Age Reallocations through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook Age Reallocation through Pub...

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Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Age Reallocation through Public Transfers in Austria Bernhard Hammer

May 12, 2011

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Outline Motivation and Overview The Role of Public Transfers in Age-Reallocation Composition of Public Transfer In- and Outflows Transfers-Categories in Detail Education Health Family and Children Unemployment Pensions Projections Evaluating Sustainability Evaluating Fairness Conclusions and Outlook Questions

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

The Role of Public Transfers in Age-Reallocation Composition of Public Transfer In- and Outflows

Age-Reallocation: Overview

Figure: Age Reallocations 2005

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

The Role of Public Transfers in Age-Reallocation Composition of Public Transfer In- and Outflows

Public Transfer Inflows 2005 Table: Public Transfer Inflows 2005 Category Total Public Transfers Transfers In Kind Education Health Other Transfers in Cash Education Health Old Age Survivor Disability and Sickness Family and Children Unemployment Social Protection, Other Other, Other Current Transfers

Amount in Mill. Euros 93,943.33 45,135.60 12,389.80 12,727.70 20,018.10 48,807.73 212.31 662.44 25,388.94 5,067.65 4,530.68 4,654.61 3,158.95 289.39 4,842.77

Percent of Total 100.0 48.0 13.2 13.5 21.3 52.0 0.2 0.7 27.0 5.4 4.8 5.0 3.4 0.3 5.2

Percent of GDP 38.6 18.5 5.1 5.2 8.2 20.0 0.1 0.3 10.4 2.1 1.9 1.9 1.3 0.1 2.0

I rules to classify transfers into NTA-categories? (ESSPROS) I age-distribution of in-kind transfers in the category ”Social Protection”? Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

The Role of Public Transfers in Age-Reallocation Composition of Public Transfer In- and Outflows

Public Transfer Inflows 1995 - 2005 Table: Comparison 1995 - 2005 Category Total in % of GDP Share YA/YL In-kind Education Health Other Cash Education Health Old Age Survivor Disability and Sickness Unemployment Family and Children Social Protection, Other Other Current Transfers Other

Bernhard Hammer

2005 38.6 0.28 48.0 13.2 13.5 21.3 52.0 0.2 0.7 27.0 5.4 4.8 3.4 5.0 0.3 3.7 1.4

2000 39.0 0.23 49.0 13.7 12.7 22.7 51.0 0.2 0.8 25.6 5.9 5.5 2.6 4.2 0.3 3.1 2.8

1995 41.7 0.20 49.1 13.3 13.3 22.5 50.9 0.2 0.8 23.5 6.1 5.4 3.2 4.3 0.1 4.3 3.0

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

The Role of Public Transfers in Age-Reallocation Composition of Public Transfer In- and Outflows

Public Transfer Outflows - Taxes

Table: Public Transfers: Outflows Outflows Taxes on Income Profits and Capital Gains Taxes on Payroll and Workforce Taxes on Property Taxes on Goods and Services Taxes on International Trade and Transactions Other Taxes Other current Transfers Social Contributions Total Outflows (Earmarked and EU-Taxes)

Bernhard Hammer

Amount in Mill. Euros 9,642 21,514 607 24,220 327 1,593 2,708 39,215 99,827 6,365

Share of Total 9.7 21.6 0.6 24.3 0.3 1.6 2.7 39.3 100.0 6.4

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Education Health Family and Children Unemployment Pensions

Education Public Education is financed out of general taxes

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Education Health Family and Children Unemployment Pensions

Health – Institutions

Table: Public Health Consumption Institution Health Insurance Federal States (Bundesl¨ ander) Communities General Government Pension Insurance

Share 46.4 43.3 5.2 1.7 3.3

Services Outpatient Services, Medicaments Stationary Services Stationary Services Stationary Services Preventive Care, Rehabilitation

Bernhard Hammer

Funding Source Contributions General Taxes General Taxes General Taxes Contributions, General Taxes

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Education Health Family and Children Unemployment Pensions

Health – Age-Distribution

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Education Health Family and Children Unemployment Pensions

