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Pensions

Eliminating poverty in old age: are social pensions the answer?

Jean-Jacques Dethier's picture

Poverty in old age is prevalent in a large number of Latin American countries. Universal minimum pensions would be an effective and administratively simple way to substantially reduce poverty among the elder generation.

Photo: © Charlotte Kesl / World Bank
Alleviating poverty in old age requires a different approach from other age groups. Since poverty reduction efforts through labor market or education policies are ineffective, the only available instrument is to directly transfer money so the elderly can purchase goods and services. In rich countries, pension systems transfer money from the rich to the poor and often include a minimum pension that contributes significantly to reducing poverty.  But in developing countries, pension systems have such a low coverage that they cannot deal with old-age poverty.  In Latin America, which has what social scientists call a “truncated welfare state” - with income redistribution for the better-off and exclusion for those in need—most poor people are not covered by pension systems.