Introduction
Pension system reform has now been on the political agendas of European countries for at least three decades. The first and major determinant of reforms of public pension systems stemmed from the aging population, explained by the increasing life expectancy and decreasing fertility rates (EC, 2013; OECD, 2013). Indeed, the expected rise in pension expenditures over the long term threatened the financial sustainability of public pension systems (Vidlund, Reference Vidlund2006; Whiteford and Whitehouse, Reference Whiteford and Whitehouse2006). However, the need to narrow government deficits, as stipulated by the Stability Pact, undoubtedly constituted a second important rationale for pension reform. Both factors explain the cost-containment reforms implemented to varying degrees in almost all European countries by the late 1990s and reinforced following the global crisis of 2008 (Schwarz, Reference Schwarz2006; OECD, 2012; Arza, Reference Arza2015).
In 1999, the European Commission proposed a strategy for modernising social protection and called on Member States to ensure three objectives: the sustainability of their pension systems, the adequacy of pension levels to combating poverty, especially among older women, and the adaptation of social protection systems to the emergence of new working arrangements (temporary and part-time contracts) and to the reconciliation of work and family life (EC, 1999). The Lisbon European Council approved the strategy and added another objective: the promotion of gender equality (European Council, 2000: 5). The Laeken Summit (European Council, 2001) reinforced that objective with the approval of a revision of pension provisions in order to ensure the principle of equal treatment between women and men (EC, 2003).Footnote 1
This guideline sought to respond to the existence of significant gender gaps in European public pension systems: on average, women not only receive lower pensions than men but also a high proportion of women receive no pensions (EC, 2013; Arza, Reference Arza2015). These gender differences in pension coverage and benefits stem from two main causes that are external to the pension system: the characteristics of the labour force participation of women and their traditional social roles (Ginn, Reference Ginn2004; Frericks et al., Reference Frericks, Knijn and Maier2009; Foster, Reference Foster2010).
Despite the differences between countries, several empirical facts may be identified: women have lower employment rates than men; segregation in the labour market and non-compliance with equal pay legislation together explain the very high gender pay gap between women and men; parenthood affects women unequally as recourse to part-time working increases with the number of children; women, as the main caregivers, experience greater career interruptions (OECD, 2002; EC, 2006, 2010, 2015a). All these facts negatively impact on the lifetime earnings and lengths of career of women and reflecting inevitably later on their pension entitlements (EC, 2013). As Tinios el al. (Reference Tinios, Bettio and Betti2015: 11) argue ‘typically pension systems cumulate inequalities that occur over a person's lifetime’.
Responding to policy debates, there was extensive literature dedicated to evaluating different pension reform paths even while generally overlooking the issue of gender. More recently, concerns about the gender consequences of those reforms did attract the attentions of the scientific community. Many researchers have since discussed the gender inequalities of these reforms (Frericks et al., Reference Frericks, Knijn and Maier2009; Jefferson, Reference Jefferson2009; Earles, Reference Earles2013; Addis, Reference Addis2015) while many others, applying different statistics techniques, simulated their gender impacts. Some of these empirical studies focus on a specific country: for example, France (Bonnet et al., Reference Bonnet, Buffeteau and Godefroy2015), Greece (Vlachantoni, Reference Vlachantoni2010), Italy (Corsi and D'Ippoliti, Reference Corsi and D'Ippoliti2009), Spain (Peinado, Reference Peinado2014) and Sweden (Stählberg et al., Reference Stählberg, Birman, Kruse and Sundén2006).
The goals of this article are two-fold. First, we aim to demonstrate that pension reforms carried out between 2000 – when the promotion of gender equality entered on EU agenda – and 2017 in the six selected countries (Austria, Belgium, France, Germany, Portugal and Spain) have almost exclusively focused on strengthening financial sustainability. In other words, despite the measures taken in the various countries having complied with the principle of equal treatment under the law, they may have nevertheless contributed to greater inequalities in pension rights between women and men. A second goal of the article is to identify similarities and differences in reforms. With regard to the earlier studies, the article presents two contributions: the cross-country evaluation of the reforms in a time space of seventeen years and the selection of three countries that are less frequently studied empirically, namely Austria, Belgium and Portugal.
The structure of the article is as follows. In the following section, we discuss the gender discrimination mechanisms within social insurance schemes. The second section includes the methodological options and the resulting analysis of the main legislative changes (concerning eligibility and entitlement) implemented in the six selected countries between 2000 and 2017, with a brief discussion of the profile of the reforms. We then discuss the gender impact of the measures as well as their effects on financial sustainability, before concluding in the final section.
