Вы находитесь на странице: 1из 76

1) 3 6q1 73

PSPDiscussion Series Paper

Effects of Social Security on Lifetime Income Distribution in Argentina

Rafael Rofman August 1995

Poverty and Social Policy Department Human Capital Development and Operations Policy The World Bank

This Booklet of Abstracts contains short summaries of recent PSP Discussion Papers; copies of specific papers may be requested from Patricia G. Sanchez via All-in-One. The views expressed in the papers are those of the authors and do not necessarily represent the official policy of the Bank. Rather, the papers reflect work in progress. They are intended to make lessons emerging from the current work program available to operational staff quickly and easily, as well as to stimulate discussion and comment. They also serve as the building blocks for subsequent policy and best practice papers.

Abstract
Argentina's Social Securitysystem is one of the olderretirementprograms in the Americas, with an importantcoveragerate and a large number of retired workers. The system was reformed in 1994, creatinga multipillarmodel with both PAYG and fully-funded components.This paper analyzesthe potentialdistributiveeffects of the new system, using a lifetimeincome approach. We calculaterates of return offeredby the system to different socioeconoric groups, giventhe alternativeschemes workerscan choose from. The results indicatethat, in the new system, no large differencesin returns betweenthose who chose to stay in the PAYG scheme and those who switchedto the new fully-fundedscheme should be expected.Instead, it is clear that regardlessof the scheme chosen, older workerswill receivebetter returns that younger workers, due to the generous compensatorybenefits created to ease the transition. Among sociodemographic economicgroups, women are better off than men, mostly and because of their lower retirement age and higher expectancyof life. Also, civil servants seem to be the best positionedoccupationalgroup, and a not very surprisingregressiveeffect by income level was detected. This study shows that the new system will not be neutral with respect to income distribution,and, more important,that the expectedeffects are not necessarilythose that were proposed during the reformprocess. As a policy conclusion,it becomes clear that duringthe reform or creationof a retirement system many variablesmust be carefullyconsideredto avoid unwanted distributiveeffects.

Tableof Contents

1. INTRODUCTION .....................................................

2. THE DEVELOPMENT OF SOCIAL SECURITY IN ARGENTINA............ 2 3. THE NEW SOCIAL SECURITY SYSTEM .................................................... 3 4. THE DISTRIBUTIVE EFFECTS OF SOCIAL SECURITY.......................... 6 5. METHODOLOGY .....................................................
5.1. Data Sources .......................................................... 5.2. Methodology ...................................

8
11 1....................... 1

6. R1ESULTS .....................................................
6.1. The distributive effects by program .......................... ................................

15
15

6.2. The distributiveeffectsby gender . ........................................................


6.3. The distributive effects by occupation ............................... ..........................

17
19

6.4. The distributive effectsby income ......................................................... 6.5. Effects for SpecificSocioeconomic Groups......................................................... 6.6. The effect of increasingreal wages ......................................................... 6.7. The role of survivor'sbenefits .......................................................... 7. DISCUSSION AND CONCLUSIONS .....................................................

20 23 25 26 29

8. POLICY RECOMMENDATIONS .......................................................... 9. BIBLIOGRAPHY ..........................................................

30 32

10. APPENDIX A. RATES OF RETURN BY SOCIOECONOMIC CIARACTERISTICS FOR DIFFERENT RETIREMENT SCHEMES ............... 33 11. APPENDIX B. RATES OF RETURN BY SOCIOECONOMIC CHARACTERISTICS FOR DIFFERENT RETIREMENT SCHEMES. MARRIED MALES, INCLUDING SURVIVOR'S BENEFITS FOR SPOUSES . ........................ 58

Effects of Social Security on Lifetime Income Distribution in Argentina


1. INTRODUCTION
Argentina's SocialSecuritysystem is one of the older retirementprograms in the Americas, with an importantcoverage rate and a large number of retired workers receivingtheir benefits. After a serious financialcrisis, the system was completelymodified in 1994. The old system, a traditionalpaydefined,was changed into a mixed model that as-you-goscheme with both contributionsand bexYefits combines elementsfrom pay-as-you-goschemes and elementsfrom fullyfunded schemes.The many provisionsof the new system,that started to functionin mid-1994,have not been fullystudiedyet, and one significantaspect of them refers to the systems' distributiveeffects. This paper presents a first approach to the study of distributiveeffects, using a lifetimeincome groups approach.We estimate the rates of return offeredby the system to different socioeconomic under twelve scenarios,by developinga simulationmodel. The analysisconsiders several dimensions, includingtransfers between individualsof differentgender, occupationand income level.In addition, we considerthe role of mortalitydifferentialsin the distributiveeffect of Social Security. Section2 of the paper presents a summaryof the historicaldevelopmentof Social Securityin Argentinaand the detenminants forced the reform of 1994. Section 3 describes the new system, that includingits contributionsand benefits regimens.Section4 developsthe conceptualframeworkof the paper, presentingthe differentapproachesused to study the problem in the literature and developing the approach used here. Section 5 describesthe methodologyused, as well as the data sources. Section 6 includesthe results obtained in the simulations,organizingthe presentationaccordingto the differentdimensions considered.In section 6 we discussthe results presented in the previous section.Finally,section 8 presents some policy recommendationsthat seem appropriatein view of our findings.The complete sets of results are includedin appendixesA and B.

2. THE DEVELOPMENT OF SOCIAL SECURITY IN ARGENTINA


Argentina's Social Securitysystem was started early this century,with the organizationof pension funds. The number of funds grew slowly during the first decades, several occupation-specific coveringcivil servants, railroad workers, employeesof public utilitiescompanies and so. By 1940,the number of workers coveredby the funds was less than 500,000, or 7 per cent of labor force. During those years, pension fund receiveda strong impulse from the governmentand a few years later coveragehad reached almost 35 per cent of labor force. By 1990, almost all labor force was formally included in the Social Securitysystem, althoughevasionwas an importantproblem. Beginningin the 195Os,the succesivegovernmentsincreasedtheir controlover the funds (until then, independently managed, usuallyby the unions) and began a process of unificationin contributions,benefits and minimumrequirementsfor retirement.In 1954, a nationallaw defined a universalcriterionto calculate benefits, establishinga progressive scale. Four years later, in 1958, a new formula was established;all retirees would receive between 70% and 82% of their salaries at the time of retirement, dependingon the total number of years with contributionsto the system. This benefitsregime was applied, with minor changes,until mid-1994. Most funds created during the first half of the century were structured as a combinationof fullyfunded and pay-as-you-go(PAYG) schemes. While the regulationsestablishedthat the systems shouldbe fully funded, the large surpluses generatedin the first years induced administratorsto grant benefits under extremelygenerous terms. For example,some funds would grant a benefit of 90% of last salaryto workers aged 50 years old, without any requirementon minimumnumber of contributions.A consequenceof this generosity,combined with poor administrationand the investmentof most funds in governmentbonds with negativereal interest rates, brought the fundsto a number of serious financial crises. By the end of the 1960s,the governmentdecided to unify all funds into two systems. The first system would cover all wage-earners,includingcivil servants, manufacturingworkers, commerce employees and other activities.The second system would cover all self-employedworkers. According to the law, wage-earnershad a minimumage for retirementof 60 years (55 for women) and selfemployed workers had a minimumage of 65 years (60 for females). Also, all workershad to prove 20

years of contributions.Whilethis reformbalancedthe financesof Social Securityat the time it was enacted,it did not anticipatethe future evolutionof the system. The poor performanceof Argentina's economyduring the 1970s and 1980s,when GDP per capita dropped 19%between 1974 and 1990 (Worldbank, 1990 and 1992), togetherwith the agingof its populationbrought seriousproblems to the SocialSecuritySystem. During most of the 1980s, Argentina's Social SecuritySecretaryfound itself unableto operate without generatinghuge deficits. As a result, the governmentbegan to applya twofold strategy:On one side, a growingproportionof Social Securityrevenuescame from other sources than workers or employers' contributions.At the same time, real benefitsbegan to decline,through the political manipulationof indexes.While this strategywas effectivein terms of formalbalances, it only disguised the actual situationof the system. By 1993,the Social SecuritySystemhad an officialsurplus of 1.2 per cent of GDP. If we only consider contributionsfrom workers and employersand correct the benefit levels to its legal values,this surplus would turn into a 1.7% deficit.(Rofman,1994a). Moreover, part of this hidden deficithas been paid in the last few years, since many retirees have sued the government,claimingthat an unlawfulreduction in their benefitshas been applied in the last years. Most of these suits have been won by the claimants, generatingan importantincrease in expenditures. 3. THE NEW SOC IAL SECURITY SYSTEM

The magnitudeof the crisis in the system duringthe 1980s promptedthe governmentto propose a major reform.After being extensivelydebated in the Congress,the new system ("Sistema Integradode Jubilacionesy Pensiones"--SLTP) approvedin 1993 and entered in force in July was 1994. Under the new regime, Argentina's Social Securityhas become a mixed scheme.On one hand, a governmentmanagedpay-as-you-gosystem continueto exist, while a fully funded, privately managed schemewas created,and each worker had to decide which systemhe or she prefers. Strictly, the new fullyfunded schemeis not completelyprivate; public banks (ownedby federal or local governments)participatein different managementcompanies(knownas Administradorasde Fondos de

Jubilacionesy Pensiones - AFJP). As of December 1994,there were six AFJPs owned totallyor partiallyby these banks, with a participationof 31% in the market. (SAFJP, 1995) The most significantchangesin the system affected the benefits structure, since contributions remain almost identical. BeginningJuly 1994, all wage-earnersmust contribute 11% of their gross salaries to the system (an increase of 1 percentage point),while their employerscontribute16% of gross salaries. Amongthe self-employed, there is a uniquecontributionof 27% of their estimated montfly income. All employers'contributions(plus 16 points of self-employedcontributions)will be directedto financethe PAYG scheme. Instead,the employee's contributions(and 11 points of selfemployedcontributions)will be directedto either the PAYG scheme or an AFJP, dependingon the choice of each worker. Accordingto the law, the governmentwill calculatethe average employee's contrilbution (known as Aporte Medio PrevisionalObligatorio-AMPO) every six months. A minimum taxable income has been set at the value of three times the AMPO, while the maximumtaxable income is sixty times the AMPO. Sincethe AMPO should correspondto nearly 11 per cent of average salary', this meansthat the minimumtaxable income will be closeto 33 per cent of average salary and the maximumwill be around 660 per cent of average. Minimum age for retiringwas set at 65 years for males and 60 for females, always with a minimumof 30 years of contributionsto either the new or old system (with a progressive enactment for wage-earners,until the limit becomes fullyeffectivein 2001). While the originallaw draft had eliminatedthe differenceof five years by sex, setting a universalage for retirement at 65, the requirementfor women was finallylowered in Congress. The benefits structure has been completelymodified, creatinga multi-pillarsystem for all workerswho retire after the reform was enacted (those already retired will continueto receivetheir benefitis until they die). A first pillar, known as Basic Benefit (Prestaci6nBasica Universal- PBU) is a basic benefit, identicalfor all workers regardlessof the amountsthey contributed. The PBU amounts

IThisestimation not exact.sincechanges the levelofevasion theestimated is in and incomeof theself-employed couldaffectit. Nevertheless, should we expecttheAMPO remaincloseto 11% ofaveragesalary. to

to 2.5 times the AMPO,or about 27.5 per cent of average salary.In addition,the PBU willbe increased 1 per cent per eachyear the worker has contributedbeyond the minimum30 years, up to a maximumof 45 years. Thus, the PBU will vary between 27.5 per cent and 31.625 per cent of average salary. The second pillar is know as CompensatoryBenefit (PrestacionCompensatoria- PC). The PC was designedto ease the transitionfrom the old PAYG system to the new mixed model. This benefit will amountto 1.5 per cent of a reference salary,defined as the average salaryin the last 10 years of work beforeretirement, times the number of years the worker contributedto the old system. Thus, if a worker started contributingin 1972 and will retire in 2002, he or she has contributedto the old system for 22 years (between 1972 and 1994).For that, the benefit will amountto about 36 percent of his average salary between 1993 and 2002. This benefit will not exceed 52.5% of the workers' reference salary (that is, 1.5 per cent times 35 years) or 1 AMPO per year of contribution(that is, no reference salaries exceeding66 AMPOs will be recognizedby the government).By definition,this benefitwill only applyto workers who were in the labor force by the time the new system started. The third pillar componentwill dependon the optionthe worker made. If he or she elects to remain in the pay-as-you-gosystem, then a benefit known as AdditionalBenefit (Prestaci6nAdicional por PermnanenciaPAP) willbe granted. The calculationof this benefitis similar to the PC's. The total PAP will amountto 0.85 per cent of the reference salary,times the number of years the worker in contributedto the new system. Thus, in our previous example,a worker who started contributing 1972 and will retired in 2002 will have contributedto the new system for 8 years (from 1994to 2002) and willreceive about 6.8% percent of his averagesalary between 1993 and 2002. If the worker prefers to join the new fullyfunded scheme,he or she will receive an Ordinary Pension (JubilacionOrdinaria- JO). The amount of the JO will dependon the amountscontributedto the fundby the worker, the returns the fund obtainsin the capital markets and the annuitymarket once he retires. The mechanismis rather simple: everymonth, the worker's net contribution(11% of his gross salary,less nearly 3.5 percentagepoints for death and disabilityinsurance and AFJP commission) is depositedin a fund that is investedin differentfinancialmarkets by the AFJP. Once the worker

reaches the minimumconditionsfor retirement,he can buy an annuityand receive,in monthly


2 payments,his moneyback.

In short, benefits wVill include the PBU for all workers, the PC for those who contributedto the old system, and the PAP or JO for those who contributedto the new system, dependingon their choice between the PAYG and the Fully Funded schemes.

4. TIIE DISTRIBUTIVE EFFECTS OF SOCIAL SECURITY


Social Securityis, by definition,a distributivescheme.In general, all retirement systems are designedto organize and administerthe socialtransfers from the younger to the older members of population.While these transfers are not restrictedto SocialSecurity (a number of other public programs and private, mostly intra-familytransfers can have a significantmagnitude)we will only considerthose related to the society-wideretirement systems. There are two standard approachesused to measure the distributiveeffect of Social Security. Many scholars considera cross-sectionalanalysis,where they compare the characteristics of the contributorsand beneficiariesof the system. Of course, this type of approachshows the existenceof a distributiveflow from younger to older groups, but different authorshave also shown a flow between social groups . An alternativeapproach, adopted in this study, is to considerthe Social Securitysystem a compulsorysavings scheme. By doing this, we can have an estimationof the flow of contributions and benefits of any individual(or averages for social groups) and compare the results each group receives from the system.

