Are pensions “growth-dependent”?

Abstract

Limits to growth raise concerns about “growth dependencies” or adverse social effects that follow if the economy does not grow. The first point of this article is that identifying pensions as growth-dependent is more conditional than has so far been recognized. It requires operationalizing growth dependence, making complete economic assumptions, and scoping the issue to specific pension functions. The second point is to take those steps and, with exploratory scenarios, show how growth dependence is and is not evident under all ideal-type pension-financing principles. All plans would be growth-dependent if we interpret the end of growth as lower interest rates and earnings development but higher inflation than under growth assumptions. However, no plan shows growth dependence under all assumptions. I also discuss post-growth pensions, arguing that funded pensions entail vulnerability and distributional issues that make them problematic in a non-growing system. Unfunded financing combined with comprehensive social and economic policies could work as a long-term approach. Growth dependence is an important research area. However, without specification, the concept may blur the conditionalities that generate and alleviate pension vulnerabilities.

Keywords

• Post-growth economics
• sustainable welfare
• eco-social policy
• social security
• limits to growth