Social insurance pensions: mechanisms of gender discrimination
The social insurance pensions returning earnings-related benefits to workers who have paid in social contributions over a specific period of time were designed within the context of the male breadwinner model in which women were mainly wives and mothers (Vara, Reference Vara2013). The mass entrance of women into labour markets has resulted in a shift away from derived pension rights to individual rights, which undoubtedly proves positive for their financial independence in old age. However, linking this right to the norms prevailing under the male breadwinner model may pose serious disadvantages for women (Frericks et al., Reference Frericks, Knijn and Maier2009).
Several authors have identified important features of gender inequality within social insurance schemes (Ginn et al., Reference Ginn, Street and Arber2001; Leitner, Reference Leitner2001; Vlachantoni, Reference Vlachantoni2012; Vara, Reference Vara2013; Arza, Reference Arza2015; Betti et al., Reference Betti, Bettio, Georgiadis and Tinios2015). The first feature stems from the qualifying period: the minimum number of years with contribution payment required for old-age pension eligibility. This requirement reduces the number of employed persons entitled to pension rights by excluding those with short or otherwise interrupted careers. The higher the number of years required, the more penalising it becomes for women due to career breaks and part-time work. Hence, this requirement may indeed limit women's access to contributory pensions.
The second feature relates to the pension calculation, which reflects both the length of coverage and the level of past earnings. The so-called (average) reference earnings of the individual worker can be measured in different ways: the final, the best years or the lifetime average. According to Leitner (Reference Leitner2001: 104), ‘long calculation periods privilege continuously high-earnings labour market careers which can be found more often among men than among women’. So, the first two are more advantageous for women although the amount of their pensions still remains lower than men on average due to the pay gap. The length of coverage constitutes an essential factor for accessing the full pension and the higher the number of years required, the greater the benefit for careers without interruptions, which is not generally the case for women.
The third feature concerns the pensionable age. Decades ago, all European systems established a lower retirement age for women as a means of compensating them for their care work. This was one of the exceptions to the principle of equal treatment within the insurance schemes, confirmed by Article 7 of the Council Directive 79/9/ECC. Whether or not a higher retirement age favours women remains is a controversial issue. According to feminist researchers, lower retirement ages reflect a means of compensating women for unpaid work (caring for both children and the elderly) (Leitner, Reference Leitner2001; Ginn, Reference Ginn2003). On the other hand, those defending the importance of social and political messages around greater gender equality advocate levelling the retirement age (Corsi and D'Ippoliti, Reference Corsi and D'Ippoliti2009).
The reforms in six specific European countries between 2000 and 2017
Methodological options
The first option details the choice of the case studies: Austria, Belgium, Germany, France, Portugal and Spain.Footnote 2 This choice stemmed from three essential features: the pension model, the pace of population aging and its impact on the long-term sustainability of pension systems. First, the six countries all provide social insurance pensions and they represent the so-called ‘Bismarck-type continental systems’ (EC, 2013) in which the pay-as-you go funding proves particularly sensitive to both the aging ratio and the incidence of economic recession. Secondly, in 2000, not only did the six countries report among the highest levels of old-age dependency ratios in Western Europe but also the respective projections for 2030 placed them among the countries with the fastest rates of population aging (EC, 2003). Finally, and consequently, the forecast for public expenditure on pensions (as a percentage of GDP) for the same year predicted that these same countries might have to cope with, in the absence of any reforms in the meanwhile, some of the severest impacts in terms of the sustainability of their systems (EC, 2003).
The second option relates to selecting the most appropriate indicators for evaluating the reform measures in terms of their potential gender effects. Therefore, we base our analysis on the legislative changes that encompass eligibility (qualifying period, pensionable age and terms of access to early and late retirement) and entitlement (accrual rate, reference earnings and the eligibility conditions for full pensions). As our data source, we draw on the Mutual Information System on Social Protection in European Union member states (MISSOC), as well as the reports regularly published by the European Commission and the OECD.
The analysis focuses on the legislative changes enacted between 2000 and 2017. This justifies two particular notes. Firstly, the choice of the base year stems from this coinciding, as detailed above, with the incorporation of promoting gender equality into the European strategy. Secondly, and in order to identify the possible influences of the global crisis of 2008, this timeframe was then broken down into two sub-periods (2000-2007 and 2008–2017).
The legislatives changes introduced between 2000 and 2017
One important question stems from whether the various measures enacted proved disadvantageous to women's pension rights. The EC legislation defines the principle of equal treatment in terms of prohibiting discrimination on the grounds of sex (Luckhaus, Reference Luckhaus2000: 153). However, indirect discrimination may exist whenever a provision or criterion seems apparently neutral but treats women in practice differently to men (MISSOC, 2012: 11). The legislative changes that took place in the six countries feature in Table 1.