According thelaw.theworkercanoptbetween to buyingan annuity froma lifeinsurance company, whichmust cover andpotential him recipients survivor's of benefits, agreewiththeAFJPon a monthly or withdraw. this In case,thebenefitcanbe re-negotiated yearand cannot largeenoughto deplete workers each be the fundtoofast. Whilethereare somedifferences interestbetween of thesetwooptions, shouldnot,undernormalconditions, they affect amount Ihe received theretiredworkersignificantly. by An interesting example this approach Ronald of is Lee'sstudyon transfer between ethnicgroups the U.S., in
(Lee, 1994)

The effect of retirementprograms on income distributionis rarelyneutral. The directionof this effect will depend on the combinedrole of five variables. These are (1) the age at enteringlabor force (and start contributionsto the system), (2) the age and retirement,(3) the age at death, (4) the rule used to determinecontributionsand (5) the rules used to determinebenefits.Any differencebetween the results social groups receive from Social Securitymust originatein one of these five determinants. Of course, individualsdiffer on these determinants:some start workingvery young, some other delaytheir entry in labor force until their late forties,and so on. These differences are expectable,and shouldnot be of particular interest, unless some we can observe an empiricalregularityof differences between certainsocial groups. Some of these differencesare random,but some are not, and should be considered.We can define two types of non-randomdifferences;a first group canbe called "InstitutionalDifferences" and includesthe differencesproduced by institutionalnorms and regulations,while the second group, of "Sociodemographic Differences"includesthose that are the result of the socioeconomicand demographicdynamicsin society. Most Social Securitysystems are designedto have some progressive effect on income distribution,through the applicationof institutionaldifferences.In most cases, the rules referto the use of non-proportionalcontributionand benefit scales and minimumor maximumbenefits. Also, minimumage for retirement is sometimesset at a lower level for groupsthat are consideredto be disadvantagedin some way. For example,women can retire earlierin many SocialSecurity systems, or workersexposed to certain dangerous activitiesare allowedto obtain an early retirement.While the distributiveeffects of these institutionaldifferencesare usuallyplanned,the effects of some socioeconomicdifferencesare neither plannednor desired. Higher educated individualstend to enter the labor force late, reducing their total contributions.Also, their earningsincrease with age faster than those of lower educationindividuals,resultingin a better result if benefits are calculatedas a replacementof earningsin the last few years of activity.Anothersocioeconomicdifferencewith importanteffects is the existenceof mortalitydifferentials.If some groups die youngerthan others, their results will be lower because they receivebenefit for a shorter period. This effect's magnitudeis significant,as we will see in the empiricalsection of the paper.

&.ME,THODOLOGY Having adopted a lifetime income approachfor this study, we must define some additional criteriato be used. Some scholars (Burkhauser and Warlick, 1981; Meyer and Wolff, 1987; Wolff, 1987)have estimatedpresent value of contributionsand benefits and then comparethem, calculating the proportionof benefits receivedby specific groups in excess of those receivedon averageby the cohortunder study. This approach, whileinterestingfor the relativelysimple calculationsrequired and the intuitiveinterpretationof results, is highlysensitiveto variationsin the discountrates applied. Altematively,another approach is to calculatethe implicit rates of return resultingfrom the flow of contributionsand benefits. This method is more stable, sinceit does not require assumptionsabout discountrates, althoughit creates some difficultiesabout the necessarycalculations. Another aspect to define is the period to be studied. Ideally,to applythis approach we should have completeinformationon contributions,benefits and mortalityfor a specific cohort. Obviously, those data become availableonly after the last member of the cohortdies. In this case, the analysis would be restrictedto one specific cohort,and the results would indicatethe effect of the Social Securilysystem over a period of nearly 80 years, confoundingthe effects of the differentinstitutional settingsthat mighthave changedover time. Instead, we chose to use cross-sectionaldata, creatinga hypotheticalcohort that would pay contributions,receive benefits and be exposed to mortalityrisks as individualsof each age group are exposed at one specific time. This approach, used traditionallyin demographyto calculatebasic measures such as life expectancyor total fertilityrates, will allow us to conclude what would be the distributiveeffectsof the system if everythingremains unchangedduring the life of a cohort. Our analysiswas directedto assess distributiveeffects of the new Social Security system in Argentna. Because of its structure, not all workerswill have the same experiencewith it. Some will choose to remain in the PAYG scheme and receive the PAP benefit, others will go to the fully funded scheme and receivethe JO benefit. Some workerswere in the labor force by the time the reform was enacted and will receive PC benefits, others will not. Finally,we do not know the level of long term rates of'interest that the pension funds willyield over the years. Consideringthe context, we decided to assess two altematives,assuming the annualrates will be 2% and 5%. It is importantto note that these

rates are real and we are assuming no increasesin averagereal wages. Thus, the corresponding
4 nominalrates under reasonable assumptionsshould be closeto 8% and 11% respectively.

The different altemativesdescribed aboveresult in twelve different "types" of socialsecurity expenence: 1) Workers that enter the labor force after the reform, contributethe minimumof 30 years and choose the PAYG program (we will call this optionPAYG-new-30years) 2) Workers that enter the labor force afterthe reform,contributethe minimumof 30 years and choose the fully funded program, obtaininga yield of 2% annual (we will call this optionFF-2%-new-30 years) 3) Workers that enter the labor force after the reform, contributethe minimumof 30 years and choose the fullyfunded program, obtaininga yield of 5% annual (we will call this optionFF-5%-new-30 years) 4) Workers that enter the labor force after the reform, contributesincethey are 20 years (resultingin 40 years of contributionsfor women and 45 for men) and choosethe PAYG program(we will call this optionPAYG-new-45years) 5) Workers that enter the labor force after the reform,contributesincethey are 20 years (resultingin 40 years of contributionsfor women and 45 for men) and choose the fullyfunded progran, obtaininga yield of 2% annual (we will call this optionFF-2%-new-45years) 6) Workers that enter the labor force after the reform, contributesince they are 20 years (resultingin 40 years of contributionsfor women and 45 for men) and choosethe fullyfunded program, obtaininga yield of 5% annual (we will call this optionFF-5%-new-45years) 7) Workers that enter the labor force beforethe reform and have 15 years left of contributionsuntil retirement (so that men are aged 50 and women are aged 45 at the time of the reform), contribute

Thesevalues result from assumingan annual inflationof 5% and averagereal wageincreaseof 1%

the minimumof 30 years and choose the PAYG program.We will call this optionPAYG-old-30 years 8) Workers that enter the labor force before the reform and have 15 years left of contributionsuntil retirement (so that men are aged 50 and women are aged 45 at the time of the reform), contribute the minimum of 30 years and choose the fullyfunded program,obtaininga yield of 2% annual (we will call this optionFF-2%-old-30years) 9) Wa,rkersthat enterthe labor force beforethe reform and have 15 years left of contributionsuntil retirement (so that men are aged 50 and women are aged 45 at the time of the reform), contribute the minimumof 30 years and choose the fullyfunded program,obtaininga yield of 5% annual (we will call this optionFF-5%-old-30years) 10) Workers that enter the labor force before the reform and have 15 years left of contributionsuntil relirement(so that men are aged 50 and women are aged 45 at the time of the reform), contribute sincethey are 20 years (resultingin 40 years of contributionsfor women and 45 for men) and choose the PAYG program (we will call this optionPAYG-old-45years) 11) Workers that enter the labor force before the reform and have 15 years left of contributionsuntil retirement(so that men are aged 50 and women are aged 45 at the time of the reform), contribute sincethey are 20 years (resultingin 40 years of contributionsfor women and 45 for men) and choose the fullyfunded program, obtaininga yield of 2% annual (we will call this optionFF-2%old[-45 years) 12) Workers that enter the labor force before the reform and have 15 years left of contributionsuntil retirement (so that men are aged 50 and women are aged 45 at the time of the reform),contribute sincethey are 20 years (resultingin 40 years of contributionsfor women and 45 for men) and choose the fully funded program, obtaininga yield of 5% annual(we will call this optionFF-5%old-45 years)

10

5.1.Data Sources The informationneeded for this study consistson data about the earnings'profilesand mortality risks of the population,differentiatedby socioeconomicstatus. All data on earningswere obtained from the Encuesta Permanentede Hogares - EPH, a biannual householdsurvey conductedin several major cities. Because some of these surveyshave been reportedto have methodological problems,we decided to use the one correspondingto Buenos Aires MetropolitanArea, which includesnearly 35 per cent of labor force. We have chosen the October 1992 survey,because it has been used in several other research projects and its reliabilityhas been satisfactorytested. The data on mortalityrisks cannotbe directlyobtained from an officialsource. Argentina's governmentdoes not estimatemortalityrates or life tables by any socioeconomicvariableother than gender and residence. Thus, we used an estimationdevelopedelsewherethat calculatedunabridgedlife tables by gender, regionof residence, income and occupationfor the period 1988-1992 (Rofinan, 1994b). 5.2.Methodoloxv The methodologyof this study consists on a three-step procedure.First, we definedthree estimated earnings'profilesby gender,occupationand average income level, using the EPH survey. The categoriesused for each of the variables are the following:
-

Gender:It adopts the standard categories;Male or Female.

- Occupation:It reflectsthe sector of the economywhere the individualworks. This variableindicates whetherthe person works as a Civil Servant,is employedby the Manufacturingor Commerce sectors, is Self-employedand a residual category ("Other"). These five categorieswere adopted in view of the limitationsof mortalitydata, which are organized in this way. - Income: Because it was necessaryto define income categoriesfor the mortalitydata, which includes life tables for each gender,occupationand income level, we decided to define a dychotomic variableinside each gender-occupation group. Thus, we calculatethe median income for each gender-occupationgroup and then splitthe group in two categories;"High Income" and "Low

11

ILcome".This criterionwas not used in the case of the Self-employed,because the law establishes that actual earnings are not importantin their case, but only an estimatedmonthlyincome is used fCoSocial Security. As of 1992, almost all Self-employedwhere supposed to earn $232 a month, so we assignedthat amountto all off them, regardlessof their gender,occupationor age, and set the bcome variable to "Low" in each case. The frequenciesof cases in each categoryand some basic descriptivestatistics are presented in table I. Table I. Buenos Aires MetropolitanArea. Distributionof Labor Force and MonthlyIncome Descriptive Values, by Gender, Occupation and Income.October 1992. Variable 'Category Gender M\ale Female Occupation Civil Servant ManufacturingWorker C(ommerce Employee Self-employed Other Income Low :High 59.2% 40.8% $328 $949 $70 $450 $580 $9000 10.1% 17.9% 25.5% 17.7% 28.8% $638 $651 $623 $232 $696 $150 $100 $70 $232 $80 $2300 $4000 $4000 $232 $9000
66.6% $615 $515 $120 $9000

Frequency _ Mean

MonthlyIncome |Minimum

Maximum

33.4%

$70

$3000

Source:Encuesta Permanentede Hogares, October 1992 The model estimated is presented in equation I, where w is the monthlyincome, and age is the age of the workers. This functionwas estimated, using MLS, for each of the 18 combinationsof gender.,occupationand income level.

12

ln(w) = exp(a +

* age + 2

* age2

(I)

Once estimatedthe earningsprofilesfor each of the 18 groups, we calculatedthe rates of return for each of them. For that, we first estimatedthe flow of contributionsand benefits correspondingto the earningsprofiles, giveneach of the 12 types describedabove. Contributionsflow (22was calculated as a proportionc of the earningsof group i, as describedin equationII, where c equal 0.1 for wageearnersbefore the reform, 0.11 for wage-earnersafter the reform, 0.26 for self-employedworkers before the reform and 0.27 for self-employedworkers after the reform.

