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Government pensions link-fu
And by government pensions, I don't mean the ones you might get by _working_ for the government as an employee of the civil service, or as a veteran of the armed forces. I mean what we call Social Security here in the US.
It occurred to me that a major form of transfer payments that results in some geographical locations receiving a ton of incoming money from the federal government/country as a whole compared to others is social security. This has been pointed out before. I know I'm not the first to notice. Each member state of the EU has their own comparable old age pension scheme. As demographics across the EU have evolved, it has become clear that these pension schemes required reform to continue on, and they have been reformed in many but not all member states. I thought, hey, you know, it would be really weird if Social Security for Mississippi, for example, was handled entirely by the state of Mississippi (honestly, it'd be weird even if it involved block grants, like Medicaid or whatever). And yet that is basically how old age pensions work in the EU. If the EU is going to truly create a unified labor market (and they both want and desperately need a unified labor market), they are going to have to harmonize their old age pensions.
So. Link fu to follow. I've got a crane in the driveway and a kid due to arrive on a van that therefore cannot enter the driveway.
http://link.springer.com/article/10.1007%2FBF03052291
This scholarly article is from 1993, and makes the basic point that I do above: if you have labor and households moving from one member country to another, then you will have to harmonize your pension scheme. It adds, for good measure, that you will also
have to share the debt 'round.
There's this:
http://www.pensionseurope.eu/iorp-directive
I think that is harmonization of pensions OTHER THAN old age pensions. So it's not like they've been ignoring this problem. They just worked their way through the lower resistance elements first.
There is a strong desire to pre-fund pensions (there are all kinds of pros and cons here that I am going to completely ignore). Thus pension managers wind up invested in ... a lot of stuff, and therefore care about how well markets are run. Here is a PensionsEurope discussion of their exposure to Greek Sovereign Debt and their participation in restructuring that debt which is ongoing.
http://www.pensionseurope.eu/economic-governance
Making PensionsEurope, and member participants like Germany that mostly avoided exposure to Greek debt participate, looks a lot like, let's make the old people fight this one out. Seems wise.
This paper, from 2003 (thus 10 years after the Springer paper above), argues that there isn't enough harmonisation yet. Which, well, kind of a duh.
https://ideas.repec.org/p/ces/ceswps/_1108.html
A few pages of this book:
_European Integration in the Twenty-First Century: Unity in Diversity?_
https://books.google.com/books?id=4Zqdmm-jU50C&pg=PA26&lpg=PA26&dq=harmonisation+old+age+pensions+europe&source=bl&ots=BUKTa3ACfr&sig=WKvzmw6o1tSsYfnIpbb-xANZ_fg&hl=en&sa=X&ved=0CCwQ6AEwAmoVChMIqturmdbYxgIVwY0NCh1A2gCL#v=onepage&q=harmonisation%20old%20age%20pensions%20europe&f=false
Give good flavor of the conflict. States with low benefit payouts (ones similar to ours in the US) have no desire to harmonize with states that have high benefit payouts (Spain and similar) to high earners/high contributors, because few states anywhere have substantial funds for their commitments, and low benefit payout states don't want to get stuck paying for high benefit payout states.
Look, I get the Krugman argument: if you can get the money circulating again in Greece, it'll all grow and be much easier to afford things than it is now. But Krugman et al are dead wrong. The demographics that allow for stimulus to work are not the demographics in play in Greece. And it really hurts even more that Greece has imported so much of what it consumes, and has done so for a really long time. Krugman's other argument -- they owe so much they can't ever possibly pay it off and trying to squeeze it out of them is vicious and cruel -- _is absolutely true_. But nobody wants to come back and do this again, so there's a desire to bend the curve somewhere.
This is an overview of Italian pension reform:
http://www.palgrave-journals.com/pm/journal/v16/n2/full/pm20116a.html
It apparently required working Italians to contribute to a private pension scheme? Maybe a 401K like thing? I dunno. But that's definitely a way to bend the curve, and move high-payout/high-cost/unsustainable systems in a direction that can someday harmonize with low-payout/lower-cost schemes.
