Many Roads to Paris: A Comparative Review of Pension Policies in Two OECD Countries

Common (neoliberal) wisdom warns against the detrimental effects of demographic changes and fiscal pressures on traditional (both defined-benefit and public) pensions and urges a paradigm shift towards defined- contribution plans and personal retirement accounts. This paper examines these claims, promoted by the OECD and World Bank, among others, by comparing the experiences of two OECD members—Israel and Ireland. While Ireland, one of the founders of the OECD, has pursued typical neoliberal policies of retrenchment, Israel—the newest member of the OECD—has taken a more sinuous path, reversing some retrenchment and eventually making pensions mandatory and almost doubling employer contributions to them. The outcomes of these policies seem to be far more positive in Israel than in Ireland, both in terms of their effects on retirees and workers, as well as their impact via aggregate demand on the overall economy, particularly in the aftermath of the Great Recession.