By Christine Corlet Walker, Dario Leoni & Tim Jackson

Ecological economists have increasingly warned that continual reliance on economic growth poses existential threats to environmental sustainability. A post-growth economy would instead prioritise environmental and societal prosperity over economic accumulation. But this transition demands a careful scrutiny of ‘growth dependencies’. One area in which this reliance on growth is potentially profound – particularly in the light of aging populations – is pension systems. In this paper, we therefore begin to address this research need by addressing the viability of earnings-related ‘pay-as-you-go’ (PAYG) systems in a post-growth economy.First, we provide some general principles that a post-growth pension system might follow and the potential challenges that it would face. Then, we adopt a case study approach, looking at Finland and Italy as our countries of interest, to gather more practical insights around how a post-growth transition might impact specific national pension systems. We undertake a simple modelling exercise, looking at how different post-growth scenarios affect the pension expenditure-to-GDP ratio of these two economies. We conclude that it is possible for PAYG systems to remain viable in a post-growth economy, but that this depends on the history of the national pension system and the willingness of political actors to introduce the necessary reforms. Although this analysis offers a positive outlook on the prospect of creating viable PAYG pensions in a non-growing economy, an open question remains as to whether PAYG or a fully funded model would be better suited to meet the goals of a post-growth pension system in the long run.

Source SSRN