Tanja Kirn - Solidarity in the pension system: Will it be (as) relevant in the future as it is today?

• Presenting author: Tanja Kirn (University of Liechtenstein)

• Authors: Tanja Kirn, Gijs Dekkers

• Session: C02A - Dynamic / Long term [3] - Wednesday 11:00-12:30 - Ceremonial Hall

To what extent will solidarities within the pension system be important in the future as female labour force participation changes? We use a RIF-style decomposition for different labour market scenarios to analyse the impact of changing labour market behaviour on future pensions and the changing relative importance of solidarities within the first pillar of the Swiss pension system. By decomposing the gender pension gap (GPG), we find that the effect of coefficients strongly dominates the effect of characteristics, reflecting the importance of solidarity within the pension system. Second, by decomposing the GPG along the distribution of pension income, we find that the effect of characteristics diminishes and even becomes insignificant along the income distribution, suggesting that differences in lifetime earnings contribute less to the GPG the higher the pension income. The effect of coefficients also diminishes along the income distribution, but remains significant. Thus, elements of solidarity such as care credits remain important across the income distribution. Third, by equalising labour market participation at the extensive and intensive margins, we find that elements of solidarity within the pension system remain important. However, as the distribution of labour market participation is not simply swapped between the sexes, but distributed equally, the elements of solidarity are comparatively less important for men with equalised labour market participation than for women under the status quo today.