Table 1 Main legislative changes
Notes: W= women; M= men.
(a) The previous rule (15 years of insurance within the last 30 calendar years) is still in force.
(b) In the 1990s: ER at 60 for M and 55 for W, with at least 20 years of insurance.
(c) In the 1990s: PA for W (61) aligned with that of M (65) by 2009.
(d) In the 1990s: age 60, with 24 years of insurance. Gradual increase in the contributory period to 35 years until 2005.
(e) In the 1990s: 45 years of insurance for M and 41 years for W. For W: gradual increase to 45 years by 2009.
(f) Ratio between contribution payers and pensioners.
(g) The factor of financial sustainability corresponded to the ratio between the life expectancy in 2006 and life expectancy in the year prior to retirement.
(h) The reference became the life expectancy in 2000 (and no longer in 2006).
(i) Previously: flat-rate of 2%.
(j) Transition period for affiliated workers before 2001.
Qualifying period
Only Austria increased its length of qualifying period (from fifteen to twenty-five years). The new rule becomes more advantageous for women because it does not require a framework period and consequently reduces access-based discrimination. However, in comparison with Germany and Portugal – with unchanged qualifying periods of five and fifteen years of insurance respectively – the new requirement harshly penalises those workers with shorter careers, a group with a greater proportional incidence of women.
Pensionable age
Firstly, the pensionable age rose in all countries and twice in two of them (PT and ES). In Austria, the measure only affected women as the reform equalised the pension age between the genders. After the global crisis, the measure impacted on both men and women. In Portugal, the 2007 approved reform introduced a link between retirement age and longevity which would have led to the retirement age rising to sixty-six by 2030. However, due to a change (in 2013) in the calculations of the factor of financial sustainability, this increase was brought forward to 2014. This undoubtedly represented a political decision unparalleled in the reform processes of all the other member states. According to Bonoli and Palier (Reference Bonoli and Palier2007: 567), a long phasing-in period ‘is inevitable, because workers need to adapt changes in legislation; on the other hand, the longer the period, the less effective the reform will be in containing future pension expenditure’. In the case of Spain, the adjustment period originally approved in 2011 was brought forward by eight years by legislation passed in 2013.
Early and late retirement
Until 2007, three countries (AT, BE and PT) tightened access to early retirement by increasing the minimum age and/or the length of the insurance period (number of the claimant's insured years). After 2008, all the countries further reinforced or introduced those measures.
However, France (in 2003) and Portugal (in 2015) improved access rules to early retirement for those having registered long contributory careers, which is more positive for men. Once again, the Portuguese reform deserves special mention: as the financial sustainability factor introduced by the reforms approved in 2007 only applies in cases of early retirement, all workers who did not continue working through to the pensionable age – which rises by the year – suffer the greatest reductions in their pensions out of all six of these European countries.
Throughout the reference period, greater financial incentives – an annual bonus to the total pension – for those continuing to work after their pensionable age were also introduced in all countries, except in Portugal.
Pension benefits and conditions for full pension
Four countries (AT, FR, ES and PT) extended the period over which earnings are measured to calculate pensions to forty years. This measure tends to cut the amount of future pensions because best earnings usually turn out higher than lifetime averages. Germany constitutes a special case: the annual pension level here is linked to a factor of financial sustainability.Footnote 3
Only Austria reduced the rate at which pension entitlements accrue for each year of contribution. The change introduced in the Portuguese scheme in 2007 (from a two per cent flat-rate to a grid of decreasing actuarial rates) was weighted favourably towards workers with lower reference earnings (a higher proportion of women).
Four countries (AT, BE, FR and ES) increased the number of contribution years necessary to receive a full pension: that is, without penalties. We would also note how in Belgium the phasing-in period previously established for women underwent a reduction.
The profile of the reforms carried out in the six countries
The legislative changes that took place by country and by year feature in Table 2. The analysis demonstrates the existence of five types of measures common to the large majority of the countries: pensionable age, pension calculation, early and late retirement and access to full pension.
Table 2 Main legislatives changes by country, parameter and year
Notes: QP = qualifying period; PA = pensionable age; ER= early retirement; LT= late retirement; AR= accrual rate; PBC= pension base calculation; FP= full pension.
Two further aspects require emphasising: the packages of measures taken in each country and their temporal application. We may note some differences between the countries. Firstly, Austria, Belgium, France and Portugal approved major pension reforms in the first sub-period. This option may be explained by the very high budgetary cost of aging, as mentioned earlier.
