Jan 10, 2005
People who are pushing to privatize Social Security claim it will provide increased pension benefits to retirees. Some even point to Great Britain and Chile to prove their point. Bad examples – they prove just the opposite!
Chile privatized its social security system over 20 years ago – with all the same claims made for private "investment accounts." Today the investment accounts of retirees are so much smaller than originally predicted that 41% of those eligible to retire in Chile are forced to continue working. Many receive only the minimum pension – and this only because the government has poured huge continuing subsidies into the system it supposedly "privatized"!
In Britain, the results of the social security privatization started in 1978 have had similar results. The government's Pensions Commission recently warned that those who think privatization has solved the British pension problem are living in a "fool's paradise." One pension expert said, "What looked like a very good idea from a financial perspective in cutting costs (in Britain) has put pensioner poverty, which had been all but eradicated, back on the agenda."
In brief, privatizing social security means lower pensions, outright poverty, and longer years of work for many older workers and retirees. Workers in Britain and Chile will tell you – don't accept it!