Implicit Public Debt of the Czech Social Security System

Abstract

The Czech social-security system is hampered by the ageing population, similarly as all European systems. The discussion of remedies is still very rudimentary. Pro-reform arguments concentrate on the non-sustainability of the current system in the long term and on the miserable returns the system produces for the taxpayers. Funded systems are consequentially quoted as a viable alternative. The main argument of the non-reformers, on the contrary, rests with the sky-high costs of such a reform and on the societal instincts that may clash within an attempt.

In this paper, we try to carry out an objective and comprehensive appraisal of the implicit debt of the Czech social-security system. Such an estimate would be crucial if a reform, at least partially based on the switch to a funded system, were to be conceived. Currently, the government is considering no such reform. Therefore, for the short-termfiscal outlook, costs of unreformed system should be taken into account. In a longerterm, though, future governments will have to deal with the pension system and implement some aspects of the pension reform.