Different countries on a similar path: comparing pension politics in Scandinavia and Australia

Abstract

Scandinavia and Australia share an early emphasis on tax-financed minimum pension schemes rather than Bismarckian style contribution-based earnings related schemes. I argue that Scandinavia and Australia also share a similar sequence of later pension-political developments, despite differences in the timing of various initiatives, as well as in the institutional designs of these initiatives. First, means-testing was softened and ultimately abolished in the minimum protection systems of both Scandinavia and Australia. Second, compulsory earnings-related pensions were introduced. The introduction of compulsory earnings-related pension schemes coincides with a period of increased income-testing in the minimum schemes, resulting in the emergence of a dual pension structure in both Scandinavia and Australia. The impact of federalism, party structure and the use of regulatory policies (e.g. compulsory arbitration) as an alternative to tax-and-spend policies in bringing about the observed convergence towards dual systems are discussed