By Anh Tran
On International Women’s Day 2021, let’s think about pensions. Why? Women around the world still face highly unequal access to a minimum income in old age. Many women spend a big part of their lives caring for others and make indispensable contributions to their societies. Yet, far too many social protection systems fail to acknowledge their contributions by not providing an inclusive pension scheme. Pensions have transformative impacts on old age poverty and should be regarded as a core social policy in any country. However, the design of pension systems can have varying impacts on gender equality in old age. Universal pensions – financed through general taxation – are one of the simplest yet most effective mechanisms to ensure that women and men are reached on an equal basis.
Fortunately, the number of tax-financed minimum pension schemes across the world is growing. Importantly, many low- and middle-income countries are implementing inclusive pension schemes indicating that their affordability is not determined by a country’s level of wealth. I highlight this in a recently published Pathways’ Perspective comparing the effectiveness of pension systems globally in guaranteeing all citizens with a minimum income from the state. However, it also showed that many countries do not offer any form of minimum pension scheme at all, while some only provide limited protection to the older population through poverty-targeted schemes that result in low coverage and low transfer values. These countries fail to provide income protection to the majority of the older population. This disadvantages women in particular who are more likely to live longer lives but accumulate less savings due to having weaker ties to the formal labour market. Despite some progress, there are still significant gaps that need to be urgently addressed.
Women are at greater risk of living in poverty in old age than men
Without access to a regular income transfer in old age, women are more likely to be living in poverty than men. Older women are not only overrepresented among the old age population due to their longer average life expectancy, but women also accumulate less wealth, land and assets over their working lives, leaving them with little to support themselves in old age. In low- and middle-income countries, older persons often continue to work to meet their daily needs. Research in Uganda by my colleagues has shown that many older people, and women in particular, take on care responsibilities for children or other adults with disabilities, which creates additional financial challenges.
The unequal pension access driven by earnings-related pensions
Around the world, pensions have come to be regarded as a core social policy that recognises the contributions that women and men have made to society and the economy throughout their lives. However, most pension systems rely on previous earnings, while many of the contributions older persons have made to society go unrecognised. Such schemes especially disadvantage women because a significant share of women’s contributions to society include unpaid care and (informal) domestic work. By one estimate, women undertake more than three-quarters of all unpaid care work, which would account for at least US$10.8 trillion, or 13 per cent of global GDP, per year. In contexts with high labour market informality, women are less likely than men to be in informal employment but are more likely to find themselves in precarious sectors, receiving little or no remuneration for their work. In low- and middle-income countries, over 30 per cent of women are contributing family workers who are mostly considered unpaid. This proportion is over three times higher for women in comparison to men in informal employment.
Because much of women’s work is invisible, contributory pensions have an inherent male bias. Women often do not meet the minimum contribution requirements to qualify for contributory pensions, and even when they do, they tend to receive lower benefits in comparison to men. This is because women work fewer years as a result of care responsibilities, have lower (average and final) earnings, and are often subject to earlier pensionable ages, all of which results in smaller pension benefits. As a consequence, women end up with fewer means to provide for themselves in old age.
These entrenched gender inequities in the labour market are prevalent everywhere, even in contexts with highly formalised labour markets and comprehensive pension systems. In the EU, women earn 14 per cent less per hour than men, because they spend fewer hours in salaried work and are overrepresented in low paid sectors. As a result, women in the EU receive a pension that is, on average, 36 per cent lower than that of men. This is partly why most of these countries have implemented robust multi-tiered pension systems – which combine tax-financed and contributory schemes – with universal social pensions as a foundational tier to provide a guaranteed, minimally adequate income to everyone in old age. In these systems, women rely more heavily on minimum public pension schemes, because they are less likely to be covered by occupational pension schemes.
Universal pensions recognise women’s work
By de-linking pension income from the formal labour market, universal pensions recognise the contributions that women make to society, through both paid and unpaid work. Universal pensions, which are provided on an equal basis to all women and men, offer a flat-rate minimum income transfer to anyone who has reached pensionable age, independent of previous earnings.
In contrast, poverty-targeted old-age pensions aim to reach the most vulnerable women and men, which have high exclusion errors and leave large numbers of older people to rely on their families for support. Moreover, many countries lack any type of tax-financed old-age pension – based on individual entitlements – and instead, only provide household-level benefits targeted at the poorest households. Household benefits do not take into account intra-household distribution of wealth which can lead to exclusion of poorer older women if they live in households assessed as non-poor. In addition, these schemes only provide one benefit that is paid to the household head, which can disadvantage married women whose husbands receive the benefit.
On the other hand, older women are more likely to be living alone due to facing a higher life expectancy. As their income declines, they are more likely to face social isolation, neglect, abuse and discrimination. Poverty targeting mechanisms are often reliant on community-based selection which has been shown to replicate existing power structures. In these mechanisms, single older women are more likely to be disadvantaged. In one the most extreme cases in Zambia, social exclusion of older women is exhibited in witchcraft accusations.
An increasing number of low- and middle-income countries are implementing inclusive social pensions with universal or near-universal pension coverage. In Kenya, our research found that the Inua Jamii universal social pension contributed significantly to women’s enhanced feeling of autonomy. The pension meant that, for the first time, older women were receiving a regular income on an equal basis with their male peers. According to one woman: “Now that I have my own money, I can make my own decisions. I don’t have to ask my husband for my own money and have him tell me what to spend it on. (p.39)” Other countries, including Lesotho, Namibia and Nepal provide universal or near-universal coverage through a tax-financed social pension with transfers above 19 per cent of GDP per capita.
However, many social pensions provide benefits that are insufficient to account for the needs of older women. Across low- and middle-income countries, 26 countries provide a minimum transfer of less than 10 per cent of GDP per capita per month. At a minimum, pension transfers should ensure an adequate living standard without requiring older women and men to work during their retirement, and benefits should increase regularly in line with inflation.
It is time that we value the work of women in our society and recognise their contributions through an adequate minimum income in old age that is accessible to all women. In order to do so, countries need to prioritise tax-financed universal pensions, which is the foundation of any pension system.
Our blogger, Anh Tran, is a Social Policy Specialist at Development Pathways.