DOUBLE DIPPING

Double Dipping: Collecting pension while working



Double Dipping: Collecting pension while working

Introduction

Receiving a pension while working often attracts great public controversy, especially when it involves tax dollars. A recent episode in Ohio in which government employees were collecting a pension while continuing on the public payroll generated the following strongly-worded reaction:

"I find the whole practice by and large very offensive, and there is no shortage of people in Hamilton County who I think have frankly scammed the system for their own benefit, which is just wrong," Commission President Todd Portune said. Cincinnati Enquirer, Tuesday August 28, 2007

So-called 'double-dipping' is also controversial in Canada. In 2005, a Toronto MP complained about former MP and Royal Canadian Mint President David Dingwall:

Toronto MP Jim Karygiannis said Dingwall already gets an MP's pension and that's all he deserves. Dingwall sat in Parliament from 1980 to 1997 as a Liberal MP and cabinet minister. "He was in here for 16, 17 years. He's got a pension. We can't double-dip. It's a healthy pension," Karygiannis said.

CTV News, October 5, 2005.

There are three potential sources of the public outrage over double-dipping. First, there may be a concern that the total lifetime pension payout to these recipients may be higher than if they waited to initiate their pension until they stopped working. Second, some might worry that a pension recipient ought to retire in order to 'free up' a job slot for a new employee. Third, if one views a pension as a gift of a beneficent employer, then continuing to work could be seen as an abuse of the payer's goodwill. No matter whether these arguments survive more serious scrutiny, they do appear influential in determining public opinion.

Many economists, on the other hand, might view 'double-dipping' from a less critical perspective. In the standard personnel economics view, pensions are a form of deferred compensation. Once rights to the deferred compensation have accrued to the employee, the timing of the payments is for the most part irrelevant. That is, the decision of when to consume the accumulated wealth of deferred compensation in theory should be largely irrelevant for decisions about how much and whether to work.

Problems with Japan's current public pension system

In this section, I discuss four problems with Japan's current public pension system: (1) the adverse impact on intergenerational equity, (2) the adverse impact on intergenerational equity, (3) the adverse impact on the labor supply of the aged and of women, and (4) the adverse impact on private saving.( Noguchi, 1987, 198)

Japan's public pension system is redistributing resources from younger cohorts to older cohorts on a massive scale.

The adverse impact on intergenerational equity

In a fascinating turn of events, recent changes in the labour market appear to have swung policy pressures in the direction of the standard economists' position. Persistent, low unemployment levels combined with the coming retirement of the baby boom generation have led to concerns about labour shortages. One policy response to perceived labour shortages is to attempt to extract more labour ...