ABSTRACT
Legal provisions concerning adjustment of public pension benefits to a wage or price index are a common feature of social security systems in Organization for Economic Co-operation and Development countries. At the moment, there is a lively debate in some countries, whether such mechanisms should be continued in a modern, flexible welfare state. Indexation of social benefits guarantees their adequacy in a dynamic sense. A certain level of benefits may be kept at constant absolute purchasing power by adjusting it to a price index, or at constant relative purchasing power by adjusting it to a wage index. Such adjustments may alternatively take place by frequent ad hoc legislation or by the routine application of a legal indexation clause. As a general rule legal provisions for indexation of social benefits originate in public old age insurance, comparable provisions being made for disability and survivors’ benefits shortly afterwards.
