Public Pension Replacement Rates - Essay Example

However, the official retirement age of both countries differ, whereby, in the US, it is sixty-two compared to fifty-eight in Greece. Averagely, the life expectancy in both countries is eighty. This means that the period of which one is paid is more in Greece compared to the United States (Greece- averagely 22, whereas, US averagely 18). Consequently, this means that the Greece government will spend more money in paying an idle population at their expense of minority workers leading to their high pension replacement rates of up to 95.

7% according to the standardized recommendation of OECD concerning replacement ratios of 63 years at the rate of 60.8%. Greece ironically surpasses this ratio by a great margin. The retirement age of Greece as earlier mentioned is at fifty-eight, while its replacement rate is a whopping 95.7%. That is a more than 35% higher than the standard rates (OECD, 2006, p.56). The social security system, in terms of pension contributions, is privatized unlike the government-oriented framework in Greece.

In America, for instance, the employer and employee contribute more than the pension kitty, the government, which contributes to sum of less than a quarter of the total amount. To propel this type of private-oriented contribution, the government offers incentives such as tax waivers to employers, in order to motivate their contribution. In Greece, however, the pension replacement system is more than government centered in that the government contributes the better share of the total pension income contributions.

Consequently, this will mean that the government has to source funds from elsewhere to sustain the social security system. This is contrary to the situation in US where the working citizens spend more time and money in assisting the unprivileged. Notably, the number of aged individuals working in the US is higher than that of Greece (OECD, 2009, p.17). The public pension replacement rates have contributed a great deal in heightening the debt burden of Greece. We are going to look at some of the contributions of the public pension replacement rates in Greece on debt accumulation.

Firstly, corruption; as much as Greece is considered to be already developed country, its governance system is highly haunted by the rise of corruption. Corruption manifests itself in many different ways in governance spheres. In Greece, for instance, some individuals in the working arena are awarded a pension at abnormally high rates in relation to their affiliations to those who are in power. In other words, pension is not paid fairly or in relation to one’s contribution to their pension scheme.

In order to sustain this highly corrupt network of dishing out money to undeserving individuals, the government is thus forced to get money from other sectors. In case of inadequacy in the government’s treasury, external creditors remain as the only option; in return piling their debt arrears. (Katsios, 2009, p.80) Secondly, for the pension replacement scheme to be effective it calls for steady and appropriate policy measures from the government side who are the main policy makers. In Greece, bureaucracy hinders sober policy formulation.

This means that in essence policies are not drawn in relation to existing realities but on the grounds of ideological preferences of those mandated to do it on behalf of the citizenry. Such bureaucratic policies evident increase is that of the