The Capital-Funded Pension System: A New Sociological Agenda for the Welfare State

Devin Wiggs, Cornell University ILR School

A category emerging in welfare state scholarship and comparative political economy is the “capital-funded pension system”: retirement funded by investment returns. It is contrasted against the “PAYGO system” (pay-as-you-go): retirement funded by taxation transfers. I argue that the distinction between capital-funded versus PAYGO is a unique, additional conceptual apparatus on social insurance that differs from sociology’s established categories of the welfare state: public vs. private, liberal vs. corporatist vs. social-democratic, and coordinated- vs. liberal-market. I contend further that this analytical development on the welfare state has implications that extend beyond its subfield with wide, exciting, and fresh research directions for the discipline of sociology more generally. The goals of this paper are three-fold: to clarify capital-funded versus PAYGO conceptually against the established categories of the welfare state; to elucidate the capital-funded pension system as a unique social structure of stratification and politics against the PAYGO system; and to plot future research directions on the capital-funded pension system for labor, political, and economic sociologists. With the United States entering a new era of social problems characterized by its unprecedented population of retirees, this analytical work paves a significant step forward for future sociological research.

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 Presented in Session 1. Welfare, States, and Security