>Social Security – Progressivity vs. Generosity

>Returning to the mission statement of Infosnack Headquarters (to find and present interesting pieces of information I find…), I give you an interesting comparison of various old-age pension systems in industrialized countries around the world.

There’s a strong inverse correlation between how progressive the system is (that is, how much more it distributes income from the rich to the poor), and how generous the benefits are (what percentage of your working-age wages are paid back in benefits).

That is, the larger systems tend to pay back based on your wages, whereas the smaller systems tend to have lower, flat payments.

I think the effect is that the more a system tends to reward you for greater effort, the more political support it has and therefore provides higher levels of benefits.

The US system is about in the middle of the pack when it comes to both median benefits (about 45% of working-age wages) and progressivity (an index of 50).

Hat tip to “Notes on Social Security Reform” by Andrew Biggs.

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About perkinsms

I'm an engineer and father interested in transit, parking and economics.
This entry was posted in budget, economics, entitlements, fiscal, government, international, politics, social security, tax. Bookmark the permalink.

2 Responses to >Social Security – Progressivity vs. Generosity

  1. Mark says:

    >This cited blog claims:”You can see visually, and a quick regression confirms, that the two are highly correlated”What kind of tripped out statistics makes a N = 17r^2 = 0.5085relationship count as “highly correlated”?

  2. Michael says:

    >In the social sciences, that counts as a pretty high correlation. We don’t get to run the experiment on as many countries as we want, and explaining 50% of the variability is a pretty good fit.

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