C~~~ -w' cZ = W~' * c

~~~~~~~

(H) (

Benefits flow result from the sum of the PBU plus the PC, when corresponds,and either the PAP or JO, as indicatedby equationIm.

B''3 PB Ui + PCX,+ PAP' + JOi = ,


The amount to be paid as PBU will be 2.5 times the average monthlycontribution,known as AMPO. Sincethis contributionis 11% of wages, PBU willbe approximately27.5% of national average wage'. The special provisionfor workers with morethan 30 years of contributions(as in types 4 to 6 and 10 to 12 in our classification)indicatingthat the PBU will be increasedby 1% per each year m excess of the minimumwas also considered. Compensatorybenefits (PC) correspondto types 7 to 12, since they had contributedto the system before the reform.The amount was calculatedas indicatedin equationIV, where R is tie age at retirementand yo' is the number of years with contributionsto the old system.

5 While the PBU is always2.5 times the AMPO,this maynot be exactlv11%of averagewage,due to the fact that

evasion or underreportingof earnings may affectits level.

13

R-1

Pci = I '0.015*

10

x=R-10

xiv*01*o

yO

(IV)

PAP benefits were calculatedwith a model similar to that of the PC. In this case, benefits are granted exclusivelyto workerswho chose to stay in the PAYG scheme. Then,in equation V we indicatethe calculationmethod, whereyni is the number of years with contributionsto the new PAYG systern.
R-1

PAP '

w w, *0.0085*yn
x=R-10

(V)

Finally,the JO benefits were calculatedadoptingthe actuarialmodels used by retirement insurancecompanies in Argentina.From the actuarial life table "GAM-83", we obtained the cost (ac') of a $1 annuityfor singlemen aged 65 and singlewomen aged 606. Then, we estimatedthe total amount accumulatedin the individualcapitalizationaccount between the time of the reform (when the worker's age was 1994 minus his or her birth year B) and the are at retirementR. For that, we calculatedthe actual annual contribution(which is the wage w,' multipliedby the differencebetween the contributiontax rate c and the administrativeand insurancecosts i7, expressed as a proportion of gross wages, and then included earned interest at rate r. The resultingJO is presented in equationVI.

The GAM-83table, currentlyin use by the insuranceindustryin Argentina,assumesa rnalepopulationwith a life expectancy 16.7years at age 65 and a femalepopulationof 25.67years at age 60. In both cases, the table of of reflectsan overestimation current mortality,since the 1990-91life tables indicateexpectanciesof life 34 years lower.Also, the tables assume a long tern 4% interest rate. This tableyields an $1 annuity costof $12.02for men at age 65 and $15.98of womenat age 60.

7Adminiistrative

and insurancecosts are opento market competitionand composedby fixed and variable

comniissions, making the actual costvary betweenmanaging firms and eamings level.For this simulation,we assumedall comnmissions 3.5% of gross earnings, a level very close to actual averagesin 1994. were

14

R-1

Joi=

Swi*(c-i)*(1+r)R-x x=1994-B

(VI)

Benefits are supposedto remain unchangedafter retirement, unless variationsin average wages modifythe value of AMPO and, consequently,the value of PBU, PC, and PAP (which is indexed to the AMNO). Knowing the flow of contributionsand benefits, we adopted the life tables obtained elsewhere to calculaterates of retum. Using equationVII, where C.' is the flow of contributionsof individualsof group i; Bi' is the flow of benefitsreceivedby individualsof group i; 1L,1 is the number of individuals alivebetween ages x and x+l and r' is the rate of return group i receive from the system.

LX (C'-Bx?*'
x-20

(I +r')-

The rates of return where estimatedfor each of the 18 defined groups and all combinedtotals and subtotals,obtaining a set of 51 rates. Additionally, set was calculatedtwice; once usingthe 1L.' this values correspondingto the total populationfor each group and one usingthe 1L,) correspondingto each specific group. By doing this, we were able to assess the effect of differencesin mortalityon the rates of return.

6.RESULTS
The estimationsand calculationsdescribed in the previous sectionproduced a total of 1224 rates, all of which are presented in appendix A. To analyzethis huge amount of information,we will considerthe different dimensionsseparately. 6.1.The distributive effects by program Accordingto the regulations,Argentineworkers can choose betweenjoining a fullyfunded scheme (through their affiliationto an AFJP) or stayingat the state-run pay-as-you-goscheme. Table II

15

shows the rates of return individualscould expect to receivefor each scheme under different assurnptions. Table H. AnnualRates of Return by type of Social SecurityProgram. Program Annual Rate of Retum Case A. New Workers,with 30 years of Contributions. 1. 2. 3. PAYG-new-30years FF-2%-new-30years FF-5%-new-30years 3.18% 2.98% 4.04% 5.2% -19.8.% Benefit Multiplier to PAYG

Case B. New Workers, with 40/45 years of Contributions. 4.


5.

PAYG-new-45years
FF-2%-new-45 years

2.13%
2.15% -0.5%

6.

FF-2%-new-45years

3.62%

-39.5%

Case C. Old Workers, with 30 years of Contributions. 7. 8. 9. PAYG-old-30years FF-2%-old-30years FF-5%-old-30years 4.07% 3.88% 4.06% 4.8% 0.0%

Case D. Old Workers, with 40/45 years of Contributions.

10. PAYG-old-45 years


11. 12. FF-2%-old-45years FF-5%-old-45years

3.05%
2.72% 2.82% 12.0% 8.0%

Source:Own, in base to EPH The annual rates of return offer by the alternativeschemes are similar.The fullyfunded scheme seems to yield better returns for workers who contributefor a longertime and for those who only contributeafter the reform. These differencesare reasonable,since workers in the situation described have better opportunitiesto accumulatefunds in the fullyfunded scheme and, consequently,increase their benefits. To facilitatethe comparison,we have estimated a "BenefitMultiplierto PAYG", as

16

shown in the third columnof table 1I.This index reflects the percentageincrease (or decrease) in benefitsnecessary to make the rates of return offeredby the fullyfunded programs identicalto the PAYG scheme.Thus, we see that, amongnew workers with 30 years of contributions,benefitsshould be increased by 5 per cent or decreasedby 20 per cent, dependingon the rate of interest obtainedby pension funds, to cancelall distributiveeffects. 6.2.The distributive effects by gender The data on table II indicatedistributiveeffects between programs, consideringthe total population.While that results shown an importantdistributiveeffect, we must considerother significantdimensions.Differencesby gender are stronglyaffected by several factors.The lower minimumage for retirement grantedto women, combined with their lower average income and their lower mortalityshould determinea strong distributiveflow from men to women. On the other hand, the fully funded scheme determinesthat some of these characteristicscan have the oppositeeffect, since the lower accumulatedfunds and longer life expectancywill result in lower benefits. Table m presents the results of our simulations,for males and females. We only show the rates correspondingto the two extreme cases to simplifythe presentation,the completedata are included in the appendix.Female workers receive,always, higherrates of return than male workers. This appliesto all programs and assumptionsadoptedhere. The differencesare significant,and they are stronger on the pay-as-you-goprogram than those received on the fully funded programs. This effect is caused by the differentstructure of benefitsreceivedby those choosingthe PAYG scheme from those choosing the fully funded scheme. In both cases, they receivethe PBU benefit, whichis similar for everyone regardlessof contributionhistory or life expectancydifferences.Then, in the cases it corresponds,all history but not to life expectancy.Finally,those workers receivethe PC, which is linkedto contribution workerswho chose the PAYG scheme receivethe PAP, linkedonly to contributionhistory. Instead, those who chose the fully funded scheme receivethe JO, which depends on the contributionsand the life expectancy.Thus, those groups with lower life expectancywill see their positionimprovedwhen the participationof JO in their benefitsincreases.This is the case when workers chose the fully funded scheme over the PAYG scheme, as it is when the interest rate of the fund increases.Thus, in these

17

cases, males will see their positionimproved with respect to females. In table IV we show the proportionof total benefits correspondingto the JO, by gender and retirementprogram. Table m. Annual Rates of Return by Gender. Selected SocialSecurityPrograms. Program Gender AnnualRate of Retum by use of mortalitydifferentials without witih difference BenefitMultiplierMaleFemale by use of mortalitydifferentials without with

Case A. New Workers, with 30 years of Contributions. 1. PAYG-new-30years Male 2.66% 2.18% -0.48% 0.57% Female 4.01% 4.58% Difference 1.35% 2.40% 1.05% 2. FF-2%-new-30 years Male 2.72% 2.24% -0.48% 0.58% 3.44% 4.02% Female Difference 0.72% 1.78% 1.06% 3. FF-5%-new-30 years 3.88% 3.43% -0.45% Male Female 4.32% 4.89% 0.57% Difference 0.44% 1.46% 1.02% 1 Case D. Old Workers, with 40/45 years of Contributions. 10. PAYG-old-45years Male 2.62% 2.24% -0.38% Female 3.94% 4.42% 0.48% Difference 1.32% 2.18% 0.86% 11. FF-2%-old-45years Male 2.56% 2.19% -0.37% 3.5807o 0.50% 3.08% Female 0.87% 0.52% 1.39% Difference FF-5%-old-45years 12. 2.67% 2.30% -0.37% Male 3.19% 3.69% 0.50% Female Difference 0.52% 1.38% 0.87% Source:Own, in base to EPH

40.8%

81.9%

20.0%

55.8%

11.7% 1

44.1%

57.6%

110.9%

19.6%

60.6%

19.8%

60.9%

When we recognizethe existenceof mortalitydifferentials,the gap between the rates received by males and females increasessignificantly.For example,in we considerworkers entering the labor force after the reform and making contributionsfor the minimumof 30 years, the gap changesfrom

18

1.35 percentagepoints to 2.40 percentagepoints, an increase of almost 80%. The magnitudeof the differencesbetween males and females can be better appreciatedif we considerthe "Benefit Multiplier",an index that shows the increase (or decrease) of benefits, in percentage,necessaryto equalize males and females' rates of return. Table IV. Percentageof total benefitsgeneratedby the fullyfunded scheme by gender and programs. Percentageof total benefits correspondingto Program JO (fullyfunded) Males Case A. New Workers, with 30 years of Contributions. 1. 2. 3. PAYG-new-30years FF-2%-new-30years FF-5%-new-30years 00.0% 50.0% 62.7% 00.0% 40.0% 51.5% Females

Case D. Old Workers, with 40/45 years of Contributions. 10. 11. 12. PAYG-old-45years FF-2%-old-45years FF-5%-old-45years 00.0% 36.7% 47.2% 00.0% 26.0% 33.3%

Source:Own, in base to EPH Accordingto our estimations,men's benefits shouldbe increased by almost 41% (if we considerno mortalitydifferences)or 82% (if we considermortalitydifferences)to equalizerates of return amongthose enteringthe labor force after the reform,contributionfor 30 years and choosingthe PAYG scheme. This adjustmentgets smaller in other programs,but evenamong those choosingthe fullyfunded scheme and assuming a 5% annual interest rate, it never drops below 44%. 6.3.The distributive effects by occupation The distributiveeffect by occupationis interestingbecause this variable reflects,at least in part, the socialstatus of the worker. While most civil servants tend to be rmiddle-class, white collar workers, commerceand manufacturingemployeesare usuallyless educatedand belong to lower classes. The

19

self-employedconstitutea categoryof difficultinterpretation;they include most independent professionals,but also informal,unskilledworkers. The simulations show that, in most cases, civil servants are receivinghigher rates of returnthan other workers. The differencesin favor of civil servants are speciallyclear when mortalitydifferentials are considered.Instead, they do not seem to have an importantadvantageif we ignore mortality differences,indicatingthat their relativelyhigher life expectancyhas a significantrole. The data also show that civil servants maximizetheir advantagein the PAYG scheme and when they have contributedto the system before the reform.This can be explainedby their steeper income profile, since the main characteristicssharedby both PAP and the PC benefitsis that they increase the returns of those with higher income in the last few years of activity. Self-employedworkersreceivethe lower returns imevery case. This is caused by they high contributionrate (whilewage-earnersmust contribute11% of their salaries, self-employedcontribute 27% of estimated earnings),althoughthis serious negativeeffect is partially compensatedby the progressive role of PBU. Because self-employedcontributionsand benefits are based on an assumed earnings' scale that strongly underestimateactual earnings,their contribution-relatedbenefits are very small, and most of their retirementbenefits came from the PBU. The differencesbetween selfemployed and other workersare very important,up to the pointthat, to equalize their rates of return to those of Civil servants, their benefits should be increases by more than 100%in several cases. The combirnation low contributionsand low rates of return resultin very low benefits,reaching minimum of values that slightlyexceed 50% of average benefitsfor other occupations. 6.4.Tb:edistributive effects by income When consideringlifetimeincome distribution,it is clear that one of the most significant dimensionsis income itself. If we can categorizethe populationby income level and then estimate the size and directionof distributiveflows,we willhave an excellenttool to assess the distributiveeffect of any program. This categorizationis not very simple in this case, mostly due to limitationsimposed by the mortalitydata. We definedtwo income levels, "Low" and "High", consideringaverage income among workers of each gender and occupation.

