Double Coverage for the Pension Scheme – Pensions Require Both Children and Wages

Giday, András and Szegő, Szilvia (2019) Double Coverage for the Pension Scheme – Pensions Require Both Children and Wages. POLGÁRI SZEMLE: GAZDASÁGI ÉS TÁRSADALMI FOLYÓIRAT, 15 (Spec). pp. 264-288. ISSN 1786-6553

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Abstract

The authors have elaborated a model to correct the false demographic message of the current pension scheme, as the latter suggests that a stable pension scheme can be maintained without having children. In this model, parents are entitled to a pension supplement for their jobholder children. In order to finance this scheme, an appropriated child-to-parent pension fund is proposed: a specified part of jobholder children’s tax payments are contributed to it, and when their parents reach the specified age, their pensions are supplemented from this fund. Following the income and outflow of payments by the various generations, the proposed pension fund would thus create a kind of a generational finance within public finances. With the adoption of the child-to-parent pension element, the generational approach becomes part of both family budgets and public finances. The expression “child-to-parent” lends a symbolic power to the particular amounts, as it suggests that children represent a coverage value. According to our calculations, already the partial enforcement of the generational budget approach we propose will result in a 3 to 4 percentage point economic growth in the next few decades.

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