The Income of the Swedish Baby Boomers

74 Pages Posted: 21 Oct 2006

See all articles by Lennart Flood

Lennart Flood

Goeteborg University - School of Business, Economics and Law; IZA Institute of Labor Economics

N. Anders Klevmarken

Department of Economics, Uppsala University; IZA Institute of Labor Economics

Andreea Mitrut

University of Gothenburg

Date Written: October 2006

Abstract

This paper studies the income of Swedish households belonging to the baby boom generation, i.e., those born in the 1940-50. An international comparison as well as an historical presentation of income patterns is given. However, the main purpose is to generate the future income of the baby boom generation as they get older. A major result is that the income standard of the young-old will become much higher than that of the very old. If our simulations bear the stamp of realism, they suggest that we will see new and large poverty in Sweden among the very old in the future. The pension system contributes to this result. The "front loaded" design gives with its reduced wage indexation a higher income immediately after retirement but a much lower income at older age. From this perspective it is unfortunate that so much attention is given to the discussion of replacement rates. The replacement rate, although interesting in itself, completely misses the long run effect and just provides a comparison of incomes shortly after with incomes before retirement. If we instead focus on the relative income of older pensioners, the results become quite different. Our results challenge the conception of a sustainable pension system. If the relative income of older pensioner's drops and at the same time expenditures for health and care increase, one might wonder how the old in our society will make both ends meet. If pensions become too small to meet "minimum standards," the requirement of financial sustainability of the pension system results in an increasing financial burden on other parts of the general social protection system.

Keywords: pension system, micro simulation, replacement rate

JEL Classification: H24, H31, H55

Suggested Citation

Flood, Lennart and Klevmarken, N. Anders and Mitrut, Andreea, The Income of the Swedish Baby Boomers (October 2006). IZA Discussion Paper No. 2354, Available at SSRN: https://ssrn.com/abstract=938992

Lennart Flood (Contact Author)

Goeteborg University - School of Business, Economics and Law ( email )

Box 640
SE 405 30 Goeteborg
Sweden
+46 31 773 1331 (Phone)
+46 31 773 1043 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

N. Anders Klevmarken

Department of Economics, Uppsala University ( email )

Box 513
SE-75120 Uppsala
Sweden

HOME PAGE: http://www.nek.uu.se/faculty/klevmark/index.html

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Andreea Mitrut

University of Gothenburg ( email )

Viktoriagatan 30
Göteborg, 405 30
Sweden

HOME PAGE: http://www.hgu.gu.se/item.aspx?id=3081

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
68
Abstract Views
834
rank
395,214
PlumX Metrics