Income Replacement Research Articles

The family working-time model: Towards more gender equality in work and care

Since the millennium, the labour market participation of women and mothers is increasing across European countries. Several work/care policy measures underlie this evolution. At the same time, the labour market behaviour of fathers, as well as their involvement in care work, is relatively unchanging, meaning that employed mothers are facing an increased burden with respect to gainful employment and providing care. We propose a family working-time model that incentivizes fathers and mothers to both work in extended part-time employment. It provides a benefit in the form of a lump-sum transfer or income replacement for each parent if, and only if, both parents work 30 hours/week. Thus, it explicitly addresses fathers and – contrary to most conventional family policies – actively promotes the dual earner/dual carer paradigm. Combining microsimulation and labour supply estimation, we empirically analyse the potential of the family working-time model in the German context. The relatively small share of families already choosing the symmetric distribution of about 30 working hours would increase by 60 percent. By showing that a lump-sum transfer especially benefits low-income families, we contribute to the debate about redistributive implications of family policies. The basic principles of the model generalize to other European countries where families increasingly desire an equal distribution of employment and care. In order to enhance the impact of such a policy, employers’ norms and workplace culture as well as the supply of high-quality childcare must catch up with changing workforce preferences.

Patterns and Predictors of Failed and Sustained Return-to-Work in Transport Injury Insurance Claimants.

A historical cohort study was conducted in the state of Victoria, Australia. People insured through the state-based compulsory third party transport accident compensation scheme were included. Inclusion criteria included date of crash between 2003 and 2012 (inclusive), age 15-70years at the time of crash, sustained a non-catastrophic injury and received at least 1 day of income replacement. A matrix was created from an administrative payments dataset that mapped their RTW pattern for each day up to 3 years' post-crash. A gap of 7 days of no payment followed by resumption of a payment was considered a RTW failure and was flagged. These event flags were then entered into a regression analysis to determine the odds of having a failed RTW attempt. 17% of individuals had a RTW fail, with males having 20% lower odds of experiencing RTW failure. Those who were younger, had minor injuries (sprains, strains, contusions, abrasions, non-limb fractures), or were from more advantaged socio-economic group, were less likely to experience a RTW failure. Most likely to experience a RTW failure were individuals with whiplash, dislocations or particularly those admitted to hospital. Understanding the causes and predictors of failed RTW can help insurers, employers and health systems identify at-risk individuals. This can enable earlier and more targeted support and more effective employment outcomes.

The political economy of social assistance and minimum income benefits: a comparative analysis across 26 OECD countries

Social assistance benefit schemes are a peculiar type of welfare state program. As the electoral costs are relatively low, this program forms an obvious target for cost reduction in times of austerity. The aim of this study is to examine the determinants of the developments in social assistance benefits. We seek to make two contributions. First, this paper provides insight into the role of economic, political, and institutional determinants of the variation in social assistance benefits. Second, cross-national data on social expenditures and income replacement rates are available for several welfare state programs, but not for social assistance benefits. Presenting minimum income benefit replacement rates, this study analyzes the developments of social assistance benefits across 26 OECD countries over the past two decades. The analysis leads to the conclusion that budgetary pressure stemming from increased exposure to international trade and soaring levels of unemployment is associated with benefit cuts.

Estimation of Public and Private Pension Income Replacement Rate and Appropriate Measures of Old-age Income Sources

Estimation of Public and Private Pension Income Replacement Rate and Appropriate Measures of Old-age Income Sources

EFFECT OF TOTAL CONTRIBUTION ON FINANCIAL PERFORMANCE OF PENSION SCHEMES IN KENYA: A SURVEY OF PENSION SCHEMES IN KENYA

Purpose: Financial performance of pension funds in Kenya is wanting and thus, raises doubts whether they can be able to ensure access to regular or lump sum income for retirees. The pension should provide an adequate replacement income for the remaining life of the member or partner and remove the risk that the member outlives the resources. Poor performance of pension schemes jeopardizes this role and hence the retired people will not be able to have high degree of retirement income security. Therefore, this study sought to analyze the effect of total contribution on financial performance of pension schemes in Kenya.
 Methodology: The target population for this study was all the registered occupational pension schemes in Kenya which according to the Retirement Benefits Authority report are 818 by the end of the year 2016. Random sampling method was applied to come up with the sample size of 261 registered occupational retirement benefits schemes. The study used secondary data which was analyzed using inferential and descriptive statistics.
 Results: The study findings established that total contribution has a positive and significant effect on financial performance of pension schemes.
 Policy recommendation: The study recommends that Pension Schemes in Kenya should invest more in systems to recruit more members to increase the total contributions as it positively affects financial performance.