Secondly, the 2008 global crisis strongly influenced the political choices of all countries, especially those hardest hit by the subsequent sovereign debt crisis (ES, FR, and PT). Besides the enacting of legislative changes aimed at extending working lives, those circumstances also seem to have driven a specific impact on reducing the generosity of pensions in France and Spain and even provided the reason stipulated as requiring changes to the formula for calculating the sustainability factor in Portugal. As Rubery (Reference Rubery2015: 733) explains, ‘Portugal signed the memorandum of understanding with the Troika, Spain has been subject to direct financial surveillance while France felt obliged to conform to the policy line because of increasing public debt problems’. We may thus undoubtedly argue that the global crisis led to negative effects on all future pensions, especially those for women.
Two additional points are worth highlighting here. First, all the countries (except Germany) tightened access to early retirement prior to 2007 – some of them twice – and these measures were then reinforced in the second sub-period. This mainly stemmed from their very low effective retirement ages in 2008, well below the pensionable age for receiving a full pension (OECD-Database).
Finally, two countries (DE, PT) introduced a link between the pension age (or pension level) and life expectancy, which likely stems from the fact that both are among the fastest aging societies in the European Union (Eurostat-Database).
What have been the gender implications of these reforms?
These reforms hold different gender implications. Increases in the pensionable age can be advantageous for women as they can substantially raise the future amount of pension payments, provided that the accumulated inequalities occurring over their lifetime are eliminated for younger cohorts. For women, a lower pensionable age ‘may be seen as a privilege – appreciated by those who do not enjoy their work and prefer leisure – but they pay the price of a lower pension’ (James et al., Reference James, Edwards and Wong2008: 13). Peinado (Reference Peinado2014: 184) estimated the effects of the 2011 reform in Spain and found that ‘an increase in the pensionable age would progressively reduce current gender differences’.
As stated above, adjustments in access to early and late retirement are more positive for men. However, those measures prove more advantageous for those workers ‘that have a freer choice to continue working than those that have little choice; men will usually be better placed to benefit’ (EC, 2012: 92).
The switch to lifetime earnings, as well as the more rigid rules for accessing full pensions, prove particularly disadvantageous to women: due both to their generally shorter careers (part-time work and caring), and their lower earnings levels when compared to men. Indeed, the negative impact on women of increases to the number of years used to calculate the reference salary is reported by Bonnet et al. (Reference Bonnet, Buffeteau and Godefroy2015) – 2003 reform in France – and Peinado (Reference Peinado2014). The changes in the two parameters held especially deep consequences in four countries (AT, BE, ES, PT). Among the six countries, these had in 2000 presented the most unfavourable indicators for female participation in the labour market in comparison with men: higher incidence of part-time work (BE), shorter working life durations (BE, ES) and higher gender pay gaps (AT, PT) (OECD, 2002; EC, 2006).
Although the legislative changes comply with the equal treatment in law principle, they represent political options resulting in gender discrimination. Finally, only two measures (the changes in the qualifying period in Austria and in the accrual rates in Portugal) tend to be positive for all women with short and/or low earnings careers.
Pension credits for childcare represent one of several mechanisms for addressing old-age pension gender differences (EC, 2003; Renga et al., Reference Renga, Molnar-Hidassy and Tisheva2010).Footnote 4 At the beginning of this period, the length of the period credited (per child) corresponded to one year (ES), two years (BE, FR, PT), three years (DE) and four years (AT). In France, the credits applied only to mothers while they were gender-neutral in all the remaining countries. In all countries, with the exception of Portugal and Spain, the acquisition of credits allowed for parallel employment. Finally, the credits counted as qualifying periods (AT, ES, PT) and also for calculating the pension amount (BE, DE, FR). Taking all these parameters into consideration, the French and the Spanish systems respectively achieved the best and worst performances in combating gender discrimination in old-age pensions. Over the period, only two countries changed some of the parameters for this provision. In Belgium, the length of period credited increased to three years. In France, the provision became gender-neutral in order to eliminate the former legal disadvantage for men, and the eligibility became dependent on working leave of absence lasting for at least two months.Footnote 5 All of these changes impact differently on women. As Renga et al. (Reference Renga, Molnar-Hidassy and Tisheva2010: 33) argue, the caring credits and other instruments ‘should be gender-neutral, as to allow them also for men is crucial in order to avoid the reinforcement of women's traditional role of caring for and raising children’. In contrast, linkage to labour market employment – full suspension or part-time reduction – penalises women who remain the main caregivers (Frericks et al., Reference Frericks, Maier and Graaf2008, Reference Frericks, Knijn and Maier2009; EC, 2012).
