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Friday, December 10, 2010

Bolivia Lowers Retirement Age--What Are They Thinking?

President Evo Morales of Bolivia today signed into a law a bill lowering the retirement age in Bolivia from 65 for men and 60 for women down to 58 for both. This obviously runs counter to the raising of the retirement age being advocated for virtually all of the world's richer, aging nations. 

The law, which takes effect in a year, also extends pensions to the 3 million people — 60 percent of the working population — who labor in the informal economy as everything from street vendors to bus drivers.
"We are fulfilling a promise with the Bolivian people. We are creating a pension system that includes everyone," Morales said at the signing ceremony.
The new law will allow Bolivia's 70,000 miners to retire two years earlier — or as soon as age 51 if they have worked in life-sapping conditions deep underground. Mothers with more than three children will also get special treatment: the right to retire at age 55.
To be sure, the demographics of Bolivia do not match those of the rich countries. Its life expectancy is slightly below the world's average and its fertility rate is above average. Thus, it has a young age structure and a relatively low probability that large proportions of the population will survive to advanced ages--at least at current rates. The benefit is also modest. For example, "Informal sector workers will qualify for pensions if they pay at least $13 a month into pension funds over a decade. They would then qualify for pensions beginning at $68 a month." That is scarcely more than $2 per day--a commonly accepted global definition of the poverty level, although it is about double the current national income per person.
It seems that this was a politically motivated short-term decision that is well-intentioned, but will probably never really come to fruition because it seems unlikely that the country will be able to afford it.

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