Demographic Dividends and Retirement Pensions in México

Isalia Nava, El Colegio de México
Roberto Ham-Chande, El Colegio de la Frontera Norte

Social security should be a main instrument for the building and functioning of demographic dividends. Retirement pensions must build up savings and investments in a first dividend to enable financial resources, economic soundness, educational levels and health programs to guarantee a sustainable second dividend. This paper analyzes the onset and development of social security during the last century, depicting the invalidation of the first dividend through inequality and poor policies. Social security is now facing financial crisis, actuarial deficits, lack of coverage, meager benefits for most, and also allowing pampered retirement for the few. Such circumstances all together cancel the first dividend and jeopardize the second. The adoption of defined contributions in individual accounts is diverting resources from investments in economic productivity, education structures and health systems. Projections are made up to 2025 to suggest possibilities for a first and second dividend requiring strong political will and social commitments.