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The risk of under‐insurance in the Finnish statutory pension scheme for self‐employed workers: A trajectory analysis
Author(s) -
Salonen Janne,
Koskinen Lasse,
Nummi Tapio
Publication year - 2020
Publication title -
international social security review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.349
H-Index - 28
eISSN - 1468-246X
pISSN - 0020-871X
DOI - 10.1111/issr.12249
Subject(s) - statutory law , pension , pension insurance , incentive , actuarial science , self employed , business , demographic economics , income protection insurance , labour economics , insurance policy , economics , public economics , general insurance , finance , political science , law , microeconomics
Using unique data on the contribution base, we investigate under‐insurance within the statutory pension scheme for self‐employed workers in Finland. Under‐insurance is defined as the difference between pension‐declared income and tax‐declared income. The trajectory modelling technique applied has allowed us to estimate the levels of under‐insurance for different subgroups and to identify possible explanatory factors. Under‐insurance is found to be persistent and large. The analysis reveals six distinctive and homogenous sub‐groups of self‐employed workers. Close to 84 per cent of these workers pay too little in contributions, often leading to inadequate protection against personal risks. Especially for lower‐income self‐employed workers, this points to myopic behaviour as regards contributing to the self‐employed statutory pension scheme and calls for fine‐tuned economic incentives.