Balancing Sustainability and Well-Being: A Multivariate Analysis of European Pension Regimes

As the European population ages, the sustainability of pension systems faces a trilemma: the structural conflict between achieving benefit adequacy, fiscal stability, and labor market flexibility. This study investigates the primary research hypothesis that these three objectives involve trade-offs under current institutional designs. We examine the structural interrelationships between economic development, population health, and institutional pension characteristics across the EU’s 27 member states. Using cross-sectional data from Eurostat and the OECD from 2023, the study employs a multivariate framework, including Multiple Factor Analysis (MFA) and Principal Component Analysis (PCA), to visualize latent trade-offs. Non-parametric statistical tests were applied to validate structural differences between the Nordic, Continental, Southern, and Central and Eastern European (CEE) welfare regimes. The paper’s central argument is that pension sustainability is less a demographic inevitability and more a path-dependent result of institutional “exit cultures” and regional health-wealth traps. The analysis explains 56.7% of the total variance across two primary dimensions, revealing a persistent east–west divide where GDP per capita and Healthy Life Years (HLYs) at age 65 are strongly coupled. Additionally, the analysis identified a fundamental sustainability trade-off: countries with higher pension expenditures and replacement rates, such as those in the Southern and Continental clusters, have significantly earlier labor market exit ages. Statistical evidence shows that the gender pension gap is the most significant factor in differentiating welfare regimes, with the CEE region showing significantly lower inequality than the Western cluster. Ultimately, the findings contribute to public administration literature by demonstrating that policy interventions must prioritize addressing the culture of early retirement in Western countries and the health-wealth trap in Eastern countries to ensure long-term viability.