Securing Decent Pensions for Nurses: Gaining Insights into the Issues at Stake for an ‘Atypical’ Workforce


Securing pension coverage and adequacy for nurses raises several basic challenges and policy implications for pension systems, for individual nurses, nurses’ professional associations and health care trade unions. In several countries, nurses are exposed to poverty in old-age due to their ‘atypical’ career path: many leave the profession early, work part-time, have discontinued careers, and retire early. Their pay is sometimes low and the calculation of their pension benefits does not take account of various hardship bonuses. As a result, their pensions may fall short of guaranteeing a decent living standard. Moreover, recent pension reforms (both public and private schemes) tend to reduce benefits, extend the period of contribution, and shift the risk of benefit adequacy to the nurses themselves. This article draws principally on a recent monograph by the author carried out for the International Council of Nurses (ICN).

1. Introduction

The primary objective of pension schemes is to prevent old age poverty. This supposes the existence of pension schemes that are affordable for individuals and society and financially sound enough to be sustainable over the foreseeable future, despite the current antagonistic economic, societal, demographic and labour market context.
Over the past three decades, major changes have occurred in these four groups factors, which will be outlined below. They have generated growing concerns about the extent of pension coverage of the population, the adequacy of income replacement in retirement, and the financial sustainability of existing pension schemes in the advanced economies. These changes have been taking place against the backdrop, first, of growing public deficits and debts (increasingly evident and acute since 2007 following the financial markets meltdown); and second, the substantial and constantly growing increase in social expenditures in the wake of demographic ageing. (Expenditure on social protection in EU-27 accounts on average for between a quarter and a third of GDP. Social benefits for old-age and survivors are by far the highest item in this expenditure, close to 46% on average, and growing steadily since 2000 by 3.4% per year. It is followed by sickness benefits and health care, close to 20% on average. (EUROSTAT 2008a).
These concerns have, over the past two decades, brought the issue of pension reforms to the forefront of the political agenda worldwide, but more particularly in the industrialised countries. The main thrust of the planned and/or implemented pension reforms is to cap social expenditure to reign in, if not reduce, rising public deficits by limiting the generosity of the welfare state by transferring the risks to employers, to pension funds and, increasingly, to the individual wage earners. They also tend to increase the legal retirement age, increase the period of social contributions and expect employers to retain older workers and employees to delay retirement.
The highly controversial debate over pension reform, however, rarely touched the problem of coverage of the growing numbers of people with short or discontinued careers. These are ill-defined categories of ‘flexible’, ‘non-standard’ or ‘atypical’ workers, for which limited labour market statistics are available nationally, and even more so internationally. They roughly include: (i) part-time work – with different numbers of working hours, sometimes less than 15 hours per week, sometimes more than 20 hours per week; they may be quasi permanent with a pro rata coverage of social and employment protection or short term, with minimal or no protection; (ii) temporary work — which may include fixed term contracts, spanning several years or a few months, and contracts through temporary employment agencies, of diverse duration and extent of social and employment protection; (iii) self-employed – with either very high or very low earnings (viz. the so-called ‘mini jobs’ or ‘solo’ self-employment); (iv) seasonal and casual work; and (v) people working in the informal sector (which, is relatively widespread even in some advanced countries where it involves between 7 and 30 % of the workforce). OECD and EU statistics do provide data on part-time employment generally, but without a breakdown of the extent of hours worked. Data on total hours worked, on the other hand, do not provide insights into the distribution among non-standard workers. One study on social protection coverage of this category only offers a few general comments on coverage of persons in ‘marginal employment’ and ‘solo self-employment’ in six EU countries (Schulze Buschoff & Protsch 2008), while another international one focuses on the informal sector and migrant workers (van Ginneken 2010).
The concern about ‘atypical’ workers is due to the fact that their social protection rights may be significantly curtailed, particularly as regards pension coverage and even more so adequacy of income replacement (this of course also applies to employment protection rights and to unemployment benefits). This issue has already been underlined in 2003 by the EU Task force on employment, chaired by Wim Kok, whose report called on EU Member States and social partners “to examine the degree of security in non-standard contract” to help prevent the emergence of a two-tier labour market where “insiders” benefit from high levels of employment protection, while an increasing number of “outsiders” are recruited under alternative forms of contracts with lower protection” (European Commission 2003:7).
