Impact of the COVID-19 Pandemic on the Formal Labor Market and the Pension System in El Salvador
Peer Reviewed
Date issued
Oct 2022
Subject
Pension Systems;
Coronavirus;
Pandemic;
Women;
Labor Force;
Wage;
Labor;
Social Security
JEL code
C22 - Time-Series Models • Dynamic Quantile Regressions • Dynamic Treatment Effect Models • Diffusion Processes;
G28 - Government Policy and Regulation;
H55 - Social Security and Public Pensions;
J14 - Economics of the Elderly • Economics of the Handicapped • Non-Labor Market Discrimination;
J32 - Nonwage Labor Costs and Benefits • Retirement Plans • Private Pensions;
J33 - Compensation Packages • Payment Methods
Country
El Salvador
Category
Working Papers
Using an impact evaluation methodology for interrupted time-series and the IDB Pension Projection Model, this study estimates that the COVID-19 pandemic could have notably effects on the private pension system in El Salvador as a consequence of the relaxation of requirements to repay early withdrawals that was established in the context of the pandemic. This fact could negatively affect passive coverage rate, system incomes, short-run system surplus and replacement rates, generating an increase in the fiscal cost. The problems of the Salvadoran pension system are structural, and the COVID-19 pandemic has exacerbated them. Consequently, although it is possible to discuss policies to reduce these effects, it is necessary to frame this discussion in the context of a comprehensive reform of the system.
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