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OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Reforming the pension system to increase coverage and equity in Colombia

Colombia is one of the most unequal countries in Latin America. The high level of informality in the labour market and many characteristics of the pension system leave many elderly in poverty. Only formal-sector employees earning more than the relatively high minimum wage are covered. Linking benefits to at least the minimum wage makes the system costly and reduces the provision of annuities by insurance companies as it is difficult to insure against changes in the minimum wage. The Government has recently introduced a matching-contribution scheme (BEPS) for informal workers and vulnerable retiring aged people who have not contributed enough to be entitled to a pension. Moreover, the coverage of the old-age minimum income support has been extended but at the cost of lowering the already modest benefits. More reforms in the pension system are needed to extend coverage while eligibility to the BEPS and the minimum income support should be expanded to guarantee old-age income for more Colombians. In the medium term an in-depth pension reform is required. This Working Paper relates to the 2014 OECD Economic Survey of Colombia. (www.oecd.org/eco/surveys/economic-survey-colombia.htm)

English

Keywords: minimum wage, pension system, minimum income support, coverage, retirement age, elderly poverty, inequality
JEL: J14: Labor and Demographic Economics / Demographic Economics / Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination; I30: Health, Education, and Welfare / Welfare, Well-Being, and Poverty / Welfare, Well-Being, and Poverty: General; H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions; J26: Labor and Demographic Economics / Demand and Supply of Labor / Retirement; Retirement Policies; J32: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
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