The Broken Generational Contract in Europe: Generous transfers to the elderly population, low investments in children

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Published: Jun 29, 2018
DOI: https://doi.org/10.24357/igjr.4.1.711
Keywords:
Generational Contract Intergenerational Transfers National Transfer Accounts Intergenerational Indicators

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Bernhard Hammer
Vienna Institute of Demography
Tanja Istenič
University of Ljubljana
Lili Vargha
Hungarian Demographic Research Institute; University of Pécs

Abstract

Based on European National Transfer Accounts data from 2010, this paper quantifies and evaluates the balance of intergenerational transfer flows in 16 EU countries, including transfers in the form of unpaid household work. On average, the value of net transfers received by a child amounts to sixteen times the labour income of a full-time worker, and the net transfers received by an elderly person to six times the labour income of a full-time worker. Intergenerational transfers can be regarded as the reciprocal exchange between two generations: the size of the transfers to the child generation determines their potential to generate income and finance public transfers to the elderly population once they enter employment. We develop and calculate an indicator to analyse if there is a balance between transfers to children and transfers expected by the elderly population. The results indicate that in most of the analysed countries the human capital investments in children are far too low to finance the generous transfers to the elderly population in the future.

Article Details

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Vol. 4 No. 1 (2018): Measuring Intergenerational Justice for Public Policy (II)
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Articles

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Author Biographies

Bernhard Hammer, Vienna Institute of Demography

Bernhard Hammer has been a researcher at the Vienna Institute of Demography since 2015. During his doctoral studies (2010-14) at the Technical University in Vienna he worked on National Transfer Accounts, an accounting system which measures the relationship between the age of individuals and their economic activities. His research interests focus on measuring, analysing and understanding the generational aspects of the economy, including the generational patterns of economic activity and intergenerational redistribution.

Tanja Istenič, University of Ljubljana

Tanja Istenič works as a teaching assistant at the Academic Unit for Mathematics, Statistics and Operations Research at the Faculty of Economics, University of Ljubljana. She has a PhD in Economics at the Faculty of Economics, University of Ljubljana. Her main research interests are in socio-economic effects of population ageing, intergenerational transfers, gender issues and welfare regimes.

Lili Vargha, Hungarian Demographic Research Institute; University of Pécs

Lili Vargha is a junior researcher at the Hungarian Demographic Research Institute and a PhD candidate in Demography at the Doctoral School of Demography and Sociology (Pécs, Hungary). Her main research interests are in population ageing, intergenerational transfers, human capital investments and time use.