Social Security

#302 - Integrated Disability and Retirement Systems in Chile

People are living longer and healthier lives, yet disability benefits are the fastest growing portion of social security expenditures in the United States and many other countries.  What can be done to restrain the rising cost of disability?  Chile may have found a partial answer. 

Chile once had a pay-as-you-go (PAYGO) public pension system similar to Social Security in the United States.  In PAYGO systems, the taxes of today’s workers fund the benefits of today’s retirees.  Chile was experiencing problems that are unavoidable in PAYGO systems, including the United States today:  Due to decreasing birth rates and increasing longevity, the number of workers supporting each retiree was falling, so the government could not finance all the promised benefits without ever-higher taxes.