Economic consequences of widowhood : some lessons for survivor pension reform in France ?

Carole Bonnet, Institut National d'Études Démographiques (INED)
Hourriez Jean-Michel, Institut National de la Statistique et des Etudes Economiques (INSEE)

Pension reforms are on the agenda in many countries and the way pension systems should adapt to an ageing population is under debate. A component of this debate concerns survivor pensions. Significant demographic changes have occurred during the past four decades raising the question of whether survivor pension system needs to be reshaped. The debate was reopened during the preparation of the 2003 french pension reform and concluded that one basic item of information is missing : with current survivor benefits, does the wife's standard of living fall after her husband's death ? It is commonly assumed that survivor benefits maintain the equivalised income of the surviving spouse, but very few information on the economic consequences of widowhood is in fact available. The objective of the paper is twofold. It aims at rethinking the question of the optimal survivor pension rate, regarding the different objectives pursued. Then we assess the income consequences of widowhood using an original data set. Since 1996 and on a yearly basis, the Labour Force survey is matched to fiscal administrative records. Until now, it has been used in a cross-sectional approach, but it is possible to use it longitudinally. Indeed, the French Labour Force survey is a panel with three successive annual waves. It is then possible to observe people around the date they become widowed. We look at mean income changes, measures of income inequality and changes in income sources and compare these effects with those found in other countries. We highlight the differences in economic consequences depending on income groups, age at widowhood, gender and previous job status of the dead spouse. Panel data are useful to disentangle the role of disparities before widowhood and factors directly related to the husband's death in evaluating the economic consequences of widowhood