NOT FOR QUOTATION . WITHOUT PERMISSION
OF THE AUTHOR
A G I N G AND SOCIAL SECURITY I N MEXICO
R o b e r t o H a m
E Z C o Z e g i o d e .Mexico, M e x i c o C i t y
J a n u a r y 1983 CP-83-1
C o Z Z a b o r a t i v e P a p e r s r e p o r t work which h a s n o t been p e r f o r m e d s o l e l y a t t h e I n t e r n a t i o n a l I n s t i t u t e f o r A p p l i e d Systems A n a l y s i s and which h a s r e c e i v e d o n l y l i m i t e d r e v i e w . V i e w s o r o p i n i o n s e x p r e s s e d h e r e i n do n o t n e c e s s a r i l y r e p r e s e n t t h o s e o f t h e I n s t i t u t e , i t s N a t i o n a l Member O r g a n i z a t i o n s , o r o t h e r o r g a n i - z a t i o n s s u p p o r t i n g t h e work.
INTERNATIONAL INSTITUTE FOR APPLIED SYSTEMS ANALYSIS A-2361 L a x e n b u r g , A u s t r i a
FOREWORD
Low f e r t i l i t y l e v e l s i n many c o u n t r i e s a r e c r e a t i n g a g i n g p o p u l a t i o n s whose demands f o r h e a l t h c a r e and income maintenance
( s o c i a l s e c u r i t y ) w i l l i n c r e a s e t o u n p r e c e d e n t e d l e v e l s , t h e r e b y c a l l i n g f o r t h p o l i c i e s t h a t w i l l promote i n c r e a s e d f a m i l y c a r e . and w o r k l i f e f l e x i b i l i t y . The P o p u l a t i o n P r o j e c t a t IIASA i s examining c u r r e n t p a t t e r n s o f p o p u l a t i o n a g i n g and changing l i f e - s t y l e s , p r o j e c t i n g t h e needs f o r h e a l t h and income s u p p o r t t h a t s u c h p a t t e r n s a r e l i k e l y t o g e n e r a t e d u r i n g t h e n e x t s e v e r a l d e c a d e s , and c o n s i d e r i n g a l t e r n a t i v e f a m i l y and employment
p o l i c i e s t h a t might r e d u c e t h e s o c i a l c o s t s o f meeting t h e s e n e e d s . The p r o j e c t i s s e e k i n g t o d e v e l o p a b e t t e r u n d e r s t a n d i n g of how low f e r t i l i t y and m o r t a l i t y combine t o c r e a t e a g i n g popula- t i o n s , w i t h h i g h demands f o r h e a l t h and income m a i n t e n a n c e , and reduced f a m i l y s u p p o r t systems t h a t can p r o v i d e t h a t maintenance.
The r e s e a r c h w i l l produce a n a l y s e s of c u r r e n t demographic p a t - t e r n s , p r i m a r i l y i n IIASA c o u n t r i e s , t o g e t h e r w i t h an a s s e s s m e n t o f t h e i r p r o b a b l e f u t u r e s o c i e t a l consequences and i m p a c t s on t h e a g i n g . I t w i l l c o n s i d e r t h e p o s i t i o n of t h e e l d e r l y w i t h i n changing f a m i l y s t r u c t u r e s , review n a t i o n a l p o l i c i e s t h a t promote a n e n l a r g e d r o l e f o r f a m i l y c a r e , and examine t h e c o s t s and
b e n e f i t s of a l t e r n a t i v e systems f o r e n c o u r a g i n g w o r k l i f e f l e x i - b i l i t y by t r a n s f e r r i n g income between d i f f e r e n t p e r i o d s of l i f e .
Although n o t a member of IIASA, Mexico 0 f f e r s . a p a r t i c u l a r l y i n t e r e s t i n g example of a c o u n t r y whose p o p u l a t i o n a g i n g h a s o n l y s t a r t e d . Mexico h a s a young p o p u l a t i o n s t r u c t u r e and a combina-
t i o n o f p u b l i c and p r i v a t e p e n s i o n s y s t e m s . F e r t i l i t y a p p a r e n t l y h a s begun t o d e c l i n e , and t h e number of e l d e r l y p e o p l e i s e x p e c t e d t o r i s e s h a r p l y i n t h e f u t u r e . I n t h i s p a p e r , Roberto H a m , t h e d i r e c t o r o f t h e P o p u l a t i o n and Urban Development C e n t e r a t E l C o l e g i o deMexico examines t h e e v o l u t i o n of Mexico's a g i n g pop- u l a t i o n and d e s c r i b e s c u r r e n t s o c i a l s e c u r i t y p o l i c i e s .
R e l a t e d IIASA p u b l i c a t i o n s a p p e a r a t t h e end of t h i s p a p e r . Andrei Rogers
Leader
P o p u l a t i o n P r o j e c t
C O N T E N T S
1 . I N T R O D U C T I O N
2 . T H E A G I N G O F A P O P U L A T I O N
3 . DEMOGRAPHIC BACKGROUND
4 . E V O L U T I O N O F AN A G I N G P O P U L A T I O N
5. A DEMOGRAPHIC MEASUREMENT O F OLD-AGE DEPENDENCY 6 . OLD-AGE DEPENDENCY AND ECONOMIC A C T I V I T Y
7 . S O C I A L S E C U R I T Y AND R E T I R E M E N T P E N S I O N S 8 . T H E MEXICAN P E N S I O N S Y S T E M
9 . SOME F E A T U R E S O F T H E MEXICAN P E N S I O N S U B S Y S T E M S R E F E R E N C E S
A G I N G AND SOCIAL SECURITY I N MEXICO
1 . INTRODUCTION
A s t h e y e a r 2 0 0 0 a p p r o a c h e s , w e f i n d o u r s e l v e s a n t i c i p a t i n g t h e t w e n t y - f i r s t c e n t u r y and what it h o l d s f o r u s and i n
p a r t i c u l a r f o r p o p u l a t i o n s t h r o u g h o u t t h e w o r l d . I n demo- g r a p h i c terms, w e a r e concerned n o t s o much w i t h h a z a r d i n g
g u e s s e s a s t o t h e f u t u r e s i t u a t i o n of t h e p o p u l a t i o n , b u t r a t h e r w i t h d e t e r m i n i n g what c a n be done i n advance t o g u i d e demographic, economic, and s o c i a l dynamics toward t h e c o n t i n u o u s improvement of t h e p o p u l a t i o n , w i t h a view t o e s t a b l i s h i n g a g l o b a l popula- t i o n optimum, p o s s i b l y i n t h e c o u r s e of t h e n e x t c e n t u r y .
Demographers t e n d t o a g r e e i n t h e i r view t h a t f u t u r e world p o p u l a t i o n w i l l a t t a i n s t a b i l i t y ; t h e v e r y c o n d i t i o n o f t h e e a r t h h a v i n g a f i n i t e s i z e l i m i t s p o p u l a t i o n growth. I n t h e U n i t e d N a t i o n s a s s u m p t i o n s , v a r i o u s r a n g e s a r e c o n s i d e r e d from t h e p o i n t o f view o f b o t h t h e t i m e r e q u i r e d f o r s u c h s t a b i l i z a - t i o n t o be r e a c h e d and t h e l e v e l of t h e t o t a l number of inhab.i- t a n t s . These r a n g e s e x t e n d from 8,000 m i l l i o n i n t h e y e a r 2 0 4 0 t o 14,200 m i l l i o n i n t h e y e a r 2130,' w h i l e t h e i n t e r m e d i a t e f i g u r e of 10,500 m i l l i o n i s f o r e c a s t f o r t h e end o f t h e t w e n t y - f i r s t c e n t u r y ( S a l a s 1981)
.
The achievement o f s t a b i l i t y , t h e l e v e l a t which i t o c c u r s , and t h e t i m e n e c e s s a r y f o r r e a c h i n g it w i l ldepend mainly on t h e way i n which f e r t i l i t y and m o r t a l i t y r a t e s d e c r e a s e . Of t h e s e two v a r i a b l e s , f e r t i l i t y h a s t h e g r e a t e r e f f e c t on d e t e r m i n i n g s t a b i l i t y and i t s c h a r a c t e r i s t i c s .
