The Poverty & Inequality Effects of Pensions Dr Michel Collins, - - PowerPoint PPT Presentation

The Poverty & Inequality Effects of Pensions

Dr Micheál Collins, UCD ml.collins@ucd.ie NERI Labour Market Conference, September 2020

Outline

• 1. Research Question
• 2. Why?
• 3. Data and Methods
• 4. Initial Results
• 5. Next Steps…

2

• 1. Research Question

 A core objective of pensions is poverty avoidance  A core objective of redistribution is poverty avoidance  Less direct focus on inequality effects

 implicit in poverty aims…  Q:

 How effective are Ireland’s existing pension policy

tools at reducing poverty and inequality?

3

• 1. Research Question

 A core objective of pensions is poverty avoidance  A core objective of redistribution is poverty avoidance  Less direct focus on inequality effects

 implicit in poverty aims…  Q:

 How effective are Ireland’s existing pension policy

tools at reducing poverty and inequality?

4

• 2. Why?

 An interest in the inequality effects of taxation measures

 interesting UK work from NSO…

 Broadened to other wing of redistribution:

 welfare effects  within this state pensions  expand to include private pensions…

 A pensions detour…

5

• 3. Data and Methods

 For this initial consideration:

 CSO SILC 2017  Microdata from the ISSDA at UCD  5,029 households and 12,612 individuals  nationally representative, detailed income data, detailed socio-

economic characteristics…

 linked to DEASP and Revenue sources to verify much of the income

information

 Collins and Hughes (earlier years) showed robustness for pensions

analysis

6

 Pensions tools available to be examined:

Work related pensions

 Private pensions (occupational and personal)  State pensions occupational

Social welfare pensions

 State pension social welfare

 OAP  survivors pension

7

 Inequality Decomposition

 Gini coefficient  from 0 to 100  isolate stand-alone impact of each policy measure on the Gini  Formally: Reynolds-Smolensky index

 Impact = Gini with – Gini without  e.g. if Gini is 50 but increases to 55 if you remove the effect of

redistribution by measure X, then the stand-alone effect of policy measure X is that it decreases the Gini by 5%

8

 Poverty Decomposition

 Similar approach, looking with and without pension tool

 Using:

Poverty risk = % of population below 60% median income

poverty line (equivalised)

Poverty gap = average distance below the poverty line Poverty count = number of people in poverty

9

• 4. Initial Results

 Initial…  Baseline positions:

 results from SILC 2017 published report  results with no pensions

 The simulations to identify effects

10

Table 1: The Poverty and Inequality Effect of Pensions, 2017 (ceteris paribus)

Poverty Gini Poverty Count Mean Poverty Gap € per week

Baseline 2017 SILC 15.7 31.5 755,592 56.35 Baseline no pensions 28.8 40.0 1,384,955 125.11

Table 1: The Poverty and Inequality Effect of Pensions, 2017 (ceteris paribus)

Poverty Gini Poverty Count Mean Poverty Gap € per week

Baseline 2017 SILC 15.7 31.5 755,592 56.35 Baseline no pensions 28.8 40.0 1,384,955 125.11

Simulations – results are changes to the no pensions baseline

Pensions overall

• 13.1
• 8.5
• 629,363
• 68.76

Table 1: The Poverty and Inequality Effect of Pensions, 2017 (ceteris paribus)

Poverty Gini Poverty Count Mean Poverty Gap € per week

Baseline 2017 SILC 15.7 31.5 755,592 56.35 Baseline no pensions 28.8 40.0 1,384,955 125.11

Simulations – results are changes to the no pensions baseline

Pensions overall

• 13.1
• 8.5
• 629,363
• 68.76

Work related pensions

• 3.5
• 1.7
• 164,437
• 15.48

Table 1: The Poverty and Inequality Effect of Pensions, 2017 (ceteris paribus)

Poverty Gini Poverty Count Mean Poverty Gap € per week

Baseline 2017 SILC 15.7 31.5 755,592 56.35 Baseline no pensions 28.8 40.0 1,384,955 125.11

Simulations – results are changes to the no pensions baseline

Pensions overall

• 13.1
• 8.5
• 629,363
• 68.76

Work related pensions

• 3.5
• 1.7
• 164,437
• 15.48
• ccupational state pensions
• 3.1
• 1.6
• 146,419
• 14.73

private pensions

• 0.3
• 0.1
• 12,028
• 0.76

Table 1: The Poverty and Inequality Effect of Pensions, 2017 (ceteris paribus)

Poverty Gini Poverty Count Mean Poverty Gap € per week

Baseline 2017 SILC 15.7 31.5 755,592 56.35 Baseline no pensions 28.8 40.0 1,384,955 125.11

Simulations – results are changes to the no pensions baseline

Pensions overall

• 13.1
• 8.5
• 629,363
• 68.76

Work related pensions

• 3.5
• 1.7
• 164,437
• 15.48
• ccupational state pensions
• 3.1
• 1.6
• 146,419
• 14.73

private pensions

• 0.3
• 0.1
• 12,028
• 0.76

Social Welfare pensions

• 9.1
• 5.0
• 435,255
• 43.44

Table 1: The Poverty and Inequality Effect of Pensions, 2017 (ceteris paribus)

Poverty Gini Poverty Count Mean Poverty Gap € per week

Baseline 2017 SILC 15.7 31.5 755,592 56.35 Baseline no pensions 28.8 40.0 1,384,955 125.11

Simulations – results are changes to the no pensions baseline

Pensions overall

• 13.1
• 8.5
• 629,363
• 68.76

Work related pensions

• 3.5
• 1.7
• 164,437
• 15.48
• ccupational state pensions
• 3.1
• 1.6
• 146,419
• 14.73

private pensions

• 0.3
• 0.1
• 12,028
• 0.76

Social Welfare pensions

• 9.1
• 5.0
• 435,255
• 43.44
• ld age pensions (cash)
• 8.8
• 4.8
• 420,648
• 42.11

survivors benefit (cash)

• 0.3
• 0.2
• 14,607
• 1.33

• 5. Next Steps

 Suggestions?  Plan for:

 multiple years of SILC (to establish the average effect, although

will do detailed analysis on just one year)

 will add 2018 data (new!)  split poverty indicators to examine above and below 65yrs / 70yrs  gender differences

 A later in 2020 project…

17

The Poverty & Inequality Effects of Pensions

Dr Micheál Collins, UCD ml.collins@ucd.ie NERI Labour Market Conference, September 2020