For affordable state pension, men have to perform more care tasks

For affordable state pension, men have to perform more care tasks

Published on: 12 March 2021

Regardless of the demographic development of the Netherlands in the coming years, the state pension will become less and less affordable. Unless female part-timers start working more hours and the Dutch work longer on average, argues Johan Barnard. Every year, the state pension is paid by working Dutch people so the more people work, the easier it is to bear the state pension. However, men do have to take on more care tasks. And for the lower incomes, 'part-time retirement' will have to become more attractive from a tax point of view.    

 

In 2020, the  Netherlands Interdisciplinary Demographic Institute and Statistics Netherlands published “Bevolking 2050 in beeld: drukker, diverser en dubbelgrijs”. This report about the Dutch population pictures various scenarios: how is migration developing? How many children do we have on average, and until what age do we live? The report then predicts the impact of those scenarios on the size and composition of the Dutch population.

 

This predicted demographic development makes it clear once again that the state pension will become less affordable in all scenarios. In contrast to the pension you accrue through your pension fund, the state pension benefits are, in principle, financed each year by the contributions and taxes collected from workers (pay-as-you-go system). An aging population means fewer people in work, who effectively have to pay the state pension for a larger group of Dutch people. In 2020, for example, there were almost 3.4 potential workers per state pension recipient, while the central Statistics Netherlands forecast for 2050 is slightly more than 2.7. The pressure on the ability to finance the state pension is therefore increasing.

 

The report also shows that a larger size or more favorable composition of the population will not be enough to solve this problem - even in the most positive scenario, with the highest number of workers. Moreover, important factors such as the number of children and migration are difficult to control. The Netherlands will therefore have to look in a different direction to solve the problem of the financing of the state pension.  

 

Which buttons can the government still turn? In theory, you can raise the state pension age even faster, lower the state pension yourself or significantly increase the premiums and taxes for the state pension. But some solutions are more effective, aimed at actually keeping or getting people who can work into work. Older employees and women are particularly interesting in this respect.

 

The Netherlands strives for a situation in which we retire later, as close as possible to the - slowly rising - state pension age. That's another trend we've noticed. But it turns out not to be easy for everyone to retire later. In the long run, you can do something about that problem through more periodic training and education during the career, so that people can go in new directions in time and don't get stuck so easily.

 

Possibilities that can help in the shorter term include demotion - going back from a higher position to a lower one - and/or part-time appointments. Of course, an employee must be left with enough income. For those who would in that case end up below a certain income level but who can bring their supplementary pension forward, you can make part-time retirement more attractive from a tax point of view. This way, you prevent large groups of people from making use of that possibility - and labor participation actually decreases - but you do help the people who really cannot work that much anymore.

 

In terms of part-time work, the Netherlands top the list in OECD countries. Nor is there any other country where the percentage of women in the total number of part-timers is so much greater than that of men (see also the OECD report  "Part-time and Partly Equal: Gender and Work in the Netherlands").  A report from the Ministry of Social Affairs and Employment and the Ministry of Education, Culture and Science last year also extensively discusses the great preference in the Netherlands for one and a half jobs per family, whereby men work full-time and women part-time - and women account for the lion's share of the unpaid domestic work and other care tasks. The report outlines potential alternatives, but leaves the choice to politicians.

 

When those choices are made, perhaps as early as the formation of a cabinet, the consequences for the affordability of the state pension, in particular, will have to be taken into account. If we opt for more equality between men and women and encourage women to work more, this will also work out well for retirement. Ideally, the number of hours worked per family will increase, with the number of hours spent by husband and wife coming closer together. And all Dutch people who are capable of this will have to be encouraged to continue working until their retirement date. We need solutions for those who are unable to do so and therefore run the risk of poverty. And if we want women to work more (paid) hours and not fall over, they will have to be enabled to do so. This is only possible if men take on more care tasks and we also better organize society accordingly - primary education and childcare, for example, but also the (financial) appreciation of informal care.

 

A pleasant - but not unimportant - side effect is that the existing 'gender pension gap' in supplementary pensions from pension funds can also become a lot smaller.