F u t u r e demographic b e h a v i o r , i n c l u d i n g p o s s i b l e s t a b i l i z a - t i o n , w i l l n o t be a uniform phenomenon around t h e w o r l d . The demographic, economic, and s o c i a l d i f f e r e n c e s , which p r e s e n t l y e x i s t between r e g i o n s and n a t i o n s , merely p o i n t t o d i f f e r e n t p r o c e s s e s of development. A t one end of t h e s c a l e w e have
c o u n t r i e s w i t h young p o p u l a t i o n s and h i g h f e r t i l i t y and m o r t a l - i t y r a t e s , accompanied by socioeconomic underdevelopment; a t t h e o t h e r e x t r e m e , w e f i n d c o u n t r i e s w i t h a h i g h l e v e l o f o l d p e o p l e , lower m o r t a l i t y and f e r t i l i t y r a t e s , and g r e a t e r
development. Between t h e s e two p o l e s t h e r e i s a whole r a n g e of i n t e r m e d i a t e s i t u a t i o n s . A l l t h i s i n d i c a t e s t h a t t h e w o r l d ' s f u t u r e p o p u l a t i o n s w i l l e v o l v e d i f f e r e n t l y , t h u s h a v i n g problems t h a t v a r y i n w e i g h t , a c c o r d i n g t o t h e r e g i o n and c o u n t r y .
2 . THE A G I N G O F A POPULATION
The d e c l i n e i n demographic growth b e c a u s e of a d e c r e a s e i n f e r t i l i t y r a t e s p r o d u c e s among o t h e r t h i n g s , t h e a g i n g of t h e p o p u l a t i o n . The term " a g i n g " , when a p p l i e d t o a p o p u l a t i o n , i s n o t a s c l e a r a c o n c e p t a s when i t i s used i n r e f e r e n c e t o a n i n d i v i d u a l . V a r i o u s measurements have been d e v i s e d f o r c a l c u l a - t i n g demographic a g i n g ; however, f o r t h e s p e c i f i c aims of t h i s work, w e have chosen t h e p r o p o r t i o n of o l d p e o p l e w i t h r e s p e c t t o t h e t o t a l p o p u l a t i o n a s o u r measurement.
The o l d age of a p o p u l a t i o n , measured by t h e p e r c e n t a g e of i n h a b i t a n t s of a t l e a s t a s p e c i f i e d minimum advanced age- f o r example, 6 5 y e a r s - i s a p o p u l a t i o n c h a r a c t e r i s t i c t h a t v a r i e s from c o u n t r y t o c o u n t r y and r e g i o n t o r e g i o n . The same c a n b e s a i d o f t h e way i n which t h e p r o c e s s l e a d i n g up t o s t a b - i l i z a t i o n o c c u r s . C o u n t r i e s r a n g e from t h e e s s e n t i a l l y young and u n d e r d e v e l o p e d n a t i o n s t h a t w i l l a g e s l o w l y , t a k i n g p e r h a p s a s l o n g a s a c e n t u r y t o r e a c h s t a b i l i t y and maximum o l d a g e , t o n a t i o n s t h a t a r e a l r e a d y advanced i n a g e , a r e g e n e r a l l y
d e v e l o p e d and w i l l a t t a i n t h e i r peak age w i t h i n a v e r y s h o r t t i m e .
The purpose of this paper is to discuss some of the charac- teristics of aging in a country like Mexico, which has a decidedly young population structure and which, although it still has a
long way to go before attaining the level of socioeconomic development desired, is progressing along a road that offers favorable prospects for the future.
3. DEMOGRAPHIC BACKGROUND
In the period following the Mexican Revolution when the first steps to consolidate public institutions were being taken, the socioeconomic conditions in Mexico favored accelerated demo- graphic growth; this was intensified after 1 9 4 0 at which time it continued on a par with the industrialization of the nation.
This acceleration is reflected in the high rates in demographic growth observed in the last few decades and illustrated by the official census figures presented in Table 1.
Table 1. Demographic growth in Mexico for census years from
1 9 2 1 to 1 9 8 0 .
Year
Population (thousands)
Intercensal annual growth rate
a Preliminary figure according to ~irecci6n General de ~stadistica (1980).
I n c o n t r a s t t o t h e tendency toward h i g h e r r a t e s of popula- t i o n growth t h a t p r e v a i l e d f o r s e v e r a l d e c a d e s , t h e r e a r e now i n d i c a t i o n s of a r e v e r s e t r e n d . A s a r e s u l t of a combination o f f a c t o r s , which a r e due t o t h e c o u n t r y ' s socioeconomic p r o g r e s s and t o government a c t i o n on f a m i l y p l a n n i n g , f e r t i l i t y r a t e s
have begun t o d e c l i n e . Given t h a t t h e p r i n c i p a l component of economic growth i n Mexico i s p r e c i s e l y f e r t i l i t y , an immediate consequence o f i t s d e c l i n e w i l l be lower r a t e s of p o p u l a t i o n growth. Another r e s u l t w i l l be m o d i f i c a t i o n s i n t h e a g e s t r u c - t u r e , p a r t i c u l a r l y i n t h e a g i n g of t h e p o p u l a t i o n .
4 . EVOLUTION OF AN A G I N G POPULATION
The 1 9 1 0 - 1 9 7 0 c e n s u s f i g u r e s f o r t h e Mexican p o p u l a t i o n 6 5 y e a r s and o v e r d e s c r i b e t h e c h a n g i n g t r e n d s ( T a b l e 2 ) .
Table 2. The p o p u l a t i o n of Mexico 6 5 y e a r s and o v e r and i t s p e r c e n t a g e of t h e t o t a l , by s e x and y e a r of c e n s u s .
Population (thousands) Percentage of the population
aged 65+ aged 65+
Year Total Male Female Total Male Female
SOURCE: ~ i r e c c i 6 n General de ~stadistica (1980).
I t i s t r u e t h a t a l l c e n s u s e s have t h e i r d e f e c t s , some more t h a n o t h e r s . However, t h e f i g u r e s i n d i c a t e two c l e a r t e n d e n - c i e s . One of t h e s e i s t h a t t h e number of p e o p l e o v e r t h e a g e of 6 4 h a s been s t e a d i l y i n c r e a s i n g ; from 3 4 5 t h o u s a n d i n 1910, t h e f i g u r e s r i s e c o n s t a n t l y , r e a c h i n g 1 m i l l i o n 791 t h o u s a n d i n
1970, a c c o r d i n g t o t h e c e n s u s t a k e n f o r t h a t y e a r . B e s i d e s t h i s i n c r e a s e i n t h e volume o f t h e p o p u l a t i o n made up of e l d e r l y
p e o p l e , it c a n a l s o b e s e e n t h a t t h e p e r c e n t a g e , w i t h r e s p e c t t o t h e t o t a l , u n d e r g o e s a g r a d u a l i n c r e a s e . From t h e 2 . 2 8 p e r c e n t o f t h e p o p u l a t i o n of 6 5 y e a r s and o v e r i n 1910 w e c a n o b s e r v e i n c r e a s e s t h a t r e a c h up t o 3.71 p e r c e n t i n t h e f i g u r e s r e c o r d e d i n t h e 1970 c e n s u s .
The t e n d e n c i e s i l l u s t r a t e d by t h e s e d a t a p o i n t t o f u t u r e i n c r e a s e s i n f i g u r e s f o r t h i s s e c t o r o f t h e p o p u l a t i o n . Next, and o f g r e a t e r i m p o r t a n c e , w e c a n a l s o e x p e c t t h e p o p u l a t i o n
of 6 5 y e a r s and o v e r t o assume g r e a t e r r e l a t i v e w e i g h t , e s p e c i a l l y s i n c e a l l i n d i c a t i o n s p o i n t t o a d e c l i n e i n r e p r o d u c t i o n r a t e s . There c a n b e no d o u b t t h a t t h e s t u d y o f t h e p a s t m e r i t s t h e i m p o r t a n c e a t t r i b u t e d t o i t . But o u r s o c i e t y s h o u l d s t r i v e , r a t h e r , t o improve p l a n s f o r t h e f u t u r e and i t s p r o v i s i o n . I n t e r m s of t h e p o p u l a t i o n v a r i a b l e and t h e i n e s c a p a b l e t a s k o f i n t e r p r e t i n g the demographic f u t u r e and i t s c o n s e q u e n c e s , w e have no o p t i o n b u t t o p l a c e o u r t r u s t i n t h e e v e r - i n a c c u r a t e p r o j e c t i o n game.
