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LATIN AMERICA & THE CARIBBEAN
 
http://www.iadb.org/news/articledetail.cfm?Language=EN&artid=3391&artType=WS
 
November 20, 2006
 
Leveling the Retirement Age for Men and Women

Women could increase their retirement benefits by 30 percent if they work as many years as men, expert says.

Latin American and Caribbean women could probably get a 30% higher payout if their retirement age were changed to equal men’s retirement age, noted specialist Truman Packard of the World Bank during a recent presentation at IDB headquarters. His new analysis sheds a bit more light on the differences between men’s and women’s participation in Latin American pension systems.

Is leveling the retirement age for working men and women an equitable and efficient solution for society?  Packard said his findings indicate that equalizing retirement ages for both genders is not only a worldwide trend, but a logical option.

Traditionally, women have retired earlier than men, but they tend to live longer than their male counterparts.  Thus, most women are in need of a pension guarantee. But few actually have one. Data from a 2003 survey of older adults (average age 60) in Argentina showed a striking difference in pension coverage between men and women. While most men are covered by self-financed or independent pensions, over half of women are covered only through survivor’s benefits, due to the contribution of their husbands.

The results from Argentina tell the story of the two informal sectors of society that are outside of the social security system: one chooses not to contribute and is largely made up of men who were either self-employed, independent or employers; and the other is composed mostly of women who were employees of small firms and/or employed without a contract and benefits. Many of these women would have liked to contribute to pension plans, but could not because their employment circumstances excluded them from participating, noted Packard.

Additionally, more women than men fail to work the minimum number of years required to be eligible for the pension guarantee. Packard conducted a survey in 2000 in Santiago, Chile, showing that while some 30 percent of men who participate in the social security system never become eligible to receive the minimum government pension guarantee, as many as 50 percent of participating women do not.

Throughout Latin America and the Caribbean there are significant behavioral differences between men and women in regard to contribution levels. Packard’s study shows that contribution density—the ratio of contributing months to total months worked in the labor force—is lower for women than for men.

“At any given moment, we might have about the same number of women as men contributing,” he explained, “but different levels of contribution density between women and men really start to show up over people’s entire work histories.”

Taking time out to get married and raise children, having jobs that offer more flexibility, staying in jobs with no benefits, earning lower salaries—all these variables help explain the differences in contribution density between men and women, Packard noted.

In Latin American and Caribbean countries, cultural factors might dictate that women stay home after getting married to work in the household or raise children, Packard emphasized. His empirical findings reveal that young, unmarried women who are active in the workforce are much more likely to contribute than young men, even when the men were married. Thus, “marriage as a variable has a very significant negative effect on the likelihood and level of contribution of women; it also has a very significant positive effect on the likelihood of contribution of men.”

It is not clear that leveling the retirement age for men and women will resolve all the benefit differences between the two, but certainly increasing the number of years that they contribute will help women fulfill the requirements to become eligible for at least the minimum pension guarantee.

Packard also suggested moving from the old pay-as-you-go public systems to multi-pillar model private systems based on contribution density. Under the old systems, he noted, if a participant does not meet the minimum contribution requirement, he or she gets nothing back.

In contrast, the multi-pillar model of many private systems let affiliates withdraw their savings at retirement so they can buy an annuity, a private actuarial or insurance instrument that is designed to cover unexpected longevity. The multi-pillar model reduces the women’s longevity issue to some extent, he said.

Pension guarantees are a hot topic for policymakers working on social protection reforms, as well as for anyone who worries about his or her golden years, Packard concluded. “That’s why social security has become such a big issue in the last 50 years, with more women entering the labor market, seeking independence, and having their own households.”

 

Also available in: Español





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