20

Table V. AnnualRates of Return by Occupation.SelectedSocial SecurityPrograms.


Program Annual Rate of Return by use of mortality differentials lwithout with difference Case A. New Workers, with 30 vears of Contributions. I1. PAYG-new-30 years Civil Servant 3.79% 4.03% 0.24% Commerce 3.22% 3.09% -0.13% Manufacturing 3.28% 2.54% -0.75% Self-employed 2.20% 2.68% 0.48% Other 3.26% 3.45% 0.19% Difference Civil S. - Self 1.59% 1.35% -0.24% 2. FF-20/o-new-30 years Civil Servant 2.97% 3.22% 0.25% Commerce 3.13% 3.00% -0.13% Manufacturing 3.36% 2.61% -0.75% Self-employed 2.11% 2.60% 0.49% Other 3.00% 3.20% 0.19% Difference Civil S. - Self. 0.86% 0.62% -0.26% 3. FF-50/o-new-30 years Civil Servant 4.08% 4.33% 0.25% Commerce 4.25% 4.12% -0.13% Manufacturing 4.44% 3.72% -0.72% Self-employed 2.75% 3.22% 0.47% Other 4.16% 4.35% 0.19% Difference Civil S. - Self 1.33% 1.11% -0.22% Case D. Old Workers, with 40/45 years of Contributions. 10. PAYG-old-45 years Civil Servant 4.01% 4.21% 0.20% Commerce 3.16% 3.04% -0.12% Manufacturing 2.98% 2.35% -0.63% Self-employed 1.64% 2.06% 0.42% Other 3.27%0 | 3.44% 0.17% Difference Civil S. - Self 2.37% 2.15% -0.22% 11. FF-20/o-new-45years Civil Servant 3.50% 3.70% 0.20% Commerce 2.87% 2.75% -0.12% Manufacturing 2.80% 2.16% -0.64% Self-employed 1.45% 1.88% 0.43% Other 2.83% 3.00% 0.17% Difference Civil S. - Self. 2.05% 1.82% -0.23% 12. FF-50/o-old-45years Civil Servant 3.61% 3.82% 0.21% Commerce 2.98% 2.86% -0.12% Manufacturingl 2.90% 2.27% -0.63% Self-employed 1.52% 1.94% 0.42% Other 2.95% 3.12% 0.17% Difference Civil S. - Self 2.09% 1.88% -0.21% Source: Own, in base to EPH Occupation Benefit Multiplier to Civil Serv. by use of mortality differentials wvithout with

15.6% 14.0% 50.1% 14.2%

25.7% 43.7% 39.8% 12.7%

-4.0% -9.6% 24.5% -0.9%

5.5% 15.6% 16.8% 0.9%

-4.3% -9.0% 40.7% -2.0%

5.0% 15.6% 31.9% -0.2%


l

33.7% 42.9% 125.0% 28.1% l_

49.4% 88.1% 109.4% 27.0%

23.6% 27.1% 100.0% 24.8% l l

40.8% 70.8% 88.7% 26.9%

23.9% 27.9% 104.4% 24.8%

41.1% 71.7% 92.4% 27.0%

21

Our estimationsindicatethat lower-incomeindividualsreceivehigher rates of return than higher-incomeindividualsif mortalitydifferentialsare ignored.The differencesin rates decrease rapidly when the overall rates of return grow (as in the case of the fully funded scheme with 5% interest rate in case "A" or the PAYG scheme in case "D") simplybecause the role of the distributive PBU benefit declines. Table VI. Annual Rates of Return by Income Level. SelectedSocial Security Programs. Program Income Annual Rate of Return by use of mortalitydifferentials without 1. PAYG-new-30years Low High Difference low-high FF-2%-new-30 years Low High Differencelow-high FF-5%-new-30 years Low High
Difference low-high

Benefit MultiplierLowHigh by use of mortality


differentials

with

difference

without

with

Case A. New Workers, with 30 years of Contributions.

3.81% 2.72% 1.09% 3.66% 2.47% 1.19% 4.44% 3.76%


0.68%

3.39% 3.20% 0.19% 3.25% 2.96% 0.29% 4.03% 4.24%


-0.21%

-0.42% 0.48% 0.90% -0.41% 0.49% 0.90% -0.41% 0.48%


0.89% 1

31.8%

4.3%

2.

35.3%

9.9%

3.

18.8%
1

-3.3%

Case D. Old Workers, with 40/45 years of Contributions. PAYG-old-45years 10. Low 3.10% 2.75% -0.35% High 3.01% 3.43% 0.42% Difference low-high 0.09% -0.68% 0.77% 11. FF-2%-old-45years Low 2.86% 2.50% -0.36% 0.42% 2.61% 3.03% High Difference low-high 0.25% -0.53% 0.78% 12. FF-5%-old-45years 2.58% -0.36% Low 2.94% High 2.74% 3.16% 0.42% Difference low-high 0.20% -0.58% 0.78% Source: Own, in base to EPH

2.9%

-18.7%

9.1%

-14.1%

7.4%

-15.5%

22

The effect of consideringmortalitydifferentialsis very important.Because lower income individualshave higher mortalityrates, their rates of retums are reduced when separate life tables are used. Conversely,higherincome individualshave lower mortality,resultingin increased rates of return if mortalitydifferentialsare considered.Our simulationsindicatethat, in most cases, the new Social Securitysystem willhave a regressiveeffect on lifetime income distribution,once mortality differentialsare consideredas part of the model. The regressiveeffect is not very strongand, as in the case of the PAYG scheme in case A, the system is sometimes slightlyprogressive.The benefit multipliersvary between 9.9% (that is, the benefitsreceivedby higherincome individualsshouldbe increased by 9.9% to equalize rates of retum) to -18.7% (meaningthat higher income individuals should see their benefitsreduced by 18.7% to equalize rates of return).Their magnitudedepends on the scheme chosen by the workers and their history in the labor force. 6.5.Effects for Specific Socioeconomic Groups It is interestingto considersome distributiveeffects includingall the aforementioned dimensions.While it is not reasonableto present here the results for each of the 51 socioeconomic groups (the completefigures are includedin appendixA), we selectedtwo groups that are particularly significant.Group I includeswomen workingin "other" occupations (this group includes most of services-relatedoccupations),earninga "low" income.This group receivesthe higherannual rate of return of all, reachinga maximumof 6.83%. Group II includes men workingin manufacturingand receivinglow income. They obtainrates of return as low as 0.73% a year, a huge differencewith group I. The differencesin rates of return receivedby these two groups have some variations, dependingon which program is considered.While the workers have the possibilityof choosing between the PAYG and the fully funded scheme, this decisiondoes not changethe distributiveeffect significantly.For example,if we considerthe situation of the workersenteringthe labor force after the Social Securityreform, someonein group I shouldchoose the PAYG schemeif she expects a low long term interest in the pension funds and the fullyfunded scheme otherwise.On the otherhand, someone m group II should chose the fully funded scheme if he expects to make contributionsin excess of the

23

minirmum 30 years and he thinks that long term interest rates will be very high. While these decisions of will alter the magnitudeof the distributiveflow, they are far from alteringits direction,and, in fact, the effect over the magnitudeis rather small. Table VII. Annual Rates of Return by type of Social SecurityProgram. SelectedSocioeconomic
Groups.

0.0373

GROUP 1* I GROUPIl**

Difference

Case A. New Workers, with 30 years of Contributions. 1. 2. 3. PAYG-new-30years FF-20/o-new-30 years FF-5%-new-30years 6.06% 5.54% 6.19% 1.85% 1.78% 2.75% 4.21% 3.76% 3.44%

Case B. New Workers, with 40/45 years of Contributions. 4. 5. 6. PAYG-new-45years FF-2%-new-45years FF-2%-new-45years 4.46% 4.11% 5.04% 0.73% 0.86% 2.31% 3.73% 3.25% 2.73%

Case C. Old Workers, with 30 years of Contributions. 7. 8. 9. PAYG-old-30years FF-2%-old-30years FF-5%-old-30years 6.83% 6.58% 6.69% 2.71% 2.59% 2.77% 4.12% 3.99% 3.92%

Case D. Old Workers, with 40/45 years of Contributions.


10. 1 1. 12. PAYG-old-45 years FF-2%-old-45 years FF-5%-old-45 years 5.23% 4.54% 4.62% 1.62% 1.56% 1.65% 3.61% 2.98% 2.97%

Notes:

Group I includes women workingin "other" occupationsand earninga "low" wage

**GroupII includesmen working in manufacturingand receivinglow income Source: Own, in base to EPH

24

Even if the woman of groupI makes a major mistake choosingthe PAYG scheme when long term rates are close to 5%, while men decide to go to the fullyfunded scheme,the members of group I will receivea rate that, at least, doubles that of members of group II. 6.6.The effect of increasing real wa2es The analysispresented up to this pointis based on a simulationthat, as mentionedin the methodologysection, assumes that average real wages remain fixed. While this assumptionis not necessarilydistantfrom reality it is interestingto assess the effect of modifyingit. A continuous increase in real wages will benefit those workerswhose benefitsdepend on their latest salariesbefore retirement,especiallyin comparisonwith those whose benefits dependon their whole earningshistory. Because of that, we should expect to find higherreturns amongworkers who chose the PAYG scheme, as well as those whose earningsprofilewas steeper, because they will gain more than others. Real wage increasesare not necessarilyidenticalfor all socialgroups and the groups with more rapid increaseswill see their rates of return increasedthe most. In order to assess the possible effect of wage increases,we re-estimatedthe rates of return for the twelve "types" of Social Securityexperiences describedin the methodologysection. In this case, we assumed a constantincrease in wages of 1% a year, with no differencesamongsocial groups. The results of this new simulation,togetherwith the figures obtainedbefore, are presented in table VIII. The results clearlyshow that real wage increasesbenefits all workers,because of the increase in PBU benefits,but the effect is especiallystrong amongworkers who chose the new PAYG scheme. There are not significantdifferencesbetween new and old workers when we considerthose choosing PAYG, because they are benefitedby either the increase in PAP or PC benefits.Instead, amongthe workers in the new fully-fundedschemethe most benefitedwill be the old workers, sincethey will see their PC benefitsincreased in a larger magnitudethan their JO benefits. Also,it is importantto note that, accordingto the rules of the system, all benefitsof the PAYG scheme (PAB, PC and PAP) are indexed to wages, while JO benefitsare not. As a result, the faster wages grow,the larger willbe the advantageof those who chose the PAYG scheme.

25

Table VIII. Annual Rates of Return by type of Social SecurityProgram, with and without wage Increases. Program Annual Rate of Return with no wage increases Case A. New Workers, with 30 years of Contributions. 1. PAYG-new-30years 2. FF-2%-new-30 years 3. FF-5%-new-30years 3.18% 2.98% 4.04% 5.05% 3-15% 4.17% 1.87% 0.17% 0.13% Annual Rate of Return with annual wage increase of 1% Difference l

Case B. New Workers, with 40/45 years of Contributions. 4. PAYG-new-45years 5. FF-2%-new-45 years 6. FF-5%-new-45 years 2.13% 2.15% 3.62% 4.12% 2.46% 3.78% 1.99% 0.31% 0.16%

Case C. Old Workers, with 30 years of Contributions. 7. PAYG-old-30years 8. FF-2%-old-30years 9. FF-5%-old-30years 4.07% 3.88% 4.06% 6.20% 5.54% 5.69% 2.13% 1.66% 1.63%

Case D. Old Workers, with 40/45 years of Contributions. 10. PAYG-old-45years 11. FF-2%-old-45years 12. FF-5%-old-45years Source:Own, in base to EPH 6.7. The role of survivor's benefits The new Social Securitylaw grants benefits survivorsto the immediaterelativesof all workers. Survivors'benefits are calculatedas 70% of retirementbenefits, if the worker dies after retirement,or 70% of a salaryof reference if the worker dies before retirement.Survivor's benefits usuallyhave a neutralizingeffect with respect to mortalitydifferentials.Those groups exposed to higher mortality 3.05% 2.72% 2.82% 5.26% 4.62% 4.70% 2.21% 1.90% 1.88%

26

receivelower rates of return when consideringretirementbenefits, but, for the same reason, they receivehigher survivor's benefits. Due to the characteristicsof the availabledata, it is not possible to evaluatethe distributive effects of survivors'benefits consideringthe probabilityof havingdependentsand the age of these relatives.Instead, we run a small simulationwhere we estimate the returns receivedby families composedby a couple, where the woman is five years younger than the man, and only the man makes contributionsand, consequently,has a right to retirementbenefits.This limited simulationleaves out some aspects that couldbe significant,such as differencesin age gap between spouses by socioeconomicstatus, differencein number and age of children,or differencesin labor force participationof wives. The model used to estimate the correspondingrates of return is presented in equation VIII and
IX

E
x=20

x,

x
(1+

B1 rVx

z= O

(VI)

where

MI = (1-I Lx-maie Lx- male 0 7 )* *


lwx=l male + ( 1-i male)* L-female

Vx<65

*7 0x265

The use of these equationsallows us to considerthe probabilitya woman has to survive her husband and receive a survivors' benefit. The results of this simulationare presented it table vmi. It is clear that all rates of return are higherthan in the case of singleworkers. This changeis reasonable, since we are now consideringan additionalbenefit.

27

Table VIII. Married Male Workers. Annual Rates of Retum by Income Level, consideringSurvivors' Benefits.Selected Social SecurityPrograms. Program Income Annual Rate of Retum by use of mortalitydifferentials without
with difference

CaseA. New Workers, with 30 years of Contributions.


1. PAYG-new-30years Low High Differencelow-high FF-2%-new-30years Low High Difference low-high FF-5%-new-30 years Low High Difference low-high 4.56% 3.40% 1.16% 4.16%
2.75%

4.38% 3.64% 0.74% 3.98%


3.00%

-0.18% 0.24% -0.42% -0.18%


0.25%

2.

1.41% 4.82% 3.92% 0.90%

0.98% 4.65% 4.16% 0.49%

-0.43% -0.17% 0.24% -0.41%

3.

Case D. Old Workers, with40/45 years of Contributions.

10.

PAYG-old-45years Low High Difference low-high 11. FF-2%-old-45years Low High Difference low-high 12. FF-5%-old-45years Low High Difference low-high Source:Own, in base to EPH

3.61% 3.48% 0.13% 3.49% 3.29% 0.20% 3.54% 3.38% 0.16%

3.43% 3.71% -0.28% 3.31% 3.53% -0.22% 3.36% 3.62% -0.26%

-0.18% 0.23% 0.41% -0.18% 0.24% 0.42% -0.18% 0.24% 0.42%

Also, differencesby income level are smaller, due to the neutralizingeffect that survivors' benefits have over mortalitydifferentials,as mentionedbefore. Still, the system appears to be regressivewhen contributionsare made for a longerthan the minimumperiod. A very interesting findingin this table is that the PAYG becomes a better choice than when survivors' benefitswere not considered. This is a result of a difference in the criterionused to determinebenefits in the PAYG and