Thanks t o t h e computer and t h e improved t e c h n i q u e s used i n p o p u l a t i o n p r o j e c t i o n s , it i s now p o s s i b l e t o s c h e m a t i z e t h e e v o l u t i o n a r y p r o c e s s of p o p u l a t i o n s t r u c t u r e s i n a v e r y p r e c i s e and comprehensive way. When one comes t o t h e n u m e r i c a l implem- e n t a t i o n of t h e s e models, however, it i s s t i l l n e c e s s a r y t o a p p l y a p a r a m e t e r o f t h e e x p e c t e d l e v e l of t h e d e t e r m i n i n g demographic v a r i a b l e s : f e r t i l i t y , m o r t a l i t y , and m i g r a t i o n .
T h i s p a r a m e t e r i z a t i . o n c o n s t i t u t e s what i s known a s t h e p r o j e c t i o n h y p o t h e s i s . Thus t h e d e g r e e of s o u n d n e s s of a p r o j e c t e d popu- l a t i o n i s a d i r e c t f u n c t i o n of how s e n s i b l y t h e p r o j e c t i o n h y p o t h e s i s i s chosen.
I n t h e case of Mexico, w e c a n p r e d i c t a s t e a d y d e c l i n e i n f e r t i l i t y , a c o n t i n u i n g t e n d e n c y t o w a r d l o w e r m o r t a l i t y r a t e s , and a p o p u l a t i o n l o s s d u e t o e m i g r a t i o n t o t h e U n i t e d S t a t e s . The p o s i t i v e o r n e g a t i v e s i g n o f e a c h o n e o f t h e v a r i a b l e s d o e s n o t r e a l l y m e r i t d e b a t e . Where d i s c u s s i o n d o e s a r i s e i s i n c o n n e c t i o n w i t h the n u m e r i c a l l e v e l a t t a i n e d by e a c h v a r i a b l e .
One n u m e r i c a l p r o j e c t i o n e x e r c i s e i n which h y p o t h e s e s were a d o p t e d w i t h p a r t i c u l a r c a r e , w a s done by Camposorteqa ( 1 9 8 0 ) . T h i s s t u d y was u n d e r t a k e n b e c a u s e o f t h e Mexican g o v e r n m e n t ' s
r e c e n t i n t e r e s t i n a c h i e v i n g a more r a t i o n a l p o p u l a t i o n p o l i c y f o r t h e c o u n t r y . One o f t h e s e p o l i c i e s , by f a r t h e m o s t p u b l i c i z e d , a i m s a t l o w e r i n g f e r t i l i t y l e v e l s . An o f f i c i a l p r o p o s a l s u g g e s t s t h e p o s s i b i l i t y o f r e a c h i n g a 2 . 5 p e r c e n t g r o w t h r a t e i n 1982 and g r a d u a l l y d r o p p i n g t o 1 p e r c e n t by t h e b e g i n n i n g o f t h e n e x t cen- t u r y . S o c i o e c o n o m i c and demographic c o n d i t i o n s make t h e s e g o a l s somewhat h a r d t o a t t a i n , b u t i f c e r t a i n m o r t a l i t y a n d f e r t i l i t y h y p o t h e s e s t h a t r e s e m b l e government a i m s a r e assumed, i t i s pos- s i b l e t o p r o j e c t t h e f u t u r e p o p u l a t i o n s t r u c t u r e , t h u s p r o d u c i n g d e m o g r a p h i c p a t t e r n s t h a t p r o v i d e some i n s i g h t i n t o t h e t i m e and e x t e n t o f the a g i n g o f t h e p o p u l a t i o n . A n u m e r i c a l s y n t h e s i s of t h e s e a s s u m p t i o n s a r e c o n t a i n e d i n t h e f o l l o w i n g t h r e e t a b l e s .
T a b l e 3 . F e r t i l i t y a s s u m p t i o n s .
Period Gross reproduction rates
-
SOURCE: Camposortega (1980).
Table 4 . M o r t a l i t y assumptions.
Life expectancy Life expectancy Infant mortality at birth at age 5
Period Female Male Female Male Female Ma1 e
SOURCE: Camposortega (1980).
T a b l e 5 . Expected growth r a t e s .
Period Rate
SOURCE: Camposortega (1980).
Using t h e s e b a s i c assumptions, Camposortega found f o r t h e p e r i o d 1 9 7 0 - 2 0 4 0 ( T a b l e 6 1 , t h e f o l l o w i n g f i v e - y e a r r a t e s of p o p u l a t i o n growth, t h e number of p e r s o n s of 6 5 y e a r s and o v e r a t t h e end of e v e r y f i v e y e a r s , and t h e p e r c e n t a g e s h a r e of t h e l a t t e r w i t h r e s p e c t t o t h e t o t a l p o p u l a t i o n .
Table 6 . Annual p o p u l a t i o n growth r a t e p r o j e c t i o n s t o t h e y e a r 2 0 4 0 , t h e p r o j e c t e d p o p u l a t i o n 65 y e a r s and o v e r , and i t s p e r c e n t a g e of t h e t o t a l f o r Mexico.
F i v e - y e a r Annual growth P o p u l a t i o n aged 6 5 + P e r c e n t a g e of t h e popu- p e r i o d r a t e ( t h o u s a n d s ) l a t i o n aged 6 5 +
SOURCE: Camposortega ( 1 9 8 0 ) .
When comparing T a b l e s 2 and 6 , w e n o t e , f i r s t of a l l , t h e i n c r e a s e e x p e c t e d i n t h e a b s o l u t e number of t h e aged p o p u l a t i o n . These f i g u r e s have shown a tendency t o i n c r e a s e up t o t h e p r e s e n t . According t o t h e p r o j e c t i o n , t h i s tendency w i l l c o n t i n u e w i t h t h e same i n e r t i a , r e s u l t i n g i n t h e a c c u m u l a t i o n e x p r e s s e d i n t h e f i g u r e s q u o t e d above. From t h e p o s s i b l e 2 m i l l i o n 1 6 8 thousand p e o p l e 65 y e a r s and o v e r l i v i n g i n Mexico t o d a y , w e can e x p e c t , by t h e y e a r 2000, a f i g u r e of 4 m i l l i o n 517 t h o u s a n d , r i s i n g t o a l m o s t 1 0 m i l l i o n by 2020 and e x c e e d i n g 2 1 m i l l i o n by 2040.
A t t h i s p o i n t an o b s e r v a t i o n s h o u l d be made i n c o n n e c t i o n w i t h t h e p e r s p e c t i v e s d i s c u s s e d i n t h e p r e v i o u s p a r a g r a p h . The p e r i o d 1980-2040 c o n s i s t s of 60 y e a r s , which i m p l i e s t h a t p a r t of t h e p o p u l a t i o n r e f e r r e d t o i n t h e 65 and o v e r p r o j e c t i o n i s a l r e a d y born. Thus, what w e a r e p r o j e c t i n g i s t h e s u r v i v a l , t a k i n g i n t o a c c o u n t m o r t a l i t y and e m i g r a t i o n , of a group t h a t now l i v e s w i t h u s (and t h a t w e o u r s e l v e s , i n f a c t , c o n s t i t u t e ) .
I n t h i s s e n s e t h e problem i s s i m p l i f i e d , f o r t h e f e r t i l i t y v a r i a b l e , w i t h a l l t h e t e c h n i c a l and p o l i t i c a l c o m p l e x i t y t h a t i t i m p l i e s i n i t s a p p l i c a t i o n , d o e s n o t i n t e r v e n e h e r e .
The o t h e r i n d i c a t o r t h a t i n t e r e s t s u s , t h e p e r c e n t a g e of o l d e r p e o p l e w i t h r e s p e c t t o t h e t o t a l p o p u l a t i o n , a p p e a r s i n b o t h T a b l e s 2 and 6. I t c a n be s e e n t h a t o v e r a l o n g p e r i o d o f t i m e , t h i s p e r c e n t a g e a l s o i n c r e a s e s and becomes g r a d u a l l y more marked. From t h e 3.14 p e r c e n t , r o u g h l y c o r r e s p o n d i n g t o t h e y e a r 1980, w e w i l l r e a c h an e s t i m a t e d 4.50 by t h e t u r n of t h e n e x t c e n t u r y , p e r h a p s 7.83 by 2020 and 15.22 by 2040. T h i s i n d i c a t e s t h a t from t h e l i t t l e o v e r 3 e l d e r l y p e r s o n s f o r e v e r y hundred p e r s o n s e x i s t i n g t o d a y , t h e r e w i l l be an i n c r e a s e of up t o a l m o s t f i v e t i m e s t h a t f i g u r e w i t h i n t h e n e x t 60 y e a r s .
