Making Increased Retirement Age Acceptable: The Impact of Institutional Environment on Public Preferences for Pension Reforms | Mannheimer Zentrum für Europäische Sozialforschung

Stefan Domonkos
Making Increased Retirement Age Acceptable: The Impact of Institutional Environment on Public Preferences for Pension Reforms

FÖV Discussion Papers; 77
Speyer
,
German Research Institute for Public Administration
,
2014
ISSN: 1868-9728

Population ageing is likely to have a long-lasting negative impact on the financial sustainability of European pension systems. As a reaction to this, some European nations have adopted automatic adjustment mechanisms that connect the amount of starting pensions to the development of demographic and economic factors, such as life expectancy and the old-age dependency ratio. Lacking such measures, other countries account for the financial problems of their public payas- you-go pension schemes by ad hoc amendments to their national legislation. This paper provides empirical evidence that national legislation linking life expectancy at retirement age and the level of old-age pensions attenuates opposition against reforms seeking increases to the statutory retirement age. Using multinomial logit models fitted on individual- level survey data, I analyze the probability that individuals accept a potential increase in retirement age among respondents in the Czech Republic, Poland and Slovakia. The results show that national institutional contexts explicitly binding pensions to the development of life expectancy attenuate opposition against a potential increase in the statutory retirement age. The implications of the study are of particular importance for policy- makers looking to resolve the problem of constantly increasing oldage dependency ratios in Europe. This requires the application of an incentive structure that increases the acceptability of later withdrawal from the labour market. Analyzing survey data from the late 2000s, this study demonstrates that an explicit attachment between the level of starting pensions and life expectancy at retirement age is particularly useful in motivating longer working careers when life expectancy is on the rise.