Argentina Helps Lead The Way In Privatizing Social

Argentina's experience demonstrates that even under very difficult economic circumstances, a nation can successfully convert from a pay-as-you-go social security system to a competitive private pension plan with individual retirement accounts.

CHICAGO: Since 1989, Argentina has rapidly introduced revolutionary reforms that greatly reduced government regulations and controls. Privatization of its social security system is the most important step during the past couple of years -- I recently went there after a three year absence to speak to a conference on this program. Argentina's experience demonstrates that even under very difficult economic circumstances, a nation can successfully convert from a pay-as-you-go social security (PAYG) system to a competitive private pension plan with individual retirement accounts.

PAYG taxes workers to pay benefits to currently retired persons. The combined social security tax on employees and employers in Argentina had reached 50 percent of wages, a crushing burden. This tax helped discourage companies from hiring additional workers. Private employment has been stagnating and the unemployment rate ballooned to more than 17 percent during the serious depression the past two years induced by the Mexican crisis.

To avoid the high social security taxes and onerous labor market regulations, many workers and companies operate in the illegal underground economy. Argentinean economists estimate that almost half of all workers have either illegal or informal jobs, a staggering percentage.

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.

required

Log in

http://prosyn.org/dGk5XhH;
  1. China corruption Isaac Lawrence/Getty Images

    The Next Battle in China’s War on Corruption

    • Chinese President Xi Jinping knows well the threat that corruption poses to the authority of the Communist Party of China and the state it controls. 
    • But moving beyond Xi's anti-corruption purge to build robust and lasting anti-graft institutions will not be easy, owing to enduring opportunities for bureaucratic capture.
  2. Italy unemployed demonstration SalvatoreEsposito/Barcroftimages / Barcroft Media via Getty Images

    Putting Europe’s Long-Term Unemployed Back to Work

    Across the European Union, millions of people who are willing and able to work have been unemployed for a year or longer, at great cost to social cohesion and political stability. If the EU is serious about stopping the rise of populism, it will need to do more to ensure that labor markets are working for everyone.

  3. Latin America market Federico Parra/Getty Images

    A Belt and Road for the Americas?

    In a time of global uncertainty, a vision of “made in the Americas” prosperity provides a unifying agenda for the continent. If implemented, the US could reassert its historical leadership among a group of countries that share its fundamental values, as well as an interest in inclusive economic growth and rising living standards.

  4. Startup office Mladlen Antonov/Getty Images

    How Best to Promote Research and Development

    Clearly, there is something appealing about a start-up-based innovation strategy: it feels democratic, accessible, and so California. But it is definitely not the only way to boost research and development, or even the main way, and it is certainly not the way most major innovations in the US came about during the twentieth century.

  5. Trump Trade speech Bill Pugliano/Getty Images .

    Preparing for the Trump Trade Wars

    In the first 11 months of his presidency, Donald Trump has failed to back up his words – or tweets – with action on a variety of fronts. But the rest of the world's governments, and particularly those in Asia and Europe, would be mistaken to assume that he won't follow through on his promised "America First" trade agenda.