B e s i d e s t h i s g e n e r a l o u t l o o k on t h e p e r c e n t a g e of p e o p l e of advanced a g e and t h e long-term p e r s p e c t i v e s , w e have a s i t u a - t i o n t h a t i s p e c u l i a r , which m e r i t s c o n s i d e r a t i o n . I f w e pay p a r t i c u l a r a t t e n t i o n t o t h e p e r c e n t a g e s f o r t h e y e a r s 1975,
1980, and 1985, w e w i l l n o t e a d e p r e s s i o n . From t h e 3.71 p e r - c e n t r e c o r d e d i n t h e 1970 c e n s u s d a t a ( T a b l e 2 ) , t h e r e i s an i n i t i a l d e c r e a s e i n t h e p r o j e c t i o n s , w i t h t h e f i g u r e s f a l l i n g t o 3.30 i n 1975, t o t h e lowest p e r c e n t a g e of 3.14 i n 1980; from t h i s p o i n t r e c u p e r a t i o n t a k e s p l a c e and t h e p e r c e n t a g e i n c r e a s e s , r e a c h i n g 3.18 i n 1985.
I f t h e f i g u r e s r e f l e c t t h e r e a l s i t u a t i o n , w e f i n d our- s e l v e s , i n 1980, i n t h e m i s t of a p o p u l a t i o n r e j u v e n a t i o n , i n t h e s e n s e t h a t t h e r e i s a lower p e r c e n t a g e of o l d p e o p l e . T h i s temporary r e g r e s s i o n i n t h e g e n e r a l a g i n g t e n d e n c y h a s a two- f o l d e x p l a n a t i o n . One of t h e c a u s e s c a n be e x p l a i n e d by t h e l a c k o f b i r t h s d u r i n g t h e r e v o l u t i o n a r y war and by t h e i n c r e a s e i n i n f a n t and c h i l d m o r t a l i t y i n t h o s e y e a r s . According t o t h e 1910 c e n s u s , m i n o r s of 10 y e a r s of age a c c o u n t e d f o r 4 , 7 7 9 , 7 9 1 , w h i l e i n 1921 t h e f i g u r e d i m i n i s h e d t o 3,713,040. The number of p e r s o n s of advanced a g e now r e q u i r e d i n o r d e r t o m a i n t a i n an u n a l t e r e d i n c r e a s e i n t h e p e r c e n t a g e growth p a r t i a l l y c o r - r e s p o n d s t o t h e l a c k of b i r t h s and t h e p o s s i b l e e x c e s s of d e a t h s among c h i l d r e n d u r i n g t h e r e v o l u t i o n a r y p e r i o d . O t h e r u n d e r l y i n g
c a u s e s c o n t r i b u t i n g t o a 1980 lower p e r c e n t a g e o f t h o s e aged 65 and o v e r a r e t h e i n c r e a s i n g l y h i g h e r f e r t i l i t y r a t e s e x p e r - i e n c e d from 1940 t o 1975. T h i s r e s u l t s i n l a r g e r p o p u l a t i o n p o r t i o n s of t h o s e aged below 6 5 , which i n t u r n l o w e r s t h e c o r - r e s p o n d i n g p o r t i o n o f t h e p o p u l a t i o n 65 and o v e r .
5 . A DEMOGRAPHIC MEASUREMENT OF OLD-AGE DEPENDENCY
I f a n i n d i v i d u a l h a s been e c o n o m i c a l l y a c t i v e and manages t o s u r v i v e and s e t t l e i n t o o l d a g e , i t i s most l i k e l y t h a t h e w i l l s t o p b e i n g productive a t a g i v e n moment and j o i n t h e pas- s i v e p o p u l a t i o n . I n o t h e r words, t h e r e i s a change i n t h e s i t u a - t i o n ; h e c e a s e s t o b e a component of p r o d u c t i o n and consumption, and now becomes e x c l u s i v e l y a consumer, j o i n i n g t h a t p a r t of t h e p o p u l a t i o n whose m a i n t e n a n c e depends on t h e a b l e and e c o n o m i c a l l y a c t i v e s e c t o r .
I t i s g e n e r a l l y c l a i m e d t h a t contemporary s o c i e t y is. n o t i n d i f f e r e n t t o t h e f a t e of i t s n o n p r o d u c t i v e e l e m e n t s . The p e r s o n who, f o r r e a s o n s of i n c a p a c i t y c a n n o t f e n d f o r h i m s e l f , h a s t h e r i g h t t o be l o o k e d a f t e r by t h e r e s t of s o c i e t y . From t h i s i t f o l l o w s t h a t a p e r s o n who i s u n a b l e t o work on a c c o u n t of h i s a g e s h o u l d r e c e i v e t h e means n e c e s s a r y f o r h i s s u b s i s t e n c e from t h e community. U n f o r t u n a t e l y , t h e s o c i e t y t h a t w e a c t u a l l y l i v e ( o r s u f f e r ) i n i s f a r removed from t h i s u t o p i a . To a
c e r t a i n e x t e n t , t h e i n c a p a c i t a t e d p e r s o n i s l e f t t o h i s own meagre r e s o u r c e s and some o l d p e o p l e a r e v i c t i m s of v i r t u a l
" g e r o n t i c i d e " . B e t h a t a s it may, w h e t h e r it i s a q u e s t i o n of a n o l d p e r s o n who e n j o y s accumulated w e a l t h o r somebody l i v i n g on p u b l i c c h a r i t y , t h e f a c t i s t h a t w e a r e d e a l i n g w i t h a s e c t o r of t h e p o p u l a t i o n t h a t , t o a lesser o r g r e a t e r e x t e n t , c o n s t i - t u t e s an economic and s o c i a l burden on t h e a c t i v e p o p u l a t i o n .
When d i s c u s s i n g t h i s a s p e c t of t h e e l d e r l y p o p u l a t i o n ' s dependency on t h e p r o d u c t i v e p o p u l a t i o n , one of t h e q u e s t i o n s t h a t i m m e d i a t e l y a r i s e s i s how t o q u a n t i f y t h i s dependency.
P o s s i b l y , a s i s t h e c a s e w i t h many o t h e r a s p e c t s o f s o c i a l s t a t i s t i c s , t h e c o n c e p t u a l s o l u t i o n f o r e s t a b l i s h i n g t h i s
measurement d o e s n o t p r e s e n t any p a r t i c u l a r problems. However, i t i s t h e p r a c t i c a b i l i t y of t h e c o n c e p t s t h a t e l u d e s u s because of o u r o l d - a g e problem of l a c k o f i n f o r m a t i o n and t h e d i s o r g a n - i z a t i o n o f t h a t which d o e s e x i s t . Hence, f o r t h e p r e s e n t , w e c a n o n l y r e l y on a p p r o x i m a t i o n s .
One of t h e s e a p p r o x i m a t i o n s , which by v i r t u e of i t s s i m p l i c i t y i s a l s o one of t h e most s u p e r f i c i a l , s i m p l y t a k e s t h e p e r c e n t a g e r e l a t i o n e x i s t i n g between t h e number of p e r s o n s o v e r t h e a g e of 6 4 y e a r s and t h e number of p e o p l e between t h e a g e s of 15 and 65 y e a r s . (See, f o r example, t h e u s e of t h i s measurement i n R a p p o r t s u r l e s E f f e t s ~ o m b i n G s de l r A b a i s s e m e n t d s l r A g e de l a R e t r a i t e e t du V i e i l l i s e m e n t de l a P o p u l a t i o n s u r l a F i n a n c e m e n t d e s Rggimes de S g c u r i t g S o c i a l e R g l a t i f s a u x P r e s t a t i o n s a Long T e r m e , C o n s e i l d e l f E u r o p e , S t r a s b o u r g ,
1977.) T h i s i n d e x i s based on t h e assumption t h a t from t h e age o f 65 onwards a p e r s o n becomes d e p e n d e n t on t h e a c t i v e popula- t i o n , t h e l a t t e r b e i n g composed of p e o p l e between t h e a g e s of 15 and 6 4 y e a r s . T a b l e 7 g i v e s t h e p o p u l a t i o n p e r c e n t a g e s c o r r e s p o n d i n g t o t h e a g e groups 0-14, 15-64, and 65 and o v e r . These f i g u r e s a r e i n a c c o r d a n c e w i t h t h e development observed i n t h e d a t a p r o v i d e d by t h e c e n s u s e s t a k e n between 1 9 1 0 and 1970, and w i t h t h e e s t i m a t e s f o r e a c h f i v e - y e a r p e r i o d between 1975 and 2 0 4 0 . I n t h e same t a b l e w e h a v e i n c l u d e d , i n t h e f i n a l column, t h e "dependency q u o t i e n t " a c c o r d i n g t o t h e a p p r o x i m a t i o n measurements d e s c r i b e d above.
