In doing so, however, they leave out crucial parts of the plot. Privatization advocates paper over very serious problems with Chile s social security program. While the full impact of privatization cannot be known until the system completely matures, a number of troubling issues have already arisen. Pension fund management fees are exorbitant. Non-participation threatens the overall viability of the system.
Individual accounts replace less of low-income workers and women s wages.
Private accounts leave workers susceptible to market downturns. Given the distinct social, political, and economic differences between Chile and the U.S., the relevance of Chile s privatization experience to U.S. policy-makers is debatable. While this concern is legitimate, we would be remiss if we failed to take note of the results of Chile s 19-year social experiment. A Need for Reform By all accounts, Chile s public pension program was foundering in the 1970s. The system was extremely complex, consisting of over 100 different retirement regimes.