Social Security and Retirement in Belgium

Abstract

The future of Belgian social security is gloomy for a number of reasons pertaining to macroeconomic, demographic, and political factors.The unemployment rate is about 10 percent and should remain at that level for some time.In spite of recurrent programs to correct the marked imbalance in public finances, the ratio of debt to GNP is still about 130 percent.The ratio between those over sixty years of age and those of working age is expected to double between now and 2030.Finally, the Belgian political process makes any long-term policy reform difficult.Social security benefit payments in 1990 amounted to 10.60 percent of GDP; this can be contrasted with 5.75 percent in 1961 and 6.46 percent in 1970.In 2048, all other things being equal, the aging of the population will push social security expenditure up by 63 percent.If such an increase cannot be supported, benefits will have to be cut drastically.It is forecast that the poverty rate among elderly people could then jump from the current 4.5 percent to 40 percent by 2040 (Delhausse, Perelman, and Pestieau 1996).Among the reform options contemplated is a range of measures aimed at increasing the effective participation rate of people over age fifty and eventually raising both the age at which one can draw social security benefits (sixty) and the mandatory retirement age (sixty-five).In that respect, it is crucial to understand the interaction between social security and more generally social Pierre Pestieau is professor of economics at the University of Li&ge and a research associate at the Center for Operations Research and Econometrics (CORE) and Delta, Paris.Jean-Philippe Stijns is a researcher at the Centre de Recherche en Economie Publique et de la Population (CREPP), University of Litge.The authors are grateful to Etienne de Callatay, Bemard Delhausse, Amaud Dellis, Sergio Perelman, and the members of the National Bureau of Economic Research project for helpful comments and to the Belgian Science

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