An a n a l y s i s of t h e s e f i g u r e s , p a r t i c u l a r l y t h o s e i n t h e f i n a l column, r e v e a l s y e t a g a i n t h e tendency toward an i n c r e a s e i n t h e q u o t i e n t under review. I t rises from 4.09 a t t h e begin- n i n g of t h e c e n t u r y t o 7.42 i n 1970. I n t h e 30-year i n t e r v a l between 1970 and 2000 t h e f i g u r e s show a n o t h e r d e p r e s s i o n . The
f i g u r e s d e c r e a s e e v e r y 5 y e a r s , s i n k i n g t o 5.58 i n 1985, and it i s n o t u n t i l t h e b e g i n n i n g of t h e f o l l o w i n g c e n t u r y t h a t t h e y r e t a i n t h e l e v e l c o r r e s p o n d i n g t o 1970. T h i s i s due t o two f a c t o r s . A q u o t i e n t i s less when t h e numerator d e c r e a s e s , t h e denominator i n c r e a s e s , o r b o t h o c c u r . I n t h e i n t e r v a l mentioned w e have a c o m b i n a t i o n of t h i s . d o u b l e e f f e c t . On t h e one hand,
w e h a v e t h e e f f e c t o f t h e l o w e r p r o p o r t i o n a l number o f p e o p l e o f 6 5 y e a r s and o v e r , r e s u l t i n g from l o w e r f e r t i l i t y and h i g h e r m o r t a l i t y d u r i n g t h e r e v o l u t i o n a r y p e r i o d and t h e 1940-1975 h i g h f e r t i l i t y r a t e s d i s c u s s e d above. On t h e o t h e r h a n d , t h e d e c l i n e e x p e c t e d i n f e r t i l i t y r a t e s w i l l c o n s i d e r a b l y d e c r e a s e t h e p e r c e n t a g e o f 15-year-old m i n o r s , a s t h e s e c o n d column makes c l e a r . T h i s d e c l i n e c a u s e s t h e i n c r e a s e i n t h e o t h e r f i g u r e s , p a r t i c u l a r l y t h o s e i n t h e t h i r d column, which c o r r e s p o n d t o t h e p o p u l a t i o n between 15 and 6 4 y e a r s of a g e .
T a b l e 7 . P r o j e c t e d p o p u l a t i o n p e r c e n t a g e s by a g e g r o u p f o r s e l e c t e d y e a r s from 1910 t o 2040 f o r Mexico.
Percentage Percentage Percentage Dependency quotient Year aged 0-14 aged 15-64 aged 65+ 65+ / 15-64 (percent)
SOURCE: Derived from censuses, population projections, and Camposortega (1980).
The s i g n i f i c a n c e of t h e f i g u r e s i n t h e f i n a l column f o r t h e y e a r 2000 and beyond s h o u l d be d i s c u s s e d s e p a r a t e l y . The a c t i o n o f a n a l r e a d y p a t e n t l y growing n u m e r a t o r , d e n o t i n g t h e r a p i d growth e x p e c t e d i n t h e p o p u l a t i o n of 65 y e a r s and o v e r , and t h e h a l t i n t h e growth o f t h e p o p u l a t i o n between 15 and 6 4 y e a r s , t o g e t h e r w i t h i t s i n i t i a l d e c l i n e , provoke t h e e x t r e m e l y ele- v a t e d f i g u r e s f o r e c a s t f o r t h e i n d i c a t o r . T h i s t e l l s u s t h a t , assuming t h e p r o j e c t i o n h y p o t h e s e s a r e r e a l i z e d , w e s h a l l n o t a t f i r s t e x p e c t , i n t h i s c e n t u r y , a g r e a t e r burden of t h e o l d e r p o p u l a t i o n on t h e p r o d u c t i v e p o p u l a t i o n ; r a t h e r , i t would a p p e a r t h a t t h i s burden i s becoming l i g h t e r . Immediately a f t e r , s t i l l w i t h i n t h e same c e n t u r y , w e can e x p e c t a n o t a b l e i n c r e a s e i n t h e mentioned i n d e x , which, by t h e y e a r 2040, s h o u l d amount t o 23.34 p e r s o n s of 65 y e a r s and o v e r f o r e v e r y 1 0 0 between t h e a g e s o f 15 and 6 4 .
6 . OLD-AGE DEPENDENCY AND ECONOMIC ACTIVITY
I n t h e p r e v i o u s s e c t i o n w e d i s c u s s e d a dependency r a t e t h a t was based e x c l u s i v e l y on r a t i o s between a g e g r o u p s . While r e t a i n i n g a d e g r e e o f meaning and s i g n i f i c a n c e , t h e s i m p l i c i t y o f t h i s i n d i c a t o r d o e s n o t a l l o w f o r a s u f f i c i e n t l y p r e c i s e i n t e r p r e t a t i o n f o r a d i r e c t and p r a c t i c a l a p p l i c a t i o n . The
f a c t i s t h a t u n p r o d u c t i v i t y , a l o n g w i t h t h e dependency it b r i n g s , does n o t o c c u r s i m p l y b e c a u s e a p e r s o n r e a c h e s t h e age of 65;
n o r i s it t r u e t h a t economic p r o d u c t i v i t y i s a n e c e s s a r y c h a r a c - t e r i s t i c e x c l u s i v e t o a l l p e o p l e between t h e a g e s of 15 and 6 4 y e a r s . I n an e x p o s i t i o n s u c h a s t h i s , o u r n e x t s t e p , when d i s - c u s s i n g dependency r a t e s , must be t o r e l a t e them t o t h e econom- i c a l l y a c t i v e p o p u l a t i o n . A g r e a t e r measurement o f dependency r e s u l t i n g from s e n i l i t y i s p r o v i d e d by o b t a i n i n g t h e number o f e c o n o m i c a l l y i n a c t i v e p e r s o n s of 65 y e a r s and o v e r f o r e v e r y
1 0 0 a c t i v e p e r s o n s . According t o t h e 1970 c e n s u s f i g u r e s , t h i s number comes t o 6.37.
When viewed p r o s p e c t i v e l y , t h i s improved r a t e r e q u i r e s two t y p e s of p r o j e c t i o n s : one t h a t i s p u r e l y demographic, con- s i s t i n g of t h e p o p u l a t i o n and i t s age and s e x s t r u c t u r e , and t h e o t h e r t h a t p r o j e c t s l a b o r f o r c e p a r t i c i p a t i o n r a t e s . With r e g a r d t o t h i s l a s t p o i n t , w e have found l i t t l e work done i n c o n n e c t i o n w i t h Mexico, and what d o e s e x i s t l e a v e s p l e n t y of room f o r improvement. Hazas ( 1 9 7 7 ) , whose s t u d y of t h e theme i s p e r h a p s t h e b e s t , a d o p t s a m o d i f i c a t i o n of t h e r a t e s pro- j e c t e d by t h e I n t e r n a t i o n a l Labor O f f i c e . H i s p r o j e c t i o n of l a b o r f o r c e p a r t i c i p a t i o n r a t e s s t a r t s w i t h c o r r e c t e d f i g u r e s t a k e n from t h e 1970 c e n s u s and assumes a l t e r a t i o n s i n t h e s e r a t e s a s a r e s u l t of socioeconomic c h a n g e s . From t h e s e r e s u l t s w e c a n e x p e c t t h e f u t u r e c o m p o s i t i o n t o t a k e t h e form e x p r e s s e d
i n T a b l e 8 .
T a b l e 8 . P r o j e c t e d l a b o r f o r c e p a r t i c i p a t i o n r a t e s by a g e group and s e x f o r s e l e c t e d y e a r s from 1970 t o 2000 f o r Mexico.
Year
Males 10-14 15-19 20-24 25-44 45-54 55-64 65+
Females 10-14 15-19 20-24 25-44 45-54 55-64 65+
SOURCE: Hazas (1977)
.
