Osman Şenkul
Dr Manuel Sá Valente from the University of Minho in Portugal, under the supervision of Axel Gosseries, Bruno Verbeek, Walter Lesch, Serena Olsaretti, Anca Gheaus, and Vincent Vandenberghe, emphasised in his PhD thesis entitled “Equal Ageing – Distributive Justice in Pension Benefits,‘ emphasises that ’despite becoming increasingly accessible to all, pension benefits continue to be distributed unequally among the rich and poor, young and old, men and women, and likely across different generations.”
Explaining that he began writing his thesis with the aim of developing a new liberal egalitarian approach to fairness in pension payments, Dr Manuel Sá Valente emphasises that he primarily advocates for pension payments to be seen not as ‘leisure time or mere wealth,’ but rather as ‘the distribution of free time,’ adding, “I have shown that we need to include free time in the list of primary goods. This explains why pensions may be necessary for liberal egalitarian societies, especially for the poor who have worked the longest and contributed the most,” he says, adding:
In my thesis, I advocated for “libertirement” (free retirement) as a matter of justice among long-lived groups, a proposal aimed at increasing the freedom to enjoy leisure time throughout life. Specifically, I proposed adding reverse retirement and “sabbaticals” (rest-breaks) in addition to old-age retirement. I justified the role of longevity in age group justice and showed that policies such as universal basic income (UBI) and income tax could offer alternative paths to libertirement. Finally, I discussed gender and intergenerational inequalities in pensions, which required us to further refine our calculations.”
Therefore, the main aim of this thesis is to defend the concept of ‘libertirement’, which proposes increasing the freedom to enjoy leisure time throughout life through retirement policies. To this end, I first demonstrate that we should obtain leisure time (rather than wealth) from retirement policies, and then argue that providing access to leisure time in the early stages of life will increase our freedom to enjoy leisure time throughout life. Therefore, I propose that communities reorganise their members’ economic life cycles by allowing them to retire temporarily while young. While pension schemes are the most likely candidates to support my proposal, they do not encompass all possible retirement policies. If designed appropriately, other schemes such as unconditional basic income and income tax could also offer alternative paths to libertirement.
The trend towards making retirement widely accessible to all citizens is relatively recent. For the most part, those with sufficient resources could always choose when to stop working (temporarily or permanently) to earn an income. On the other hand, the vast majority had to work for as long as possible. Sometimes by helping their families as best they could, sometimes by taking on irregular and low-paid jobs due to their declining earning capacity. In Ancient Greece and Rome, soldiers who could retire long before the system became widespread were the only exception. However, much later, in the 18th century, two leading thinkers proposed an idea that formed the seeds of today’s pension system. In 1795, the renowned French thinker Nicolas de Condorcet put forward the following idea regarding social insurance based on contribution:
“Here lies a necessary cause of the inequality, dependence, and even misery that constantly threaten the most populous and active class of our society. We shall show that this can be largely eliminated by guaranteeing the elderly a livelihood, partly from their own savings and partly from the savings of others who make the same expenditure but die before receiving their reward (…).”
Just one year later, in 1796, the American thinker Thomas Paine published a pamphlet entitled Agrarian Justice, in which he advocated a property tax to finance universal old-age and disability pensions and a fixed sum to be paid to all citizens upon reaching adulthood. These ideas inspired the voluntary mutual aid societies that later emerged in many European cities and led to labour movements demanding state-organised social insurance (similar to Condorcet’s proposal).
Employers increasingly recognised these rights, sometimes as a gesture of generosity, sometimes as a convenient means of dismissing those unfit for work. In the 19th century, pensions received the most attention under the German Chancellor Otto von Bismarck. Bismarck’s motivation was not concern for workers, but rather a strategy to reduce the risk of revolution in the face of Marxism’s growing popularity. In a speech to the Reichstag in 1889, Bismarck stated: ‘I shall regard it as a great advantage that 700,000 people receiving small pensions receive an annual salary from the state, especially if these people belong to classes that have little to lose in the event of an uprising and mistakenly believe they have much to gain from it.’
Dr Manuel Sá Valente emphasises that today’s pension plans consist of three fundamental elements, each serving a different purpose. He states, ‘Furthermore, there are two characteristics common to all such plans. One is that employees who rely on the state for their retirement can only retire when they are elderly, after having worked for a long time (for example, a 40-year career).’ He explains:
“The other is that people generally do not build up a ‘savings’ or ‘fund’ for their own retirement. Instead, they typically pay taxes that finance the pensions of current retirees and hope that the same will be done for them when they grow old. This is known as pay-as-you-go (PAYG) financing. Old-age requirements and pay-as-you-go financing are paradigmatic features of nearly all retirement plans and are incorporated in different ways into each of the three pillars I will now explain.
The first tier is redistributive and consists of a “basic pension” aimed at preventing poverty in old age. This pillar generally “does not require contributions”: it lifts older people out of poverty regardless of whether they contributed to a pension scheme and how much they contributed. This pillar is explicitly linked to old age and is mostly financed through PAYG (though this is not mandatory).
The second pillar plays an “insurance role” because it guarantees a standard of living in retirement that is close to the one we had while working (thanks to adequate replacement rates). These replacement rates tend to increase as the socio-economic level rises, because the proportion of income replaced by the pension scheme decreases. This pillar is usually mandatory and contributory, meaning that the benefits received depend on contributions (which are also earnings-related). However, being contributory does not mean that it is financed by the workers themselves rather than through PAYG. In fact, it can be financed in both ways.
