Augmenting Resilience of Public Pension Schemes By Activation? Benefit Adjustment and Activating Pension Reforms in European Comparison

Public pension schemes make up a lion’s share of modern welfare states’ fiscal burden and play a key role in citizens’ income security after labour market exit due to old-age. Therefore, the challenges posed by demographic ageing, austerity and changing labour market participation are particularly pressing for old age protection systems. Policy makers have responded to such challenges with more or less exhaustive reforms in recent decades, and although most pensions systems have proven resilient towards major cut-backs, system hybridization can be observed. European welfare reforms have in general been guided by the so-called activation strategy advised in the Lisbon strategy and Europe 2020 strategy in past years. However, the extent to which pension reforms, too, have followed the idea of “active social policy” has received less attention so far.

This paper focusses on shifts from income protection towards more activating approach in European pension systems by looking at the relationship of push and pull factors of labour market exit, specifically cuts in work-related pension benefits and pension reforms aiming at keeping elderly longer in employment (such as increasing standard retirement age and reducing early retirement incentives). Comparative empirical evidence is also provided on the outcome side by examining the effective age of labour market exit. This way, the paper aims at a systematic empirical assessment of recent pension reforms from the perspective of activation in different welfare regimes. The paper also discusses whether we can observe a spatial pattern of reform spread potentially indicating policy diffusion.