Work histories and workers’ failure to satisfy pension contribution requirements: A comparison of Mexico and Uruguay

Abstract

AbstractComparing Mexico and Uruguay, this article examines the work history of workers and the challenges they face to satisfy the minimum contribution period for eligibility to receive a contributory old‐age pension. Administrative data on work histories is used to formulate a survival model aimed at estimating hazard rates of entering and transitioning out of a given contribution status. This model is then used to perform a Monte Carlo simulation to forecast contribution histories. Results suggest that the hazard rate is negatively associated with the length of a worker’s spell in his or her current status and warn that, both in Mexico and Uruguay, a significant group of workers will find it difficult to gain entitlement to a contributory pension in old age. The manner in which each of these national systems has addressed the challenges associated with low contribution densities may explain the two countries’ very different coverage results.