1. Reflections on intergenerational solidarity – a policy perspective
Reflections on intergenerational solidarity – a policy perspective
Pekka Sinko, CES Finland
The Hague, November 9th 2011
Valtioneuvoston kanslia

2. Contents
Pension insurance as intergenerational contract
Nordic model for intergenerational solidarity
Finnish PMO project on defining and evaluating intergenerational equity

3.
Some definitions
An intergenerational contract is an assumption that future generations will provide a service to a generation that has previously done the same service to an older generation
In policy context, intergenerational equity requires actions taken not to overly discriminate between individuals born at different times
If an intergenerational contract is not considered fair, an intergenerational conflict is likely to rise
Pekka Sinko, CES Finland
Valtioneuvoston kanslia

4. Pensions as intergenerational contract
Pensions as intergenerational contract
Maybe the most obvious manifestation of an intergenerational contract is a statutory pension insurance where pension for the retired generations is provided through payments made by the working generations
It is also an example of a contract which is not equitable but - at least in Finland - implies an considerable income transfer from those born later to those born in the 40’s and 50’s.
By chance those born in the 40’s and 50’s also happen to be largest generations in number.
Pekka Sinko, CES Finland
Valtioneuvoston kanslia

5. Rate of return of Finnish pension insurance by year of birth
Rate of return of Finnish pension insurance by year of birth
Year of birth
Differences in the implied rate of return between generations reflect the fact that the older generations (those born in the 40’s) did not pay contributions in the beginning of their working life, but still received a full pension. Furthermore, many of the reforms made later on to improve sustainability did not affect older gnerations.
Source: Finnish Centre for Pensions
Valtioneuvoston kanslia

6. Old-age dependency ratio in 2010 and 2020
Old-age dependency ratio in 2010 and 2020
Finland is one of the fastest ageing societies in EU for the next decade or so.
Valtioneuvoston kanslia

7. Old-age dependency and ratio of pension recipients to employed workers in Finland 2010, 2020 and 2030
Source: Finnish Centre for Pensions

8. Eurobarometer : Nordic model in intergenerational solidarity?
Eurobarometer : Nordic model in intergenerational solidarity?
Clearly a Nordic (DEN,FIN,SWE) consensus in
readiness of the working aged population to finance the age related costs through taxation
no acceptance to cuts in benefits by the elderly
More mixed opinions regarding the existence of intergenerational interest conflict and bias in the political decision making
In Sweden people see a potentially large interest conflict, but do not expect a bias in the political decisions in favour of the elderly
In Denmark and Finland people do expect a bias in the political decision making, but do not regard the interest conflict as evident as the Swedes
Source: Intergenerational solidarity: Analytical Report, Eurobarometer, European Commission 2009.
Pekka Sinko, CES Finland
Valtioneuvoston kanslia

9. Generational Finland
Project launched by former Prime Minister Mari Kiviniemi
Focused on defining and evaluating intergenerational equity
Comprised of a limited number of work shops and seminars; produced only scarce and preliminary results
Owing to the change in government coalition has not been extended so far
Pekka Sinko, CES Finland

10. Some conclusions of the project 1/2
Some conclusions of the project 1/2
It is often far from clear how generation and generational impact are defined in a policy context
To avoid saturation, evaluation of generational impact should be confined to policies with obvious and potentially large differentiated effects on different age groups such as fiscal, educational, environmental and energy policies
When designing public policies the impact of private sector acts - in particular intergenerational transfers within families - should be taken into account
Pekka Sinko, CES Finland
Valtioneuvoston kanslia

11. Some conclusions of the project 2/2
Independent evaluation organs or “watch dogs” may prove useful in promoting generational perspective and equity
Evaluation should not be based on cross- sectional data only but allow for a life cycle view
To provide a firmer basis for evaluation a related academic research programme should be established
Research and other institutional information should be supplemented by more fragmented and tacit knowledge provided by e.g. social media
Pekka Sinko, CES Finland

12. End of presentation
Thank you!
Pekka Sinko, CES Finland