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PensionReforms has already looked at international comparisons of pensioner poverty: here, from the OECD and here about Europe. Also, this most recent report’s author was involved with further reports on EU countries here and here.
International comparisons of most things economic and financial are difficult but especially poverty levels. They depend completely on the measures used to establish relativities. The measures may not translate easily from one country to another. That said they can be used, with caution, as a report card on the measurement of progress towards improving conditions. The measure of those ‘at risk’ used in this report is having an income of less than 60% of the local “national equivalised median income”.
A new measure, the “material deprivation rate” is also used. This “...offers a more absolute approach to reflect on incapacity to afford some items which are considered desirable or even necessary by most people to have adequate living standards. It is defined as the “enforced” lack of at least three of “ nine ‘essential’ items.
“This policy brief provides the latest evidence on how EU countries differ in terms of poverty risks for older people (aged 65 years and over). Results derived from the latest EU-SILC data for 2008 [based on 2007 incomes] show that, on average, older people face a higher poverty risk rate (19%) than the working age population (15%).”
Poverty rates amongst the elderly in some countries seem
extraordinary and the range between top and bottom is very wide:
“The highest poverty risk rates for older people were observed in Latvia (51%), Cyprus (49%), Estonia (39%) and Bulgaria (34%), and the lowest in Hungary (4%), Luxembourg (5%) and the Czech Republic (7%).”
The report says there seems no one explanation for the differences but countries with a good safety net seem to fare best. Pension arrangements that have strong redistributive effects also help.
“The overlapping group of single elderly women and the oldest age cohort 75+ have, in general, a much higher poverty risk rate compared to other subgroups of older people. The low pension income for older women is mainly due to the fact that their working lives experienced patterns of employment which have generally low coverage of pension scheme affiliation, and also they had childcare related gaps in their employment record.”
PensionReforms wonders why pension entitlements reflect work and pay experiences at all. It isn’t clear why, for example, the elderly widow of a deceased retired worker who experienced long periods of unemployment or ill health should suffer financially at the hands of the state.
PensionReforms also notes that where countries base pension increases on prices rather than community incomes, that also tends to penalise women. They usually live longer and so are more likely to suffer the effects of falling relative incomes.
The report notes the relative changes between the elderly in the covered countries and households with children:
“In general, poverty risks for older persons had not risen for many countries during the last five years, with the important exception of three Baltic countries and the neighbouring Finland. The rise is most dramatic in Latvia, followed by Estonia and Lithuania. In Estonia and Lithuania, the poverty risk for older people increased while it was falling for children. For Latvia and Finland, the rise in the poverty risk for older people has been much greater than the rise in poverty risks for children.
Conditions for the elderly improved in only four (of 27) countries in the five years covered by the report:
“Four countries observed a decline in the poverty risk for older people during the period in question, most notably Ireland, but also Portugal, Hungary and France. For these countries, the relative economic position of older people improved, since the decline in the poverty risks for older people exceeded that for children. These countries observed, in general, a more substantial rise in non-contributory social pensions during the period in question.”
As far as pensioners are concerned, recent changes in pension systems have tended to be about reducing, rather than improving benefits. The changes have tended to be made in the name of improving future affordability.
“In view of financial sustainability concerns linked with various forms of pension generosity in EU countries, recent pension reforms in many EU countries have tightened the eligibility conditions (especially for early retirement) and scaled down the level of pension benefits and their growth (in relation to wages). Thus, in the absence of extending working careers and greater private personal savings, it is feared that future generations of older persons will be more often poor than the rest of the population.”
The comparison of ‘material deprivation’ measures produce similar results:
“...on average, 16% of the older population in EU27 could be considered materially deprived during 2008. This result compares favourably to the at-risk-of-poverty rate for the same subgroup at the EU level: 19%. Also, on average, only about one third of the older population that is at-risk-of-poverty was also disadvantaged by material deprivation.”
PensionReforms thinks this really isn’t good enough – in the EU27 in 2008, of the population over age 65, one in six were ‘materially deprived’; one in five were ‘at risk of poverty’. And it seems this will probably worsen over coming decades. That means current arrangements will probably become less able to satisfy a country’s most basic obligation – to help those who demonstrably need it. Perhaps that needs to have a greater focus in public policy discussions over things such as whether workers might be saving ‘enough’ for retirement. (File size 1.2 MB; 23 pp) 387
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