Table 3 presents a summary of the effects described above as well as their impacts, whether positive or negative, on financial sustainability.
Table 3 Legislative changes: impact on financial sustainability versus gender impact
Notes: W= women; M= men.
Six of the nine types of measures listed are designed to contain pension expenditure and only one of them might boost the future value of the pensions of women (pensionable age). Of the three measures with a negative impact on financial sustainability, only two are advantageous to women in the sense of boosting coverage (lowering the qualifying period) and the amount of the pension (regressive actuarial rates). This stems from how females represent a larger proportion of workers with shorter careers and/or low wages.
The two objectives defined at the EU level – financial sustainability and gender equality – received different responses at national level. The main reforms undertaken in the six countries clearly sought to contain pension expenditure while ignoring the second objective. The negative impact on women of the large majority of these measures brought about neither public debate nor opposition, with the exception of France (reforms of 2003 and 2010) through campaigns run by social organisations combating gender discrimination (Guillemard, Reference Guillemard2016; Renga et al., Reference Renga, Molnar-Hidassy and Tisheva2010). In all the remaining countries, these reforms faced strong opposition from trade unions due to the effects on workers in general (Busemeyer, Reference Busemeyer2005; Bonoli and Palier, Reference Bonoli and Palier2007; Guillemard, Reference Guillemard2016; Gago, Reference Gago, Bargawi, Cozzi and Himmelweit2017; Hagemann and Scherger, Reference Hagemann and Scherger2016).
Conclusions
The pension reforms designed and implemented during the 1990s sought to curb the growth of pension expenditure brought about by the aging of the population – thus also reducing public deficits (Grech, Reference Grech2015). Throughout the 2000–2017 period, this remained a priority objective. However, prior to the 2007 global crisis, ‘financial sustainability has become a concern for the present rather for the future’ (OECD, 2015: 16), especially in those European countries most affected by the sovereign debt crisis.
From analysis of the most significant reforms carried out in the six selected countries, we may conclude that all measures, with the exception of those changes in the qualifying period in Austria and the new accrual rates in Portugal, are aimed at the cost containment of old age expenditure. Moreover, some countries have accelerated the pace of reforms either by reducing the phasing-in periods (BE and PT) or by the post-2008 reinforcing of the requirement conditions for accessing early retirement (AT, BE, and DE). All these political options sought ‘to amplify the sustainability effects for years 2012–2018’ (EC, 2012: 252).
However, despite the EU objective of gender equality, these reforms did tend to drive negative consequences for the majority of women (Earles, Reference Earles2013), and consequently did not contribute to any significant reduction in the gender gap in future pension entitlements. While true that younger cohorts of women may well attain better conditions (through greater labour market participation, longer careers, and higher wages) than those of their older cohorts, it also remains true that labour markets have become more deregulated since 2008, and especially in those countries hardest hit by financial and economic crisis (Arza, Reference Arza2015). Based on data for the third semester of 2016, the EC (2017: 11–12) presents very important conclusions: i) ‘work experience has been shifting in directions consistent with the spread of the so-called ‘gig economy’ – that is, greater polarisation, development of non-standard forms of work, and more short-term employment’, more common among female workers; ii) women continue to do the ‘lion's share of household and care’ (per week in unpaid work: twenty-two hours for women and ten hours for men). Among our selected counties, only two (FR and BE) rank above the EU28 average. The same report concludes (p.53) that ‘at this rate of change [gaps in pay, employment and working hours] it will take more than a century to close the overall gender gap in earnings’.
Another means of equalising the pension rights of women encapsulates addressing the gender differences prior to retirement (Bonnet and Geraci, Reference Bonnet and Geraci2009; EC, 2012), in particular through ensuring compliance with the principle of equal pay for equal work and, by degenderising public policies (Saxonberg, Reference Saxonberg2013), seeking to bring about a better reconciliation (for women and for men) between work and family life. However, in 2014, the division of unpaid working hours remained much more disadvantageous for women with values of seventeen hours (AT) and fourteen hours (ES, PT) higher than the men (EC, 2017).
Despite all the EU legislation and recommendations on greater gender equality, not only have national pension reforms been driven primarily by the goal of financial sustainability but also few efforts have been taken to foster greater gender equality before retirement.
Acknowledgments
This work was supported by the Portuguese national funding agency for science, research and technology (FCT). I would also like to thank Liam Foster and the three anonymous referees for their valuable comments and suggestions.