Family and Children – Institutions Table: Family and Children - Inflows Institution Family Burdens Equalization Fund Health Insurance Family Allowance (Public) Federal States

Amount 4,043.05 347.92 198.58 65.05

Share of Total 86.9 7.5 4.3 1.4

Benefit Family Allowances, Child Benefits Maternity Allowance Family Allowance, Child Benefits Family and Child Allowances, Means Tested

Table: Family and Children - Outflows Institution Family Burdens Equalization Fund Health Insurance Family Allowance (Public) Federal States

Bernhard Hammer

Funding Payroll Tax (85%), General Taxes (15%) Contributions (Payroll) Imputed Contributions Employer General Taxes

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Education Health Family and Children Unemployment Pensions

Family and Children – Age-Distribution

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Education Health Family and Children Unemployment Pensions

Unemployment Funding: Contributions (92%), General Budget (8%)

I The peak before retirement includes pensions due to unemployment and a

so called ”Vorruhestandsgeld” (paid leave before retirement) Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Education Health Family and Children Unemployment Pensions

Pensions Table: Social Protection: Old Age Transfer-Type Old Age Pension Invalidity Pensions (≥ 60/65) Compensation Allowances Early Retirement Pensions Public Pensions (≥ 60)

Amount 12,239 2,202 353 2,202 6,667

Share in % 48.2 8.7 1.4 8.7 26.3

1,453 273 25,389

5.7 1.1 100.0

Care Benefits Other Total

Institution Pension Insurance

General Government

General Government Miscellaneaous

Funding Contributions (73.7%) General Taxes (26.3%)

General Taxes (28%) Contributions (25% real, 47% imputed) General Taxes General Taxes

Table: Social Protection: Disability and Sickness Transfer-Type Invalidity Pensions (≤ 60/65) Public Pensions (≤ 60) Care Benefits Other Total

Amount 2,959.56 1,179.79 378.78 12.55 4,530.68

Bernhard Hammer

Share in % 65.3 26.0 8.4 0.3 100.0

Institution Pension Insurance General Government General Government, Federal States General Government

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Education Health Family and Children Unemployment Pensions

Pensions

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Education Health Family and Children Unemployment Pensions

Pensions: Old Age

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Education Health Family and Children Unemployment Pensions

Pensions: Survivor

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Education Health Family and Children Unemployment Pensions

Pensions: Disability and Sickness

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Evaluating Sustainability Evaluating Fairness

Population

Figure: Age Reallocations 2005

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Evaluating Sustainability Evaluating Fairness

Projections – Dependency-Ratios

Figure: Projections - Dependency-Ratios

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Evaluating Sustainability Evaluating Fairness

Projections – Pensions

Figure: Projctions Pension In- and Outflow – Ratio

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Evaluating Sustainability Evaluating Fairness

Projections – Transfers

Figure: Projections of the In- Outflow – Ratio

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Evaluating Sustainability Evaluating Fairness

Evaluating Fairness I

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Generational Fairness: The contributions of a cohort should equal its benefits Example: Follow 1945 cohort and estimate contribution and benefits using 2005 age-profiles I I I I

106,000 persons (+Migration) labor market entrance from 1960 onwards retirement around 2005 2025 still 63,000 (60%) alive); 2035 still 27,600 (26%)

I

ratio inflows/outflows = 1.4

I

thats what happened with the first demographic dividend

I

long lasting liabilities: curse of the first demographic dividend

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Questions

Conclusions and Outlook

I

Funding structure of pension system unsustainable (and unfair)

I

Increasing importance of capital income: extending contribution base of the insurance and tax system

I

Careful comparisons of developments over time (data)

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Comparison with other countries

Bernhard Hammer

Age Reallocation through Public Transfers in Austria

Motivation and Overview Transfers-Categories in Detail Projections Conclusions and Outlook

Questions

Reminder

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assignment of transfers to NTA-categories

I

estimation of the age distribution of in-kind transfers

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what shall we include into the category ”Social Protection, Old Age” (TGSOAI)

Bernhard Hammer

Age Reallocation through Public Transfers in Austria