The Washington times., 1937-02-27
SWEDEN LIKES
'PAY-AS-G0'
SECURITY
Special to The Washington Times

oasis dS SuBBeSGeu v.
Senator Vandenberg, the non
partisan Social Security Commits
sion, sponsored by the Hears
newspapers, today made public {
study of how Sweden had dealt
with a similar problem.
In making the announcement
FOR the commission, Merryle Stan
ley Rukeyser said that the report
mad been prepared by DR.. Richard
A. Lester, Princeton economist ano
research member of the commits
sion, who had been in Sweden last
summer to study economic condi
lions there.
Summary Of Study
Summarizing the Swedish solu
lion to a similar problem of switch
ing from a large reserve fund fol
Did age benefits more nearly to 4
basis, DR.. Lester re
ported:
"Tn 1928 a royal commission
was appointed to review the Swe.
dish national pension system for
contributing OId-age and invalid
ity insurance established in
1928. After six years Of study,
the commission recommended
the abandonment of the full re-
Serve-principle that had been
followed for more than 20 years.
"a law passed by the Swedish
parliament in 1885 defective
January l, 1891 carries out the
recommendations by providing
for q much smaller reserve, for
large pensions to old persons in
the near future, and later on,
when the contribution and in.
tereSt on the smaller reserve are
insufficient to pay full pensions,
for q Government subsidy from
general tax funds. In its 1884
report the commission gave the
following reasons in support Of
its recommendation that the re-
serve be limited to one thousand
million kroner (leSS than 800 mil
lion dOllars).
INCOME ASSURED
81. Full reserves are not nee
esSary under social insurance
since the Government Ievies
taxes to cover the benefits.
Therefore, a steady income is
assured and, on the basis of
actuarial studies. future income
and expenses can be estimated
with . reasonable degree Of &C.
curacy. Private insurance COM
panies, on the other hand, do
not have absolute assurance
that future income from pre-
miums will remain constant or
incre:. Sc.
"2. A full reserve system
fails to offer adequate help to.
wards the support Of those who
reach retirement in the first
decades Of its operation because
such a system only becomes
fully effective when people have
contributed during most of their
lives. Consequently an Old-age
insurance system with q strong
fund-buiIding tendency imposes
a double burden upon the gen.
Grafton living at the time the
system is established. This gen.
Grafton is obliged through taxes
to contribute to the fund and
at the same time is obliged to
support it's own aged persons
who receive only an insufficient
amount Of pensions
"3. A limited reserve system
readily permits adoption to new
conditions. On the other hand.
a full reserve system is too in
flexible to adjust to changing
economic circumstances and to
alterations in living standards,
which are bound to occur in the
future. Exact predeterminatiOn
Of wages, costs and benefits far
into the future Is unrealistic in
. changing economic world sub
ject to monetary disturbances.
In order to support the aged Of
the future at a certain standard
of living under such a system,
the purchasing power of the
money must remain relatively
constant so that q certain pen
sion when due will have tho
same purchasing power as esti-
mated when the size of the con-
tributiOnS was fixed Judging
from the recent past, such none
tary stability is unlikely during
the next four or five decades.
Since the Government cOmpeIs
contributions, the level of the
pensions paid must of necessity
be in proportion to the general
standard Of living at the time
when they are DUE
"a. There is no assurance that
the reserve will be invested In
such a way that the interest on
it will represent any increase in
the real national income That
is necessary If the burden on
future generations for support
Of tho aged is to be Hghtened
by reason Of the reserve fund.
"In a special report to the
commission, Prof. Bertil Ohlin,
a weII-knOwn Swedish economist,
says that the nation has no age
in the same sense that an In
diVidual does and, therefore,
that the Government need not
save up for its OId-age needs the
way an individual does"