It is true that these figures areopen to discussion, since they are particularly questionable for the female labor force participation rates. However, since they are the most suitable
figures to be found among available data, we have used them, combining well-thought-out projection techniques with an extra element of our own. We suppose that the hypothetical rates projected for the first year of the twenty-first century will be maintained from the year 2000 to 2040. This simplicity enables us to apply a numerical exercise to Camposortega's
projections, from which the following forecast figures for this new economically inactive population rate (EIP) (of 65 years and over) divided by the economically active population rate
(EAP) were obtained (Table 9)
.
Table 9. Projections for selected years of the economically inactive population aged 65+ (EIP) divided by the economically active population (EAP) for Mexico.
Year EIP 65+/EAP Year EIP 65+/EAP
Assuming that the projection hypothesis is valid, the
figures in Table 9 indicate that lower percentages in the older population combined with lower rates of activity within this sector result in a practically constant dependency level between
1970 and 1985. Then, the steadily rising percentages of the older population, as presented in the fourth column of Table 7, together with the lower labor force participation rates, should
provoke increases in the dependency ratio; after the year 2 0 0 0
the dependency ratio should increase rapidly, giving us over 3 1
old-aged dependents for every 1 0 0 economicaliy active persons by the year 2 0 4 0 .
One of the reasons for the expected increase in the depen- dency level is the constant decline in the rates of labor force participation in the population over the age of 6 4 years. This hypothesis is not reflected in the participation rates for both sexes shown in Table 8. From the 8 4 . 2 0 male participation rate
for 1 9 7 0 , we can expect a rate of 3 9 . 3 8 in the year 2 0 0 0 and
beyond. In the case of females, the 1 0 . 9 3 rate for 1 9 7 0 will decrease to 5.10 at the end of the century. This assumption is supported by the fact that the developing pension and retirement systems, which are becoming more widespread every day, will cause more and more people to retire from active life and to live on pension benefits.
7 . SOCIAL SECURITY AND RETIREMElNT PENSIONS
In countries where old people account for a high percentage of the total population, social, economic, and demographic
problems arise. Among them are the important problems of social security and retirement pensions. As more and more elderly
people retire from the labor force,economic burdens placed on the younger generations become more and more difficult to main- tain. As shown in the previous section, Mexico might reach such an aging of its population, thereby creating a financial crisis in social security systems like the ones many developed countries are now experiencing.
The question arises: What will have to be done to accommo- date such future possibilities? One immediate answer to this question, of course, is that it would be unthinkable to suggest halting the drop in mortality and fertility rates in order to control a future old-age dependency ratio. It also will take some time before aging becomes a real problem in many developing countries despite the fact that social welfare plans eventually
l e a d t o p o p u l a t i o n a g i n g , s i n c e t h e i r i m p l i c i t o b j e c t i v e i s t o o b t a i n d e c r e a s i n g m o r t a l i t y and f e r t i l i t y r a t e s . I t i s e s t i m a t e d t h a t c o u n t r i e s l i k e Mexico, whose p r e s e n t s h a r e o f p e o p l e 65
y e a r s and o v e r i s s t i l l o n l y a r o u n d 3 p e r c e n t , w i l l n o t r e a c h t h e p r e s e n t l e v e l s o f c o u n t r i e s l i k e t h o s e i n Western Europe u n t i l a t l e a s t 50 y e a r s . I t i s n o t s e n s i b l e t o become o v e r l y a n x i o u s a b o u t such p r o b l e m s , e s p e c i a l l y s i n c e p r e s e n t s c i e n t i f i c , t e c h n o l o g i c a l , s o c i o e c o n o m i c , and p o l i t i c a l c h a n g e s a r e l e a d i n g u s t o a t w e n t y - f i r s t c e n t u r y t h a t w i l l be v e r y d i f f e r e n t from t h e t w e n t i e t h . Should w e worry a b o u t a 65+ / (15-64) dependency r a t i o when w e a r e aware o f t h e f u t u r e p r o d u c t i v i t y t h a t automa- t i o n seems t o p r o m i s e ?
I f a l l t h i s i s s o , t h e n e x t q u e s t i o n w i l l be w h e t h e r o r n o t d e v e l o p i n g c o u n t r i e s s u c h a s Mexico have any problems r e g a r d i n g t h e p r e s e n t s t a t e of t h e e l d e r l y p o p u l a t i o n , i t s f u t u r e , and e s p e c i a l l y t h e problem o f s o c i a l s e c u r i t y c o v e r i n g r e t i r e m e n t p e n s i o n s .
8 . THE MEXICAN PENSION SYSTEM
I t a p p e a r s t h a t t h e . m o s t d e s i r a b l e way s o c i e t y can h e l p t h o s e who, b e c a u s e of o l d a g e , c a n no l o n g e r p r o v i d e f o r them- s e l v e s i s by means of p e n s i o n s y s t e m s . The a c t o f p e n s i o n i n g o f f an aged worker and t h e r e b y a s s u r i n g him o f a d e c e n t and
s t a b l e income i s a n a c t o f j u s t i c e and reward f o r a n a c t i v e l i f e t i m e o f e f f o r t s t o t h e b e n e f i t o f s o c i e t y . One must n o t f o r g e t t h a t p r e s e n t g e n e r a t i o n s make u s e of t h e b a s i c founda- t i o n s and t e a c h i n g s i n h e r i t e d from p a s t g e n e r a t i o n s ; n o r s h o u l d it be f o r g o t t e n t h a t f u t u r e g e n e r a t i o n s w i l l r e c e i v e t h e b e n e f i t o f i n v e s t m e n t s t h a t a r e now b e i n g made by p r e s e n t g e n e r a t i o n s , which i s what a l l o w s p r a g m a t i c s o l i d a r i t y between g e n e r a t i o n s - t h e b a s i s o f p e n s i o n s y s t e m s . I n s t e a d of o l d - a g e homes, good
( o r b a d ) accommodations on t h e p a r t o f r e l a t i v e s , o r p u b l i c c h a r i t y , one e a r n s t h e r i g h t t o a p e n s i o n . I t i s a s y s t e m whereby b e n e f i c i a r i e s do n o t l e a n on o t h e r s b u t i n s t e a d make u s e o f s o m e t h i n g t h e y have e a r n e d t h r o u g h t h e i r p a s t l a b o r .
When s o c i a l s e c u r i t y i s a n a l y z e d , t h e r a t h e r o b v i o u s f a c t i s p e r c e i v e d t h a t a c o u n t r y ' s w e l f a r e and s o c i a l s e c u r i t y a r e a c t u a l l y s o c i a l and economic goods, which means t h e i r q u a l i t y i s c l o s e l y c o n n e c t e d t o t h e e x t e n t o f t h e s p e c i f i c c o u n t r y ' s economic development and s o c i a l harmony. And s i n c e p e n s i o n s a r e p a r t o f w e l f a r e and s o c i a l s e c u r i t y programs, it i s c l e a r t h a t a n o t h e r d i s a d v a n t a g e o f a s o c i a l l y and e c o n o m i c a l l y l e s s developed c o u n t r y l i k e Mexico i s an i n s u f f i c i e n t and unbalanced g r a n t i n g o f p e n s i o n s .
P r e v a i l i n g p e n s i o n s y s t e m s , w i t h a l l t h e i r i n t e r n a l v a r i a - t i o n s , r e s u l t from t h e s o c i a l , economic, and mainly p o l i t i c a l p r i o r i t i e s t h a t o r i g i n a l l y i n f l u e n c e d t h e i r development. They have v a r y i n g e f f e c t i v e n e s s and o r g a n i z a t i o n , and t h e main d i f - f e r e n c e s between them a r e t o be found i n : ( 1 ) t h e p e o p l e who a r e b e n e f i t t e d by a g i v e n program, ( 2 ) t h e s t a n d a r d s used t o d e t e r m i n e t h e r i g h t t o a p e n s i o n , ( 3 ) t h e l e v e l of b e n e f i t s w i t h r e g a r d t o t h e a c t u a l amount of s t i p e n d s , ( 4 ) t h e manner i n which p e n s i o n s a r e f i n a n c e d , and ( 5 ) t h e l e g a l f o u n d a t i o n s upon which t h e s y s t e m i s b a s e d .
One c h a r a c t e r i s t i c o f p e n s i o n systems i s t h a t t h e y a l m o s t always s t e m from l a b o r r e l a t i o n s * , w h i l e b e i n g g r a n t e d under norms e s t a b l i s h e d t h r o u g h c o l l e c t i v e b a r g a i n i n g , l a w s , o r l a b o r r e g u l a t i o n s .
