During his visit to Mexico, the president of the Global Aging Institute, Richard Jackson said that the labour market structure must be strengthen in order to enable more workers to contribute to the social security system.

Jackson thinks that Mexico’s greatest challenge is to reduce informality and inequity, and increase adequate living conditions for those who are about to retire from the workforce.

He pointed out that only 35% to 40% of the workforce are currently included in the pension’s system, which means that the country has high informality levels, “and this is a problem that must be addressed immediately”.

In an interview with Notimex, he stated that “this is the number one challenge in Mexico, and must be faced during the 10 to 15 years to come in order to seize the demographic bonus, or the problem shall never be solved”.

Jackson claimed that even though the problem of pension system exclusion affects several countries in Latin America, such as Brazil and Chile, Mexico must implement reforms to change the situation and help increase workers contributions.

The current mandatory level of contribution is 6.5%, according to the law of the Mexican Institute of Social Security (IMSS), the lowest among the 34 country members of the OECD.

This level of pensions’ savings is not enough to make sure that people shall have the economic resources to face a decent retirement, said Jackson, as it does not help to have a proper replacement rate (percentage of the salary received after retirement).

He explained that with a contribution rate close to 7%, including the social contribution, Mexican workers would have a replacement rate of 25% to 30%.

But, if the contribution rate was doubled, from 6.5% to 13%, Mexican workers would have a replacement rate of 50% or 60% for their retirement.

It is impossible to implement this measure “from one day to the next”, as there would be a massive disruption in the labour markets. So, the ideal thing to do would be to strengthen the voluntary saving system.

“Mexico is a young country, but the population is aging, and the percentage of elder population will be three times higher by 2030. Therefore, the country must work to generate more equity, and a pension system that provides more benefits in both, the private and public sector”, he concluded.

The pension system must be urgently reconsidered in the region. This a demand directly linked to the aging population.