Does the introduction of non-contributory social benefits discourage registered labour? Testing the impact of pension moratoriums on unregistered employment in Argentina (2003-2015)

Mercredi | 2017-03-29
B103 12h30

Leonardo Eric CALCAGNO

In recent years, Argentina has reached nearly universal retirement benefits coverage. This was achieved through two successive pension moratoriums, implemented in the third quarter of 2006 and the third quarter of 2014, which allowed buying back missing contribution years and retire even with incomplete careers. In principle, the effect of moratoriums on unregistered employment is unclear: they may discourage retirement contributions by opening an alternative way for retiring, but they also may be an incentive for senior workers with incomplete careers to contribute more years before retiringand thus reduce the social security debt they will buy back with the moratoriums. In this paper, we ascertain the impact of these pension moratoriums on senior workers’ transitions between formal and informal employment. We first use a dynamic microsimulation framework to simulate careers and tellapart elderly workers needing a moratorium to retire (our treatment group) from elderly workers who may yet retire normally (our control group). We then compare the transitions between unregistered employment and registered labour of the treatment and control group before and after each of thesemoratoriums. Our first results suggest the first moratorium did not have any significant effect on transitions to formal employment or unregistered labour. Nevertheless, the 2014 moratorium seems to have both encouraged elder workers formalisation and to have discouraged senior workers from leaving the formal sector before reaching retirement age.