There i s a n o t h e r i n t e r e s t i n g a s p e c t of long-run w e l f a r e b e n e f i t s t a k i n g t h e form of p e n s i o n s ; more and more t h e y a r e s h i f t i n g o v e r from t h e competence and p o s s i b i l i t i e s of i n d i v i d - u a l s and p r i v a t e g r o u p s t o p u b l i c i n s t i t u t i o n s i n c h a r g e of s o c i a l s e c u r i t y . The g r e a t m a j o r i t y of p e n s i o n system b e n e f i t s a r e t o be found i n t h e s e i n s t i t u t i o n s , a s can be s e e n i n F i g u r e
1 , which o u t l i n e s t h e o r g a n i z a t i o n and c o v e r a g e of old-age p e n s i o n s i n t h e Mexican system.
*Exceptions t o t h i s r u l e a r e p e n s i o n s t h a t a r e g r a n t e d by t h e F e d e r a l Government f o r some s p e c i a l r e a s o n . For example, p e n s i o n s a r e g r a n t e d t o reward d i s t i n g u i s h e d s e r v i c e t o o n e ' s c o u n t r y , a s i n t h e c a s e of pensioned v e t e r a n s of t h e Mexican R e v o l u t i o n .
MEXICAN INSTITUTE FOR SOCIAL SECURITY (IMSS) 3.1 INSTITUTE FOR SOCIAL SECURITY AND . SERVICES FOR STATE WORKERS (ISSSTE) 3.2 COMPLEMENTARY SYSTEM TO IMSS 3.3
\ Y
COMPANIES' INDIVIDUAL SYSTEMS 3.51
ECONOMICALLY ACTIVE 2.1 POPULATION NO CLAIM TO PENSION BENEFITS 3.6
I LOCAL SOCIAL SECURITY OFFICES 3.4 TOTAL POPULATION OLD-AGE PENSIONED POPULATION 4.1 I ECONOMICALLY INACTIVE 2.2 OTIIER PENSIONED POPULATION 4.2 POPULATION NON-PENSIONED POPULATION 4.3 Figure 1. The Mexican system for granting old-age pensions.
W e w i l l u s e t h i s c h a r t t o a t t e m p t a p r o v i s i o n a l c l a s s i f i c a - t i o n o f i n s t i t u t i o n s i n c h a r g e of a d m i n i s t e r i n g p e n s i o n s , t o g e t h e r w i t h a n i n i t i a l e v a l u a t i o n of t h e k i n d of p o p u l a t i o n c o v e r e d
by t h e s e a g e n c i e s . The f i r s t l e v e l r e p r e s e n t s t h e whole pop- u l a t i o n ( b l o c k I ) , which i s t h e n s u b d i v i d e d i n t o s u b p o p u l a t i o n s , a c c o r d i n g t o t h e k i n d o f i n s t i t u t i o n t h a t h a n d l e s t h e p e n s i o n
s y s t e m f o r e a c h of t h e s e s u b p o p u l a t i o n s . W e w i l l i n i t i a l l y con-
-
s i d e r t h e s u b p o p u l a t i o n s t o be complementary and e x c l u s i v e , a l t h o u g h a c t u a l l y t h e r e i s some o v e r l a p p i n g . *
The f i r s t s u b d i v i s i c n d i v i d e s t h e t o t a l p o p u l a t i o n i n t o two c a t e g o r i e s : t h e e c o n o m i c a l l y a c t i v e p o p u l a t i o n ( b l o c k 2 . 1 ) and t h e e c o n o m i c a l l y i n a c t i v e p o p u l a t i o n ( b l o c k 2 . 2 ) . T h i s was done b e c a u s e p e n s i o n s a r e d e r i v e d s o l e l y from l a b o r r e l a t i o n s , a s p r e v i o u s l y mentioned.
The f i r s t c a t e g o r y , t h a t of t h e e c o n o m i c a l l y a c t i v e popu- l a t i o n , c o n s i s t s of t h e s e c t i o n c a p a b l e o f c o l l e c t i n g b e n e f i t s and e v e n t u a l l y making r e a l u s e o f t h e r i g h t t o a p e n s i o n . Types and l e v e l s o f a p e n s i o n s y s t e m ' s b e n e f i t s depend on l e g i s l a t i o n and t h e agency c h a r g e d w i t h a d m i n i s t e r i n g i t . Sometimes b o t h l e g i s l a t i o n and t h e t y p e o f a d m i n i s t e r i n g agency a r e s o c l o s e l y c o n n e c t e d t h a t t h e i r c o r r e s p o n d e n c e i s one-to-one. The t y p e of i n s t i t u t i o n i n which a worker i s employed and t h e l e g i s l a t i o n he w i l l b a s e h i s c l a i m s o n , b o t h depend d i r e c t l y on t h e k i n d of company t h a t employs h i s s e r v i c e s . I n t h e s p e c i f i c c o n d i t i o n s p r e v a i l i n g i n Mexico, w e would c l a s s i f y t h e d i f f e r e n t t y p e s of p e n s i o n p l a n a d m i n i s t r a t i o n a s f o l l o w s , t a k i n g i n t o a c c o u n t t h e c h a r a c t e r i s t i c s t h a t make them s i m i l a r :
a ) I n s t i t u t o Mexicano d e l Seguro S o c i a l (IMSS) [Mexican I n s t i t u t e f o r S o c i a l S e c u r i t y ] ( b l o c k 3.1 )
b ) I n s t i t u t o d e S e g u r i d a d y S e r v i c i o s S o c i a l e s d e 10s Traba j a d o r e s d e l E s t a d o (ISSSTE [ I n s t i t u t e f o r S o c i a l S e c u r i t y and S e r v i c e s f o r S t a t e Workers] ( b l o c k 3.2) c ) t h e complementary s y s t e m t o IMSS ( b l o c k 3 . 3 )
* I t i s n o t uncommon t o d i s c o v e r c a s e s o f p e o p l e h o l d i n g d i f f e r - e n t job a c t i v i t i e s and r e c e i v i n g c o v e r a g e from two d i f f e r e n t s y s t e m s , t h u s r e t i r i n g on two p e n s i o n s .
d) regional or local social security offices or institutes (block 3.4)
e) companies' own individual systems (block 3.5) f) individuals having no claim to pension benefits
(block 3.6)
The final item (f) takes into account the section of the population that does not enjoy the kind of benefits we are discussing here. Even though there is an explicit lack of a pension plan for a section of the population, it was necessary to include it in this study precisely because of the fact that this vast, unprotected population exists.
The economically inactive population (block 2.1) is also divided into subclasses. First, there is the section of the population that has already retired and is receiving a pension because of old age (block 4.1). The second subclassification includes those who are on a pension because of reasons other than age (block 4.2), for example widows and orphans; this
group is usually covered by certain legal guarantees to protect dependents of deceased laborers or pensioners. Premature dis- ability caused by an accident or sickness, whether or not it was on the job, also comes under this heading. Finally, we have
the section of the population that is not engaged in any economic activity but at the same time does not rely on a pension, e.g., minors, students, and housewives, as well as the unemployed
senile population having no pension benefits. The second and third classifications are included for clarity but are not relevant to our discussion of pensions for the aged.
9. SOME FEATURES OF THE MEXICAN PXNSION SUBSYSTEMS
To classify is to group together elements that are similar to one another in some given characteristic. The classification of different prevailing pension systems in Mexico proposed in Section 8 is based on two conditions of similarity. One is related to the type of workers each subsystem covers and the other refers to the type of benefits granted. The same, roughly
homogeneous, t y p e o f workers t e n d t o seek c o v e r a g e from t h e same systems and t o r e c e i v e a p p r o x i m a t e l y t h e same k i n d of b e n e f i t s . 9 . 1 The I n s t i t u t o Mexicano d e l Seguro S o c i a l [Mexican I n s t i t u t e
f o r S o c i a l S e c u r i t y ]
The IMSS, a governmental agency, i s t h e l a r g e s t compulsory s o c i a l s e c u r i t y i n s t i t u t i o n i n t h e c o u n t r y . The p o p u l a t i o n i t c o v e r s i s made up m o s t l y of w a g e e a r n e r s who work i n p r i v a t e e n t e r p r i s e . A few s p e c i a l groups of workers from t h e p u b l i c s e c t o r and from s m a l l a r e a s o f a g r i c u l t u r e a r e a l s o members.
