Strengthening the Scientific Foundation for Policymaking to Meet the Challenges of Aging in Latin America and the Caribbean: Summary of a Workshop by Kevin Kinsella

Author:Kevin Kinsella
Language: eng
Format: epub
Publisher: The National Academies Press
Published: 2015-10-13T00:00:00+00:00

PENSION SYSTEMS IN LATIN AMERICA

Roberto Ham Chande, Colegio de la Frontera Norte, focused on what he called “a great need to renew the Latin American pension system, particularly in Mexico.” In his view, the major underlying topic of the entire workshop has to do with interpreting old age as a dependency. He said he believes that old age should be defined as a state of dependence, especially in terms of economic security. Economic security can be achieved through a promise of future support by family, by children, or by the state. One of these promises can be a pension, i.e., an agreed-upon form of support, legally validated, accepted without reluctance, and claimed with a full sense of entitlement. A widespread but misleading belief, he said, is that personal savings are the means of allowing people to purchase the goods and services needed during aging and retirement.

Policies to promote these promises have been discussed during the workshop. However, Ham Chande noted, established policies often do not deal with what is currently happening. Rather, they deal with what will come, with the hope that whatever will come will be better. For this reason, marketing is needed about what old people really need during their retirement, based on data and projections. He divided needs into four parts. The first involves necessities of daily living (food, housing, clothing). The second is health care, including clinical care, medications, therapy, exams, and hospitalization. The third is long-term care, which may be provided by families but may also involve assisted living arrangements and nursing homes. The fourth is family and social life, including a focus on social networks and entertainment. By far, health and long-term care are going to be the most expensive.

In Ham Chande’s opinion, the focus should move beyond the monetary aspect of future needs. Referencing an historic paper by Dawson (1912), Ham Chande noted that there is a fundamental fallacy in the notion that people are supported in old age from their savings. Another focus must be on the distributional aspects of economic, political, and social systems, and on notions of the proper distribution of goods and services, including among older individuals. He noted that this has been a theme in the literature beginning more than 100 years ago, and continuing to the present (see, e.g., Barr and Diamond, 2006; Lee and Mason, 2011).

Ham Chande presented several of his thoughts about pension systems in Latin America. The first is that pensions with a defined benefit represent a burden that is impossible to pay as now structured. This is partly due to population aging and increased life expectancy, and less so to corruption within social security institutions. Another aspect, in his view, is that pensions have become public debt because of labor unions, which have created a series of privileges that cannot be paid anymore. The same fundamental economics underlie a pay-as-you-go tax system and funded private savings, he asserted; all pensions systems, funded or unfunded, involve a transfer of resources from workers to retirees.

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