Silence Is Golden? Assessing the Public Debate on Pension Reform

Speaker: Tito Boeri, Professor, Bocconi University, Milan

Discussant: Pierre Pestieau, Professor, University of Liege
 
Date: 14 September 2004
 
Tito Boeri first remarked that the general public is poorly informed of the costs, and ‘intergenerational redistribution’ effects implied by pension systems.  He also observed those who are more informed about the pension systems in Europe are more supportive of reforms aimed at increasing sustainability.  Professor Boeri then addressed the question of whether the media’s coverage of the pension situation in Europe was helpful, or whether it sometimes scared people.
 
He considered the question of exactly how well informed are citizens on this topic.  He answered by presenting surveys carried out in different European countries including, Germany, Italy, France and Spain.  He showed graphs that demonstrated that a large portion of the people polled thought that the system operates in a deficit.  In examining the longer-term prospects, the polls showed that most people think that a crisis is looming, and that past reforms to the pension system have been ineffective.  When questioned about individual contributions to the pension system, most citizens responded that they were unaware of the amount they contributed, and were not informed of the intergenerational redistribution, with many believing the fallacy that early retirement made some way for the younger or unemployed.
 
Another topic Boeri addressed was that of the press/media coverage of the pension system.  His research demonstrated that the press/media coverage was extensive, and the trend showed that the coverage was constant over the period surveyed.  Boeri reported that most people have seen television programs or read newspaper articles that dealt with pension reform and that males who are educated and close to the age of retirement are the ones that pay the closest attention to the debate.  The speaker then summarised his findings by saying that citizens are poorly informed and that those who choose to be involved have similar socio-economic characteristics with those who are more informed, but this is a self-selection bias.
 
Three different proposals about pension reform were polled with there being no majority shown for any.   The cleavages of age, education, labour market status and ideology were shown to be the biggest dividers on this issue.  He then went on to illustrate that the fear of pension reform was the biggest motivational factor in determining when to retire.  He demonstrated this by plotting the last three Italian reforms on a time line, which showed an increase of the incidence of retirement precisely at those junctions in time when the new reforms were being passed, or just prior to passing.
 
In a way of keeping the citizens directly involved in the decision-making process, Mr. Boeri showed the Swedish system of the ‘orange envelope’, in which the government mails orange envelopes with information and options on pensions to the citizens.  He then recommended that other European countries adopt systems similar to Sweden’s as a way of obtaining direct data from the citizens and ensuring a democratic element in the procedure.
 
See the slides of Prof. Boeri’s presentation.