Because of t h e r a d i u s i n which i t o p e r a t e s , t h e p o p u l a t i o n t h a t b e n e f i t s from IMSS i s p r e d o m i n a n t l y urban and wage e a r n i n g ;
p r o t o t y p e members a r e i n d u s t r i a l workers and lower r a n k i n g white- c o l l a r employees. Old-age p e n s i o n b e n e i f t s a r e o u t l i n e d t h r o u g h a branch t h e S o c i a l S e c u r i t y Law r e f e r r e d t o a s " I n v a l i d i t y , o l d a g e , unemployment a t o l d a g e , and d e a t h " . I t i s a l s o worthy of n o t e t h a t n o t a l l IMSS members a r e covered by p e n s i o n p l a n s , s i n c e some programs o n l y g r a n t m e d i c a l a t t e n t i o n . T h i s i s a
consequence o f t r y i n g t o o f f e r s o c i a l p r o t e c t i o n , a l b e i t p a r t i a l , t o v e r y poor p e o p l e .
Normal r e t i r e m e n t age h a s been e s t a b l i s h e d a t 65; 500 weeks of c o n t r i b u t i o n t o t h e system i s r e q u i r e d a s a minimum and t h e maximum amount i s 10 t i m e s t h e minimum wage i n t h e F e d e r a l
D i s t r i c t , which i s p r e s e n t l y 9,000 p e s o s a month (180 U S d o l l a r s ) . T h e r e f o r e , a worker who r e t i r e s a t t h e a g e of 65 a f t e r 30 y e a r s of working a t c l o s e t o t h e minimum wage, r o u g h l y 10,000 p e s o s p e r month ( $ 2 0 0 ) , w i l l g e t an a v e r a g e p e n s i o n o f around 6,200 p e s o s a month ( $ 1 2 5 )
.
I t s h o u l d be n o t e d t h a t t h e minimum wage i n Mexico i s b a r e l y enough t o l i v e on and t h a t 60 p e r c e n t of t h i s income f a l l s s h o r t of t h e s u b s i s t a n c e l e v e l . B e a r i n g i n mind t h a t most o f t h e l a b o r f o r c e i s a t income l e v e l s s i m i l a r t o t h e one i n t h e example, i t i s e v i d e n t t h a t IMSS p e n s i o n allow- a n c e s a r e n o t a d e q u a t e .The same law t h a t g o v e r n s IMSS p r o v i d e s f o r t h e p o s s i b l e p e n s i o n once t h e a g e of 60 i s r e a c h e d , though t h e amount i s s m a l l e r . T h i s amount i s a p e r c e n t a g e of t h e sum one would
c o l l e c t a t 6 5 , r a n g i n g from 75 p e r c e n t a t t h e a g e of 60 and i n c r e a s i n g 5 p e r c e n t e v e r y y e a r ; by t h e a g e of 64 it i s 95 p e r c e n t .
9.2 The I n s t i t u t o d e S e g u r i d a d y S e r v i c i o s S o c i a l e s d e 10s T r a b a j a d o r e s d e l E s t a d o [ I n s t i t u t e f o r S o c i a l S e c u r i t y and S e r v i c e s f o r S t a t e Workers]
The ISSSTE i s t h e second l a r g e s t compulsory s y s t e m i n t h e c o u n t r y . T h i s i n s t i t u t i o n i s d e d i c a t e d t o a d m i n i s t e r i n g s o c i a l s e c u r i t y f o r F e d e r a l Government p e r s o n n e l and t h o s e employed i n o t h e r p u b l i c s e c t o r s . Through t h e ISSSTE's l e g i s l a t i o n , t h e norm i s e s t a b l i s h e d t h a t o l d - a g e p e n s i o n s r e q u i r e a t l e a s t 15 y e a r s of s e r v i c e and 55 y e a r s o f a g e o r 30 y e a r s o f s e r v i c e r e g a r d l e s s o f a g e . The amount a p e n s i o n o f f e r s r a n g e s from 50 p e r c e n t of t h e a v e r a g e s a l a r y of t h e l a s t t h r e e y e a r s , a f t e r one h a s worked f o r 15 y e a r s , t o 100 p e r c e n t o f t h i s a v e r a g e a f t e r 30 y e a r s o f c o n t r i b u t i n g t o t h e s y s t e m . The a v e r a g e amount o f a n ISSSTE p e n s i o n i s p r e s e n t l y somewhat more t h a n
15,000 p e s o s a month, which i s e q u i v a l e n t t o 300 US d o l l a r s . The p r o v i s i o n making it p o s s i b l e t o r e t i r e a f t e r 30 y e a r s o f work, r e g a r d l e s s of a g e , h a s c a u s e d q u i t e a few c a s e s o f p e o p l e r e t i r i n g by t h e t i m e t h e y a r e 48 y e a r s o l d , a f r e q u e n t c a s e among women s e c r e t a r i e s .
9.3 The Complementary System t o IMSS
Some p r i v a t e companies, u s u a l l y t h e l a r g e s t and b e t t e r o r g a n i z e d , o f f e r b e n e f i t s f o r t h e i r employees t h a t complement IMSS p e n s i o n s . The r u l e s f o r g r a n t i n g t h e s e b e n e f i t s t e n d t o make t h e amount g r a n t e d by b o t h p e n s i o n s j o i n t l y , t h e IMSS p e n s i o n and t h e company's p e n s i o n , e q u i v a l e n t t o a r o u n d 100 p e r c e n t o f t h e a v e r a g e s a l a r y d u r i n g t h e l a s t y e a r o f a c t i v i t y .
T h i s a p p a r e n t c o n c e r n f o r t h e f u t u r e of r e t i r i n g p e r s o n n e l on t h e p a r t o f e m p l o y e r s a c t u a l l y s t e m s less from u n s e l f i s h n e s s a n d more from p e c u n i a r y m o t i v e s , a s c a n be s e e n by t h e f o l l o w i n g :
(a) The Federal Labor Law bars retiring anybody from a
job solely on account of his age. Therefore, companies that wish to substitute old and obsolete personnel for younger, more skilled and profitable people will have to fire these older employees, which means paying lawful compensations. One way of obtaining voluntary dismissals and at the same time avoiding having to pay compensations is to offer a complementary pension.
The legal compensations that would be required for dis- missals are the equivalent of three months salary,
plus 20 days salary for each year spent with the company, plus 12 days salary with, at the most, double the
minimum wage for each year spent on the job. Thus a worker who has been working in a company for 30 years, say, can only be dismissed upon a compensation payment equivalent of more than 1,000 days salary.
(b) Companies do not actually pay extra costs, since the cost of complementary pensions is actuarially covered by the lump sum that amounts to the dismissal compensa- tion.
(c) There are a series of provisions in the Income Tax Law that allow for tax deductions on contributions to
"social security plans" and to other financial opera- tions, all of which provides additional advantages for companies who engage in this type of benefit.
(d) Complementary pension plans are a way to keep personnel in the company, which is quite important when dealing with skilled workers, especially if they have been trained by the company. One way a company can retain skilled workers is by granting additional benefits directly proportional to the number of years they have worked in the company.
9.4 Local Social Security Offices or Institutes
Some areas of the public sector outside the federal govern- ment, especially areas administered by state governments,*
establish general social security plans and, specifically,
pension systems, all of which are administered by local institutes or offices. Not surprisingly, a great similarity is to be
observed between these systems and procedures used at ISSSTE.
The explanation for this is quite simple if one takes into account the country's tremendous political and administrative centralism. The progress made in social security benefits
first comes from the central government, and then the remaining systems try to match these benefits with modifications. In this regard, the. regulations concerning age, conditions for retire- ment, and the amount of pensions are similar to those followed by ISSSTE, though there might be some small differences. This similarity can even be seen in the names of these institutes;
some examples are the Instituto de Seguridad Social del Estado de Sonora (ISSTESON) [Sonora State Social Security Institute], and Instituto de Seguridad Social del Estado de Chiapas (ISSTECH)
[Chiapas State Social Security Institute].
9.5 Individual Systems within Companies
Under this heading, we are classifying decentralized companies or partially state-owned companies that for certain reasons have been able to set up their own social security systems, which includes pension plans. These state controlled companies have their own administration, their own particular criteria for granting allowances, and they operate with their own financial resources. It must be said that this is the type of social security that affords workers the most advantageous conditions. Some clauses allow for retirement solely on the basis of the number of years a worker has been in a company, thereby allowing for truly young pensioners with really high
*Mexico is also a federal union, which is clearly expressed in its official name, the United States of Mexico.
