12. Chile

In 1990, 9% of the population were aged 60+; this has now increased to 16% of the population and is expected to reach 25% in 2035 (Bravo and Hughes 2018; CEVE UC 2018). As in many countries, Chile displays significant gender gaps in relation to employment and pension income. However, this nation holds one of the lowest rates of women in paid work across the Organisation for Economic Co-operation and Development (OECD) member countries (OECD 2017). Scholars have mainly attributed this gendered context to persistent social norms that associate women with both domestic and care work (Madero-Cabib et al. 2019a). We now focus on understanding this scenario specifically among older individuals.

Data from a national survey in Chile (CASEN 2015) shows that from 2006 onwards an increasing proportion of older individuals have participated in the labour force (Table 12.1). Specifically, 72.6% of men in the 60–64 age group were working in 2006, as compared to 80.6% in 2015. Women display a similar trend, although labour force participation rates are considerably lower.

As seen in Table 12.2, labour force participation in Chile among individuals aged 65+ is clearly higher than in the OECD average (OECD 2015, 2017).

One explanation behind the high labour force participation among people beyond statutory retirement age in Chile are the financial obligations faced by many workers without adequate pension savings for later life. Indeed, as recent studies show (Centro UC Políticas Públicas 2017; CEVE 2018), ‘financial needs’ (64.5%) are the most important motive for extending working lives, while ‘health problems’ (66.5%) and ‘having other duties’ (18.1%) are the main reasons for leaving the labour market.

One of the main ways older Chilean adults remain active in the labour market is self-employment (CEVE 2018). However, as previous literature indicates, most self-employment among older adults is in the informal sector (Huenchuan et al. 2007; Vives et al. 2017), which often entails precarious working conditions (Centro UC Políticas Públicas 2017).

Average income is one indicator of older workers’ working conditions. The average income of older workers in Chile (65+) is equal to 67% of the average income of the rest of the population, while in OECD countries this statistic is 86.2% (CAPSP 2015; OECD 2013). Average income for people aged 65+ in Chile is about €458 per month, and there is a substantial gap between men (about €541 per month) and women (about €291 per month) (CAPSP 2015).

Access to occupational training is another indicator of good working conditions. In one study, 20.8% of older workers say they would like to continue learning new work-related competences (Programa Adulto Mayor UC 2013). However, another study indicates that only 4% of workers aged 60–74 have been in an 8+ hour job training session during the last year (Centro UC Políticas Públicas 2017).

The evaluation of health risks in the workplace also measures working conditions. Vives et al. (2017) assessed exposure to labour risks in four different domains: hygiene, ergonomics, security and psychosocial wellbeing. They found that 20% of individuals aged 70+ are employed in jobs that expose them to high temperatures and solar radiation. The most common ergonomic risks for older workers are harsh positions, repetitive tasks, and working while standing. Regarding psychosocial risks at work, 20% of older individuals believe that time allocated to work is insufficient for performing their tasks adequately, 50% believe that their jobs involve excessive concentration, and 45% state that their jobs are highly exhausting (Vives et al. 2017; Centro UC Políticas Públicas 2017).

In 1981, during the dictatorship of Augusto Pinochet, Chile was the first country to entirely replace a public defined-benefit pay-as-you-go pension scheme (PAYG scheme) with a private mandatory defined-contribution individual-retirement-account pension scheme (IRA scheme). Since then, every employee must contribute 10% of their monthly salaries to their pension savings. The savings are administered by private institutions called Pension Fund Administrators (AFPs), for-profit companies that invest pension savings in different economic and financial activities.

During the 2000s, the Chilean pension system was the target of multiple criticisms. The main critiques were (1) the absence of a strong welfare net for people with low pension savings, (2) the unjustified administration fees for AFPs (about 2.6% of workers’ salaries), and (3) the gender inequalities both in replacement rates and pension income (Arenas de Mesa et al. 2006). To address some of these issues, in 2008 the Chilean government, led by President Michelle Bachelet, implemented an important pension system reform, which aimed to strengthen the non-contributory dimension of pensions as a way to reduce old age poverty and to address gender gaps in pensions (Cumsille 2015; Todd and Joubert 2011). Regarding gender inequalities, with the objective of compensating for women’s interruptions in pension contributions—mainly caused by pregnancy and periods of child rearing—the 2008 reform introduced a new pension subsidy, consisting of an economic bonus in which, for each child—born or adopted—women receive a once off contribution equal to roughly €663 into their private pension accounts. Another measure stated that in the case of a divorce, a judge is allowed to take up to 50% of the individual pension savings of either member of the couple and reallocate it to the personal account of the other member.

Despite the changes introduced in 2008, by 2014 the Chilean pension system still presented several deficiencies (Mesa-Lago 2015; Barr and Diamond 2016). The government at the time commissioned an Advisory Committee to identify existing weaknesses in the pension system and suggested policy measures to overcome them. The analyses of the Advisory Committee indicated three main limitations of the pension system: (1) low pension incomes, (2) low replacement rates, and (3) gender inequalities. For instance, official statistics show that in Chile between 2007 and 2014 the monthly pension median was about €112 (for women approximately €57 and for men approximately €152). The commission elaborated several recommendations. Among other measures, they proposed (1) strengthening and expanding public subsidies for pension incomes, both in terms of coverage (from 60% to 80%) and amount of income (by 20%); (2) that not only workers but also employers contribute to pension savings (about 5% of worker’s salary); (3) that self-employed individuals contribute to their pensions by promoting financial incentives; (4) that a portion of the new employers’ contributions goes to a shared fund which benefits those with lower pension incomes; and (5) reducing gender gaps by equalising the retirement age of men and women, and eliminating the use of gendered mortality rates to calculate individual monthly pensions.

