26% of Salvadorans 65 and older continue to work

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By LatAm Reports Editor

26.2% of Salvadorans 65 years of age or older work or are looking for a job according to the most recent report Panorama Labour 2023, prepared by the International Labour Organization (ILO).

Whether they don’t have a pension, they don’t have other incomes, or because they’re still able to do a job, these adults are still linked to the labour market despite having exceeded the minimum retirement ages.

El Salvador is the eighth country in the region with the highest labor participation rate in this age group. Panama, Honduras, Paraguay and Guatemala are other nations with high participation of older adults working.

According to the ILO report, the labour participation rate of over 65 years of age or older in Latin America and the Caribbean has remained close to 30 per cent over the past 30 years, i.e. almost one in three elderly people work. In 2022, this indicator was 28.7%.

“In the region, economic reason would be one of the main reasons for the work of the elderly. It is estimated that one in two over 65 years of age did not have access to a pension in 2015, a substantially higher proportion for women,” the report says.

The participation of older persons in the labour market can largely be explained by the low coverage of pension systems. And they join the informal market.
Carlos Argueta, Economist.

In the case of El Salvador, the percentage of 26.2% is below the Latin American average, which in 2022 was 28.7%, but exceeds the percentage of older adults working in OECD countries (Organization for Economic Cooperation and Development), which in 2022 was 11.9%.

Another factor that affects older adults continuing to work is also linked to demographic factors. According to ILO, several countries are in a process of accelerated population ageing and older people are expected to reach 25.1% (193 million) of the total population by 2050, i.e. there will be 2.1 times more older than in 2022 (ECLAC, 2023).

“This phenomenon sets out the need for policies to promote women’s labour participation and postpone the retirement age,” the report says.

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Economist Carlos Argueta explains that the figure of 26.2% of older people working shows an alarming picture in El Salvador, as this means that one in 4 people 65 or older are working or looking for a job, when it comes to ages when people should have other plans for their daily activities.

“Many of these people may be doing so in the face of the lack of guarantee of access to social security.”

In addition, when adults over 65 years of age join the labour market, “they usually do so in the informal market,” the expert said.

“The participation of older people in the labour market can largely be explained by the low coverage of pension systems,” Argueta reiterated.

Pension coverage is, in fact, one of the great challenges that has not been overcome despite the fact that the private pension system operating today is already 25 years old.

According to the Fundaungo Pension Observatory, to date only one in four people in El Salvador is quoted on social security and is guaranteed an income for the age of 55 men.

But in addition, this observatory shows that, in addition, 40.7% of contributors do not achieve the minimum value required to meet the conditions of retirement and access a pension, so their income will remain lower.

The data show that the social security coverage of the Older Population is among the lowest in countries with individual capitalization. Only one in six older persons has an old-age pension in El Salvador, contributory or non-contributory.

For Argueta, it is in old age that health costs increase more, therefore “to the extent that these people lack access to social security, health systems, care systems, we see that this is permeating in the population and what it may be generating ultimately is that poverty acquires a face of old age at the future stage.”

The picture could be aggravated by the fact that, according to government projections, by 2050, two out of 10 people will be older adults.

Possible solutions

In view of this Overview, the analysis included in the ILO report suggests

For the economist, it is also necessary to address pension coverage because although different reforms to the system have been made in recent years, none of these has managed to increase the number of contributors because much of the Salvadoran economy continues to move in informality, where there are no pension contributions.

The ILO Labour Panorama report already addresses this: informal employment has grown in Latin America.

The same has led the agency to warn that “a highly complex scenario is projected.”

In El Salvador, the government only records formal work data, but this report, which must be released by the Salvadoran Social Security Institute (ISSS), has not been published since March.

To date, it is unknown whether there is an increase in formal employment.

The other indicator shown by the labour market is the contribution to Pension Fund Managers (AFP), but this report has not been updated since April 2023 either.

This indicator shows the number of contributors they are saving for their future retirement.

4 reasons for working in adults

These are four reasons raised by the ILO in its Labour Panorama report.

1. Income
They do not have enough income to survive either because of the low capacity for savings during working life or because of the absence or low income provided by pension systems.

2. By election
Many adults decide to continue working either for personal performance or because the work they do does not require physical skills to perform certain tasks.

3. Demographic
The secular increase in women’s labour participation that would determine greater average labour participation for all age groups. It influences a higher life expectancy.

4. Institutional
Trends in ageing can have consequences for labour markets, including a shortage of labour supply. That can encourage higher retirement age.xcv