Increased longevity and social security reform: questioning the optimality of individual accounts when education matters

par Gilles Le Garrec

In 1950, life expectancy at birth in Western Europe was 68 years. It is now 80 years and should reach 85 by 2050. The downside of this trend is the serious threat that is hanging over the financing of our public retirement systems. Financed on a pay-as-you-go (PAYG) basis, i.e. pension benefits are paid through contributions of contemporary workers, the systems must cope with an increasingly large number of pensioners compared to the number of contributors. For example, leaving the average age of retirement unchanged in France would lead to a ratio of pensioners to workers (the dependency ratio) of 70.1% in 2040, whereas this ratio was 35.8% in 1990. Changes are unavoidable. Maintaining the current level of benefits within the same system in the near future requires to increase either the contribution rate or the length of contribution (by delaying the age of retirement). Continue reading “Increased longevity and social security reform: questioning the optimality of individual accounts when education matters”

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Social inequality in the face of death*

By Gilles Le Garrec

The problem of inequality in the face of death has become an important topic in French public discourse in recent times, in particular in autumn 2010 during debate about raising the minimum legal retirement age by two years, by gradually shifting it from age 60 to 62. The debate became focused around a politically divisive issue: should the retirement age remain unchanged for low-skilled workers on the grounds that they enter the labour market earlier and / or have more strenuous jobs and live shorter lives? Continue reading “Social inequality in the face of death*”

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