Mariano Bosch, Carmen Pages, and Angel Melguizo at the Inter-American Development Bank (IDB) are proposing a new approach to expanding the coverage of pension systems in Latin America while helping create more and better jobs. Their ideas are spelled out in a new book "Better Pensions, Better Jobs: Towards Universal Coverage in Latin America and the Caribbean." The book is about Latin America but the problems discussed and proposed solutions are relevant for any middle-income country. I think the IDB's proposal is a great contribution to the debate on pension reform. Below I discuss some of the points they make that I agree with and those where I think other options could be considered.
During the second half of the 20th century contributory pensions were popular in industrial countries. Today, social pensions — also called a citizen's pension or a non-contributory pension — are starting partly to replace them. As Latin America debates the best way forward, this blog argues that social pensions offer the greatest promise.
The panorama of pension coverage in Latin American and the Caribbean (LAC) is quite worrisome. Fewer than half of the 38 million older workers (aged 65 and older) are receiving a contributory pension — based on contributions (savings) accumulated during their active lives. This means only a small number of the region's elderly in a position to enjoy the two key objectives of pension systems: eliminating poverty in old age and maintaining an adequate standard of living for workers once they stop working.