Chile about to privatise unemployment insurance

Two decades after Chile launched what turned out to be the amazingly successful privatisation of its social security system, its current Socialist government plans to allow the private sector to manage the nation's unemployment insurance system.

Instead of turning to the government for benefits, unemployed workers will draw from individual accounts that have been invested in a mixture of stocks and bonds.

Under the new system, scheduled to go into effect October 1, 2002, workers will pay 0.6 percent of their wages into an account administered by a private fund with employers contributing 2.4 percent.

The government's only involvement will be to make an annual payment of about $12 million to a fund for workers whose own contributions are not enough to guarantee them minimum benefits.

All unemployed workers will be allowed to collect the equivalent of 40 percent their wages for up to five months any time they find themselves without a job whether they have been laid off or fired or have quit.

At retirement, workers can collect payoffs from their accounts the amount depending on how much they have withdrawn from their account throughout their working lives.

Source: Larry Rohter, Chile Will Privatise a New Span of its Noted Social Safety Net, New York Times, June 24, 2002.

For text http://www.nytimes.com/2002/06/24/international/americas/24CHIL.html
For more on Privatisation Innovations http://www.ncpa.org/iss/pri

FMF Policy Bulletin\25 June 2002

Publish date: 01 July 2002
Views: 419

Energy,

The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation. This article may be republished without prior consent but with acknowledgement to the author.

Share this article

Help FMF promote the rule of law, personal liberty, and economic freedom become an individual member / donor HERE ... become a corporate member / donor HERE