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Case Study: Cuba's Pension Problems

1. Some workers in Cuba's private sector unionizing.

Independent Cuban transportation workers are joining unions as part of a sweeping economic overhaul that's allowing increased private-sector activity.

The official labor newspaper Trabajadores says workers including bicycle taxi operators, car washers and people who repair tires are joining existing syndicates.

Havana bike taxi union representative Carlos Reyes Martinez tells the paper that this "very important" measure lets workers defend their rights and express grievances.

Trabajadores didn't give details on how many workers have joined unions. President Raul Castro has set in motion changes to stimulate Cuba's struggling economy. While officials have said private workers could join pre-existing unions, this is the first report of such activity.

2. Ageing Cuba Ups Retirement Age

Like much of Cuba's work force, Alfredo Congas is going gray. The chain–smoking 61–year–old retired last March after 42 years as a hotel doorman and rum–company driver. Now he's back working 12–hour shifts as a security guard to supplement his minuscule pension. "I'm here without a cent in my pocket," said Congas, whose new job brings his total income — pension plus paycheck — to the equivalent of $23.45 a month, about $4 more than the average state wage.

Sweeping poverty forces most of Cuba's 2.2 million retirees to get new jobs that enable them to keep a steady income and supplement their pensions. Many barely scrape by, wandering the streets selling peanuts and newspapers or guarding parked cars at hotels for tourists' change.Now even that is harder to do. Faced with an aging population and a life expectancy of 77.3 years, nearly the same as the U.S., Cuba's government has raised the retirement threshold by five years, to 60 for women and 65 for men, delaying the second jobs many have counted on to make ends meet in their old age.

About 90 percent of Cubans have government jobs, and now both sexes must work at least 30 years, not 25, to get a full pension. "Retirement in Cuba was already no picnic. Now it's more complicated," said Oscar Espinosa Chepe, a state–trained economist turned political dissident. The overhaul, to be fully phased in by 2015, means Cuba's retirement age will exceed Latin America's average of 59 for women and 62 for men, according to Carmelo Mesa–Lago, an expert on the Cuban economy at the University of Pittsburgh.

The island's population is aging faster than the rest of the region — some 17 percent will be 60 or older by 2010, compared with 9 percent across Latin America today, according to U.N. data. A quarter of Cubans will top 60 by 2025, a point the rest of the region won't reach until 2050. As Cuba's work force shrinks, the ratio of workers to retirees has narrowed from seven–to–one in 1970 to three–to–one today. Had the country not raised its retirement age, the ratio would have been two–to–one by 2025, the government said.

"More needs to be done, but what else can you do? You can't turn the screw even more," Mesa–Lago said. State pensions, though small, were once enough to live on in this communist country, where housing and health care are free and the government subsidises food, utilities and transportation. But the Soviet Union's collapse cost Cuba huge amounts of income in subsidies and trade, crippling the economy and sparking widespread shortages that still persist. A U.S.–dollar–fueled black market mushroomed; prices soared and Cuba's peso plunged from 1 to the dollar to 22 to the dollar today.

The minimum monthly pension was worth about $92 in 1989. Adjusted for inflation, it is now the equivalent of $9.50. "I'm going to keep working, keep fighting," said Antonio Valdes, a 63–year–old graphic designer who earns $19.30 a month. "The elderly who don't know how to do that are screwed." Many countries are making tough decisions to keep funding social security programs as populations skew older. The U.S. retirement age is slated to increase to 67 by 2027.

A handful of former Iron Curtain countries have privatised their once–troubled pension systems, as well as raising retirement ages and slashing benefits to stretch resources. Several Latin American nations have followed a private–account model pioneered by Chile in 1981. But privatisation isn't an option in Cuba's command economy, where there are no 401Ks or pooled pension funds invested to draw earnings, and most forms of free–market enterprise are illegal.

Instead, a 1994 tax law requires Cuban state firms to contribute 14 percent of each worker's salary to a national social security pot. It also obligates employees in profitable sectors such as tourism to contribute an additional 5 percent. Still, contributions cover less than 60 percent of current pension costs, with the rest financed by unspecified areas of the federal budget, Mesa–Lago said. While the government doesn't say how much it spends, in 2006 he estimated the sum approached 6.3 percent of gross domestic product.

