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The OECD has warned
In its 2008 economic survey of
Despite hailing the 2005 pension reform in Finland as “an important first step” towards addressing concerns about an ageing population and its implications for medium- and long-term fiscal sustainability, the report states without further pension reform, social security contribution rates will have to rise in the future.
Since higher contribution rates would push up the labour tax wedge and worsen employment-creation conditions, the report argues additional measures should be taken to avoid such an outcome.
“In the short term, the government should take steps to ensure that the fiscal target set out in the government programme – a target of 3.5% of GDP for the general government surplus – is met,” said the report, while arguing additional steps are needed to improve the long-term sustainability of the fiscal accounts.
One of the measures the OECD proposes is returning unemployment- and disability-related benefits to the purpose they were originally designed for, rather than allowing them to be used as alternative pathways for early retirement.
Other changes should entail eliminating the higher pension accrual rate at age 53, and phasing out the unemployment pension more quickly rather than waiting until 2009.