RAND Solution
Challenge
Mexico is undergoing unprecedented demographic changes. Advancements in living conditions, health care, and technology have raised life expectancy, but a larger percentage of Mexico's elderly is poor and rural, and many lack the social safety nets available to urban seniors. Could reforms to Mexico's social security system help alleviate political and social instability before Mexico's baby boom reaches retirement age?
Context
Several social security systems exist in Mexico, but there are gaps in coverage. National coverage rates are low compared not only with other OECD countries but also with many other Latin American ones: only about 46% of Mexico's public and private employees were covered in 2009. Many elderly Mexicans therefore continue working into old age. Many countries around the world have introduced non-contributory social security programs, including Brazil, Bangladesh, and South Africa. Non-contributory social security programs are implemented as a poverty alleviation measure for elderly with no contributory social security coverage or employer provided pensions.
In 2001 Mexico introduced government-paid noncontributory pension programs for the growing segment of the population that lacks social security coverage. A public health care program for the uninsured also expanded substantially, though neither of these is universally available.
“As the population of Mexico ages, the nation will face greater challenges ... [Our research] provides some options about how Mexico can strengthen the security of its older population.”
Emma Aguila
Project Description
Given the worldwide trend of aging populations, it is important to understand the long-term and short-term effects of these programs. RAND designed, with the State of Yucatan, Mexico, a non-contributory social security program for towns with more than 20,000 inhabitants, to evaluate the program's impact on the welfare of residents age 70 and over.
The study follows both treatment and control groups over time to examine short- and longer-term effects. This is a unique project to test and understand the effects of non-contributory pension systems on the health and welfare of the elderly.
Research Questions
- Could a non-contributory pension program be designed both to reduce poverty and to measure the health and welfare improvements of elderly Mexicans?
- How expensive would such a program be, relative to the benefits observed?
Key Findings
- The RAND research team was able to develop a computerized questionnaire and employ a randomized design with treatment and control groups and measurements before and after the intervention.
- The treatment group – those receiving the pension – registered a decline in the number of older people still working, an increase in use of medical services and medicine, and improvement in food availability, relative to the control group.
Impact
Recognizing the positive impacts of the pension program, the Mexican government subsequently asked RAND to analyze the financial sustainability of expanding the program to cover a larger number of localities and beneficiaries.
“We have enjoyed the opportunity to publish an in depth report on income security and health in Mexico and to address common challenges with the United States.”
Vicente Fox Quesada, Former President of Mexico.
