Male Labor Force Participation and Social Security in Mexico

by Emma Aguila

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In 1960, the labor force participation of males 60 to 64 years old in Mexico was 94.6 percent; by 2010, it had declined to 65.2 percent. Other Latin American countries are seeing similar trends, as did developed countries before the 1990s. These trends are important because workers' early retirement affects the financial sustainability of social security systems. This study finds that the Mexican social security system is not actuarially fair and provides incentives to retire "early" — before age 65. The system's retirement incentives affect retirement behavior and are potentially one of the main factors explaining the decline in male labor force participation.

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