The Great Recession and inequalities in access to health care: a study of unemployment and unmet medical need in Europe in the economic crisis.

BackgroundUnmet medical need (UMN) had been declining steadily across Europe until the 2008 Recession, a period characterized by rising unemployment. We examined whether becoming unemployed increased the risk of UMN during the Great Recession and whether the extent of out-of-pocket payments (OOP) for health care and income replacement for the unemployed (IRU) moderated this relationship.MethodsWe used the European Survey on Income and Living Conditions (EU-SILC) to construct a pseudo-panel (n = 135 529) across 25 countries to estimate the relationship between unemployment and UMN. We estimated linear probability models, using a baseline of employed people with no UMN, to test whether this relationship is mediated by financial hardship and moderated by levels of OOP and IRU.ResultsJob loss increased the risk of UMN [β = 0.027, 95% confidence interval (CI) 0.022–0.033] and financial hardship exacerbated this effect. Fewer people experiencing job loss lost access to health care in countries where OOPs were low or in countries where IRU is high. The results are robust to different model specifications.ConclusionsUnemployment does not necessarily compromise access to health care. Rather, access is jeopardized by diminishing financial resources that accompany job loss. Lower OOPs or higher IRU protect against loss of access, but they cannot guarantee it. Policy solutions should secure financial protection for the unemployed so that resources do not have to be diverted from health.

Impact of Asset Mix on Financial Performance of Registered Occupational Pension Schemes

The Pension scheme industry plays a crucial role in providing an employment income replacement upon the retirement of the working pensionable population. Retirement income accounts for 68% of the total income of retirees in Kenya. Studies done in Kenya didn’t address the issue of financial performance and Asset mix relationship in pooled work-related funds. The main objective of this research study was to assess the impact of Asset mix on the Financial Performance of the Registered Occupational Pension Schemes. Systematic sampling technique was used to select a probability sample of 297 sample units from a population of 1232 registered pension schemes for the period 2006–2016 according to the Retirement Benefits Authority(RBA) records. Information on this particular variable was obtained mainly through a questionnaire survey which was conducted between March and April 2017.The SPSS statistical package was used to analyze data. A panel regression model was used for data analysis. The study found a positive correlation where changes in financial performance of occupational Pension schemes could be explained by the variations in the Asset mix. The study was guided by the Modern Portfolio theory on investments as developed in the 1952 by Harry Markowitz in his article on investments.

Measuring the Adequacy of Retirement Savings

This paper introduces four metrics for quantifying the adequacy of retirement savings, taking into account all major sources of retirement income. We then apply them to projections of expected future retirement income streams of a representative sample of the Australian population aged 40 and above. We find that omitting one or more pillars of savings significantly biases estimates of retirement savings adequacy. We also find that the four metrics are only weakly correlated with key commonly used indicators of financial well‐being, in particular current income and net worth. Our analysis also points to several shortcomings of the widely used income replacement ratio as an indicator of savings adequacy.

WASPI's Is (Mostly) a Campaign for Inequality

AbstractWomen Against State Pension Inequality (WASPI) has mounted a vociferous campaign for full compensation to be given to ‘1950s women’ who, it argues, have suffered severe financial hardship as a result of the rise in their state pension age from age 60. That campaign has gained significant political traction, with much sympathy expressed for the plight of those affected and acceptance (most notably by the Scottish National Party and the Labour Party) that some form of compensation is urgently needed. But WASPI fails to acknowledge the rise in the state pension age's roots in the fight for women's equality, disregards the fact that the problems experienced by this cohort as they near retirement are faced by both women and men and glosses over the fact that the increase in pension age above 65 applies to both genders equally. Its campaign obscures deeper and more important issues in old‐age income replacement.

