Abstract for: Dynamics of transition to universal tax-funded pension system
The mainstream policy debate on the issue of pensions is focused on the dipole between “privatization” according to the capitalization system and “trilateral funding”, where the reasoning of restitution and of capitalization often co-exist. Both perspectives, however, are quite sort-sighted: the pension system is perceived as a closed system, without major interactions with the economy. A radically different approach is proposed here. Pension is not treated as a result of savings, but as a right to decent active retirement and part of a guaranteed income system. Contributions are regarded as taxation on labor. The impact of the transition to a universal pension system (possibly income-tested) is examined under a broader set of socio-economic performance, such as fiscal burden and employment. The core structure of a model of and universal pension system the results of the transition to it (fiscal burden, tax revenue, and employment) are presented. Results were drawn from a system dynamics simulation, based on the data of the Greek economy (demographic forecast, pension system rules etc.) It is shown that the transition to the new system would be beneficial in terms of fiscal burden as well as employment.