Pension schemes and labor supply in the formal and informal sector

Abstract

This paper analyzes the participation path of workers in the formal and informal sectors throughout their lives and their pension eligibilities, as well as how the social security scheme can change the aforementioned participation path. High levels of informality have impacts on the benefits that workers receive, especially their pension benefits. I use Argentinean panel data from 1995 to 2008 to construct a structural discrete choice model which estimates the population's labor path and their pension eligibilities. I find evidence that low-educated workers have difficulties to obtain a pension by the age of 65 and even by age 70. Policy experiments show that if the parameters are fixed as in the pay-as-you-go (PAYG) model, there is a slight reduction in the years worked in the formal sector and the percentage of workers who obtain a Full pension. If the pension requirements (minimum age and years contributing) are stricter, there is an increase in the years spent in the formal sector but it is not sufficient to achieve the benchmark level of pension coverage. If the requirements are looser, there is a reduction in the amount of time spent in formality to contribute up to the new threshold.

The Efficacy of the Retirement Pension Provision System: Modeling, and Assessing of the Case of Kazakhstan

“…The state of the labor market is the main factor affecting the efficiency of the pension system [50][51][52][53]. Therefore, the indicators of the labor market for 2014-2019 were used as independent variables affecting the forecast indicators of the Kazakhstani pension system efficacy in the context of regions and cities in the Republic of Kazakhstan in line with [15].…”

Pension System Future Direction on Employees of Small and Medium-sized Enterprises in Indonesia, Vietnam, and Hungary

“…When their needs are met, they may be more motivated to contribute productively to the enterprise's performance. Ceni (2017) stated that a forceful pension ensures a worker's satisfaction and dedication to the firm throughout his or her working time. Similarly, Salah et al (2019) also suggested that contributory pension schemes are an essential management approach to improve worker engagement and job satisfaction.…”

“…Despite their socioeconomic significance, SMEs have a variety of obstacles. According to Ceni (2017), one of the fundamental features of developing-country labor markets is the insufficiency of pension contributions from firms and employees. This characteristic impacts not only the current condition of employees who are not entitled to advantages such as medical care, unemployment insurance, or additional grants but also admission to the pension scheme for the aged.…”