Can Airbnb Provide Livable Incomes to Property Owners?: An Analysis on National, Regional and City District Level

In this paper, we explore the Airbnb payoffs on the macro (global), mezzo (national) and micro (city) level. The main aim of the paper is to pilot a methodology for exploring, whether Airbnb can serve as a source for income replacement. Combining a variety of data sources on the affluence of a given location, we aim to estimate the potential payoffs to property owners from renting out a property on Airbnb vis-a-vis the living cost in that place. We discover a great variety of payoffs between individual countries, regions and city districts, which appear to be quite complex and cannot be universally simplified to indicators such as prosperity or tourists visits. Many interesting patterns found in this study would require further examination

The Life Cycle Model, Replacement Rates, and Retirement Income Adequacy

The key insight of the life cycle model in economics is that a household’s consumption at any given time is determined not so much by its current income as by the total income available to the household over its lifetime. A replacement rate can be a useful tool in approximating the life cycle model’s predictions for how households prepare for retirement. The Social Security Administration’s Office of the Chief Actuary (SSA OACT) publishes two different calculations of retirement income replacement rates, each of which finds that Social Security benefits replace about 40% of a typical retiree’s pre-retirement earnings. Some interpret these figures as indicating that Social Security benefits are insufficiently generous and that U.S. households’ total retirement saving is inadequate. But SSA OACT’s two methods for calculating replacement rates both violate the life cycle model in a meaningful way. SSA OACT’s career-average earnings replacement rates, in which lifetime earnings are first indexed upward by the rate of economywide wage growth, exaggerates by roughly one-fifth the real value of earnings available to a household for consumption over its lifetime. This overstatement lowers a household’s measured ability to replace their pre-retirement earnings. SSA OACT’s final-earnings replacement rates effectively compare Social Security retirement benefits to pre-retirement earnings only in the years in which the individual worked, ignoring the life cycle model’s prediction that household consumption is a function of long-term average earnings, including years in which a household member was not employed. A replacement-rate calculation more consistent with the life cycle model would compare retirement income to an average of real earnings calculated over a significant number of years. Such an approach would find substantially higher replacement rates for the typical retiree. It is important both for Social Security policy and the analysis of overall retirement savings adequacy that replacement-rate calculations build on the insights of the life cycle model that guides most economic analysis of retirement saving.

Social Assistance and Minimum Income Levels and Replacement Rates Dataset

The Social Assistance and Minimum Income Levels and Replacement Rates Dataset provides two new indicators for comparisons of social assistance and minimum income benefits across countries and over time, namely real net minimum income benefit levels and net minimum income benefit replacement rates. The dataset contains information for 33 countries for the period 1990–2009. For information on social assistance and minimum income benefits, the dataset draws upon information from Nelson’s (2013) dataset. The minimum income replacement rates are comparable to unemployment replacement rates.

担い手減少下の地域農業における国産濃厚飼料イアコーン導入と農地管理の可能性

In Japanese livestock farming, there has been an increasing focus on the need to improve feed self-sufficiency rate, especially the self-sufficiency rate for concentrate feed. This study targets ear corn produc­tion, which is currently emphasized as domestic con­centrate feed. Consequently, it examines the possibility of introducing ear corn production through integrated farming systems of arable and livestock in the regional agriculture of Abira town, Hokkaido. This possibility is studied from the viewpoint of farmland management in upland farms, as the number of farmers decreases in the region. The results show a further decrease in the number of farmers in the future, which would enhance the need for farmland maintenance and management. Additionally, if farmers introduce ear corn production, it will be possible to expand the labor-saving operational scale through labor extensive production. Consequently, labor saving will facilitate farmland management in the area. The introduction of ear corn production in the region by an integrated farming system of arable and livestock is expected to be an effective measure to promote both management stability, through income replacement of wheat as main crop, and farmland management, for not only dairy farms but also upland ones, considering the decline in the number of farmers.

