Labour Market Flexibility and Pension Reforms Work and Welfare in Europe Series Editors: Denis Bouget, University of Nantes, France, Jochen Clasen, University of Edinburgh, UK, Ana M. Guillén, University of Oviedo, Spain, Jane Lewis, London School of Economics and Political Science, UK and Bruno Palier, Sciences-Po Paris, France Titles include: Sigrid Betzelt and Silke Bothfeld ACTIVATION AND LABOUR MARKET REFORMS IN EUROPE Challenges to Social Citizenship Sonja Drobnič and Ana M. Guillén WORK–LIFE BALANCE IN EUROPE The Role of Job Quality Colette Fagan, Maria González Menéndez and Silvia Gómez Ansón WOMEN ON CORPORATE BOARDS AND IN ELITE MANAGEMENT European Trends and Policy Neil Fraser, Rodolfo Gutiérrez and Ramón Peña-Cassas WORKING POVERTY IN EUROPE Patricia Frericks and Robert Maier THE LIFE COURSE AND THE ECONOMIC SUSTAINABILITY OF THE WELFARE STATE Paolo Graziano, Sophie Jacquot and Bruno Palier THE EU AND THE DOMESTIC POLITICS OF WELFARE STATE REFORMS Europa, Europae Karl Hinrichs and Matteo Jessoula LABOUR MARKET FLEXIBILITY AND PENSION REFORMS Flexible Today, Secure Tomorrow? Trudie Knijn WORK, FAMILY AND TRANSITIONS TO ADULTHOOD IN EUROPE Birgit Pfau-Effinger and Tine Rostgaard CARE, WORK AND WELFARE IN EUROPE Rik van Berkel, Willibrord de Graaf and Tomáš Sirovátka THE GOVERNANCE OF ACTIVE WELFARE STATES IN EUROPE Reconciling Work and Welfare in Europe Series Standing Order: HBK: 9780230280274 PBK: 9780230280267 (outside North America only) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and the ISBN quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England Labour Market Flexibility and Pension Reforms Flexible Today, Secure Tomorrow? Edited by Karl Hinrichs University of Bremen, Germany and Matteo Jessoula University of Milan, Italy Selection and editorial matter © Karl Hinrichs and Matteo Jessoula 2012 Individual chapters © their respective authors 2012 Softcover reprint of the hardcover 1st edition 2012 978-0-230-29006-8 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2012 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-349-33124-6 ISBN 978-0-230-30760-5 (eBook) DOI 10.1057/9780230307605 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. 10 9 8 7 6 5 4 3 2 1 21 20 19 18 17 16 15 14 13 12 This volume is dedicated to Elena, Fil, Leo, Riccardo, Giulia and the young people of Europe, with the hope they will be secure and happy pensioners tomorrow. Contents List of Tables ix List of Figures x Series Preface xii Preface and Acknowledgements xiv Funding Acknowledgement xv Notes on Contributors xvi 1 Labour Market Flexibility and Pension Reforms: What Prospects for Security in Old Age? 1 Karl Hinrichs and Matteo Jessoula Part I Traditional Single-Pillar Countries 2 Germany: A Flexible Labour Market Plus Pension Reforms Means Poverty in Old Age 29 Karl Hinrichs 3 A Risky Combination in Italy: ‘Selective Flexibility’ and Defined Contributions Pensions 62 Matteo Jessoula 4 Poland: Are Flexible Labour Markets Ready for Individualized Pensions? 93 Igor Guardiancich Part II Traditional Multi-Pillar Countries 5 Lessons from the UK: When Multi-Pillar Pension Systems Meet Flexible Labour Markets 125 David Natali 6 Switzerland: Building a Multi-Pillar Pension System for a Flexible Labour Market 155 Silja Häusermann and Hanna Schwander vii viii Contents 7 The Danish Flexicurity Model and Old Age Protection 182 Niels Ploug 8 The Netherlands: Reconciling Labour Market Flexicurity with Security in Old Age 203 Karen M. Anderson Part III Conclusion 9 Flexible Today, Secure Tomorrow? 233 Matteo Jessoula and Karl Hinrichs Index 251 Tables 1.1 Incidence of part-time employment, 1983–2009 11 1.2 Incidence of fixed-term employment, 1983–2009 11 1.3 Evolution of theoretical gross replacement rate of statutory pensions, 2007–2060 16 2.1 A typical employment and unemployment in Germany, selected years 1991–2009 36 2.2 I ncidence of particular episodes during the employment career for different birth cohorts in West and East Germany 46 2.3 T otal number of years particular episodes lasted during employment career for different birth cohorts in West and East Germany 47 3.1 Main labour market indicators, Italy, 1970–1990 67 3.2 I ncidence of fixed-term workers as share of total dependent employment by age, 2005 and 2007 71 3.3 Main labour market indicators, Italy, 1992–2009 72 4.1 Pension crises characteristics, 1989–2002 96 4.2 The Polish old-age pension system in 2009 99 4.3 Social security contributions in 2008 100 4.4 Beneficiaries and insured in KRUS, 1991–2009 104 4.5 Structural indicators of the Polish labour market 107 4.6 Fixed-term and permanent dependent employment in Poland 110 4.7 Self-employment in Poland, 2000–2007 111 4.8 Gross replacement rates for SER 114 5.1 Structural indicators of the UK labour market 129 5.2 Fixed-term and part-time employment, self-employment in UK 131 5.3 Evolution of British pensions (1940s–1990s), major reforms 133 5.4 New Labour’s major pension reforms, 1999–2008 140 6.1 Structure of the Swiss pension system, mid-1980s 157 6.2 Unemployment rates in Switzerland, 1991–2009 164 6.3 Reforms in the Swiss multi-pillar pension system since 1985 172 8.1 Pension benefits as per cent of GDP 209 8.2 The role of the AOW offset 221 9.1 Basic retirement benefits as percentage of average earnings 244 9.2 Main issues of concern of Europeans, 2006 248 ix