February 28, 2005
MEANWHILE, IT'S 14% OF AMERICANS OVER 65 (via AWW):
Poor Chileans labor past retirement (Indira A.R. Lakshmanan, February 28, 2005, Boston Globe)
At a time when President Bush has made overhauling Social Security a central objective of his second administration, he and other proponents of privatization have held out Chile, the first in the world to privatize pensions in 1981, as a role model.
By transforming its system, this country of 16 million people fended off a looming pension debt owed its aging population and fueled domestic capital markets, contributing to high growth rates and a halving of poverty in what has become one of the most affluent nations in Latin America. For steadily employed Chileans who consistently channel 10 percent of their salaries into private retirement accounts, as required by law -- and preferably top it up with more, tax-free contributions -- pensions could reach 70 percent of salaries, providing a comfortable standard of living in retirement, according to estimates by the pension fund managers' association.
But what supporters of Chile's model have not advertised is that for poor, seasonal, and itinerant workers, and even for a great part of the middle-class and self-employed, the private system has proved inadequate, largely because those workers are unable to contribute enough to their private accounts. More than 17 percent of Chileans 65 and older keep working because their pensions are inadequate, according to a government-commissioned study.
Based on Chile's experience -- and that of more than 20 countries mostly in Latin America and Eastern Europe that followed its lead by privatizing part or all of their pension systems -- one conclusion from a new World Bank report is that the government will have to play a bigger role in any reformed pension system than proponents of privatization suggest. Private accounts can be one pillar of a Social Security system, but the state will have to provide a safety net.
The story opens with the heartrending sagas of Chileans who can't retire when they're 60...the heart bleeds.
However, the latter points are valid. If folks can't make full contributions we should fill the gap--a little now saves us big later. Andthere'll be a safety net for the truly destitute elderly.Posted by Orrin Judd at February 28, 2005 12:34 PM