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More Than Half of All Older Persons in Latin America Do Not Receive a Pension from a Contributory System: ECLAC and ILO

In a new joint publication, the United Nations organizations indicate that the lack of retirement income forces many men and women over 60 in the region to remain active in the labor market.

22 May 2018|Press Release

The lack of income from a contributory pension system in more than half of all men, and above all in women, aged 60 or over in Latin America, is the main factor for remaining active in the labor market, the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Labour Organization (ILO) sustain in a new joint publication released today.

In edition No. 18 of the Employment Situation in Latin America and the Caribbean (May 2018), both United Nations organizations stress that according to their projections, the proportion of people aged 60 or older in the workforce will rise from 7.5% to 15% between 2015 and 2050. This is due, above all, to the aging of the population and, to a lesser degree, a moderate increase in older adults’ labor participation.

Despite recent advances in employment formalization and the expansion of contributory pension systems, according to data from eight countries in the region an average 57.7% of people between 65 and 69 years of age, and 51.8% of people 70 or older, still do not receive a pension from a contributory system, with even higher rates seen for women. This situation forces many older people to work: the employment rate for all people 60 years or older totals 35.4% in the region, the study indicates. This proportion is elevated even in age groups that have already exceeded the legal retirement age: 39.3% in the group from 65 to 69 and 20.4% in the segment of 70 years or older. The rates are higher in countries with low coverage of contributory pension systems, the report explains.

ECLAC and ILO highlight that own-account work is the main source of income among older persons who continue working. This may reflect both the discrimination that hinders access to a salaried job for older persons, as well as their desire to work independently, taking advantage of the skills acquired over the course of their working lives to work in conditions that allow for greater flexibility. In addition, the study shows that a high proportion of employed older adults work in the agricultural sector, where pension system coverage tends to be low.

The study also finds that 7.2% of people 60 years or older are working despite the fact that they receive a pension from a contributory system, which may be due to the low amount that they receive or their preference to remain active, above all among people with higher educational levels.

“It is necessary to expand pension system coverage and supplement it with non-contributory pensions to reduce the pressure on older people to continue working, usually in low-productivity jobs, just to have a minimum standard of living at an age when societies should guarantee them the conditions to enjoy their old age with dignity,” Alicia Bárcena, ECLAC’s Executive Secretary, and José Manuel Salazar, ILO Regional Director, indicate in the publication’s foreword.

They add that given the accelerated aging process that many Latin American countries face, it is essential to analyze the conditions and funding needed for inclusive and sustainable pension systems.

With regard to the current overall employment situation in Latin America, the ECLAC-ILO report explains that in 2018 the region is undergoing a phase of modest economic recovery and growth is estimated at 2.2%, compared with the 1.3% recorded in 2017. In this context, the organizations project a slight rise in the regional employment rate, which is expected to contribute to the fact that, for the first time since 2014, there will likely be a small drop in the urban unemployment rate to around 9.0% (down from 9.3% in 2017, the highest level since 2005). This evolution in employment, coupled with real wages that are expected to keep rising moderately, should help strengthen households’ purchasing power, thereby contributing to the stabilization of the economic recovery.

 

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