The political economy of pension reform: public opinion in Latin America and the Caribbean

The political economy of pension reform: public opinion in Latin America and the Caribbean

Countries around the world are facing important challenges to the sustainability of their pension systems. Changing policies, especially those of large scope and financial magnitude, is a political challenge. It takes a combination of willingness, capacity and enough political support to change the status quo and avoid costly subsequent reversals. Taking advantage of several waves of public opinion data in Latin America and the Caribbean, this paper aims to identify and analyse individual-level factors that are relevant to gauging political support for pension reform.

The data analysed in this paper corroborates the view of practitioners that retirement plan coverage rates in the region are not only low, but also significantly unequal. Retirement policy, however, remains a very low priority for citizens in every country surveyed. Moreover, perceptions of government capabilities is not strongly associated with either attributing responsibility to government for providing retirement plans or enrolling in such schemes.

One important concern in regard to pension reform is the potential opposition of older individuals currently enrolled in unsustainable plans. Given that life expectancy has been increasing considerably in the region, this group of voters is becoming increasingly numerous and therefore relevant for electoral results. Moreover, there is evidence that older individuals tend to be significantly more likely to vote.

There are, however, countervailing forces to that trend:

  • as shown, voter turnout in the region can be high due to laws making the act compulsory. This somewhat reduces the impact such a group could have at the polls by raising participation of other segments as well
  • pension coverage is highly unequal in the region, and those who have a stake in defending the status quo are, in most cases, far from being a majority
  • the low political salience of retirement is not likely to rally voters around that issue but around other issues that could split “winners” and “losers” along very different lines

These general trends and patterns suggest that any opposition to reforming pension schemes in the region is likely to arise from a minority of citizens currently benefiting from the status quo. If that is the case, other forms of political participation, in particular those available to pressure groups and lobbyists, are likely to be used. Many important questions remain thus open to further research. Better-tailored data is needed to shed light on some important issues, in particular those concerning citizens’ preferences for specific changes relative to the status quo and whether they trust the government to carry them out.