Typically, this pillar is also linked to old age, as only employees who have paid contributions for a long period can benefit from this type of assistance. Finally, the third voluntary pillar allows individuals to invest their savings beyond the mandatory requirements. It has a flexible structure and generally provides additional advantages to high-income groups. It is financed by investment returns rather than PAYG. Although to a lesser extent than other pillars, it is generally linked to old age (because it depends on the investment each individual chooses for themselves).
Following this brief introduction to retirement pensions, I will outline the five main issues that the theory of fairness in retirement pensions must address. Several articles in this thesis attempt to address many, if not all, of these issues.
Freedom
The first issue concerns the relationship between retirement and personal freedom. By personal freedom, I mean the ability to do what one wants to do. Employees are obliged to contribute to the pension system and do not have the freedom to choose when they will receive their pension. In most cases, receiving a pension means leaving the labour market (often known as compulsory retirement). Furthermore, pensioners have very little discretion over how they wish to receive their pensions, as they are usually obliged to receive them in regular instalments (known as annuities). Therefore, an important issue for distributive justice in pensions is how much freedom people should have over when and how they retire, and how much this decision should affect their freedom to work. As the name “Libertirement” suggests, the approach I propose for fairness in pension payments is based on a strong assumption of greater individual freedom, granting much more discretion over how we allocate our free time throughout our lives.
Equality
Equality is an issue that may require restrictions on pension freedom, particularly for more advantaged groups. As noted at the outset, the distribution of retirement pensions is unequal between rich and poor, men and women, and people living for different lengths of time. It is important to ask whether retirement pensions should reduce, maintain, or even increase inequalities between people (as is the case with gender, for example). Of course, the answer to this question cannot determine whether such inequalities belong in a fair society. However, even if that were the case, it raises an additional question about how pension schemes should address these inequalities. Within this topic, I will address three main inequalities: socio-economic class, gender, and longevity.
Age
Since the beginning, most citizens have associated retirement with old age. The long-standing association of retirement with old age may be the most obvious and accepted example of age discrimination to date. Today, as exemplified in the latest UN report on age discrimination, age is being added to other more traditional grounds for discrimination due to increasing interest. It is questionable whether age discrimination has the same moral status as other traditional forms of discrimination, such as ethnic origin or gender. Unlike ethnic origin and gender, the fact that we all grow old seems to make age discrimination compatible with respect for equality. This is because, although we may be subject to unequal treatment at different stages of life, if we all go through the same stages of life, no one is worse off than others throughout their life. For example, young people cannot complain about old-age pensions if they will benefit from them later. However, if the fact that we all grow old is relevant to the acceptability of age discrimination, then the fact that some of us live longer than others should also be relevant. Unequal life expectancy calls into question the idea that old-age pensions are a benefit for all citizens, as they exclude many of us who die before reaching old age.
Generations
When we consider “generations” as birth cohorts – that is, people born around the same time – we realise that pensions also involve significant intergenerational transfers. This issue prompts us to ask not only the more traditional intergenerational question of what we owe to future generations, but also a new question: what does each generation owe to the previous one? More specifically, it concerns the pensions we children owe to our parents’ generation. Such questions become particularly urgent as concerns grow that today’s younger generations will have to pay a higher proportion of their income to their governments for lower service and welfare entitlements than their parents’ generation. If this is true, is it unfair?
Substitutability
Finally, there is the question of whether other financial systems can perform the functions of the pension system. For example, an unconditional basic income set at a level sufficient to lift everyone out of poverty could replace the pension function of combating old-age poverty. But could it replace the entire system? If so, societies must fully coordinate their pension systems with any other financial systems they wish to implement.
It is sometimes said that lifetime equality is indifferent to how goods are distributed across age groups. For example, Juliana Bidadanure, in her recent book on intergenerational justice, argues that this is not a reason to object to intergenerational inequalities. For example, let us consider two situations.
Early Heaven. The older members of a society are in a difficult situation, while the younger members are in a much better situation, just as the older members were when they were young. As the younger members age, they too will find themselves in a difficult situation.
Late Paradise. The younger members of a society are in a difficult situation, while the older members are in a much better position, although they too were in a difficult situation when they were young. As the younger members grow older, they will be in a much better position.
At the end of his long and comprehensive thesis, Dr Manuel Sá Valente seems to have predicted that Social Security Institution President Raci Kaya would explain the reason for the low pensions in Turkey with the words, ‘We used to die at 50-55, now the average life expectancy is 78 years,’ which drew quite a harsh reaction. He says:
“When political equality is based on a lifelong perspective rather than a specific time frame, it is consistent with proportionality in different elections. To demonstrate this, I focused on the specific benefits of the right to vote. However, I am aware that equalising the right to vote may not be sufficient for political equality. For example, if money begets political power, wealthier individuals, despite having equal voting rights, receive more political attention due to their economic status.
“These issues require going beyond the distribution of specific rights such as votes and instead addressing a distribution of power that takes everything into account. Furthermore, I have not taken a position on whether it makes more sense to implement lifelong political equality in parliamentary elections or referendums. The debate assumes that storable votes make the most sense in regularly held decisions such as parliamentary elections or referendums.
“Although the examples I have given mostly refer to votes on specific issues, this argument also applies to parliamentary systems where we vote on multiple policies simultaneously. Accumulative voting is possible regardless of how direct the democratic system in question is, but this does not mean it is independent of the context in which it is applied. Providing a complete answer to such questions is beyond the scope of this article.
“The aim of the article is to discuss the consequences that the temporal scope of political equality has on the tension between political equality and proportionality. Introducing a lifetime perspective in the political sphere is valuable because, as Ronald Dworkin once noted, we may need to deviate from equality at certain points in order to be sensitive to people’s projects, plans, and goals in life. Lifelong political equality can revitalise our democracies by offering the possibility of proportionality without inequality.”