It occurred to me that a major form of transfer payments that results in some geographical locations receiving a ton of incoming money from the federal government/country as a whole compared to others is social security. This has been pointed out before. I know I'm not the first to notice. Each member state of the EU has their own comparable old age pension scheme. As demographics across the EU have evolved, it has become clear that these pension schemes required reform to continue on, and they have been reformed in many but not all member states. I thought, hey, you know, it would be really weird if Social Security for Mississippi, for example, was handled entirely by the state of Mississippi (honestly, it'd be weird even if it involved block grants, like Medicaid or whatever). And yet that is basically how old age pensions work in the EU. If the EU is going to truly create a unified labor market (and they both want and desperately need a unified labor market), they are going to have to harmonize their old age pensions.
So. Link fu to follow. I've got a crane in the driveway and a kid due to arrive on a van that therefore cannot enter the driveway.
http://link.springer.com/article/10.1007%2FBF03052291
This scholarly article is from 1993, and makes the basic point that I do above: if you have labor and households moving from one member country to another, then you will have to harmonize your pension scheme. It adds, for good measure, that you will also
have to share the debt 'round.
There's this:
http://www.pensionseurope.eu/iorp-directive
I think that is harmonization of pensions OTHER THAN old age pensions. So it's not like they've been ignoring this problem. They just worked their way through the lower resistance elements first.
There is a strong desire to pre-fund pensions (there are all kinds of pros and cons here that I am going to completely ignore). Thus pension managers wind up invested in ... a lot of stuff, and therefore care about how well markets are run. Here is a PensionsEurope discussion of their exposure to Greek Sovereign Debt and their participation in restructuring that debt which is ongoing.
http://www.pensionseurope.eu/economic-governance
Making PensionsEurope, and member participants like Germany that mostly avoided exposure to Greek debt participate, looks a lot like, let's make the old people fight this one out. Seems wise.
This paper, from 2003 (thus 10 years after the Springer paper above), argues that there isn't enough harmonisation yet. Which, well, kind of a duh.
https://ideas.repec.org/p/ces/ceswps/_1108.html
A few pages of this book:
_European Integration in the Twenty-First Century: Unity in Diversity?_
https://books.google.com/books?id=4Zqdmm-jU50C&pg=PA26&lpg=PA26&dq=harmonisation+old+age+pensions+europe&source=bl&ots=BUKTa3ACfr&sig=WKvzmw6o1tSsYfnIpbb-xANZ_fg&hl=en&sa=X&ved=0CCwQ6AEwAmoVChMIqturmdbYxgIVwY0NCh1A2gCL#v=onepage&q=harmonisation%20old%20age%20pensions%20europe&f=false
Give good flavor of the conflict. States with low benefit payouts (ones similar to ours in the US) have no desire to harmonize with states that have high benefit payouts (Spain and similar) to high earners/high contributors, because few states anywhere have substantial funds for their commitments, and low benefit payout states don't want to get stuck paying for high benefit payout states.
Look, I get the Krugman argument: if you can get the money circulating again in Greece, it'll all grow and be much easier to afford things than it is now. But Krugman et al are dead wrong. The demographics that allow for stimulus to work are not the demographics in play in Greece. And it really hurts even more that Greece has imported so much of what it consumes, and has done so for a really long time. Krugman's other argument -- they owe so much they can't ever possibly pay it off and trying to squeeze it out of them is vicious and cruel -- _is absolutely true_. But nobody wants to come back and do this again, so there's a desire to bend the curve somewhere.
This is an overview of Italian pension reform:
http://www.palgrave-journals.com/pm/journal/v16/n2/full/pm20116a.html
It apparently required working Italians to contribute to a private pension scheme? Maybe a 401K like thing? I dunno. But that's definitely a way to bend the curve, and move high-payout/high-cost/unsustainable systems in a direction that can someday harmonize with low-payout/lower-cost schemes.