Thursday, May 24, 2007
[IWS] CRS: SOCIAL SECURITY: THE CHILEAN APPROACH TO RETIREMENT [17 May 2007]
IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Congressional Research Service (CRS)
Order Code RL34006
Social Security: The Chilean Approach to Retirement
May 17, 2007
Christopher Tamborini, Analyst in Social Security, Domestic Social Policy Division
http://www.opencrs.com/rpts/RL34006_20070517.pdf
[full-text, 33 pages]
Summary
Over the past few years, there has been intense debate about Social Security
reform in the United States. A number of options, ranging from changing the benefit
formula to adding individual accounts, has been discussed. The policy debate takes
place against the backdrop of an aging population, rising longevity, and relatively
low fertility rates, which pose long-range financial challenges to the Social Security
system. According to the 2007 Social Security Trustees Report's intermediate
assumptions, the Social Security trust funds are projected to experience cash-flow
deficits in 2017 and to become exhausted in 2041.
As policymakers consider how to address Social Security's financing
challenges, efforts of Social Security reform across the world have gained attention.
One of the most oft-cited international cases of reform is Chile. Chile initiated
sweeping retirement reforms in 1981 that replaced a state-run, pay-as-you-go defined
benefit retirement system with a private, mandatory system of individual retirement
accounts where benefits are dependent on the account balance. As a pioneer of
individual retirement accounts, Chile has become a case study of pension reform
around the world. Although Chile's experience is not directly comparable to the
situation in the United States because of large differences between the countries,
knowledge of the case may be useful for American policymakers.
This CRS report focuses on the Chilean individual retirement accounts system.
It begins with a description of the U.S. Social Security policy debate, along with a
brief comparison of Chile and the United States. Next, the report explains what
Chile's individual retirement accounts system is and how it works. The pension
reform bill sent to the Chilean Congress for debate in 2007 is also discussed. The
report does not address other components of Chile's social security system, such as
maternity, work injury, and unemployment.
The final section provides an assessment of Chile's now 26-year-old individual
retirement accounts system. Pension reforms have contributed to the rapid growth
in the Chilean economy over the past two decades and returns on pension fund
investments have been greater than expected. Administrative costs, however, have
been high and participation rates have been modest at best. There is concern that the
system does not cover the entire labor force and provides inadequate benefits to low
income workers.
This report will not be updated.
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Congressional Research Service (CRS)
Order Code RL34006
Social Security: The Chilean Approach to Retirement
May 17, 2007
Christopher Tamborini, Analyst in Social Security, Domestic Social Policy Division
http://www.opencrs.com/rpts/RL34006_20070517.pdf
[full-text, 33 pages]
Summary
Over the past few years, there has been intense debate about Social Security
reform in the United States. A number of options, ranging from changing the benefit
formula to adding individual accounts, has been discussed. The policy debate takes
place against the backdrop of an aging population, rising longevity, and relatively
low fertility rates, which pose long-range financial challenges to the Social Security
system. According to the 2007 Social Security Trustees Report's intermediate
assumptions, the Social Security trust funds are projected to experience cash-flow
deficits in 2017 and to become exhausted in 2041.
As policymakers consider how to address Social Security's financing
challenges, efforts of Social Security reform across the world have gained attention.
One of the most oft-cited international cases of reform is Chile. Chile initiated
sweeping retirement reforms in 1981 that replaced a state-run, pay-as-you-go defined
benefit retirement system with a private, mandatory system of individual retirement
accounts where benefits are dependent on the account balance. As a pioneer of
individual retirement accounts, Chile has become a case study of pension reform
around the world. Although Chile's experience is not directly comparable to the
situation in the United States because of large differences between the countries,
knowledge of the case may be useful for American policymakers.
This CRS report focuses on the Chilean individual retirement accounts system.
It begins with a description of the U.S. Social Security policy debate, along with a
brief comparison of Chile and the United States. Next, the report explains what
Chile's individual retirement accounts system is and how it works. The pension
reform bill sent to the Chilean Congress for debate in 2007 is also discussed. The
report does not address other components of Chile's social security system, such as
maternity, work injury, and unemployment.
The final section provides an assessment of Chile's now 26-year-old individual
retirement accounts system. Pension reforms have contributed to the rapid growth
in the Chilean economy over the past two decades and returns on pension fund
investments have been greater than expected. Administrative costs, however, have
been high and participation rates have been modest at best. There is concern that the
system does not cover the entire labor force and provides inadequate benefits to low
income workers.
This report will not be updated.
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 6:30 AM
