Population Aging, Class Context, and Age Inequality in Public Spending

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Citation: Pampel (1994) Population Aging, Class Context, and Age Inequality in Public Spending.
Internet Archive Scholar (search for fulltext): Population Aging, Class Context, and Age Inequality in Public Spending
Tagged: uw-madison (RSS), wisconsin (RSS), sociology (RSS), demography (RSS), prelim (RSS), qual (RSS), WisconsinDemographyPrelimAugust2009 (RSS)

Summary

Introduction: In the US, Social Security payments constitute a much greater share of the federal budget than income transfers that benefit children. This has led some observers to conclude that age based inequality in public spending is the result of demographic changes which numerically favor the elderly. However, "The age-based differences in social welfare policy across nations may stem as much from the sociopolitical environment as the inherent consequences of population aging. . . Arguments concerning the political influence of age groups presume a pluralist political environment, such as in the United States, in which diverse, specialized, and numerous interest groups compete for influence. . . The less pluralist political environments of many European nations, which organize and centralize interests on the basis of class, religion, or ethnicity, may inhibit age-based politics and encourage political solidarity across generations" (p. 155). The demographic theory posits that spending rises in an aging society because the elderly gain disproportionate political advantage. This advantage stems not just from sheer numbers, but also from the fact that the elderly are a more formidable political force than disadvantaged families and their children. A different argument, formalized in a class politics and corporatism theory, asserts that unifying class interests override age-based interests. Thus, in nations with strong leftist political parties, both pensions and family transfer payments could rise simultaneously. Pampel argues that each theory may be correct if viewed in the appropriate national context.

Methods: Pampel makes observations on 18 developed nations from 1959-1986, resulting in 504 total observations. Dependent variables are total family allowance and pension transfers, adjusted for GDP and the population age structure. Rather than a simple ratio of welfare/pension to measure age-based inequality, Pample employs an orthogonal regression technique which compares observed pension to expected pension based on the level of family allowance. Independent variables include the percent aged, partisan party rule, corporatism, a dummy variable to isolate predominately Catholic nations and a series of other control variables. Generalized Least Squares models with a series of interaction terms are used to analyze the data.

Results: Pension spending across all nations is nearly 5 times greater than family allowances. More importantly, the correlation between the two is .30, which demonstrates that high spending for the elderly does not typically reduce spending for children-in fact, just the opposite is the norm. "An additive model shows that political and social structures determine age inequality in spending, but age structure does not. . . As expected, left party rule reduces relative spending for the elderly," since family transfers are also high in such societies" (p. 175). Interaction terms demonstrate that the percent elderly bears little or no relationship to age-based spending inequality in countries with high levels of corporatism and/or strong leftist parties; however, in pluralist settings (particularly the US) the percent elderly is an important determinant of age-based spending inequality (i.e., higher percent elderly produces greater inequality).

Conclusions: "Rather than competing, demographic and class-based theories complement one another: demographic theories apply best in pluralist contexts where leftist parties are weak, and class theories apply best to corporatist contexts where leftist parties are strong. A rapprochement between the theoretical perspectives can benefit both traditions and improve our understanding of cross-national divergence in public policies" (pp. 187-188).