The funding crunch has grown more urgent since last year's hurricanes caused more than $10 billion in damage, leaving nearly 1 million homeless, crippling farming and forcing costly food imports. Cuba's budget deficit ballooned to $4.2 billion. The government says 3 million people attended town–hall meetings to discuss the potential retirement age increase last year, with 99.1 percent supporting it. Workers who attended say many complained, but didn't dare oppose the measure in a public show of hands.

"I'm not prepared for this," said Grace, 52, a high school chemistry teacher who supports her 23–year–old son and 86–year–old mother on a monthly wage worth about $25. She asked to be identified by her middle name only, to avoid problems at work. Now, she'll have to defer retirement and plans to tutor for extra income for two more years. Much of what the government saves by delaying retirement, it will dole out in bigger pensions. Payments are rising to 60 percent of an employee's peak five years of earnings, from 50 percent. Workers also earn an additional 2 percent for each year on the job after 25 years.

But for some Cubans, the decision to keep older citizens working rather than cracking down on younger, job–ditching countrymen is shaking their faith in the communist revolution. While Cuba guarantees "full employment" and reports an official jobless rate of 1.6 percent, low salaries mean that many young people no longer seek formal jobs, even though neighborhood–watch committees are supposed to discourage unemployment. Instead, they live with their parents and work on the black market, failing to pay into the pension system at all.

A 34–year–old nurse, who declined to be named for fear her comments would hurt her husband's army career, said the retirement reform leaves her even "more disillusioned." "I'm young," she said, her eyes welling with tears. "But I'm less optimistic than before."

3. Cuban Pension Plans--What the Government Tells Its People

One of the most painful and critical problems in Latin America is the situation of poor economic state of the art situation that retired people is going through in the continent. Neoliberal trends go straight ahead to the constant rise of food's and service's prices and cause social security's privatization.

This circumstance is shown in a research carried out by the Economic Commission for Latin America, CEPAL. The report highlights pension schedules in the region have just began a crisis stage. The analysis stated these programs face acute problems and in many cases are key factors in the deepening of some countries' fiscal deficits. Pensions' paying facilities count with no funds and are ill managed; besides benefits for the membership are lower than contributions they had previously made when they were active workers.

CEPAL highlighted the main cause for this problem is a fund's poor management; resources are used for goals far away from retired people's benefit and poor funds' investment.


The question is logic if we analyse the gross economic situation Cuba is experiencing. The answer is not a typical one and is a paradox. Those in doubt can consult data which are really convincing. In spite of the crisis that had punished the island since the vanishing of the Socialist countries in Europe and the toughening of the economic blockade, no pension has been reduced and every month 1 450 226 people are paid, that is to say 10 % of the population in Cuba is retired. Furthermore, 358 769 Cubans are under social security system. They are also paid every month.

Every year, 75 thousand citizens join the retired in the island. The budget for year 2004 is of 2 thousand 700 millions of pesos (one peso equals one dollar in the official exchange). This figure is higher than last year's assignment. Social security foresees maternity, accidents, temporary illnesses, also wages for the jobless due to work's rescheduling in factories and companies and social care for old people and disable or mentally ill. Ages for retirement keep steady since the triumph of the revolution. Women do retire at the age of 55 and men at the age of 60. In both cases they need 25 years of service. Several Latin American countries such as Peru, Colombia and Chile retire their workers with the same age to that of Cubans, but one might ask what a Chilean worker can enjoy if life expectancy is of 56, 8 years and retirement is granted at the age of 60.

This reality does contrast to that of Cuba where life expectancy is of 77 years so its citizens enjoy retirement for nearly 20 years. 14 % of the more than 11 millions of inhabitants in the island are older than 60 years old.


A milestone of the whole advanced and wide national system for social welfare in Cuba is the decisive and prevailing role of the state. It guarantees social security system. The in force program foresees all subsidies for accidents, common illnesses and work accidents, maternity which is paid for a whole year, pensions to workers' relatives in case of death or people just needing an additional economic help or the situation of disable people.

Disable people deserve a wider item due to the human approach of its system in Cuba. There are more than 140 specialized workshops for disable, mainly deaf-mute and those with mild blindness. They receive a wage for their jobs. Others have decided to work at home. Old people living alone, 11 thousand in the whole country, receive house attention granted by social security mainly house cleaning and repairing of electric kits, shoes and clothes. Social security scenario was not always like that in Cuba. When the revolution triumphed in 1959, budget for pensions did not cover all workers' needs such as the agriculture branch, the greatest in the country.

