Editing Pension (section)

==== Decrease of real pensions ====
One pension reform channel is to decrease the amount of real pensions paid to retirees by for example 1 [[Gross domestic product|GDP]] point. It proves to be [[demand shock]] insofar as the household's [[Disposable and discretionary income|available income]] decreases in the short term. This drop of [[purchasing power]] implies a diminishment of [[Consumption (economics)|consumption]] and of demand in general. The activity is then negatively affected. However, the [[Current account (balance of payments)|current account]] is improved as imports decrease following the reduce of domestic demand. In the medium term, since this cut of consumption and demand, [[unemployment]] increases. The [[price index]] decreases as the consumption price drops. As a consequence, exports increase. The real [[Direct labor cost|labour cost]] falls increasing thus companies' margins which limits the degradation of investments. The drop of consumption remains higher than the increase of current account which thereby results in the decrease of GDP. The public finance balance increases following the diminishment of pension benefits spent to retirees. However, unemployment benefits increase and given the drop of consumption and of household's incomes, which implies a fall in the incomes received from income tax and VAT by public administration.<ref name=":0" />