Thought du Jour

I discovered some interesting information on old-age pensions at the time of their introduction in Norway. Two things surprised me. First, an important motivation apparently was to “increase the number of children in the families”. By providing cash benefits for the elderly, the state made it possible for adult children to divert expenditure from aged parents to their own young children. Second, an unwritten promise was that anyone, regardless of means, could obtain at least a portion of the supposedly means-tested benefit. If means-tests were not strictly applied, part of the benefit was effectively universal. In support of this conjecture, I would like to see statistics on the proportion of age-eligible Norwegians in receipt of partial (or full) age pensions in those years.

[In Norway during the decades of 1880-1920] there was mutual responsibility of support between grown children and parents, according to the poor relief legislation. This principle was weakened by the introduction of the old age pension in 1923 (which was not passed until 1937, with minor changes). An important motivation behind the act was the wish to increase the number of children in the families. Those with an occupation should use their income on their children rather than on their elderly parents. In order to stimulate such a development, the children’s income, from 1937, was no longer a factor in the appraisal of whether the over-seventies were entitled to their pensions or not. This was a breach of what had been viewed as the natural bonds of familial solidarity. It was a marked distinction from the poor relief system and put heavier emphasis on the nuclear family’s importance in society. In other areas as well, means testing was less severe than in the poor relief system, and the appraisals of need were not as haphazard.

Retirement pension also represented a shift from the Norwegian insurance system. For the first time previous wage labour was not a requirement for receiving benefit. Thus eligibility became largely divorced from work performance or other market participation. Entitlements were made independent of individual contributions since the financial responsibility was shifted onto public revenues. The principle of rightful means testing is adopted. Everyone had a right to receive benefit if certain economic conditions were met. An expressed premise was that the aged would receive a certain sum without any means test, to encourage them to find some income in addition.

Compared to that of other Scandinavian countries, the Norwegian retirement pension system was based more on the recipients’ rights than on testing their means of income. In principle, all old people were guaranteed a standard minimum amount with no conditions of previous wage labour or premium payment attached to it. However, two groups were excluded: those who had lived abroad and those who had been convicted of vagrancy, begging, drunkenness, and so forth.

Øyvind BjØrnson, “The Social Democrats and the Norwegian Welfare State: Some Perspectives“, Scandinavian Journal of History, 26:3 (2001), pp. 197-223.

To restrain costs, the Norwegian government initially set the age of eligibility at 70 years. The old-age pension became universal (without a means test) in 1959. Income tests were reinstated in 1969, and later reduced to tests of other pension income. Norway today, like Sweden, provides a Universal Minimum Pension to everyone who meets age and residence requirements. The age of eligibility was reduced (from 70 to 67 years) in 1973.