By World Bank
"Early retirement and lax eligibility for incapacity are undesirable for the economic system simply because they lessen exertions productiveness and the provision of skilled employees, and they're undesirable for the method simply because they impose a heavy monetary burden that makes it nonsustainable." Costa Rica is at a turning element with recognize to its social safeguard procedure. whereas part the workforce is roofed and beneficiaries have fared good long ago, the pay-as-you-go (PAYG) pension procedure is unsustainable for the longer term. This ebook describes the current pension process, its shortcomings, and defends the necessity for pressing reform. It additionally makes tips on how you can reform the procedure, what can be replaced first, and precisely what components of the pension process will be converted.
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Some of the reports are published in this series with the least possible delay for the use of governments and the academic, business and financial, and development communities. The typescript of this paper therefore has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. Some sources cited in this paper may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent.
Vesting period the minimum amount of time required to qualify for full ownership of pension benefits. Page xi Executive Summary Costa Rica is at a turning point with respect to its social security system. While half the work force is covered and beneficiaries have fared well in the past, the pay-as-you-go (PAYG) pension system is unsustainable for the future. Overly-generous benefits, early retirement, and easy access disability benefits all impose huge long run burdens on the system. These problems are exacerbated by the presence of special schemes for selected occupations, whose pensions sometimes exceed their wages, and by the high replacement rates, far exceeding their contributions, for workers who have only contributed for 20 years.
Informal Sector as a Share of Labor Force, Selected Latin American Countries, (1990/1995) Souce: ILO Panorama Laboral 1996 Evasion is generally high in economies characterized by many small enterprises, so these numbers are not surprising. But evasion in Costa Rica is exacerbated by certain features of the social security system that could be changed, such as the absence of a transparent link between contributions made and benefits received; inadequate collection and inspection mechanisms; a failure to treat evasion as a tax crime; and poor information systems.