Indeed, where the level and duration of cash benefits payments are linked to the length of past employment record, the amount of contributions paid and previous earnings, atypical workers may be at significant disadvantage compared to ‘standard’ full-time, full career workers. Even in the few countries where universal basic public pension schemes exist for all residents, the qualifying period of residence is rather long (40 years in Denmark, 50 years in the Netherlands), or the level of benefits below poverty line (for example in the UK (Ginn 2002). Moreover where remuneration is low (sometimes reflecting part-time employment), it may disqualify many ‘atypical’ workers from access to supplementary pension schemes to improve their retirement income (e.g. in UK and, until recently, Switzerland).
The latest ILO data shows the relatively low pension coverage worldwide – nearly 40% of the population of working age is legally covered by contributory mandatory old-age pension schemes. Arguably, this average hides a widely diverse regional situation. North America and Western Europe legal coverage is almost twice as high, though somewhat lower in Central and Eastern Europe (73%, 70% and 62% respectively). More importantly, when considering the effective coverage1 of the compulsory old-age pension, the percentages slightly decline to 72% in North America and 65% in Western Europe, but to 48% in Central and Eastern Europe. By comparison, the percentages drop from 58% to 28% in Latin America and the Caribbean, from 38% to 18% in the Middle East, from 28% to 19%, in Asia and the Pacific, and from 14% to just 4% in Sub-Saharan Africa (ILO, WSSR 2010, pp. 49-50, Figure 4.1). This leaves quite a substantial number of non-protected people, presumably many among whom are in atypical jobs. Unsurprisingly, the ILO concludes that “Incomplete coverage is a widespread phenomenon; it is seen not only in developing countries but in industrialized countries too. Given the fact that a large proportion of pension schemes provide benefits on an earnings-related basis, some groups with incomplete past work records tend to fall behind. Notably hard-hit groups include women (as discussed above), low-skilled workers and ethnic minorities.”(Ibid: 59).
Atypical work status is common among women in advanced economies, and is associated with child rearing and caring for older relatives. It explains the strong gender dimension of poverty in old age (Sarfati 2004). A further aggravating factor is the fact that atypical workers are usually not covered by unemployment insurance — which in several industrialized countries pays pension contributions (credits) during unemployment. This of course affects the limited level of income replacement where they have pension coverage. In high income countries, nearly 70% of the labour force is covered by law for some type of unemployment protection scheme, the percentage drops to 40% in upper-middle income countries and less than 20% in lower-middle-income countries. However, as with pensions, the effective level of coverage is substantially lower, even in high income countries, dropping to less than 40% of all unemployed, though many among them may qualify for general social assistance (ILO, 2010:.70-71). Moreover, coverage of atypical workers varies widely even within this group of countries, with high coverage above or close to 80% in Luxembourg, Denmark, Sweden and Finland, about 60% in the Netherlands, Spain and France, but lower in other EU-15 countries. (Leschke 2007 and 2009).
Given the difficulty in assessing the exact social protection situation of this growing ‘atypical’ workforce, the author felt that looking at one occupational group – nurses — provides interesting insights for the policy implications of ensuring provision of coverage and decent pension benefits in ageing societies where a ‘permanent austerity welfare State’ is plausible for the foreseeable future (to paraphrase Paul Pierson: 2001) for the following main two reasons:
First, nurses cumulate several characteristics of an ‘atypical’ workforce as regards pension coverage and adequacy. Nurses seem to be a well established professional group in great demand, but they tend to have short and discontinued careers, work part-time and retire early. While in most advanced countries nurses, at least in public and private hospitals, are covered by statutory public pension schemes (‘pay-as-you-go’ PAYG) and also have, in several countries, access to employer occupational pension schemes, they may still be exposed to poverty in old age, as will be shown in this article. Among developing economies, few countries have adequate pension systems to support retired nurses, although ‘emerging economies’ do have basic public schemes and some have either already developed or are in the process of developing supplementary pensions schemes.
Second, the nursing profession is ageing — with some 40% of presently employed nurses in advanced economies expected to retire in the coming decade. There is a risk of a nursing shortage, because the highly demanding conditions of work and, in several countries, the relatively low pay, do not attract sufficient numbers of younger persons into the profession. There is therefore a concern that the growing demand for adequate staffing in institutional and community long-term care for the ageing population will not be met. Providing adequate pensions may improve hiring (besides, perhaps, offering rare job openings in a deteriorating labour market).
Though a substantial proportion of nursing personnel are employed in public hospitals, rather limited information is available about their pension coverage. The Geneva-based International Council of Nurses, representing registered nurses worldwide, has therefore asked the author to undertake a comparative study on this issue on which much of this article is based.2
The article starts with a description of the context in which pension reforms take place, reviewing successively the changing societal and labour market profiles, demography, gender and the effects of the financial crisis. It follows with a brief summary of selected findings of the ICN monograph on the pension coverage and adequacy situation of nurses in several countries and concludes with some policy implications.

