Hungary, like many developed and developing nations, has a sinking fertility rate and an ageing population. The problem that this creates for Hungarian policy makers has been exacerbated by the strains of transition from a socialist economy, an early retirement age, and discrimination against older workers. The contributions to this book, written before the present financial crisis, analyse the reforms to the pension system that have been implemented since 1997, their impact on retirement age, and the relative benefits and burdens that they have produced for older and younger generational cohorts. It raises, but does not discuss in detail, some general problems concerning equity between and within generations.

The socialist government instituted a pay-as-you-go pension system which worked to the benefit of the less well-off members of the workforce. After 1989 during the transition period, this provided a safety net for many older workers who lost their jobs through the privatisation of large sectors of the economy. The demands that it had to meet, coupled with an early retirement age, made it unsustainable, and the government responded by introducing a ‘three pillar’ system that is closely discussed in this book. A reformed version of the government-funded pension system remained, but younger members of the workforce (and older members who volunteered) are now required to contribute to privately-managed schemes, most of which are run by banks and insurance companies. The third pillar consists of voluntary private funds to which workers are encouraged to contribute. The returns from these private funds are supposed to top up the pensions provided by the other pillars. Most of the contributors to this book regard the new system as a qualified success despite constant changes made for political motives and the low rate of return of the privately-managed funds. The financial crisis, which has hit Hungary especially hard, makes this assessment now seem over-optimistic. Private funds, which depended heavily on depreciating government bonds, have been devastated, leaving many Hungarians pessimistic about their prospects in old age.Footnote ¹ It is not clear, however, whether any other kind of reform could have better insulated Hungarians from the effects of the world economic crisis.

Any pension policy raises issues of both inter- and intra-generational justice. To what extent should members of a generational cohort be expected to subsidise each other? And what inequalities, if any, are tolerable between generations? An insurance scheme that gives benefits to members proportional to what they put in tends to favour the more highly paid or those who have a longer working life. By moving in this direction, the reformers of the government-funded pillar repudiated the socialist ideal of equality. This ideal is probably not viable in a more competitive economy where tax evasion becomes a problem. The question which is not really discussed in this book is what idea of intragenerational equity ought to be embodied in a pension system. Another important but less often discussed issue of intragenerational equity is touched on in the conclusions that Gál, Iwasaki and Széman draw from their research. When intergenerational resource allocation is no longer a family matter, the task of providing care and education for the young is dissociated from the task of providing benefits to the old. In a pre-industrial society, those who put effort into providing for the young reap the benefits in old age, but in modern societies this is no longer the case. This means, the authors say, that there is less of an incentive to do unpaid work in the household. It also means that those who do this work, and consequently sacrifice earnings, end up receiving smaller pensions than those who did not engage in unpaid work. Should this apparent inequity be removed, and if so how? The authors briefly consider a few answers to this question.

The idea of intergenerational equity that hovers in the background of the various contributions to this book is that it is unfair, other things being equal, that one generational cohort should be more heavily burdened than others, either because of the operation of a pension system or because of a transition from one system to another. A pay-as-you-go system financed by government debt, as in Hungary, is likely to burden young and unborn cohorts. Demographic transition makes things worse. Requiring generational cohorts to take more responsibility for funding their own retirement is the solution that the reforms were supposed to implement, but the contingencies of economics and politics mean that a particular generation can end up with heavy burdens. What seems fair in good times may create suffering in bad times. How Hungary and other similarly affected nations ought to respond is the issue that now needs discussion.