SOME NOTES ON THE REDISTRIBUTION INHERENT IN THE US PUBLIC PENSION SYSTEM

This paper shows that the U.S. Old-Age Insurance (OAI) does not eliminate all the regressive redistribution characterizing earnings-related schemes. The benchmark against which OAI is tested is the one-to-one contribution-benefit rule of the Notional Defined Contribution (NDC) scheme. The paper suggests that by redesigning OAI according to the NDC scheme workers would perceive the higher contributions needed to finance current obligations not as a tax but as an increase in mandatory savings rewarded with the pay-as-you-go interest rate and a stream of pension annuities more generous than that it would be possible to pay at the current contribution rate. (JEL H55, J26)