Social Security Privatization Study Questions #2

1. According to The Heritage Foundation, what is the difference in the rate of return between the U.S. system and the rate of return in the Chilean system?



2. Name two pieces of economic evidence that Piñera cites which illustrate the success of the privatized pension plans.



3. According to Piñera, what is the mandatory percentage of income that must be placed in the private account, and at what level of income does that percentage start to decrease?



4. How does the Chilean system insure against a retiree (who has been working for a while) whose pension fund is very low?



5. What were the two main ways that Chile financed the transition from the pay-as-you-go system to the privatized system?



6. How do the AFP's help to regulate companies in which they invest?



7. How does Piñera point out that the workers have "voted" for the market, and how is this statement somewhat misleading?



8. According to Soto, how did Chile pay for the transition to personal accounts?



9. According to Soto, what percentage of potential earnings is siphoned off by administrative fees and costs (in his model) over a length of 23 years for a personal account?



10. According to Soto, as the system gets older, what is the percentage increase of workers in Chile who will receive the minimum pension guarantee benefit ?



11. What is Jacobo Rodríguez's occupation and why is it important?



12. What does Rodríguez claim is the participation rate and the average real rate of return for the Chilean system?



13. Why does Rodríguez claim that class conflicts have been reduced under Chile's new privatized system?



14. According to Rodriguez what is the projected percentage of pensions that will require a government subsidy in Chile?



15. What did the Ibbotson analysis find about the average rate of return in the stock market over the last 20 years?



Extra Credit: What is the argument for the current system being disadvantageous to blacks?