Chile's Social Security Phase-Out Experience
In the
“talking points” that the GOP puts out about Social Security, one of
the big examples they cite is the “success” that Chile has experience
in privatizing their Social Security system.
Today, the New York Times takes a look at this so-called success.
“What we have is a system that is good for Chile but bad for most
Chileans,” said a government official who specializes in pension issues
and who spoke on condition of anonymity, fearing retaliation from
corporate interests. “If people really had freedom of choice, 90
percent of them would opt to go back to the old system.”
…
For those remaining in the government's original pay-as-you-go system,
the maximum retirement benefit is now about $1,250 a month. The
National Center for Alternative Development Studies, a research
institute here, calculates that to get that same amount from a private
pension fund, workers would have to contribute more than $250,000 over
their careers, a target that has been reached by fewer than 500 of the
private system's 7 million past and present contributors.
This
leaves many Chileans in a situation that has led to the coining of a
phrase: “pension damage.” There is now even an Association of People
With Pension Damage, 157,000 members and growing, that consists of
Chileans, mostly former government employees, who find that their
pensions, based on contributions to the private system, are
significantly less than if they had remained in the old system.
“They
come to us in desperation,” said Yasmir Fariña, the group's president,
“because those who stayed in the government system are often retiring
with monthly pensions twice as large as everyone else's.”
The
article does discuss the investment capital that has resulted in
capital investments in the Chilean economy, but overall the system has
not benefited the population as a whole.
Something
else to consider: Chile's old system was being systematically
looted by the corrupt Pinochet dictatorship – outside of snarky
comments, is this administration seriously looking to the Pinochet government for inspiration?
Take a look at other experiences – namely the Thatcher-lead UK privatization schemes – in an earlier post.
UPDATE: Another phase-out proponent tool, the Cato “Social Security Calculator” is a crock.
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