Furthermore, most of the funds had been embezzled and even cheques with some cents for a whole month were paid. Since then, Cuban social security has experienced a constant development and has widened its service to all workers of the country.


Figures tell Cuba is to have the oldest population in the Latin American continent, since birth rate increase taken place in the 60 decade will cause its side effects in the age pyramid.

That is why people expecting their retirement for that date are going to increase. State plans for the occasion lies on the budget for social security. Notwithstanding the high expenditure for such concepts, the Cuban government keeps at present and in the future its cardinal principle of guaranteeing this service to the population. A complex panorama but radically different to that surrounding the Greatest of Antilles.

4. Cubans Understand the Value of a Pension Plans, But Have None They Can Rely Upon

December 2010: The following are case histories of Cubans who hope pension reform will one day come to their country.

Richard, a cashier, has had it in mind for quite some time to defect from Cuba. Aside from his half-brother's wife who lives in Havana, he has no remaining family here. "It's a matter of days," he's recently told me. "Once I know for certain that things are in the hands of God I will make my voyage."

Richard plans to float to the coasts of Florida on a water tube. He keeps the tube safe, and hidden, in his little house in the city. Richard is one of the more fortunate of potential refugees I have spoken with. The hotel in which he works feeds him on occasion, which is an added benefit seeing as he only makes five dollars a month and some times goes days between meals. What are his plans once he reaches the U.S.? His cousin has a job selling peanuts at a local amusement park in Orlando, and has forwarded a note to Richard advising him to make the voyage soon. For some like Richard, the lure of the United States is too much to stay away from.

Manni got a job as a bartender in Mariel, a city just west of Havana two years ago. He would one day like to open up a bar of his own, and believes that the time spent in Mariel will one day pay off for him. He is learning how to run and operate the bar he works at. He knows that tourism suffers as a result of the way things are in Cuba but he feels that when things change, which he hopes will happen soon, he and his friend Richard will be able to fulfill there dream and open a tourist bar in downtown Havana. His cousin Abe, who lives in Miami, sent him a book on how to make drinks and Manni spends his days and nights making those drinks for the tourists. His main clientele come from a local newspaper in Mariel who Manni credits with giving him the inspiration to open up the bar.

Ynilo is a short man. He is both proud and fearful of his Cuban heritage. Ynilo rolls cigars and is paid almost seven dollars a month. He just started working at the factory. Others who work there make a bit more, but now that Ynilo has the job he is hopeful that he will do a well so he can make more money and support his wife and daughter. Like many other Cubans, Ynilo illegally searches for more work. The government of Cuba doesn't allow its citizens to work more than one job, which makes it tough for people like Ynilo. He is happy to be in Cuba, but unlike his brother who lives in New York, Ynilo fears he is too Cuban to survive in the U.S. When asked why Ynilo would leave Cuba for the U.S. he said "Cause sometimes it is miserable in my country, and I want to live like a different person. I want to live like my brother." But for now, Ynilo rolls cigars, gets money from his brother, and is happy to be alive.

Cheena and her daughter Isabelle were detained in the Southern City of Iztapalapa in Mexico for trying to enter the U.S. illegally three years ago. The United States paid for their ride back to Cuba, but thoughts of leaving again are always with them. Although Cheena has begun her own little business where she sells lemonade to the people searching for housing accommodations in Havana's Parque Central, she and her daughter barely live month to month and rely heavily on the money her husband sends her from Los Angeles. Cheena is happy for now, but when her husband sends enough money so that she and her daughter can afford to be smuggled, they will make the trip again. If, however, it does not work out for Cheena and Isabelle, and they are forced to stay in Cuba, her husband says he will come back when the government changes.

Elian and his ex-wife Marisa have been separated for eight months but because Cuban citizens are not allowed to own, much less sell private property, the two are living together waiting to "swap" houses with someone else. They hope to find two small apartments for there one modest home. When they finally do exchange residences, and things in Cuba are different, Elian hopes the laws will change so that he can become a real-estate agent. He said that the eight months he's been forced to live with Marisa have given his life new meaning and that when things are different he will quit his job as a taxi driver and focus on property.

