No Pension Generation? Why youth-inclusive pension schemes are key

Banner image: Shutterstock/Alexandros Michailidis

Like Comment

This article is part of a series in which OECD experts and thought leaders — from around the world and all parts of society — address the COVID-19 crisis, discussing and developing solutions now and for the future. Aiming to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge, opinions expressed do not necessarily represent the views of the OECD.

Join the Forum Network for free using your email or social media accounts to share your own stories, ideas and expertise in the comments.


The European Youth Forum is the leading platform of youth organisations in Europe fighting for youth rights.

Let’s be honest: young people are rarely who we, as a society, think about when we talk about pensions. Yet this omission risks bearing serious consequences for the sustainability of our pension models. Demographic changes in Europe are leading to the growth of an ageing population, with the proportion of the population over the age of 65 expanding rapidly as life expectancy increases. Meanwhile, as fertility rates decrease, the working age population is rapidly declining.[1] This means young people are likely to have to pay higher contributions to fund the increasing expenditure on pensioners. All the while, they may find that their own pension entitlements will be much lower due to a smaller working age population contributing to the system.[2]

Not only will there be a smaller labour force propping up our pension systems, but current labour market dynamics also mean that many young workers aren’t contributing to pension schemes at all. In the EU, more than one in every four young people are at risk of poverty and social exclusion.[3] Youth unemployment is more than double the overall unemployment rate.[4] Non-standard forms of work and in-work poverty are on the rise among youth. And transitions from education to employment have become increasingly challenging, as young people seemed to be caught in a cycle of internships and temporary or unpaid work.

More on the Forum Network: A lesson from discussing the COVID-19 job crisis with young policy makers: Listen! by Nicola Brandt and Nadja Nolting, OECD Berlin Centre

This prevalence of precarious work and low wages means many young people are unable to save. They are also often unable or less able to participate in contributory statutory pension systems, or be enrolled in pension schemes until their late 20s to early 30s.[5] In fact, in Europe a whopping 50% of young employees (aged 15 to 24) were working on a temporary contract in 2019, compared to 15% for the total working population.[6] As a result, many of today’s youth risk living in poverty when they reach retirement age.

These challenges are likely to be further exacerbated in the context of the current COVID-19 pandemic. For one, youth employment is more deeply impacted by economic shocks than adult employment.[7] Moreover, it is those industries in which youth are more likely to work that are being hit the hardest. As such, youth unemployment is already rising. In September 2020, it was already at 17.1%, up from 14.9% last year.[8] This figure is expected to continue to grow as the longer-term effects of the pandemic on our economies continue to be felt.

All working experiences—including internships and apprenticeships—should count towards working time for pension entitlements and access to unemployment benefits, to protect young people from the risk of poverty as they get older.

In this context, how can our pension models possibly be sustainable in the long run?

Reforms based on the principle of intergenerational solidarity are key. For that, we need to safeguard the well-being of the older population without overburdening the young. Intergenerational solidarity means ensuring that older people are able to receive an adequate pension, so that they are not forced to remain in the labour market for longer because they cannot make ends meet.[9] We also need to reverse the trend of increasing the statutory retirement age, which can forcibly extend people’s working lives. As more experienced workers stay in their jobs for longer, this may cause a decrease in employment opportunities for young people in the future and risks pitting generations against each other as they compete for income security.

Read the full OECD Policy Response on our COVID-19 HubYouth and COVID-19: Response, recovery and resilience

Intergenerational solidarity also means that pension schemes need to be better adapted to young people’s employment trajectories. All working experiencesincluding internships and apprenticeshipsshould count towards working time for pension entitlements and access to unemployment benefits, to protect young people from the risk of poverty as they get older.

Raising awareness is also fundamental. Too often we see that young people are not made aware of what different employment statuses mean for their access to benefits and contributory statutory pension schemes. Creating and disseminating free, youth-friendly and accessible information for all young Europeans on this topic is a critical step towards empowering them to make informed choices about their futures.

What is all too clear is that governments can no longer afford an approach that focuses solely on current pensioners and leaves young people out. Together, we need to be more forward-thinking and take into consideration the needs of younger generations so that they too can fully enjoy their pension rights. Should they continue to omit us from this conversation, governments risk condemning us to become the No Pension Generation.

References

[1] Eurostat, (2017). People in the EU - population projections.
[2] European Commission, (2017). Access to social protection for people working on non-standard contracts and as self-employed in Europe: a study of national policies.
[3] Eurostat (2019) At risk of poverty or social exclusion rate
[4] Eurostat (2020) September 2020 Unemployment rate
[5] UNDESA, (2018). Promoting Inclusion through Social Protection: Report on the World Social Situation 2018.
[6] Eurostat (2019) Youth Employment Data.
[7] This is based on ILO data from 2008-2019.
[8] By contrast, the adult unemployment rate in September was at 7.5%. Eurostat, (2020. Unemployment Statistics.
[9] CEPS, (2018). The Internet and Jobs: opportunities and ambiguous trends.

Related topics

Tackling COVID-19 Future of Work Intergenerational Solidarity

Whether you agree, disagree or have another point of view, join the Forum Network for free using your email or social media accounts and tell us what's happening where you are. Your comments are what make the network the unique space it is, connecting citizens, experts and policy makers in open and respectful debate.

Nikita Sanaullah

Senior Policy Officer on Social and Economic Inclusion, European Youth Forum

Nikita is a Senior Policy Officer at European Youth Forum. She specialises in access to social rights and the future of work and has authored a report on the topic. Nikita has been working on inclusion and human rights for many years, including at Making the Leap, where she assisted in the running of employability programmes for youth from marginalised and vulnerable backgrounds in London. Prior to joining the Youth Forum in January 2018, she worked on EU advocacy for Norwegian Refugee Council and Save the Children. Nikita is a graduate of Development Studies from the University of Sussex.

No comments yet.