Family, social security and social insurance: General remarks and the present discussion in Germany as a case study

16

now member of a PAYGO scheme may have children who later contribute to a funded
scheme.

This already points at a difficulty if the argument for improving the conditions for families is
based on effects for PAYGO schemes only. And it would be a misunderstanding of reality to
assume that funded schemes are not depending on future gainfully employed people. It
cannot be assumed that the development of capital markets is independent of the
development of employment and the labour market as well as of the age structure of the
population and thereby the number of persons saving and accumulating financial capital and
those persons who reduce their capital stock (financial assets) to finance their living in old
age.

Coming back to the question how to quantify the externalities as a base for calculating how
much, for example, the contribution burden of contributors with children should be reduced
compared to those contributors without children, one needs some information regarding the
effect of the activities of the family on human capital development of their children. This is
not only depending on parents’ activities. There are other influencing factors like schooling,
training and retraining in firms, own investment by children themselves and how they use their
ability to earn money as a base for contributing to social insurance schemes or paying taxes.

Taking these aspects into account, some conclusions can be drawn regarding the ways and
means for improving the income position of families for internalising externalities (and not for
compensating economic costs of raising children):

- These measures cannot be targeted only at parents contributing to PAYGO schemes
but also have to include members of those mandatory funded schemes that are
elements of the first tier of pension arrangements.

- If there are externalities for several social insurance schemes as well as for the society
in general, then implementation of measures into each of the schemes - despite the
fact of great difficulties to quantify externalities - would undermine transparency of
family policy and would increase transaction costs. The conclusion is that these
measures should not be financed from specific levies for specific schemes like
earnings-based social insurance contributions of different branches of social insurance
but in principle from tax revenue. In order to increase transparency and to improve the
possibility of a rational family policy, an integration of various measures within one
organisation might be useful. This will be discussed below.

<<   13   14   15   16   17   18   19   >>

More intriguing information