28

fully funded schemes. In the first case, retirementbenefits are determinedaccordingto a preset rule, as described in section 3 of this paper. Instead,JO benefits are calculatedconsideringthe existenceof potentialbeneficiariesof survivors' benefits. Thus, unmarried workers' benefits are higherthan if he or she is married or has young children.In other words, being married is a disadvantagefor workers choosingthe fullyfunded scheme, whileit does not have any effect for those choosingthe PAYG scheme.

7.DISCUSSION AND CONCLUSIONS


Argentina's SocialSecurity system has gone through a major overhaul during 1994, in an attempt to end decades of financiallosses and inefficiencyin resources assignment.The new system aims to create a multi-pillarmodel,which should improvethe distributivedynamicof the system while offeringincentivesto avoid evasion,a serious problem for the SocialSecurityAdministration.This paper attempts,by modelingand simulatingthe system development,to assess from a positive approachthe distributiveeffectsof Social Security.The number of dimensionsthat shouldbe consideredis large, but we limitedour interest to the effects of scheme selectionby the workers, gender, occupation,income level, maritalstatus and mortalitydifferentials.Of course, there are other significantdimensionsthat shouldbe carefullystudied,but data limitationsforced us to ignorethem for the time being. Our study shows that the choiceof either the pay-as-you-goor the fully funded scheme is not a major determinantof distributiveeffects, and its role can onlybe fully assessed using an ex-post approach, once we knowthe long term rate of interesfof pension funds. Nevertheless,the simulations indicatethat, unless the differencebetween long term interest rates and wage growth are large, the new system tends to favor those in the PAYG. This findingis importantbecause, if the optionbetween the two schemes remainsopen, many workerswill choose to stay in the PAYG. In that sense, policy designers should be awarethat, giventhe potential medium and long term difficultiesthe new PAYG scheme can find in the long term, such possibilitycouldseriously affect the long term reform effect on public finances.

29

Instead, it is clear that workers enteringthe labor force after the reform will receivelower returns than those who were workingbefore 1994. Also, the additionalbenefitsreceivedby those who contributemore than the minimum30 years are not enough to equalizetheir rates of return to that of workers with minimumcontributions. The gender-specificflow is also clear; thanks to the lower age for retirement and their higher higher than males. It is importantto notice that, life expectancy,women receivereturns significantly while these differencesare importantand in favor of women, the absolutevalue of their benefits is still lower than their males' counterparts. The differencesamongoccupationsare not surprising.Civil servants are, in most cases, in the better position,especiallywhen earningsin the last few years beforeretirement are more important. The sijmulations show beyond any doubt the difficultsituationof the self-employed.Being forcedto pay both the employee's and the employer's contributions,they find themselves with rates much lower than other workers.While the successivegovernmentshave manipulatedthe estimated eamings scale to reduce their taxes, the combinationof low rates of return and relativelylow contributionsproduces very low benefits. The regressiverole of the distributiveflow by income level is the most interesting findingin this paper. We found that, regardlessof the progressive role of the PBU benefit, higher-income worker-s receive better retums than lower income in most possible scenarios.If the system will aim will to concentrateits effortin supportingthe poorer groups, significantchangeswill have to be introduced in the future. 8.POILICY RECOMMENDATIONS The Social Securitysystem imArgentinais supposedto satisfy several goals simultaneously. Two of the most importantgoals are directlyrelated to SocialPolicies aimed to povertyalleviation. They are to guaranteeminimumearningsto workers after retirementand to improveincome distributionover the life time. The designersof the new Social Securitysystem had these goals in nind when they created the PBU, a basic and universalbenefit that willbe receivedby all retirees in the same amount. Our study found that, even consideringthis benefit,the system fails to satisfy the

30

mentionedgoals and that correctingmeasures should be taken. Among them, we believethe following policy recommendationswill improvethe performance of the system if implemented: 1.- Women's minimumage at retirementshould be increasedto 65 years. The current minimumat 60 years not only affects negativelythe financialsituationof Social Security,but also reduces women's benefits. 2.- The self-employedregime should be modified.These workers are forced to contributea significant amountof their earningsto the system, but only a small proportionis actuallyapplied to their own retirement(self-employedworkers who chose the fullyfunded schemehave only around 27% of their contributionsdeposited in their retirementaccounts).This situationincreases evasion incentivesand should be reversedby reducingor eliminating "employerpart" of their the contributions,whilethe estimatedearnings scale is increased. 3.- The PBU should not be granted to all workers,but only to those with benefits under a minimum level. This measure would not affect significantlythe retirementbenefits of richer workers,while the savingsgeneratedcould be directedto increase benefitsof lower-incomeworkers. 4.- Finally,a programof fiscal incentivesto increase individualretirement savings shouldbe developed,in order to improveolder individualsearningsand decrease their dependencyfrom the formal Social Securityprograms.

31

9.BIBLIOGRAPHY
Burkhauser,R and Warlick, J. (1981). "Disentangling Annuityfrom the RedistributiveAspects of the
Social Security in the United States," The Review of Income and Wealth, Vol. 27, pp. 401-421.

Lee, R. (1994) "Race-Ethnicityand SocialSecurityTransfers:Who Gains and Who Loses". Paper presented at the Population Associationof AmericaMeeting, Miami. Meyer, C. and Wolff,N. (1987) "Intercohortand hntracohortRedistributionunder old age insurance: The 1962-1972 retirement cohorts"Public Finance Ouarterly, Vol. 15, No.3, pp. 259-281.
Rofman, R. (1993) Social Security and Income Distribution. Ph.D. Dissertation, Berkeley, CA.

Rofman,R. (1994) "La reforma previsionalargentina:Que podemos esperar?".Mimeo, Buenos Aires


Rofinan, R. (1 994b) Diferenciales de MortalidadAdulta en Argentina. Notas de Poblacion, year

XXII, no. 59. Centro Latinoamericanode Demografia,CELADE, Santiago,Chile. Rofiran, R. (1995) "Effect of Social Securityon LifetimeIncome Distributionin Brazil". Report to the Education and Social PolicyDevelopmentDepartment,the World Bank. SAJFP (1994) Memoria Trimestralno. 1. Superintendenciade Administradorasde Fondos de Jubilacionesy Pensiones. Buenos Aires.
The World Bank (1988) Argentina. Reformsfor Price Stability and Growth. A World Bank Country Study. Washington, DC.

The World Bank (1992) WorldDevelopment Report 1992. Oxford UniversityPress. Washington,DC. The World Bank (1994) Envejecimientosin Crisis. Oxford UniversityPress. Washington,DC.
Wolff, N. (1987). Income Redistribution and the Social Security Program. UMi Research Press, Ann

Arbor, Michigan.

32

10.APPENDIX A. RATES OF RETURN BY SOCIOECONOMIC CHARACTERISTICS FOR DIFFERENT RETIREMENT SCHEMES.

33

Rates of Return for PAYG, with 30 years of Contributions. Workers entering Labor Force after the Reform
I OBS
I
_

GENDER
_
________

OCCUPATION INCOME FREQ


_

RATES OF RETURN(ANNUAL%) MORTALITYDIFFERENTIALS


WITHOUTI WITH 3.18 3.39 3.20 4.03 3.09 2.54 2.68 3.45 4.08 4.26 3.16 3.18 2.75 2.51 2.68 4.41 3.21 2.18 4.58 2.44 2.19 4.85 4.52 2.87 2.28 1.86 2.04 2.06 4.68 4.22 4.10 3.73 5.28 1.96 3.57 IDIFFERENCI 0.00 -0.42 0.48 0.24 -0.13 -0.74 0.48 0.19 -0.42 0.74 -1.49 0.66 -1.90 0.11 0.48 -0.20 0.53 -0.48 0.57 -0.91 0.07 0.27 0.89 -0.64 -0.57 -1.13 0.14 -0.28 0.67 0.39 0.04 0.98 0.70 -1.75 0.14

1 2 3 4 5 6 7 8 9 10 11 12 13 14

15
16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH _ BOTH BOTH BOTH MALE FEMALE MALE MALE FEMALE FEMALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE MALE _ MALE

ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER ALL ALL ALL ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVAN1

ALL LOW HIGH ALL ALL. ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH ALL ALL LOW HIGH LOW HIGH ALL ALL ALL ALL ALL ALL ALL ALL ALL ALL LOW HIGH 34

100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 18.29 15.30 4.76 11.88 18.89 12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32 2.43

3.18 3.81 2.72 3.79

3.22
3.28 2.20 3.26 4.50 3.52 4.65 2.52 4.65 2.40 2.20 4.61 2.68 2.66 4.01 3.35 2.12 4.58 3.63 3.51 2.85 2.99 1.90 2.34 4.01 3.83 4.06 2.75 4.58 3.71 3.43

Rates of Return for PAYG, with 30 years of Contributions. Workers entering Labor Force after the Reform
OBS GENDER OCCUPATION INCOME FREQ RATES OF RETURN (ANNUAL %) MORTALITY DIFFERENTIALS WITHOUT|__ WITHDIFFERENCE 4.30 2.13 4.23 2.15 1.90 3.89 1.65 5.08 3.59 5.22 3.17 5.89 3.04 2.75 5.64 4.14 2.16 2.46 1.85 1.94 2.04 3.15 1.76 5.35 4.57 4.66 4.13 5.13 3.71 3.73 6.06 5.06 -2.14 0.33 -2.38 -0.21l 0.14 -0.74 0.11 0.27 0.98 -0.56 0.96 -0.76 0.67 0.98 0.42 0.92

36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

MALE MALE MALE MALE MALE

MALE M)ALE
FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE

5.82 6.06 LOW 10.38 MANIUFAC. HIGH 8.51 SELF LOW 12.56 OTHER LOW 9.06 OTHER HIGH 9.25 CIVIL SERVANT LOW 2.49 CIVIL SERVANT HIGH 3.08 COMMERCE LOW 2.75 COMMERCE HIGH 3.50 MIANUFAC. LOW 3.07 M[ANUFAC. HIGH 3.01 SELF LOW 5.05 LOW L 4.93 OTHER OTHERF HIGH 5.71

COMMERCE COMMERCE NLINUFAC.

LOW

HIGH

35

Rates of Return for Fully Funded (2%) with 30 years of Contributions. Workers entering Labor Force after the Reform
OBS GENDER OCCUPATION INCOME FREQ

RATESOF RETURN(ANNUAL%) MORTALITYDIFFERENTIALS


WITHOUTI WITH 2.98 3.25 2.96 3.22 3.00 2.61 2.60 3.20 4.05 3.08 2.83 3.21 2.57 2.78 2.60 4.28 2.89 2.24 4.02 2.45 2.29 4.47 3.82 1.87 2.29 2.01 2.05 2.41 4.00 3.98 4.01 3.49 4.26 2.25 2.01 D1 REC 0.00 -0.41 0.49 0.25 -0.13 -0.75 0.49 0.20 -0.43 0.77 -1.51 0.65 -1.92 0.11 0.49 -0.20 0.54 -0.48 0.58 -0.91 0.07 0.27 0.91 -0.66 -0.57 -1.13 0.14 -0.28 0.69 0.40 0.03 0.99 0.71 -1.73 0.13

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH _MALE FEMALE _MALE MALE FEMALE FEMALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE MALE MALE

ALL ALL ALL CIVIL SERVANT COMMEvRCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. M.ANUFAC. SELF OTHER OTHER ALL ALL ALL ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANI

ALL LOW HIGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH ALL ALL LOW HIGH LOW HIGH ALL ALL ALL ALL ALL ALL ALL ALL ALL ALL LOW HIGH 36

100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 1 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 18.29 15.30 4.76 11.88 18.89 12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32 2.43

2.98 3.66 2.47 2.97 3.13 3.36 2.11 3.00 4.48 2.31 4.34 2.56 4.49 2.67 2.11 4.48 2.35 2.72 3.44 3.36 2.22 4.20 2.91 2.53 2.86 3.14 1.91 2.69 3.31 3.58 3.98 2.50 3.55 3.98 1.88

Rates of Return for Fully Funded (2%) with 30 years of Contributions. Workers enteringLabor Force after the Reform
I RATES OF RETURN(ANNUAL%)
_ _ __OUT_

OBS

GENDER OCCUPATION INCOMEI FREQ MORTALITY DIFFERENTLALS

WITH |IFFERENCE
1.94 2.60 1.78 2.27 2.05 3.35 2.20 5.13 3.67 4.19 4.00 4.73 3.84 3.49 5.54 3.81

36 MALE 37 MALE 38 |MALE 39 MALE 40 MALE 41 MALE 42 MALE 43 FEMALE 44 FEMALE 45 FEMALE 46 FEMALE 47 FEMALE 48 FEMALE 49 FEMALE |50 FEMALE 51 FEMALE

COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER

LOW HIGH LOW HIGH LOW LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH

5.82 6.06 10.38 8.51 12.56 9.06 9.25 2.49 3.08 2.75 3.50 3.07 3.01 5.05 4.93 5.71

4.09 2.27 4.16 2.48 1.91 4.08 2.08 4.86 2.66 4.77 3.04 5.50 3.18 2.50 5.12 2.83

-2.15 0.33 -2.38 -0.21 0.14 -0.73 0.12 0.27 1.01 -0.58 0.96 -0.771 0.66 0.99 0.42 0.98

37

Rates of Return for Fully Funded (5%) with 30 years of Contributions. Workers entering Labor Force after the Reform
OBS GENDER
___ ________

OCCUPATION INCOME FREQ


__________ _____ ___

RATES OF RETURN(ANNUAL%) MORTALITY DIFFERENTIALS


WITHOUTI WITH IDIFFERENCE

I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 t

BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH MALE FEMALE MALE MALE FEMALE FEMALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE _FEMALE FEMALE MALE _ MALE

ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVAN1 CIVIL SERVAN COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER ALL ALL ALL ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVAN

ALL LOW HIGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH ALL ALL LOW HIGH LOW HIGH ALL ALL ALL ALL ALL ALL ALL ALL ALL ALL LOW HIGH 38

100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 18.29 15.30 4.76 11.88 18.89 12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32 2.43

4.04 4.44 3.76 4.08 4.25 4.44 2.75 4.16 5.29 3.58 5.19 3.84 5.33 3.94 2.75 5.31 3.68 3.88 4.32 4.23 3.63 4.83 3.99 3.80 4.09 4.30 2.60 3.98 4.30 4.52 4.84 3.03 4.47 4.95 3.31

4.04 4.03 4.24 4.33 4.12 3.72 3.22 4.35 4.88 4.32 3.73 4.47 3.46 4.06 3.22 5.12 4.20 3.43 4.89 3.34 3.71 5.10 4.87 3.18 3.53 3.21 2.74 3.72 4.96 4.90 4.88 4.00 5.17 3.26 3.44

0.00 -0.41 0.48 0.25 -0.13 -0.72 0.47 0.19 -0.41 0.74 -1.46 0.63 -1.87 0.12 0.47 -0.19 0.52 -0.45 0.57 -0.89 0.08 0.27 0.88 -0.62 -0.56 -1.09 0.14 -0.26 0.66 0.38 0.04 0.97 0.70 -1.69 0.13

Rates of Return for Fully Funded (5%) with 30 years of Contributions. Workers entering Labor Force after the Reform

1
OBS
l
__

1