The Role of Self-Control on Retirement Preparedness of US Households

We examine the self-control problems of U.S households and their effects on households' retirement preparedness based on the Behavioral Life-Cycle Hypothesis. Using the 2010 Survey of Consumer Finances dataset, the level of retirement adequacy was estimated with income replacement ratio (IRR), and only 42% of households were adequately prepared for retirement. Results from logistic regression analysis indicated that households with loan payment and saving self-control problems were less likely to be prepared adequately for retirement compared to those without such problems. Age, education, race/ethnicity, marital status, employment status, retirement plans, expected retirement age and risk tolerance were significantly related to retirement preparedness. This study provides financial educator and researchers with suggestions on how to help household make a better retirement plan.

Social Assistance and Minimum Income Benefits: Benefit Levels, Replacement Rates and Policies across 26 Oecd Countries, 1990–2009

Until recently, social assistance and minimum income benefits have received relatively little attention in the comparative welfare state literature. Relying on two new indicators, this paper examines the development of minimum income benefits across 26 EU and other OECD countries. The real benefit level, the first indicator, is relatively easy to interpret, but international comparisons require adjustments for exchange rates and purchasing power, which can introduce variation that is not related to underlying policy changes. In the second indicator, the net minimum income replacement rate, this disadvantage is cancelled out by construction. Our analysis shows that real benefit levels increased in most countries, whilst replacement rates declined on average. A subsequent qualitative analysis of the changes in the benefit levels confirms that the increased benefit levels reflect policy changes and that the lower replacement rates do not reflect benefit cuts, but relatively larger wage increases. Such a widening gap between benefit levels and wages is in line with the policy agenda of ‘making work pay’. Finally, by analysing the extent to which changes in quantitative indicators reflect actual policy changes, this paper seeks to make a methodological contribution to the ongoing debate on the ‘dependent variable problem’ in the welfare state literature.

Australian Superannuation: The Current State of Play

AbstractThis article focuses on the challenges facing superannuation, the income replacement pillar of Australia's retirement income system, as it matures. We discuss four questions: In an era when households are making critical and complex choices that most have never previously confronted, how should policy‐makers and private providers guide choices? How should superannuation be taxed? How should the drawdown phase be structured? And to what extent will the Superannuation Guarantee be able to meet the objective of providing retirement income to substitute or supplement the age pension? This article attempts to provide perspective on each of the issues and concludes with a statement of research need.

How Much Should DC Savers Worry about Expected Returns?

Many defined contribution (DC) savers and plan sponsors implicitly assume that future long-term capital market returns will be similar to those observed in the favorable markets of the past few decades. In recent history, an unexceptional savings rate of 8% each year over one’s career, together with other common industry assumptions, would have allowed DC savers to reach a target retirement income replacement ratio of 75%. Unfortunately, current market yields indicate that both stocks and bonds may deliver lower returns in coming years. This may impact savers significantly: We quantify that roughly 2% lower expected returns could almost double the savings rate required over one’s working career to achieve this same 75% replacement ratio. We conclude by briefly describing some investment strategies that may help enhance portfolio returns. <b>TOPICS:</b>Retirement, portfolio construction

PhD Thesis: Trends in Social Assistance, Minimum Income Benefits and Income Polarization in an International Perspective

This thesis collects six empirical studies regarding the developments of social assistance benefits, their determinants and the impact of the benefit changes on income polarization. The first study suggests that the real minimum income benefit levels increased in many OECD countries whilst minimum income replacement rates declined on average. The increased benefit levels reflect policy changes while the declined replacement rates do not reflect benefit cuts but larger wage increases. The second study shows that globalization, soaring levels of unemployment and trade unions have triggered social assistance and minimum income benefit reforms. The third study indicates that the Lisbon Strategy has been positively associated with minimum income benefit developments since 2005. The findings in the fourth study suggest that in China, minimum income benefit programs vary considerably across regions and the benefit generosity has been increasing over the decade although still at low levels in an international perspective. The fifth and sixth studies focus on the indicator of income polarization to analyze income distribution. The fifth study shows that income polarization is stable in European countries and Europe as a whole. The sixth study further indicates that tax-benefit systems are essential in reducing initial market income polarization.

