According to the authors of this book the main goals of social security systems are poverty prevention and the provision of adequate replacement rates. They argue that government intervention is required for redistribution and to promote saving for retirement, given the strong preference of individuals for present consumption. In this context, design features of pension systems combine to generate redistribution both towards and against women. The situation of women has many particularities that make it imperative to have a special look at them when social security design is formulated. This book should therefore be consulted by policy makers that are reviewing social systems around the world.
The authors develop a theoretical framework that is extremely useful for assessing this impact. Before going into how to measure the impact of social security reforms, the authors ask, in the first chapter, why these reforms have a gender impact. To do this they review the specific characteristics of women that need to be considered in order to identify correctly their strengths and vulnerabilities, and how these are interrelated to social security arrangements. Among other characteristics, the authors argue that the labor career of a woman tends to be more interrupted with lower wages; and at retirement, women have a higher life expectancy.
Chapter two describes how the retired live, and what kind of support they have. Women, it is argued, depend mainly on their husbands' support, widow benefits or extended family support. This is a key point stressed by the book: this situation makes women vulnerable at retirement, since, as the authors recognize, women's wellbeing should not depend on family good will. They cite family breakdowns, divorce and other adverse family situations as leading women to have a worse position in the future. Social security reforms have a long term impact. Possible changes in society over time should be considered by policy makers in this context.
Getting into the challenge of assessing gender impact of social security reforms, the authors provide significant detail about social security systems in Chile, Argentina and Mexico. In all of these countries there was a shift from a pay as you go system to a multi-pillar system with an individual capitalization component. In doing this, they not only take into account the self-financed pension, but also the public pillar and the benefits derived from husbands. They recognize that any social security reform has incentive and disincentive effects, generating behavioral changes in the labor market and in family arrangements. Therefore, when addressing the impact of the reform they also take into account these effects. Even though the three countries analyzed have reforms that go in the same direction, there are elements specific to each country that make the reader understand better the impact of the changes introduced by this type of reform. Moreover, the authors provide examples of other regions which allow for a wide range of analysis.
The authors also emphasize that value judgments are required, or at least made, in determining the specification of those design features that determine gender outcomes. The trade-off between protection and incentives is never easily resolved, and is especially difficult when gender issues are considered.
The book is focused on the comparison between men and women; nevertheless, it also looks at distribution impacts between other groups or subgroups. In this more general context, the authors argue that public benefits financed by general taxes to social security members may effectively be transfers from more to less vulnerable sectors. This gives the book relevance not only for considering gender issues, but also more comprehensively.
When considering the results, readers should keep in mind that they compare the relative situation of men and women in the system before and after the reform, but do not analyze the impact on the population as a whole, in absolute terms. It could be that everyone is better off, with women doing relatively well; or that everyone is worse off, with women harmed less than men. The authors argue that this is difficult to determine because the previous systems had sustainability problems.
For the case of Chile the authors neglect to mention the relative importance of minimum pension guarantee for widows. In fact, not many women that have low education levels comply with the 20 years of contribution required for the minimum pension. But for widows the qualifying contribution period is much lower. In fact, if the husband has passed away as a retiree, there is no minimum contribution period for access to the minimum pension guarantee as a widow. The data provided by the Pension Supervisory Authority as of November 2009 shows that from the total minimum pension guarantees paid in that month, 33% went to widows, 22% to men of pensionable age, and 15% to women of pensionable age. The existence of this minimum pension guarantee for widows might also discourage labor force participation; because women that receive this benefit, or expect to receive it, might end up losing it if their own old age pension is equivalent or above the amount received as widow. Disability benefits are not considered in the book. What type of benefits were provided under the old schemes? What were the eligibility requirements? What was the level of those benefits? Is there any design feature that makes women end up better or worse off after the reform? These questions are not addressed by the book. It might be the case that there is no significant impact with respect to this type of benefit, but this is not clearly stated by the authors.
Additional factors that are also especially important for the case of Chile are the risks faced by affiliates. As the authors explain, women might be more risk averse than men when choosing among investment options, leading to safer alternatives with lower expected returns, which translates to a gender impact, for instance, in the value of accumulated savings and pensions. In the case of Chile, there are five alternative funds, the riskiest with a maximum limit of 80% in equity, and the safest with a maximum limit of 5% variable income. This might be something to look at in future research. Additionally, it might be argued that the comparison between multi-pillar and pay as you go systems should also include a comparison of the risks faced by affiliates in each system, even if there is little choice as the authors mention. This is because the minimum pension guarantee can also be seen as an insurance against investment risk, which is present even if there is no alternative at all. If women are the ones favored by the minimum pension guarantee, then there is also a benefit for them because they would be more likely to be covered by this insurance. The fact that we live in a world of uncertainty on the investment side is a very strong argument for having multi-pillar systems that allow for the diversification of risks. This is mentioned but not given sufficient emphasis.
Overall this is a very well written book that analyzes comprehensively an issue of central importance for policy makers that are evaluating pension reforms. In the case of Chile, there was an important second generation reform that goes in line with one of the main messages of the authors, which is that a woman should be thought of as an individual able to support herself. This is done by a stronger solidarity pillar, which is better integrated with the contributory pillar. Additionally, within this last pillar the position of women is strengthened. For example, in the case of divorce, the possibility of dividing the balance at the time of divorce is incorporated. This is accompanied by a more symmetrical treatment, by imposing the obligation for spouses to buy joint life annuities, being before only compulsory for men.