l GENDER MALE MALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE

_______

| RATES OF RETURN (ANNUAL %) OCCUPATION INCOME FREQ MORTALITY DIFFERENTIALS | _________ _____ _____ WITHOUT| WITH 7DIFFERENCE l
|

36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

COMMERCE COMMERCE MANUFAC. LMANUFAC. SELF OTHER OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER

LOW HIGH LOW HIGH LOW LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH

5.82 6.06 10.38 8.51 12.56 9.06 9.25 2.49 3.08 2.75 3.50 3.07 3.01 5.05 4.93 5.71

5.02 3.67 5.08 3.83 2.60 5.03 3.55 5.55 3.79 5.47 4.11 6.09 4.23 3.03 5.77 3.91

2.93 4.00 2.75 3.65 2.74 4.32 3.68 5.83 4.76 4.92 5.03 5.35 4.87 4.00 6.19 4.84

-2.09 0.33 -2.33 -0.18 0.14 -0.71 0.13 0.28 0.97_ -0.55_ 0.92 -0.74 0.64 0.97_ 0.42 0.93

39

Rates of Return for PAYG, with 40/45 years of Contributions. Workers entering Labor Force after the Reform
OBS

jGENDER INCOME OCCUPATION


_______ _________ _____

RATES OF RETURN (ANNUAL %)

FREQ

MORTALITY DIFFERENTIALS
WITH 2.13 2.03 2.36 3.13 2.08 1.45 1.54 2.44 2.54 3.55 1.87 2.29 1.41 1.57 1.54 2.81 2.41 1.30 3.55 1.23 1.52 3.51 3.68 2.16 1.40 0.90 0.95 1.31 3.78 3.26 3.00 2.69 4.15 0.72 2.98
_DIFFERENC_

____WITHOUT|

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

BOTH ALL BOTH ALL BOTH ALL BOTH CIVIL SERVANT BOTH COMMERCE BOTH MANUFAC. BOTH SELF BOTH OTHER BOTH CIVIL SERVANT BOTH CIVIL SERVANT BOTH COMMERCE BOTH COMMERCE BOTH MANUFAC. BOTH MANUFAC. BOTH SELF BOTH OTBER BOTH OTHER MALE ALL FEMALE ALL MALE ALL MALE ALL FEMALE ALL FEMALE ALL MALE CIVIL SERVANT MALE COMMERCE MALE MANUFAC. MALE SELF MALE OTHER -FEMALE CIVIL SERVANT FEMALE COMMERCE FEMALE MANUFAC. FEMALE SELF FEMALE OTHER MALE CIVIL SERVANT _ MALE CIVIL SERVA

ALL LOW HIGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH ALL ALL LOW HIGH LOW HIGH ALL ALL ALL ALL ALL ALL ALL ALL ALL ALL LOW HIGH 40

100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 18.29 15.30 4.76 11.88 18.89 12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32 2.43

2.13 2.39 1.93 2.92 2.20 2.09 1.11 2.27 2.91 2.92 3.15 1.72 3.03 1.47 1.11 2.97 1.95 1.68 3.05 1.99 1.44 3.28 2.89 2.66 1.87 1.85 0.81 1.53 3.20 2.91 2.98 1.82 3.55 2.17 2.84

0.00 -0.36 0.43 0.21 -0.12 -0.64 0.43 0.17 -0.37 0.63 -1.28 0.57 -1.62 0.10 0.43 -0.16 0.46 -0.38 0.50 -0.76 0.08 0.23 0.79 -0.50 -0.47 -0.95 0.14 -0.22 0.58 0.35 0.02 0.87 0.60 -1.45 0.14

Rates of Return for PAYG, with 40/45 years of Contributions. Workers entering Labor Force after the Reform
RATES OF RETURN (ANNUAL %)
lOBS

GENDER

OCCUPATION

NCOME

FREQ

MORTALITY DIFFERENTIALSR

OBS 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

GENER MALE MALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE

OCCUPATIONFQWITHOUTL COMMERCE COMMERCE MANUFAC. MANJUFAC. SELF OTHER OTHER CIVIL SERVAN CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER LOW HGH LOW HIGH LOW LOW HIGH LOW HGH LOW HIGH LOW HIGH LOW LOW HIGH 5.82 6.06 10.38 8.51 12.56 9.06 9.25 2.49 3.08 2.75 3.50 3.07 3.01 5.05 4.93 5.71 2.80 1.40 2.72 1.25 0.81 2.37 1.13 3.63 3.02 3.88 2.43 4.20 2.23 1.82 4.10 3.31

WITH 1.03 1.69 0.73 1.10 0.95 1.78 1.25 3.85 3.88 3.37 3.28 3.50 2.82 2.69 4.46 4.11

IDIFFERENCT -1.77 0.29 -1.99 -0.15 0.14 -0.59 0.12 0.22 0.86 -0.51 0.85 -0.70 0.59 0.87 0.36 0.80

41

Rates of Return for Fully Funded (2%) with 40/45 years of Contributions. Workers entering Labor Force after the Reform
|OBS GENDER I__ _______ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH MALE FEMALE MALE MALE FEMALE FEMALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE MALE MALE OCCUPATION INCOM
_________ _____

RATES OF RETURN (ANNUAL %) MORTALITY DIFFERENTIALS ____WITHOUT| WITH IDIFFERENC FREQ 100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 18.29 15.30 4.76 11.88 18.89 12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32 2.43 2.15 2.45 1.92 2.29 2.31 2.39 1.19 2.25 3.11 1.90 3.04 1.96 3.07 1.98 1.19 3.08 1.86 1.94 2.64 2.20 1.73 3.06 2.34 1.95 2.09 2.22 1.00 2.02 2.64 2.80 3.04 1.67 2.75 2.67 1.59 2.15 2.09 2.35 2.51 2.19 1.75 1.62 2.42 2.74 2.56 1.75 2.52 1.44 2.09 1.62 2.91 2.33 1.55 3.15 1.44 1.82 3.29 3.15 1.43 1.62 1.29 1.14 1.81 3.25 3.15 3.06 2.55 3.37 1.25 1.73 0.00 -0.36 0.43 0.22 -0.12 -0.64 0.43 0.17 -0.37 0.66 -1.29 0.56 -1.63 0.11 0.43 -0.17 0.47 -0.39 0.51 -0.76 0.09 0.23 0.81 -0.52 -0.47 -0.93 0.14 -0.21 0.61 0.35 0.02 0.88 0.62 -1.42 0.14

ALL ALL ALL CIVIL SERVANI COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MA.NUFAC. SELF OTHER OTHER ALL ALL ALL ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT COMMERCE NMANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVAN1

ALL LOW HIGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH ALL ALL LOW HGH LOW HIGH ALL ALL ALL ALL ALL ALL ALL ALL ALL ALL LOW HIGH 42

Rates of Return for Fully Funded (2%) with 40/45 years of Contributions. Workers entering Labor Force after the Reform
OBS

GENDER

IOCCUPATION tIC |MEI INCOME FREQ


COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER LOW HIGH LOW HIGH LOW LOW HGH LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH 5.82 6.06 10.38 8.51 12.56 9.06 9.25 2.49 3.08 2.75 3.50 3.07 3.01 5.05 4.93 5.71

MORTALITY DIFFERENTIALS
WITHOUT_ WITH

(ANNUAL %) RATES RETURN OF


IDIFFERENCE

36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

MALE MALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE

2.80 1.75 2.84 1.83 1.00 2.76 1.67 3.58 2.21 3.59 2.43 3.98 2.51 1.67 3.76 2.27

1.03 2.05 0.86 1.70 1.14 2.19 1.79 3.80 3.11 3.06 3.29 3.27 3.09 2.55 4.11 3.12

-1.77 0.30 -1.98 -0.13 0.14 -0.57 0.12 0.22 0.90 -0.53 0.86 -0.71 0.58 0.88 0.35 0.85

43

Rates of Return for Fully Funded (5%) with 40/45 years of Contributions. Workers entering Labor Force after the Reform
|OBS
I__

GENDER
I______

OCCUPATION INCOME
__________

INCoMEj

FREQ

RATES OF RETURN (ANNUAL %) MORTALITY DIFFERENTIALS


WITHOUTI WITH TIDFFERENCE

1
2 3 4 5 6 7 8 9 10

11
12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 _ 35 _

BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH

ALL ALL ALL LOW ALL HIGH CIVIL SERVANT ALL COMMERCE ALL MIANUFAC. ALL SELF ALL OTHER ALL CIVIL SERVANT LOW CIVIL SERVANT HIGH COMMERCE LOW COMMERCE HIGH MNANUFAC. LOW

MANUFAC.

HIGH

MALE
FEMALE MALE MALE FEMALE FEMALE MALE MALE MALE MALE MALE -FEMALE FEMALE FEMALE FEMALE FEMALE MALE MALE

SELF LOW OTHER LOW OTHER FHGH ALL ALL ALL ALL ALL LOW ALL HIGH ALL LOW ALL HIGH CIVIL SERVANT ALL COMMERCE ALL MANUFAC. ALL SELF ALL OTHER ALL CIVIL SERVANT ALL COMMERCE ALL NMANUFAC. ALL SELF ALL OTHER ALL CIVIL SERVANT LOW CIVIL SERVANT HIGH 44

100.00 58A44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 18.29 15.30 4.76 11.88 18.89 12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32
2.43

3.62 3.64 3.60 3.77 3.83 3.90 2.23 3.79 4.31 3.52 4.28 3.63 4.32 3.67 2.23 4.31 3.56 3.54 3.81 3.51 3.56 3.96 3.71 3.65 3.76 3.84 2.14 3.72 3.90 4.02 4.18 2.46 3.97 4.10
3.44

3.62 3.29 4.01 3.97 3.71 3.30 2.64 3.97 3.96 4.14 3.06 4.17 2.76 3.79 2.64 4.17 4.01 3.18 4.29 2.80 3.66 4.18 4.46 3.18 3.31 2.95 2.28 3.53 4.48 4.34 4.21 3.31 4.56 2.76
3.59

0.00 -0.35 0.41 0.20 -0.12 -0.60 0.41 0.18 -0.35 0.62 -1.22 0.54 -1.56 0.12 0.41 -0.14 0.45 -0.36 0.48 -0.71 0.10 0.22 0.75 -0.47 -0.45 -0.89 0.14 -0.19 0.58 0.32 0.03 0.85 0.59 -1.34
0.15

Rates of Return for Fully Funded (5%) with 40/45 years of Contributions. Workers entering Labor Force after the Reform
OBS GENDER OCCUPATION INCOME FREQ RATES OF RETURN (ANNUAL %) MORTALITY DIFFERENTIALS WITHOUT_ WITH | DIFFERENCE 4.16 3.58 4.19 3.63 2.14 4.15 3.52 4.56 3.61 4.56 3.78 4.85 3.83 2.46 4.68 3.65 2.49 3.86 2.31 3.53 2.28 3.62 3.66 4.79 4.44 4.07 4.58 4.18 4.40 3.31 5.04 4.44 -1.67 0.28 -1.88 -0.10 0.14 -0.53 0.14 0.23 0.83 -0.49 0.80 -0.67 0.57| 0.85 0.36 0.79

36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

MALE MALE

MALE
MALE MALE

COMMERCE COMMERCE MANUFAC.

LOW

HIGH
LOW HIGH LOW LOW

MANUFAC.
SELF OTHER OTHER CIVIL SERV CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER

MALE
MALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE

HIGH
LOW

HIGH
LOW HIGH LOW HIGH LOW LOW HIlGH

5.82 6.06 10.38 8.51 12.56 9.06 9.25 2.49 3.08 2.75 3.50 3.07 3.01 5.05 4.93 5.71

45

Rates of Return for PAYG, with 30 years of Contributions. Workers entering Labor Force before the Reform
=
OBS GENDER OCCUPATION INCOME

(ANNUAL %) RATES RETURN OF


MORTALITY DIFFERENTIALS

FREQ

WITHOUT|l WITH IDIFFERENCg


I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34
35

BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH MALE FEMALE MALE MALE FEMALE FEMALE MALE NMALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE MALE _ MALE

ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIV1L SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. M[ANUFAC. SELF OTHER OTHER ALL ALL ALL ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT COMMERCE

ALL LOW

HIGH
ALL ALL ALL ALL ALL LOW

HIGH
LOW HIGH LOW HIGH LOW LOW

HIGH
ALL ALL LOW

HIGH
LOW

HIGH
ALL ALL ALL ALL ALL ALL ALL ALL ALL ALL LOW

100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 18.29 15.30 4.76 11.88
18.89

MA.NUFAC.

SELF OTHER CIVIL SERVANT CIVELSERVANT HIGH

12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32 2.43

4.07 4.48 3.77 4.86 4.15 4.14 2.68 4.25 5.22 4.74 5.49 3.51 5.45 3.32 2.68 5.38 3.78 3.55 4.87 4.04 3.19_ 5.22 4.64 4.73 3.83 3.89 2.38 3.28 4.96 4.66 4.81 3.21 5.59 4.44 4.83

4.07 4.07 4.25 5.10 4.01 3.41 3.16 4.44 4.81 5.45 4.03 4.15 3.58 3.43 3.16 5.19 4.30 3.09 5.42 3.14 3.27 5.49 5.50 4.12 3.27 2.78 2.52 3.00 5.62 5.04 4.85 4.18 6.27 2.72 4.97

0.00 -0.41 0.48 0.24 -0.14 -0.731 0.48 0.19 -0.41 0.71 -1.46 0.64 -1.87 0.11 0.48 -0.19 0.52 -0.46 0.55 -0.90 0.08 0.27 0.86 -0.61 -0.56 -1.11 0.14 -0.28 0.66 0.38 0.04 0.97 0.68 -1.72 0.14

46

Rates of Return for PAYG, with 30 years of Contributions. Workers enteringLabor Force before the Reform

I
OBS GENDER 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 MALE MALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE

I
OCCUPATION INCOME

|INCOME RATES RETURN F |EQ OF (ANNUAL %)


FREQ

I
COMMDERCE COMMERCE LOW

MORTALITY DIFFERENTIALS ~~~WITHOUT| WITH |DIFFERENCE 5.16 3.18 5.05 3.12 2.38 4.64 2.68 5.77 4.67 5.99
4.03

HIGH
LOW

MANUFAC.
MNANUFAC. SELF OTHER OTHER CIVIL SERVANf CIVIL SERVAN COMMERCE COMMERCE

HIGH
LOW LOW

HIGH
LOW

HIGH
LOW

HIGH HIGH
LOW LOW

NLANUFAC. LOW
NLANUFAC.
SELF OTHER OTHER

HIGH

5.82 6.06 10.38 8.51 12.56 9.06 9.25 2.49 3.08 2.75 3.50 3.07 3.01 5.05 4.93 5.71

3.06 3.51 2.71 2.93 2.52 3.92 2.80 6.05 5.61 5.45
4.96

6.59 3.82 3.21 6.41 5.26

5.86 4.48 4.18 6.83 6.15

-2.10 0.33 -2.34 -0.19 0.14 -0.72 0.12 0.28 0.94 -0.54 0.93 -0.73 0.66 0.97 0.42 0.89

47

Rates of Return for Fully Funded (2%) with 30 years of Contributions. Workers enteringLabor Force before the Reform
RATES OF RETURN (ANNUAL %)

OBS
I
_

GENDER

OCCUPATION INCOME FREQ


I________
__WITHOUTI

MORTALITY DIFFERENTIALS
WITH 3.88 4.34 3.54 4.55 3.98 4.02 2.57 4.02 5.08 4.36 5.31 3.35 5.31 3.21 2.57 5.22 3.51 3.45 4.57 3.95 3.06 5.00 4.28 4.44 3.71 3.80 2.31 3.21 4.63 4.42 4.62 3.05 5.19 4.39 4.46 3.88 3.93 4.02 4.79 3.85 3.28 3.05 4.21 4.67 5.08 3.84 3.99 3-43 3.32 3.05 5.03 4.04 2.98 5.13 3.05 3.14 5.27 5.16 3.82 3.15 2.68 2.45 2.93 5.30 4.81 4.66 4.02 5.88 2.67 4.61 IDIFFERENCE 0.00 -0.41 0.48 0.24 -0.13 -0.74 0.48 0.19 -0.41 0.72 -1.47 0.64 -1.88 0.11 0.48 -0.19 0.53 -0.47 0.56 -0.90 0.08 0.27 0.88 -0.62 -0.56 -1.12 0.14 -0.28 0.67 0.39 0.04 0.97 0.69 -1.72 0.15

ALL 2 ALL 3 ALL 4 CIVIL SERVANT 5 COMMERCE 6 M[ANUFAC. 7 SELF 8 OTHER 9 CIVIL SERVANT 10 CIVIL SERVANT 11 COMMDERCE 12 COMMERCE 13 MANUFAC. 14 MANUFAC. 15 SELF 16 OTHER 17 OTHER 18 _MALE ALL 19 FEMALE ALL 20 MALE ALL 21 -MALE ALL 22 FEMALE ALL 23 FEMALE ALL 24 MALE CIVIL SERVANT 25 MAb4LE COMMDERCE 26 -MALE MANUFAC. 27 MALE SELF 28 MALE OTHER 29 FEMALE CIVIL SERVANT 30 FEMALE COMMERCE 31 FEMALE MANUFAC. 32 FEM[ALE SELF 33 FEMALE OTHER 34 MALE CIVIL SERVANT 35_ MALE CIVIL SERVANT

BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH

ALL LOW

HIGH
ALL ALL ALL ALL ALL LOW

HIGH
LOW

HIGH
LOW

HIGH
LOW LOW

HIGH
ALL ALL LOW

HIGH
LOW

HIGH
ALL ALL ALL ALL ALL ALL ALL ALL ALL ALL LOW HIGH 48

100.00 58.44 41.56 10.3-3 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 - 18.29 15.30 4.76 11.88 18.89 12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32 2.43

Rates of Returnfor Fully Funded (2%) with 30 years of Contributions. WorkersenteringLabor Forcebefore the Reform
% (ANNUAL RATESOFRETURN
OBS GENDER OCCUPATION INCOME FREQ

WITH IDIFFERENCE 1WITHOUTi


5.03 3.07 4.94 3.04 2.31 4.58 2.62 5.58 4.28 5.75 3.80 6.38 3.65 3.05 6.16 4.80 2.92 3.40 2.59 2.84 2.45 3.86 2.74 5.86 5.23 5.20 4.74 5.64 4.31 4.02 6.58 5.71 -2.11 0.33 -2.35 -0.20 0.14 -0.72 0.12 0.28 0.95 -0.55 0.94 -0.74 0.66 0.97 0.42 0.91

MORTALITY DIFFERENTIALS

36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

MALE MALE MALE MALE MALE MALE


XMALE

FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE

COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER

LOW HIGH LOW HGH LOW LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW LOW FHGH

5.82 6.06 10.38 8.51 12.56 9.06 9.25 2.49 3.08 2.75 3.50 3.07 3.01 5.05 4.93 5.71

49

Rates of Return for Fully Funded (5%) with 30 years of Contributions. Workers entering Labor Force before the Reform
OBS GENDER
E _
I

OCCUPATION INCOME FREQ


_WWIITH ALL LOW HIGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH ALL ALL LOW HIGH LOW HIGH ALL ALL ALL ALL ALL ALL ALL ALL ALL ALL LOW HGH 50 100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 18.29 15.30 4.76 11.88 18.89 12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32 2.43

RATES OFRETURN(ANNUAL%) MORTALITYDIFFERENTIALS


