Social Security Coverage around the World: The Case of China and Mexico

Authors

Abstract

We describe the current state and recent trends in the landscape of social security programs in China, Mexico, and India. A common thread across these countries is the introduction and recent expansion of old-age pension programs with noncontributory components. We use surveys from the HRS-family to analyze trends in the levels and correlates of social security coverage in Mexico and China. The most notable development is the increase in public pension coverage for the elderly population. In China, coverage rates for the population 70 and older grew from 33 percent in 2011 to 68 percent in 2015; and in Mexico from 32 percent to 55 percent in the 10 years following 2002. The new programs also caused significant changes on the determinants of coverage in ways that share similarities across countries. Variables such as educational attainment, urban status, and an employment history in the formal sector, were strong predictors of public pension receipt in the earlier survey-waves, but not in the most recent ones for China and Mexico. However, a strong relationship remains, and is unchanged across time, between those same characteristics and the average income pension amount. Likewise, there are no significant changes between them and receipt of benefits from other social programs. Based on these results, we conduct simulations that show, for example, that even rapid transformation of the labor market or education levels of the population would not radically change the proportion covered by pension programs but would largely increase average pension amounts.

Key Findings

  • In recent years, Mexico, China, and India have made significant reforms in social security programs with the aim of extending social security coverage to a larger fraction of their elderly population. This has been done through the introduction and expansion of programs that have a noncontributory component.
  • Between 2011 and 2015, China increased the proportion of individuals 70 and older who receive public pensions from 33.5 percent to 68%. In Mexico, the proportion of individuals age 70 and older who are covered by either a contributory or noncontributory programs increased from 33 percent in 2002 to 56 percent in 2012.
  • The new programs also caused significant changes in the coverage determinants in ways that share similarities across Mexico and China. Variables associated with high socioeconomic status and a history of formal labor-force attachment are strong predictors of public pension receipt in the early survey waves, but not in the most recent ones. However, a strong relationship remains, and is unchanged across time, between those same characteristics and the average income pension amount. Likewise, we do not find large, significant changes between these variables and receipt of benefits from other social programs.
  • We find that even a rapid transformation of the labor market would not radically change the proportion of who is covered by a pension program, but would indeed substantially increase average pension amounts. By the same token, increasing the levels of education of the population would not largely change the coverage patterns in Mexico or China but would substantially raise the average pension income in both of them.
  • Though the introduction of noncontributory programs has brought about dramatic changes resulting in coverage rates that do not depend on growth in labor market opportunities, the latter is still an important factor affecting future elderly populations’ level of benefits and economic security.

Citation

Perez-Arce, Francisco, Maria Prados, Erik Meijer, and Jinkook Lee. 2018. “Social Security Coverage Around the World: The case of China and Mexico,” University of Michigan Retirement Research Center (MRRC) Working Paper, WP 2018-395. Ann Arbor, MI. https://mrdrc.isr.umich.edu/publications/papers/pdf/wp395.pdf

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Project

Paper ID

WP 2018-395

Publication Type

Working Paper

Publication Year

2018
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