous negative elements remained in the pension system which operate towards a levelling of the future pensioner society, regardless of the earlier position and time spent on the labour market or of the earnings. As a result the system in part reproduces poverty among the elderly. Due to problems with the second pillar of the pension system, further changes were made recently to the system. However, the move towards private insurance predicted by experts has been less than expected because employees do not have confidence in the social insurance pension system. Society must face the problem that within the stratum of pensioners who make up close to one third of the total population, substantial numbers of pensioners have incomes close to the subsistence minimum. In order to ease this trend 1) there is a need to introduce regulators on the labour market imposing stricter sanctions on the evasion of social insurance by both employees and employers (e.g. through unregistered work), thereby increasing social security in old age for employees. 2) Pensions should be indexed not to a combination of wage increases and inflation, but solely to wage increases since at present these exceed inflation.

Pages: 24 pages
Date: 2003-03
Note: Revised version of the paper prepared for the Pension Reform in Transition Economics, Hosted by the Institute of Economic Research (IER), Hitotshubashi, Kunitachi, Tokyo, Japan, February 22, 2003, The revised version was made on March 31 2003
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