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Contact: Simona Combi, (202) 261-5709, scombi@ui.urban.org
WASHINGTON, D.C. August 16, 2007 -- An aging population and soaring health care costs are pressing policymakers to realign Social Security’s promised benefits with its resources. So far, reforms have failed, with the last major changes dating to 1983.
International Perspectives on Social Security Reform, new from the Urban Institute Press, takes a close look at public pension changes in six countries that, like the United States, are expecting grayer demographics: Sweden, Japan, Germany, the United Kingdom, Canada, and Italy.
In compact detailed chapters, each country’s pension system before and after reform is described, as well as the economic and political conditions that made reform possible. Each analysis is complemented by two commentaries from distinguished economists on which reform elements could work in the United States.
Options examined include private accounts, notional accounts, wage indexing versus price indexing, incentives to delay retirement, lower income-replacement rates, higher payroll taxes, and systems that automatically adjust pensions to demographic and economic circumstances.
“Even if these countries have not solved their pension problems once and for all, they have made tremendous progress in creating more financially stable systems that will keep benefits from dropping below an acceptable level,” says Urban Institute senior fellow Rudolph Penner, the book’s editor. “America would be wise to learn from these nations by buttressing Social Security with automatic revisions that would make it sustainable.”
Inside International Perspectives
The overseas reforms took place generally during the 1990s, but Japan began reengineering its system in 1985 and has had three waves of reform since then. Other revisions, such as those in the United Kingdom, are as recent as 2006.
Most of the countries studied have higher payroll taxes than the United States and have raised the retirement eligibility age or the number of years beneficiaries must pay into the system. Some governments provide retirees with free health care, while Sweden offers a supplement of up to 90 percent of monthly housing costs to people with very low pensions.
Sweden’s reforms are the most radical. Swedes pioneered notional defined-contribution accounts, which grow with new contributions and have an annual rate of return that equals the rate of growth of wages. The rate of return and retiree benefits will be automatically adjusted during any financial difficulties.
The book grew out of an international conference held at the Urban Institute in 2006, when the domestic Social Security reform debate started by President George W. Bush was losing traction. The book’s contributors are Alex Beer, Réal Bouchard, Stuart Butler, James C. Capretta, Jagadeesh Gokhale, Dalmer D. Hoskins Neil Howe, Richard Jackson, Estelle James, Tetsuo Kabe, Agneta Kruse, Maya MacGuineas, Michael Mersmann, Tom Moscovitch, Edward Palmer, Stanford G. Ross, Benjamin Pfeiffer, Alicia Puente Cackley, Lawrence H. Thompson, John Turner, and Paul N. Van de Water.
“This book makes it abundantly clear that many countries have made at least some progress in reconciling two competing priorities: how to provide a measure of economic stability for public retirement systems and how to provide a foundation of basic economic security for retirees. I hope that we in America will have the courage and the wisdom to strengthen our Social Security system in a way that provides both,” says Kenneth Apfel, a former commissioner of Social Security who is now a professor at the University of Maryland School of Public Policy.
International Perspectives on Social Security Reform, edited by Rudolph G. Penner, is available from the Urban Institute Press (paper, 6" x 9", 174 pages, ISBN 978-0-87766-743-8, $26.50). It is available for purchase online at http://www.uipress.org, by phone at 1-800-537-5487, or via e-mail at hfscustserv@press.jhu.edu.
The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and governance challenges facing the nation.
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