take-up of universal pensions in Mexico City

Take-up of Mexico City’s universal pension reached 97% in 2008, then fell to 81% and has not recovered. (See the chart below.) Something has happened. The purpose of this post is to investigate what, and why.

Take-up of pensions will never equal 100% of residents old enough to qualify, for two reasons. First, some of the elderly will not satisfy residency requirements (three years of continuous residence, in the case of Mexico City). Second, some wealthy residents,  to avoid real or perceived stigma, refuse to be seen asking government for a relatively small benefit. These two groups combined, however, will typically be a small proportion of the relevant population. This is evident in Mexico City from the fact that take-up went up quickly to 86% by the end of the second year of the programme, then climbed slowly but steadily to 97% in the year 2008.

Source: Author’s estimates (see table 1).

At the present time, Mexico City guarantees elderly residents from age 68 a monthly cash benefit, known as a pensión alimentaria (food pension), equal to 15 minimum daily wages. Each January, the size of the pension increases with the minimum wage. This year (2013) the minimum daily wage is MX$64.76, so the monthly pension is 971.40 pesos (about 75 US dollars). The pioneering scheme – Mexico’s first social pension – began in February 2001 for residents aged 70 years and older. The government of the Distrito Federal (the legal name for Mexico City) lowered the pension age to 68 years in September of 2009. The only requirement, other than age, is permanent residence in Mexico City, and residence must have been continuous for at least three years at the time of application. Ongoing residence is the city is required of those receiving a pension. Officials can visit a pensioner’s home on any day, unannounced. If they cannot locate a pensioner after three consecutive visits, they remove the person from the list of pensioners.

I have posted three times on Mexico City’s universal pension scheme – here, here and here – but until now never looked closely at take-up of pensions. This statistic is often referred to as “coverage”. I prefer the word “take-up” because, when an age pension is universal, coverage is close to 100% by definition.

Calculations of take-up, as a percentage of eligible population, are reported in table 1 for years 2001 through 2013. The first column is an estimate of the population aged 70 plus (68 plus from 2009) in June of each year. The second column is the number who received an age pension in December of each year. The take-up, in column 3, is simply the number of beneficiaries as a percentage of the eligible population. There is a slight upward bias for our measure of take-up, since the elderly population is growing over time, and estimates are for June of each year rather than December.

By this measure, it appears that take-up, as a percentage of eligible population, peaked at 97% in 2008. In 2009 the number of beneficiaries increased by 6,000 (to 436,000), but the eligible population increased by about 95,000 (to 538,429), primarily because of the lowering of the age of eligibility to 68 years, so the estimated take-up fell sharply, to 81%. The number of beneficiaries increased by nearly 29,000 in 2010, but take-up stayed low, at 85.3%. Beginning in 2011, the number of beneficiaries was fixed at 480,000, for reasons never explained by government. As a consequence, the estimated take-up began to fall once again, reaching 81.5% in 2013.

The last two columns of table 1 report the budgeted cost of the pension, in pesos and as a percentage of the total budget of the DF government. In nominal pesos, the budget for the universal pension increases each year. As a percentage of the budget, however, the amount allocated for the age pension peaks at 4% in 2011, then falls in two years to 3.8% – the same level registered in 2006 and 2007.

This is an obvious contradiction. How is it possible that a pension for everyone from age 68 in 2013 can be financed with the same percentage of the budget as a pension limited to those 70 years of age and older cost in 2006 and 2007. The answer, of course, is that take-up is lower in 2013. But why? This is a mystery, but an internal evaluation of data for the year 2010 sheds some light on this.

According to the census of population, nearly 85,000 persons aged 68-69 years resided in Mexico City in mid-2010. The internal evaluation reports that 4,000 in this age group were receiving pensions at the beginning of 2010, and 27,912 were on the pension list at the end of 2010. This implies a take-up of 32.9% by end-2010. The same evaluation, in a table listing of the number of beneficiaries by age group, inexplicably reports a larger number of beneficiaries, implying a take-up of 37.4%. Even the higher figure is a very low rate of take-up, registered after 16 months of operation with a lowered pension age. In comparison, the programme launched in February 2001 recorded a take-up nearly twice as high – 68.8% – in its 11th month of operation. (See table 1.)

 

 

Table 2, calculated by collating data from the 2010 census with data from the internal valuation, suggests that take-up by those aged 68-69, at 37.4%, was lowest of all the age groups. Detailed statistics are not publicly available on beneficiaries by age, but I suspect that the shortfall for the 70-74 age group, which registers a take-up of 77.8%, is due primarily to non take-up by those aged 70 years. Take-up by groups from age 75 to age 94 is quite high, in fact, greater than 100%. Low take-up by the older-old, those aged 95-99 (82%) and, especially, those aged 100-112 (68.5%) is troubling. This might reflect stigma, since the wealthy tend to live longer than those less fortunate. But it might also reflect lack of awareness of the universal programme by those whose mental state may not be the best. More effort on the part of government to reach the oldest citizens might yield good results.

As for the younger old, whatever method the government is using to discourage their take-up of benefits, it seems to be working. So far, there have been no visible complaints, no protests.

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