Abstract

Gender Pension Gaps in Europe: Future prospects and key drivers
Presenter: Karel Van den Bosch (Belgian Federal Planning Bureau)
Joint with Gijs Dekkers  (Belgian Federal Planning Bureau), Mikkel Barslund (HIVA-KU LEUVEN), Tanja Kirn (University of Liechtenstein), Nicolas Baumann (University of Liechtenstein), Nataša Kump (Institute for Economic Research, Slovenia), Philippe Liegeois (LISER), Amílcar Moreira (ICS, University of Lisbon, Lisbon), Nada Stropnik (Institute for Economic Research, Slovenia).

Building on the European Commission’s Ageing Working Group demographic and macroeconomic forecasts (see Ageing Report, 2018 and 2020), and making use of the heuristic power of dynamic microsimulation models, we project the likely development of the Gender Pension Gap (GPG) up to 2070. As the GPG varies widely across European countries, we analyse countries with a high (Luxembourg), middle (Switzerland, Belgium, Portugal) and low GPG (Slovenia). In this regard, we show that the GPG is likely to fall significantly - particularly in Slovenia and Portugal, where the gap is expected to drop to close to 5 percent in 2030, and to have essentially disappeared by 2040. In Belgium and Luxembourg, the gap is reduced to 7 and 5 percent in 2050, respectively, more than two-thirds below the 2020 level. In Switzerland, the GPG in the 2nd pension pillar among pensioners aged 65-74 would decrease from 58 to 40 percent between 2018 and 2070, whereas the GPG of the first pillar remains small.

In addition to this, we run a set of scenarios to try to disentangle the complex interplay between gender differentials in (previous and prospective) labour market participation, wage differentials and the design of pension systems in shaping the future development of the GPG in these nations. Here we show that the projected reductions in the GPG in all countries under scrutiny can be explained by steady reductions in gender differences in employment rates and wages over the past 50 years, the effect of which will slowly work their way through the pension system. In certain countries, namely in Portugal, the architecture of the pension system plays a decisive role in shaping the projected reduction of the GPG.

We conclude the paper by discussing the relevance of these findings for the design of policies for reducing GPG in Europe.

Caring, Pension policy and the pension of women
Presenter: Tanja Kirn (Universität Liechtenstein)
Joint with Mikkel Barslund (Centre for European Policy Studies), Gijs Dekkers (Federal Planning Bureau, Belgium), Nataša Kump (Institute for Economic Research, Slovenia), Philippe Liegeois (LISER), Amílcar Moreira (University of Lisbon), Nada Stropnik (Institute for Economic Research, Slovenia), Karel van den Bosch ((Federal Planning Bureau, Belgium), Vincent Vergnat (LISER and University of Luxembourg)

We study how providing care to a child or an older adult might impact women’s future pension claims. As the impact of care-related labour market decisions depends on the design of the pension system, we carry out a cross-country comparison, in which we analyse the impact in countries with a high (Luxembourg), middle (Liechtenstein/Switzerland, Belgium, Portugal) and low (Slovenia) Gender Pension Gaps.

Making use of standard simulation models, we examine to what degree the impact of care-related events – which are assumed to last 6 years - is mediated by a) pension rules, and b) women’s caring decisions - move to full-time care, combine care with part-time work, or combine care with full-time work.

Four main findings stand out. First, the impact of having to provide care to a dependent adult on pension entitlements largely exceeds the impact of having to provide care to children. This is particularly so in Portugal. Second, we identify large cross-country differences in the impact of reducing work hours to provide care for children or dependent adults. In Luxembourg, reducing work hours by 50% (for 6 years) to provide care to a child is projected to reduce the value of the old-age pension by up to 7%. In Belgium and Portugal, a similar decision will have a negligible effect on pension entitlements. Third, the impact on earnings from absence from the labour market can have an as big or larger effect on the final pension when it comes to childcare compared to the period of caring itself. Finally, we find evidence that pension rules − namely, the availability of pension credits and the degree to which these replace lost wages/earnings − introduce significant nonlinearities in the impact of care episodes on pension entitlements.  In this regard, Belgium’s system of pension care credits emerges as the most effective at protecting the pension entitlements of women that are  reducing their work hours to provide care.

Practical information

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