IDIFFERENCEI 4.06 4.48 3.77 4.75 4.17 4.21 2.68 4.22 5.21 4.58 5.46 3.57 5.46 3.42 2.68 5.36 3.74 3.65 4.72 4.11 3.32 5-11 4.46 4.68 3.93 4.00 2.44 3.44 4.80 4.57 4.75 3.13 5.35 4.55 4.72 4.06 4.07 4.24 4.99 4.04 3.47 3.16 4.41 4.80 5.30 4.00 4.21 3.59 3.54 3.16 5.17 4.26 3.19 5.28 3.21 3.39 5.38 5.33 4.06 3.37 2.89 2.58 3.17 5.46 4.96 4.79 4.11 6.03 2.84 4.87 0.00 -0.410.47 0.24 -0.13_ -0.74 0.48 0.19 -0.41 0.72 -1.46 0.64 -1.87 0.12 0.48 -0.19 0.52 -0.46 0.56 -0.90 0.07 0.27 0.87 -0.62 -0.56 -1.11 0.14 -0.27 0.66 0.39 0.04 0.98 0.68 -1.71 0.15

I BOTH 2 BOTH 3 BOTH 4 BOTH 5 BOTH 6 BOTH 7 BOTH BOTH 8 9 BOTH 10 BOTH 11 BOTH 12 BOTH 13 BOTH 14 BOTH 15 BOTH 16 BOTH 17 BOTH 18 _MALE 19 FEMALE 20 MALE 21 MALE 22 FEMALE 23 FEMALE 24 MALE 25 MALE 26 MALE 27 MALE 28 MALE 29 FEMALE 30 FEMALE 31 FEMALE 32 FEMALE 33 FEMALE 34 MALE 35 MALE

ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTBER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER ALL ALL ALL ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT COMMERCE NMANUFAC. SELF OTHER CIVIL SERVAN1 CIVIL SERVAN1

Rates of Return for Fully Funded (5%) with 30 years of Contributions. Workers entering Labor Force before the Reform

I
OBS GENDER 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 MALE MALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE

OCCUPATION INCOME

2 IIRATES
FREQ 5.82 6.06 10.38 8.51 12.56 9.06 9.25 2.49 3.08 2.75 3.50 3.07 3.01 5.05 4.93 5.71

OF RETURN (ANNUAL%)

MORTALITY DIFFERENTIALS

WITHOUTI WITH |DIFFERENCE


COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE LOW HIGH LOW HIGH LOW LOW HIGH LOW HIGH LOW HIGH LOW 5.20 3.32 5.11 3.28 2.44 4.74 2.88 5.69 4.47 5.87 3.97 6.48 3.81 3.13 6.27 4.98 3.10 3.65 2.77 3.08 2.58 4.02 3.00 5.97 5.41 5.33 4.91 5.74 4.47 4.11 6.69 5.88 -2.10 0.33 -2.34 -0.20 0.14 -0.72 0.12 0.28 0.94 -0.54 0_94 -0_74 0_66 0.98 0_42 0.90

MANUFAC. MANUFAC.
SELF OTHER OTHER

HIGH
LOW LOW HIGH

51

Rates of Return for PAYG, with 40/45 years of Contributions. Workers entering Labor Force before the Reform
OBS
I

GENDER
_

OCCUPATION INCOME

FREQ

RATES OF RETURN (ANNUAL %) MORTALITY DIFFERENTIALS


WITHOUTI WITH IDIFFERENCE

1
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34
35

BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH _ BOTH BOTH BOTH BOTH BOTH MALE FEMALE MALE MALE FEMALE FEMALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE MALE _ MALE

ALL ALL ALL LOW ALL HIGH CIVIL SERVANT ALL CONMMERCE ALL. MIANUFAC. ALL SELF ALL OTHER ALL CIVIL SERVANT LOW CIVIL SERVANT HIGH COMMERCE LOW COMMERCE HIGH M[ANUFAC. LOW

MANUFAC.

HIGH

SELF LOW OITIER LOW OTHER HIGH ALL ALL ALL ALL ALL LOW ALL HIGH ALL LOW ALL HIGH CIVIL SERVANT ALL COMAMERCE ALL NA>NUFAC. ALL SELF ALL OTHER ALL CIVIL SERVANT ALL COMMERCE ALL NAkNUFAC. ALL SELF ALL OTHER ALL CIVIL SERVANT LOW CIVIL SERVANT HIGH 52

100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 18.29 15.30 4.76 11.88 18.89 12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32 2.43

3.05 3.10 3.01 4.01 3.16 2.98 1.64 3.27 3.64 4.14 3.99 2.75 3.84 2.43 1.64 3.75 3.06 2.62 3.94 2.71 2.54 3.95 3.93 3.84 2.87 2.77 1.35 2.51 4.19 3.78 3.75 2.33 4.56 2.93 4.15

3.05 2.75 3.43 4.21 3.04 2.35 2.06 3.44 3.28 4.74 2.75 3.30 2.25 2.54 2.06 3.59 3.51 2.24 4.42 1.97 2.63 4.18 4.68 3.37 2.41 1.85 1.49 2.31 4.76 4.11 3.77 3.18 5.14 1.51 4.30

0.00 -0.35 0.42 0.20 -0.12 -0.63 0.42 0.17 -0.36 0.60 -1.24 0.55 -1.59 0.11 0.42 -0.16 0.45 -0.38 0.48 -0.74 0.09 0.23 0.75 -0.47 -0.46 -0.92 0.14 -0.20 0.57 0.33 0.02 0.85 0.58 -1.42 0.15

Rates of Return for PAYG, with 40/45 years of Contributions. Workers entering Labor Force before the Reform
OBS GENDER OCCUPATION INCOME FREQ RATES OF RETURN (ANNUAL %) MORTALITY DIFFERENTIALS
WITHOUT| WIT"H

IDEFFERENCE
-1.71 0.29 -1.94 -0.13 0.14I -0.57 0.12 0.23 0.82 -0.49 0.83 -0.67 0.58 0.85 0.36 0.77

36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

MALE MALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE

COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER

LOW HIGH LOW HIGH LOW LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH

5.82 6.06 10.38 8.51 12.56 9.06 9.25 2.49 3.08 2.75 3.50 3.07 3.01 5.05 4.93 5.71

3.67 2.48 3.56 2.25 1.35 3.14 2.23 4.34 4.13 4.67 3.34 4.90 3.06 2.33 4.87 4.43

1.96 2.77 1.62 2.12 1.49 2.57 2.35 4.57 4.95 4.18 4.17 4.23 3.64 3.18 5.23 5.20

53

Rates of Return for Fully Funded (2%) with 40/45 years of Contributions.

Workers entering Labor Force before the Reform


=
I ___ _ ________

OBS GENDER OCCUPATION INCOME FREQ MORTALITY DIFFERENTIALS


____________ ______ _____

(ANNUAL %) RATESOFRETURN
WITHOUT| WITH IFFERENC

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH MALE FEMALE MALE MALE FEMALE FEMALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE MALE MALE

ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER ALL ALL ALL ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT COMNMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT

ALL LOW
HIGH

ALL ALL ALL ALL ALL LOW HGH LOW HIGH LOW HIGH LOW LOW HGH ALL ALL LOW HIGH LOW HIGH ALL ALL ALL ALL ALL ALL ALL ALL ALL ALL LOW HIGH 54

100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 18.29 15.30 4.76 11.88 18.89 12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32 2.43

2.72 2.86 2.61 3.50 2.87 2.80 1.45 2.83 3.31 3.56 3.71 2.45 3.66 2.24 1.45 3.46 2.54 2.56 3.08 2.67 2.48 3.33 2.90 3.71 2.81 2.72 1.32 2.48 3.22 3.01 3.10 1.81 3.54 2.90 4.00

2.72 2.50 3.03 3.70 2.75 2.16 1.88 3.00 2.94 4.19 2.45 3.01 2.05 2.35 1.88 3.30 3.01 2.19 3.58 1.93 2.57 3.56 3.69 3.24 2.35 1.80 1.46 2.27 3.82 3.35 3.12 2.69 4.14 1.49 4.14

0.00 -0.36 0.42 0.20 -0.12 -0.64 0.43 0.17 -0.37 0.63 -1.26 0.56 -1.61 0.11 0.43 -0.16 0.47 -0.37 0.50 -0.74 0.09 0.23 0.79 -0.47 -0.46 -0.92 0.14 -0.21 0.60 0.34 0.02 0.88 0.60 -1.41 0.14

Rates of Return for Fully Funded (2%) with 40/45 years of Contributions. Workers entering Labor Force before the Reform

OBS GENDER OCCUPATION FREQMORTALITY INCOME DIFFERENTIALS


WITHOUT| 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 MALE MALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE FEMALE COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER LOW HIGH LOW HIGH LOW LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH 5.82 6.06 10.38 8.51 12.56 9.06 9.25 2.49 3.08 2.75 3.50 3.07 3.01 5.05 4.93 5.71 3.60 2.42 3.50 2.21 1.32 3.11 2.19 3.75 3.00 3.98 2.53 4.31 2.37 1.81 4.18 3.25 WITH IDIFFERENCTE 1.89 2.71 1.56 2.08 1.46 2.54 2.32 3.98 3.87 3.46 3.38 3.61 2.96 2.69 4.54 4.06 -1.71 0.29 -1.94 -0.13 0.14 -0.57 0.13 0.23 0.87 -0.52 0.85 -0.70 0.59 0.88 0.36 0.81

RATES OF RETURN (ANNUAL %)

55

Rates of Return for Fully Funded (5%) with 40/45 years of Contributions. Workers entering Labor Force before the Reform

DIFFERENTALSI INCOME OCCUPATION FREQMORTALITY GENDER |_OBS


OBS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 _ G ER OCCUPATIONFREQ ALL ALL ALL CIVIL SERVANT COMMERCE MANUiFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER ALL ALL ALL ALL ALL ALL CIVIL SERVANT COMNMERCE MANUFAC. SELF OTHER CIVIL SERVAN COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVAN ALL LOW HIGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH ALL ALL LOW HIGH LOW HIGH ALL ALL ALL ALL ALL ALL ALL ALL ALL ALL LOW HIGH 56 100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 66.41 33.59 40.15 26.26 18.29 15.30 4.76 11.88 18.89 12.56 18.32 5.57 6.25 6.09 5.05 10.64 2.32 2.43 WITHOUTL WITH D 2.82 2.94 2.74 3.61 2.98 2.90 1.52 2.95 3.40 3.69 3.80 2.58 3.74 2.36 1.52 3.54 2.68 2.67 3.19 2.75 2.61 3.41 3.04 3.82 2.92 2.83 1.38 2.60 3.35 3.13 3.21 1.88 3.65 2.99 4.11 2.82 2.58 3.16 3.82 2.86 2.27 1.94 3.12 3.03 4.31 2.54 3.14 2.14 2.48 1.94 3.38 3.14 2.30 3.69 2.01 2.70 3.64 3.83 3.35 2.46 1.91 1.52 2.40 3.94 3.47 3.23 2.75 4.26 1.58 4.26 DIFRERENCN 0.00 -0.36 0.42 0.21 -0.12 -0.63 0.42 0.17 -0.37 0.62 -1.26 0.56 -1.60 0.12 0.42 -0.16 0.46 -0.37 0.50 -0.74 0.09 0.23 0.79 -0.47 -0.46 -0 92 0.14 -0.20 0.59 0.34 0.02 0.87 0.61 -1.41 0.15 BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH BOTH MALE FEMALE MALE MALE FEMALE -FEMALE MALE MALE MALE MALE MALE FEMALE FEMALE FEMALE FEMALE FEMALE MALE MALE

RATES OF RETURN(ANNUAL%)

Rates of Return for Fully Funded (5%) with 40/45 years of Contributions.

Workers entering Labor Force before the Reform


RATES RETURN OF (ANNUAL %)
OBS GENDER OCCUPATION INCOME
I I I

FREQ

I
I I

MORTALITY DIFFERENTIALS ~~~~~~~~~~~~~~WITHOUT WITH TDIFFERENCE


I I~-

ITw

1DrKC

36 37
|38 |39

MALE

COMMERCE

NlALE MALE MALE


MIALE MALE

HIUGH 6.06 COMNIEMRCE


NLAN"UFAC. LOW
M[ANrUFAC.

LOW

5.82

40
41 42

MALE

SELF

HIGH

10.38 8.51

3.69 2.55 3.59 2.33


1.38

1.98 2.84 1.65 2.20


1.52 2.63

-1.71 0.29 -1.94 | -0.13


0.14 -0.56

LOW-

12.56
9.06 _RGH 9.25
2.49 3.08

43_
44

OTBER LOW OTHER FEMALE CIVIL SERVANT LOW FEMALE CIVILSERVANTHIGH

45 46 47 48

FEMLALE

COMMERCE FEMLALE COMMERCE

FEMALE FEM_ALE MNLANUFAC. HIGH


FEMALE FEMALE FEMALE SELF OTHER OTHER LOW LOW

LOW IHGH MMANUFAC. LOW

49 50 51

HIGH

2.75 3.50 3.07 3.01 5.05 4.93 5.71

3.19 2.33 3.83 3.15 4.06 2.66 4.38 2.49 1.88 4.27 3.39

2.46 4.06 4.01 3.55 3.51 3.69 3.08 2.75 4.62 4.19

0.13 0.23 0.86 -0.51 0.85 -0.69 0.59 0.87 0.35 0.80

57

11. APPENDIX B. RATES OF RETURN BY SOCIOECONOMIC CHARACTERISTICS FOR DIFFERENT RETIREMENT SCHEMES. MARRIED MALES. INCLUDING SURVIVOR'S BENEFITS FOR SPOUSES.

58

Rates of Return for PAYG, with 30 years of Contributions. Workers entering Labor Force after the Reform Male workers. Includes survivors' benefits for wives five years younger
OBS GENDER OCCUPATION INCOME FREQ RATES OF RETURN (ANNUAL %) MORTALITY DIFFERENTIALS WITHOUT| WITH I DIFFERENCE 3.91 4.56 3.40 4.82 4.10 4.21 3.20 3.59 4.86 4.81 5.49 3.41 5.40 3.40 3.20 5.05 2.93 3.91 4.38 3.64 4.94 4.01 3.87 3.52 3.69 4.70 5.09 4-83 3.76 4.61 3.50 3.52 4.96 3.22 0.00 -0.18 0.24 0.12 -0.09 -0.34 0.32 0.10 -0.16 0.28 -0.66 0.35 -0.79 0.10 0.32 -0.09 0.29

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE

ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMM:ERCE MANUFAC. MANUFAC. SELF OTHER OTHER

ALL LOW HIGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH

100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96

58

Rates of Return for Fully Funded (2%) with 30 years of Contributions. Workersentering Labor Force after the Reform Maleworkers. Includes survivors' benefitsfor wives five years younger
OBS GENDER OCCUPATION INCOME

_
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER ALL LOW HIGH ALL ALL ALL ALL ALL LOW HGH LOW HIGH LOW HIGH LOW LOW HIGH

RATES OF RETURN (ANNUAL %) FREQ MORTALITY DIFFERENTIALS ~~~~~~~~~~~~WITHOUT1 WITH |DIFFERENCI 100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 3.38 4.16 2.75 3.14 3.47 3.77 2.90 3.27 4.68 2.43 4.82 2.81 4.88 3.03 2.90 4.79 2.58 3.38 3.98 3.00 3.27 3.38 3.42 3.22 3.37 4.51 2.76 4.13 3.17 4.06 3.13 3.22 4.70 2.88 0.00 -0.18 0.25 0.13 -0.09 -0.35 0.32 0.10 -0.17 0.33 -0.69 0.36 -0.82 0.10 0.32 -0.09 0.30

59

Rates of Return for Fully Funded (5%) with 30 years of Contributions. Workers entering Labor Force after the Reform Male workers. Includes survivors' benefits for wives five years younger
RATESOFRETURN (ANNUAL %)
OBS GENDER OCCUPATION INCOME FREQ MORTALITY DIFFERENTIALS
WITHOUT7 WITH
_DIFERENC

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE

ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVAN COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER

ALL LOW HIGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH

100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96

4.31 4.82 3.92 4.18 4.46 4.70 3.40 4.32 5.43 3.62 5.54 3.97 5.59 4.14 3.40 5.52 3.81

4.31 4.65 4.16 4.30 4.38 4.37 3.72 4.42 5.27 3.92 4.88 4.30 4.80 4.24 3.72 5.44 4.09

0.00 -0.17 0.24 0.12 -0.08 -0.33 0.32 0.10 -0.16 0.30 -0.66 0.33 -0.79 0.10 0.32 -0.08 0.28

60

Rat.es of Return for PAYG, with 40/45 years of Contributions. Workers entering Labor Force after the Reform Male workers. Includes survivors' benefits for wives five years younger

OBS

jGENDER INCOME FREQ OCCUPATION _


MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVILSERVAN COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER ALL LOW HIGH ALL ALL ALL ALL ALL LOW I GH LOW HIGH LOW HIGH LOW LOW HIGH 100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96

RATES OF RETURN(ANNUAL%) MORTALITYDIFFERENTIALS

WIT-H JDIFFERENCQ ~~~~~~~~~~~~WITHOUT|


2.66 2.93 2.44 3.63 2.83 2.79 1.83 2.51 3.08 3.83 3.70 2.39 3.62 2.23 1.83 3.27 2.15 2.66 2.74 2.69 3.70 2.74 2.46 2.15 2.62 2.85 4.11 3.03 2.73 2.80 2.34 2.15 3.20 2.44 0.00 -0.19 0.25 0.07 -0.09 -0.33 0.32 0.11 -0.23 0.28 -0.67 0.34 -0.82 0.11 0.32 -0.07 0.29

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

61

Rates of Return for Fully Funded (2%) with 40/45 years of Contributions. Workersentering LaborForce after the Reform Male workers. Includes survivors' benefits for wives five years younger
OBS GENDER OCCUPATION INCOME RATES OF RETURN (ANNUAL %) FREQ MORTALITY DIFERENTIALS |WITHOUT|WI TH IDIFFERENCE 100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 L 14.96 2.36 2.73 2.06 2.34 2.48 2.62 1.69 2.40 3.12 1.94 3.27 2.08 3.32 2.17 1.69 3.23 1.99 2.36 2.54 2.31 2.43 2.39 2.28 2.01 2.51 2.90 2.26 2.58 2.43 2.48 2.28 2.01 3.15 2.28 0.00 -0.19 0.25 0.09 -0.09 -0.34 0.32 0.11 -0.22 0.32 -0.69 0.35 -0.84 0.11 0.32 -0.08 0.29

I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE

ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER

ALL LOW HIGH ALL ALL ALL ALL ALL LOW HGH LOW HIGH LOW HIGH LOW LOW HIGH

62

Rates of Return for Fully Funded (5%) with 40/45 years of Contributions. Workers entering Labor Force after the Reform Male 'workers. Includes survivors' benefits for wives five years younger
OBS GENDER
_ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE NMALE ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER ALL LOW IEGH ALL ALLALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH 100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96

OCCUPATION INCOME FREQ

RATESOF RETURN(ANNUAL%) MORTALITY DIFFERENTIALS