2. The Context of Pension Reforms

2.1 Societal and Labour Market Changes

Major societal and labour market changes have generated new risks, calling into question the basic parameters that underpinned the post-1945 European welfare State, namely a stable and full-time employment (mostly) of the male breadwinner and the (traditional) family. These include (Sarfati 2002):
•    Changes in the family status and composition, with a dramatic incidence of divorce, single parenthood and single-person households (associated with poverty and social exclusion).
•    Massive access of women to education and paid work accompanied by demands for equal opportunities in both areas, which require an affordable provision of child care and care for elderly dependents and a more balanced division of labour in the family.
•    Delayed labour market entry as a result of extended education, high youth unemployment and early labour market exit, which had been encouraged in earlier recessions and has only slightly declined in response to reversing incentives for pre-retirement.
•    Low employment rates of young and older workers, as well as women of all age groups, despite their massive entry into the labour market since 1945 and their higher employment rates during the economic expansion of the past decade.
•    Rapid expansion of “atypical” or “non-standard”, often precarious, jobs — which increasingly tend to be the main source of job creation.
•    Significant, though fluctuating peaks of unemployment in OECD countries from the mid-1970s to mid- or late 1990s, and again in the current recession which wiped out most previous job gains (most spectacularly in Ireland, Spain and the US) though the safety net limited the crunch in Western Europe (Sarfati 2002).
•    These changes obviously tend to shrink the size of the active population and therefore limit the potential for a dynamic labour force, which is indispensable for maintaining the Welfare State.

Hedva Sarfati: ISSA consultant on Labour market and welfare reforms Geneva Former ILO Director, Industrial Relations and Labour Administration Department, E-mail .
1 To give an idea of the magnitude and limits of legal and effective social protection coverage worldwide: “Only one-third of countries globally (inhabited by 28 per cent of the global population) have comprehensive social protection systems covering all branches of social security (plus social assistance) as defined in ILO Convention No. 102 and R.67. However, most of these social security systems cover only those in formal employment as wage or salary workers, and such workers constitute less then half of the economically active population globally — but over 70 per cent in countries with comprehensive social security systems. Taking into account those who are not economically active, it is estimated that only about 20 per cent of the world’s working-age population (and their families) have effective access to such comprehensive social protection systems.” (ILO 2010: 51).
2 Sarfati, Hedva: Decent pensions for nurses, International Council of Nurses/ International Centre for Human Resources  in  Nursing, Geneva, 90 pp. .

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