Retirement Security: Better Information on Income Replacement Rates Needed to Help Workers Plan for Retirement

What GAO Found: Household spending patterns varied by age, with mid-career households (those aged 45-49) spending more than older households. For example, according to 2013 survey data from the Bureau of Labor Statistics (BLS), mid-career households spent an estimated average of around $58,500, while young retiree households (those aged 65-69) spent about 20 percent less. While the share of spending was consistent for some categories, other categories had larger variations across age groups. For example, housing expenses comprised the largest share of spending regardless of age, while older households spent more out of pocket on health care than mid-career households. Spending was less variable across age for low-income households compared to other households. For example, there was not a significant difference in average spending between mid-career and young retiree households in the lowest income quartile, compared to an approximately $20,000 difference for the highest income quartile. These variations in spending patterns have implications for the resources households need to maintain their standard of living in retirement. Researchers and financial industry professionals develop target replacement rates — the percentage of income to aim for in retirement — based on certain key factors, including spending, household characteristics, and pre-retirement earnings. GAO's analysis of the literature found that calculating an appropriate replacement rate can be complex. For example, there is debate over whether households that have raised children should target a lower replacement rate than households that have not. In addition, a worker's pre-retirement earnings could be defined as earnings at the end of the worker's career or as average earnings over the course of the career. Despite these complicated considerations, target replacement rates cited in the articles and reports GAO reviewed typically range between 70 and 85 percent. Some financial industry professionals told GAO that they develop customized targets that take into account workers' assets and expected spending, while others questioned the usefulness of replacement rates. The information and tools on replacement rates that the Department of Labor (DOL) provides may be too limited to help workers understand how to use such rates for retirement planning. DOL's Employee Benefits Security Administration's (EBSA) website provides information and tools to help American workers better plan for retirement, including a tool to help workers calculate their retirement income needs as a percentage of preretirement income. While EBSA's materials note that a target replacement rate can vary based on individual circumstances, they do not include specific examples of demographic groups that research indicates can result in higher or lower income replacement needs, or how much a replacement rate might need to be adjusted for those groups or for other individual circumstances. Without additional information, workers may not understand how to adjust target replacement rates when planning for retirement. Further, EBSA's worksheet and online tool for calculating how much to save use a default replacement rate with no opportunity for a user to adjust the rate based on individual circumstances. Without the ability to adjust the replacement rates used in planning tools, workers may over- or under-estimate how much they need to save for retirement. Why GAO Did This Study: Part of DOL's mission is to promote the retirement security of America's workers, a goal that has become increasingly challenging. One tool for assessing the adequacy of retirement income is the replacement rate. However, recommendations for the replacement rate that a household should target vary widely, in part because of the diverse underlying assumptions used to develop the rates. GAO was asked to review what consumption in retirement looks like and how target replacement rates are developed. GAO examined (1) whether and how spending patterns vary by age, (2) key factors used to develop target replacement rates, and (3) the usefulness of information on such rates provided by DOL. GAO analyzed data from the BLS's 2013 Consumer Expenditure Survey, the most recent available; analyzed 59 articles and reports that discussed how to develop, calculate, or evaluate replacement rates; collected non-generalizable information from 14 retirement services firms and financial planners recommended by researchers and actuaries who have studied replacement rates; and reviewed DOL materials and interviewed officials. What GAO Recommends: GAO recommends that DOL provide additional examples and guidance on using a replacement rate for estimating retirement savings needs in its planning tools, and modify the planning tools so the rate can be adjusted. DOL generally agreed with our recommendations and plans to add information and provide options for adjusting replacement rates in its planning tools by June 2017.

IMPORTANCE OF FUNDED PENSION SCHEMES IN PROVISION OF PENSIONS: THE EXPERIENCE OF LATVIA AND THE OLD EU COUNTRIES

During the past 20 years, pension reforms in the EU countries have lowered pension benefits. As a consequence of reforms each person’s responsibility for the result has increased. Examples of such reforms are those in Latvia (1995–2001), Germany (2001–2004) and the Netherlands (2004–2010). The essential part of future pension sufficiency is based on funded pension schemes, which are expected to prevent poverty and ensure the replacement of sufficient income in old age.The government defines a significant role to funded pension schemes. It is important to take into consideration major structural weaknesses in relation to social security. This includes such aspects as security and payment levels, risk management of savings and payment phases, tax implications and necessity of pension plan monitoring. These are all the problems to be solved in order to draw funded schemes as an integral part of retirement security among investors.This paper investigates the importance of funded pension schemes in securing pension in Latvia and in some old EU countries.