Work histories and pension entitlements in Argentina, Chile and Uruguay

This paper proposes alternative methods to project pension rights and implement these methods in Chile, Uruguay and Argentina. The paper indicates that the histories of contribution required to access pensions are apparently unattainable for large segments of the population, at least under the labour market conditions that have prevailed in the region. Yet, the paper deems these conditions were established to avoid abuse and provide incentives to contribute. However, the findings suggest that these tough access conditions severely undermined the social protection function of the pension systems without being effective in providing incentives for continuous contribution.

The paper wonders whether current rules will be appropriate when they are actually enforced, noting that the administrations will be increasingly able to enforce the rules. For example, the paper states that it is hard to believe that the comparatively high levels of coverage observed in Uruguay would have been possible if the tough conditions established to access to pensions were strictly enforced.

The main findings of the paper are:

• there is a flaw in the design of the pension programs in general and of the minimum pension provision in particular in the three countries
• nevertheless, weak enforcement of pension’s stringent conditions may have offset these conditions
• the transition rates between contributing and not contributing are on average quite large
• the age profiles of the transition rates suggest that young workers are particularly mobile
• the transition rates from both contributing and not contributing are decreasing functions of the time spent in the state
• aggregate shocks matter as the transition rates out of contributing are higher and into contributing are lower during downturns
• higher income workers show lower transition rates out of and higher transition rates into contributing than low income workers
• there is negative correlation between income level and the compatibility with access conditions