By Jen Ross
Friday, March 10, 2006
Chile's president-elect Michelle Bachelet has promised an overhaul of the nation's private pension system. She says her reform will do much more to help women than the "pension for housewives" promised by her opponents during the campaign.
SANTIAGO, Chile (WOMENSENEWS)--With a toothless smile and a trembling hand, Rosita Hernandez greets the caretaker as he makes his lunch-hour rounds at her retirement home in a quiet middle-class neighborhood in Chile's capital.
While her husband worked, she was a devoted housewife and never worked for pay. Lacking her own pension and now a widow in her 70s, she receives survivor benefits from her husband, but not enough to cover all her costs. Luckily, her children have stepped in to help pay her bills.
Chile doesn't have universal social security for old age and, according to a 2003 government population survey, 200,000 of the country's 706,000 women over 65 have no pensions. Many of the rest, like Hernandez, find that small survivor's pensions and state pensions don't make ends meet.
The predicament of the country's older women--many of whom spent their lives as housewives--became a major campaign issue in a country where 63 percent of women don't work for pay.
On March 11 Michelle Bachelet--who made the boldest promises of any presidential candidate to enhance women's financial security--takes office as the country's first female head of state.
La Concertacion (The Compromise), the coalition of left-wing parties that Bachelet represents, holds the majority in the upper and lower houses of Congress, giving her a strong mandate to pursue pension reform as one of her 36 top priorities during her first 100 days.
Other priorities that affect women in particular include free child care for all working parents with children under 4 and free child care for low-income working parents with older children. She's also promised to enact an anti-discrimination labor code for the public sector and a voluntary one for the private sector.
After the first 100 days, Bachelet also promises to move ahead on promises to provide shelters for abused women and to support a law requiring that 40 percent of the candidates political parties put forward are women.
She promised to boost the number of people contributing to the country's trend-setting private-pension system, and encourage competition in the pension-fund market to lower administrative costs for participants. She also plans to convene a blue-chip commission to recommend ways to increase quality and fairness in the pension system by June. Commission proposals, she says, will provide the basis for a congressional bill on reforming the pension system.
In 1981, Chile's military government reformed the state-run pay-as-you-go system of retirement savings. In its place it created a largely privatized, obligatory individual savings program that deducts 10 percent of a worker's salary (12.6 percent with fund commission charges).
At retirement, workers take out what they paid in, plus interest. Chile's system
--which has since been copied by two dozen countries--boasts average returns on investment of above 10 percent and one of the best coverage rates for any privatized system in the world. Almost 70 percent of Chile's 5.5 million work force is on board.
But the system still leaves many people out. A recent government study found that 95 percent of Chile's independent or informal workers--30 percent of the country's work force--don't contribute at all. Far fewer women than men actively contribute to the system; 930,000 versus 1,681,000 men, according to a 1998 government study.
These and other deficiencies put the celebrated model at the center of the presidential campaign debate and gave rise to what turned out to be a popular idea: providing housewives with public-assistance pensions.
The idea didn't come from the progressive Bachelet. It came from her right-wing opponents, Sebastian Pinera and Joaquin Lavin. But Bachelet picked up the housewife-security initiative and charged ahead of her opponents.
While her opponents talked about a fund of $170 million to pay pensions to housewives, Bachelet said that wasn't nearly enough and went on to propose a stronger and wider safety net for the country.
"Of course housewives deserve a pension," Bachelet said during the campaign. "Who more to say so than me? I'm a professional and a life-long housewife. I know it's hard work. Still, when I divide your $170 million by the number of women who would be eligible, I come up with a mere 15,000 to 20,000 pesos per month ($28-$38)."
Bachelet said that the government's public pension allowance is about $75, which she planned to raise, and guarantee not only for housewives, but all seniors and disabled people. "I think that's a better end result."
In the 1960s, Uruguay introduced a so-called Mother Law that provided pensions for mothers, but the country's military regime dropped it during the 1980s.
The Uruguay experiment failed, says Rossana Castiglioni, a political scientist at Diego Portales University in Santiago. "When you try to keep up a welfare state, without the kind of financing developed countries enjoy, obviously it's hard to maintain. Uruguay also has an older population and it ended up over-extending itself, with an incredible deficit."
Castiglioni says a similar system in Chile runs the same risk, because the state would be contributing to an untold number of people who don't have enough pension savings. Currently 63 percent of Chilean women do not work for pay, according to government statistics.
"We really don't know how many people we're talking about," says Castiglioni, adding that Chile has the lowest rate of female work-force participation in the continent, so the state's burden would be substantial.
Managers of the country's private pension funds, meanwhile, are waiting nervously. "We presented our own proposals for reform to all of the presidential candidates," says Guillermo Arthur, president of Chile's Association of Pension Fund Administrators, which represents all of the fund management companies offering private pensions plans in Chile. As soon as the new government is sworn in, he said, fund managers will request a formal interview with Osvaldo Andrade, the new minister for labor and social security.
Jen Ross is a Chile-based freelance journalist who delves into social issues affecting women across the Americas.
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