~~~~~~~~~~~~WITHOUTI WITH IDIFFEREN(fl 3.70 3.78 3.65 3.79 3.89 3.98 2.56 3.84 4.29 3.54 4.38 3.66 4.41 3.72 2.56 4.36 3.60 3.70 3.60 3.88 3.86 3.80 3.66 2.87 3.95 4.08 3.83 3.73 3.98 3.63 3.84 2.87 4.30 3.87 0.00 -0.18 0.23 0.07 -0.09 -0.32 0.31 0.11 -0.21 0.29 -0.65 0.32 -0.78 0.12 0.31 -0.06 0.27

63

Rates of Return for PAYG, with 30 years of Contributions. Workers enteringLabor Force before the Reform Male workers. Includes survivors' benefits for wives five years younger
OBS GENDER OCCUPATION INCOME FREQ RATES OF RETURN (ANNUAL %) MORTALITY DIFFERENTIALS

WIT-HOU-T| WITH |DIFFERENCW

.~~~~~.6
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVAN COMMERCE COMMERCE _MANUFAC. MA.NUFAC. SELF OTHER OTHER ALL LOW RHGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH 100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 4.77 5.22 4.42 5.99 5.03 5.08 3.66 4.48 5.57 6.13 6.32 4.42 6.20 4.33 3.66 5.77 3.92 4.77 5.05 4.66 6.09 4.95 4.75 3.97 4.58 5.42 6.39 5.70 4.74 5.43 4.43 3.97 5.69 4.20 0.00 -0.17 0.24 0.10 -0.08 -0.33 0.31 0.10 -0.15I 0.26 -0.62 0.32 -0.77 0.10 0.31 -0.08 0.28

64

Rates of Return for Fully Funded (2%) with 30 years of Contributions. Workers entering Labor Force before the Reform Male workers. Includes survivors' benefits for wives five years younger
= OBS GENDER
l________

OCCUPATION INCOME FREQ


___________ ___

RATESOF RETURN(ANNUAL%) MORTALITY DIFFERENTIALS


WITH
_D__ERENC

WWITHOUT|
4.46 4.81 4.28 5.56 4.61 4.46 3.79 4.29 5.22 5.75 5.37 4.39 5.15 4.12 3.79 5.47 3.88 0.00 -0.18 0.23 0.11 -0.08 -0.32 0.31 0.10 -0.15 0.27 -0.64 0.34 -0.77 0.10 0.31| -0.09 0.28

I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE

ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVAN COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER

ALL LOW HIGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH

100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96

4.46 4.99 4.05 5.45 4.69 4.78 3.48 4.19 5.37 5.48 6.01 4.05 5.92 4.02 3.48 5.56 3.60

65

Rates of Return for Fully Funded (5%) with 30 years of Contributions. Workers entering Labor Force before the Reform Male workers. Includes survivors' benefitsfor wives five years younger
I
OBS

GENDER

I_________
_____.

OCCUPATION INCOME

%) (ANNUAL jRATES OFRETURN FREQ MORTALITY DIFFERENTIALS

WITH IDIFFERENC WITHOUTI


100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96 4.60 5.10 4.23 5.62 4.85 4.93 3.56 4.36 5.48 5.66 6.14 4.23 6.04 4.19 3.56 5.67 3.79 4.60 4.92 4.46 5.72 4.77 4.60 3.87 4.46 5.33 5.93 5.50 4.57 5.27 4.29 3.87 5.59 4.07 0.00l -0.18 0.23 0.10 -0.08 -0.33 0.31 0.10 -0.15 0.27 -0.64 0.34 -0.77 0.10 0.31 -0.08 0.28

I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

MALE MALE

MALE
MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE

MALE
MALE MALE MALE

ALL ALL ALL LOW ALL HIGH CIVIL SERVANT ALL COMMERCE ALL NMANUFAC. ALL ALL SELF ALL OTHER CIVIL SERVANT LOW CIVIL SERVANT HIGH LOW COMMERCE COOMMERCE HIGH LOW MANUFAC. MLANUFAC. HIGH LOW SELF LOW OTHER HIGH OTHER

66

Rates of Return for PAYG, with 40/45 years of Contributions. Workers entering Labor Force before the Reform Male 'workers. Includes survivors' benefitsfor wives five years younger
RATES OF RETURN (ANNUAL %/O)
OBS GENDER OCCUPATION INCOME FREQ MORTALITY DIFFERENTIALS

_BS GENDER 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 MALE MALE MALE MALE MALE MALE MALE


_MALE

OCCUPATIONQ ALL ALL ALL LOW ALL HIGH CIVIL SERVANT ALL COMMERCE ALL MANUFAC. ALL SELF ALL
OTHER ALL

MWITHOUTA YDIFFERENCE WITH 100.00 58.44 41.56 10.33 18.13 24.98 17.61
28.95

3.54 3.61 3.48 4.74 3.78 3.67 2.34


3.44

3.54 3.43 3.71 4.81 3.69 3.35 2.65


3.55

0.00I -0.18 0.23 0.07 -0.09 -0.32 0.31


0.11

MALE MALE MALE MALE MALE MALE MALE MALE MALE

CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. M.ANUFAC. SELF OTHER OTHER

LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH

4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96

3.80 5.06 4.53 3.41 4.41 3.17 2.34 4.00 3.18

3.58 5.33 3.88 3.73 3.63 3.29 2.65 3.94 3.46

-0.22 0.27 -0.65 0.32 -0.78 0.121 0.31 -0.06 0.28

67

Rates of Return for Fully Funded (2%) with 40/45 years of Contributions. Workers entering Labor Force before the Reform Male workers. Includes survivors' benefits for wives five years younger
OBS I
__

GENDER
________

OCCUPATION INCOME
_________ _____

FREQ
_____

RATES OF RETURN (ANNUAL %) | MORTALITY DIFFERENTIALS WITHOUTI WITH IDIFFERENCFJ 3.38 3.49 3.29 4.50 3.61 3.52 2.24 3.29 3.69 4.78 4.38 3.23 4.28 3.02 2.24 3.89 3.02 3.38 3.31 3.53 4.57 3.52 3.20 2.55 3.40 3.47 5.05 3.73 3.56 3.48 3.14 2.55 3.82 3.30 0.00 -0.18 0.24 0.07 -0.09 -0.32 0.31 0.11 -0.22 0.27 -0.65 0.33 -0.80 0.12 0.31 -0.07 0.28

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

MALE MALE MALE MALE MALE MVALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE MALE

ALL ALL ALL CIVIL SERVANT COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANNUFAC. SELF OTHER OTHER

ALL LOW HIGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH

100.00 58.44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96

68

Rates of Return for Fully Funded (5%) with 40/45 years of Contributions. Workers entering Labor Force before the Reform

Male workers. Includes survivors' benefits for wives five years younger
_ = OBS

jGENDER INCOME FREQ OCCUPATION


____ ___________

RATES OF RETURN(ANNUAL%)

MORTALITY DIFFERENTIALS |
WITH
_IFFERENC

______WITHOUTI

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

MALE MALE -MALE MALE MALE -MALE MALE MALE MALE MALE MALE MALE MALE MALE _MALE MALE MALE

ALL ALL ALL CIVIL SERVANf COMMERCE MANUFAC. SELF OTHER CIVIL SERVANT CIVIL SERVANT COMMERCE COMMERCE MANUFAC. MANUFAC. SELF OTHER OTHER

ALL LOW IHIGH ALL ALL ALL ALL ALL LOW HIGH LOW HIGH LOW HIGH LOW LOW HIGH

100.00 58A44 41.56 10.33 18.13 24.98 17.61 28.95 4.81 5.52 8.57 9.56 13.46 11.52 17.61 13.99 14.96

3.45 3.54 3.38 4.57 3.69 3.59 2.28 3.38 3.75 4.86 4.44 3.32 4.34 3.10 2.28 3.95 3.12

3.45 3.36 3.62 4.64 3.60 3.27 2.59 3.49 3.53 5.13 3.79 3.65 3.55 3.22 2.59 3.88 3.39

0.00 -0.18 0.24 0.07 -0.09 -0.32 0.31 0.11 -0.22 0.27 -0.65 0.33 -0.79 0.12 0.31 -0.07 0.27

69