The historical origins of old-age pension schemes

Abstract

Old-age pensions are the most widespread social security programmes around the world. While many case studies have focused on the historical origins of old-age pensions, global and comparative studies are limited mainly due to missing data. To address this shortcoming, this article introduces the novel PENLEG dataset (Pension Legislation around the World, 1880–2010), which comprises data on: (1) the timing of the first pension introductions; (2) the pension design; (3) the mode of financing; (4) eligibility criteria; (5) benefit generosity and (6) coverage rates for all independent countries. Additionally, the article describes global pension patterns and highlights case evidence. It shows that economic development strategies, political incentives to bind citizens to the state, administrative reasons as well as colonial legacies and the Soviet model of social security have strongly affected the origins of old-age pensions.

From Benefits and Beneficiaries: The Historical Origins of Old-Age Pensions From a Political Regime Perspective

“…In total, the dataset captures 118 countries from which six countries have opted for a two-pillar pension system, mostly consisting of a social insurance scheme with a supplementary means-tested program. This extends the dataset to 124 observations (Grünewald, 2020b, p. 3).…”

“…Even though the bulk of pension revenues in social insurance schemes are also generated via employer and employee contributions, states are often direct co-funders of the pension system (Grünewald, 2020b, p. 10). Moreover, many social insurance schemes define income ceilings or provide minimal benefits to people that do not fulfill the required criteria for benefit receipt.…”

“…In addition to the (1) implementation dates of the first old-age pension programs, the PENLEG dataset codes information on the (2) pension design, (3) the mode of financing, (4) eligibility criteria as well as on, (5) legal pension coverage rates, and (6) pension generosity levels. The respective information was mainly derived from the ILO Legislative Series (ILO, 2018) and further original pension laws (Grünewald, 2020b, p. 2). The most important innovations of the dataset, however, concern the estimates on benefit generosity levels and legal pension coverage rates, which will be described subsequently.…”

“…However, this approach suffers from several shortcomings. First, by assigning predefined coverage rates to, for example, means-tested pension programs, variance in coverage rates cannot be documented for these pension designs (Grünewald, 2020b, p. 5). While current research has not agreed on whether coverage rates of means-tested programs are high or low (see e.g., Esping-Andersen, 1990; Korpi & Palme, 2018; Scruggs et al, 2017), fixing the pension coverage rate of this pension design can be misleading.…”

“…Second, the existing coverage indicators have only accounted for horizontal coverage so far. However, pension laws often do not cover the entire occupational group, but exclude specific segments (Grünewald, 2020b, p. 5). Thus, accounting for vertical coverage rates becomes of utmost importance.…”