In October 2018, President Sebastián Piñera announced a new bill that aims to improve the living standards of current and prospective retirees, which is now being discussed in Congress. Among other measures, this new bill proposes to provide moderate financial incentives from the state for those who extend their working life beyond statutory retirement age. However, what this bill project also aims, beyond providing incentives, is for individuals to have longer occupational careers and therefore to postpone retirement, for them to access a salary for a longer life period (a salary often higher than a pension income), as well as to increase the accumulated fund of pension savings.

This is the very first time a bill aiming to foster extended working life is proposed in Chile. It is a policy measure that stresses individual accountability for dealing with poverty risks in old age. Yet, this policy focus strongly differs from the viewpoint of some members of the Advisory Committee on pensions, union leaders, members of non-governmental organisations, and academic scholars, who have instead claimed for responsibly increasing welfare and public benefits to prevent and eliminate high poverty ratios among men and women in old age. They have specifically claimed that these welfare and public benefits are especially relevant in the frame of the IRA pension system in Chile, which mainly relies in contributory programs, and non-contributory gains for individual pension accounts are very scarce. These public benefits are even more relevant if we consider that, according to a recent Chilean study on pension contributions histories (Madero-Cabib et al. 2019b), only about half of people currently aged 65 contributed continuously to a pension fund during their thirties, forties and fifties; while the rest of people from this cohort either did not contribute (e.g. people working in the informal sector), or they remained permanently inactive (mostly women focused on care and domestic tasks at the expense of labour market participation). Therefore, the new bill corresponds to a policy measure with a very specific focus: it aims to ameliorate poverty in old age not by increasing welfare state benefits, but primarily by individualising the responsibility of keeping a decent living status after the retirement transition.

Furthermore, specialised literature in Chile points out that the reflection on the extension of labour-force trajectories should consider not only the financial benefits of later retirement, but other occupational aspects such as the possibility of working fewer hours per week, working conditions that protect individuals’ physical integrity, accessible public transport, as well as reduced transport costs for older workers (Madero-Cabib et al. 2019c). On the other hand, it is of utmost importance to reflect on the differentiated impact of these policy measures between men and women who, especially in Chile, have very different labour-force trajectories during adulthood, with women often being in longer periods of inactivity (Madero-Cabib et al. 2019b). Finally, a crucial assumption of these policy measures is that most older workers will be healthy enough to remain active in the labour market until later ages, which is why it is essential to consider the advantages and disadvantages for health fostered by these public policies (Azar et al. 2019; Baumann and Madero-Cabib In Press; Madero-Cabib et al. In Press).

The Chilean pension system provides the option for workers who want to match the AFP contributions, to voluntarily contribute towards a supplementary private pension fund. This fund in Chile is known as Aporte Previsional Voluntario (APV) and is administered exclusively by private bureaus. To make APVs financially attractive, the state offers economic incentives to individuals who contribute to them, notably the reduction of some taxes. The 2008 pension reform introduced an additional voluntary pension fund that works similarly to APVs, but also requires the employer to contribute to the employee’s fund, known as APVC (or Collective APV). If employers contribute, their contributions are excluded from corporate taxes. However, in spite of tax exemptions and benefits, the overall coverage of these two plans (APV and APVC) is still very low, in 2014 only 0.2% of contributors had an APV and an even smaller fraction had an APVC (CAPSP 2015). Therefore, one proposal of the Advisory Committee for the 2015 pension reform was to increase the number of employers contributing to the APVC.

Voluntariness can also be analysed in the regular contributions to the AFP. This is because monthly pension contributions into private accounts are only mandatory for employees, but not for self-employed individuals. Chile is one of the few countries in the OECD (along with Australia, Denmark, Mexico, and Switzerland) in which self-employed workers are excluded from pension coverage. In Chile, only 6% of self-employed workers contribute to their pension funds. However, pension contributions by the self-employed will be mandatory from 2019 onwards.

As already mentioned, a main assumption of extending working lives is that the vast majority of older individuals will have adequate health status in order to keep active in the labour market until later ages (Madero-Cabib et al. 2019d). In this section, we discuss some of the most crucial health issues among current older people in Chile.

The substantial increase in life expectancy has led an increasing number of Chilean scholars and policymakers to devote more attention to economic, health, and cultural dynamics during the last stage of life. In this chapter, these dynamics have been discussed in light of gender differences. We would like to reflect on some ideas that we must consider when elaborating on measures that promote economic, health, and cultural inclusion of older men and women.

We suggest that policy measures that seek to foster economic and physical wellbeing in old age should not exclusively focus on promoting extended labour force participation in old age, but also to consider other life experiences and previous stages of lifecourse. This perspective—which in international literature is known as ‘lifecourse sensitive policy approach’ (Leisering, 2003; Madero-Cabib and Fasang, 2016—indicates that adequate social and individual conditions in old age rely on multiple experiences across the lifecourse such as: (1) the transition to the labour market once compulsory education is finished in early adulthood; (2) risk prevention policies as well as the promotion of healthy lifestyles in workplaces across the whole occupational trajectory; (3) adequate possibilities of balancing family and work life in middle adulthood; (4) public transport and mobilisation policies in cities and towns designed with older adults in mind; (5) the presence of strict anti-age discrimination policies.

In other words, policy measures that seek to promote economic, health, and cultural inclusion among older women and men should consider that wellbeing in old age is neither a phenomenon exclusively associated with work, nor is it only dependent on what occurs in old age. Instead, this is a process that depends on experiences in other dimensions of life such as family, education, transportation, diet, cultural values, sports, health, and work, which are confronted by people from infancy to old age, through early, middle and late adulthood. We hope that the discussion held in this chapter about the ageing context in Chile will contribute to a better and more informed reflection on the development of wellbeing in old age and of extended working life policies in this country.