Franz Rothenbacher
Pension System Reforms and Changing Living Conditions

BIGSSS International Conference 2014 "(UN-)STABLE, (UN-)EQUAL & (UN-)PREDICTABLE: The Link between Social Stratification and the Welfare State", Universität Bremen, June 12th to June 13th, 2014

The paper investigates the interrelationship between pension schemes and social inequality. It is a matter of fact that the design of national pension systems influences economic and social inequality. Nevertheless, the theoretical mechanisms are often unclear and there are only few studies dealing with this subject thoroughly. National pension schemes within Europe vary to a large degree and there exists no European harmonization of any kind; national pension systems furthermore show a high persistence due to institutional inertia; finally, differing national economic and social challenges caused a growing divergence in national pension systems in the two last decades. National pension systems have been classified by several authors alone or as part of larger welfare state typologies. Well-known is the typology of countries with, first, universal basic pensions supplemented by occupational pension schemes (tradition of Beveridge systems). Second, there are countries without a basic pension instead of a complete pension with high replacement rates (Bismarck tradition); these pension systems only partially include supplementary occupational pensions (mainly for public servants and selected private employees); furthermore, these national pension systems are still fragmented due to historical reasons along occupational boundaries. Thus, in this type mainly public servants (among others) still have their own and independent pension schemes. Finally, the third main type is in principle similar to the second type of pension schemes according to occupational boundaries; the main difference lies in its often very high fragmentation (e.g. Greece) and low replacement rates (typical for Southern Europe). The main hypothesis is now that the first type of pension schemes generates less inequality and a more equal society; the effects of the second type are to increase inequality because of missing basic pensions, strong relationship of pensions to earnings, still existing occupational fragmentation and pension privileges for selected occupational groups. The third type probably contributes strongly to increase inequality due to its high fragmentation, incomplete coverage of the work force and high privileges for certain professions like the public servants. On this background the paper investigates – with special reference to the Swedish pension reforms which are considered by many social politicians and scientists of a paradigmatic nature for other countries – the effects on the social and economic inequality and living conditions in Sweden. The question will be raised if the hypothesis can be verified that the Swedish pension reform is a departure from the ‘pursuit of equality’ and brings Sweden more to the liberal welfare model, or in effect closer to the European average concerning economic inequality, public sector employment, unemployment, and other segments of global living conditions.