The Great Recession, unemployment and pensions: the case of Spanish regions

Wed 22 November 2017

Mill Lane Lecture Rooms

The Spanish Pension system is a PAYG social security system in which the different cohorts of pensioners are entitled a pension that is supported by the contributions of current working population. Before the Great Recession, the main concern for policy makers had been the threat of the ageing population process. At that time reforms were design to guarantee the sustainability of pension systems. However, after the Great Recession the problem of unemployment has become a major concern. Unemployment situations imply lower amount of contributions and, consequently, lower revenues to face the payment of the existing pensions. Reform proposals, however, do not take into account the existence of another relationship: the relationship between unemployment and pensions. Peinado and Serrano (2017) show that there is a negative relationship between these two variables and, accordingly, future pensioners are likely to be entitled lower pension benefits. Under these circumstances, attention should be paid, not only to the lower revenues implied for the system, but also to the detrimental effects on the welfare level of future cohorts of pensioners that the higher rates of unemployment registered may have if reforms are not implemented. Arestis and Peinado (forthcoming) follow this line of research to quantify the effects on poverty dynamics for retirees. Additionally, the rates of unemployment have an interesting regional dimension that worth being addressed. Pensioners from regions with exceptionally high rates of unemployment are expected to suffer more the detrimental effects of the Great Recession than retirees from the less affected regions. Policy makers should then take into account not only the effect of unemployment on pensions but also the regional dimension of the phenomena to design the different reform proposals.

Patricia Peinado is Assistant Professor at the University of the Basque Country, Visiting Academic at the Department of Land Economy and VCRA at Wolfson College, University of Cambridge. She has made several contributions in journals such as the Journal of Pension Economics and Finance, Feminist Economics, Journal of Panoeconomicus on the effects of social security reforms on the welfare level of retired population. Recently she has concentrated on estimating the relationship between the rate of unemployment and pensions and the effects that, through this relationship, the Great Recession may have on future cohorts of pensioners in Spain. A contribution in this line has been recently published in the International Review of Applied Economics. Currently she is working on the regional dimension of the effects of the Great Recession on Spanish pensioners. Additionally, she is highly concerned with the introduction of innovative techniques to teach Macroeconomics to undergraduates. Granted by the University of the Basque Country to take part in an innovative teaching program she has recently published the teaching material and main results of the Problem Based Learning (PBL) experience to teach Macroeconomics to undergraduates in IKD-baliabideak.

Cost: free