Although living standards for the average Cuban remain depressed compared to ten years ago, the people here find ways to make a living. Norma, her husband Carlos, and their three children live in a small apartment in Bayamo in the southern section of Cuba. Between she and her husband and their oldest son, who just turned 11, they make more than enough to survive. Both Norma and her son wake up at four o'clock every morning to bake bread at a warehouse in the city center. Carlos takes any excess dough that the warehouse throws out and bakes it in there home and sells it on the street. He has become known as the "bagel baker" because he forms the dough in the shape of a bagel and sells them to churchgoers on Sundays. He would like to open up his own bakery one day where he can implement his bagel recipe on a regular basis.

Because he has worked at a gas station for over seven years, Alejandro has become accustomed to fixing many cars. Because he is not a mechanic himself, but has built up a clientele over the years he has aspirations of opening up a shop fixing cars when things in Cuba change. Officially, if you asked him, he is a gas attendant, but people tip him here and there when he performs service on their cars. It works as a nice supplement to his six-dollar a month job at the gas station. If and when things in Cuba do change, Alejandro would like his brother to come back to Cuba. His brother actually is a mechanic in Miami and only left Cuba because he feared getting caught fixing cars when he was working as a gas attendant at the same gas station. Alejandro and his brother will have to wait to fulfill their dreams. Meanwhile, they are building up enough experience to own and operate a fine shop one day.

Laline is a waitress at a hotel in Havana. She makes about seven dollars a month. Laline is tall and considered by her co-workers to be beautiful. She would like one day to be on television or in the movies. A couple of years ago before the American movie Thirteen Days was released in the United States, Laline had the opportunity to meet Kevin Costner at the hotel she works at. He was in Cuba showing the movie to Fidel Castro before it was released. She says "the day I met Kevin Costner changed my life forever." At the time she was a student at the university in Havana, but has recently quit school to become a waitress, hoping to make enough money to go to Hollywood and become a film star. If not, she is content with just learning the craft. In the meantime she is taking acting lessons and would like to open up her own acting studio in Havana as a sort of first step for aspiring Cuban actors who want to move to Hollywood.

The ten hours a day that Che puts in as a clerk at a local grocery store in Bayamo are well worth it to him. He only makes eight dollars a month now, but would like very much to stay with the grocer until he is given the opportunity to move up. He has been a clerk for over two years and knows that the cashier job is just around the corner. Che considers himself to be a dedicated worker and he knows that his hard work and perseverance will pay off one day. He offers his humble advice to the store manager and more often than not Che's ideas are implemented. His manager has said, "Che is a credit to this store and if he does keep up his work good things will happen for him."

Anier is currently unemployed. He was one of several people to lose his job at the Havana airport where he worked as a porter. To make ends meet he's been begging on the street and can barely pay his rent, much less buy enough for food. He is contemplating going to the U.S. to find work. His Uncle has a job as a parking lot attendant in Houston. He's been visiting several of the parking lots in and around the airport hoping to find some work, but it is tough going. He has been unemployed for months, and the parking lot owners won't hire him because he has no experience.

Aside from begging Anier has been selling some of the artwork he's done over the past couple of months while he has been unemployed. His cousin Dayami is a school teacher and she has been giving him enough paper and charcoal from her supplies in class to keep him busy doing his artwork. He draws landscapes very well, as well as portraits, and has been selling them to tourists for whatever he can get.

Rubén is wearing his token tri-cornered hat covering up his graying hair. He wears suits mostly, he says, but today as we drive through town in his convertible he wears a loose fitting button down shirt and shorts, exposing his skinny legs. He has a cigar in his mouth. We're looking for a group of men that Rubén sells his cigars to. He rolls the cigars himself and has made quite a lucrative career selling them to tourists and locals alike. He operates and owns a little cigar shop in downtown Havana, Cuba. He is fortunate to own and operate his own business. Most Cubans will never have the opportunity. He's hoping that after Castro leaves office the U.S. and Cuba will have stronger ties and some of the bans the U.S. has put on Cuba will be lifted. As a result of this, Rubén says, he will be able to open his cigar business to the U.S. on the internet. Rubén confesses to me that he believes, "All Americans love our famous cigars," and that he can make double or triple what he does if the U.S. market opens up to him. For now, Rubén is biding his time.

When Tía was younger she was paid to dance at the Buena Vista Social Club. Today, she still hangs around the same neighborhood making necklaces and bracelets for her grandsons who sell them in downtown Havana. She sits on a modest chair in front of the place where the famous nightclub used to reside designing her jewelry. Behind her, the owners of the now private residence in this middle-class neighborhood tell me "Tía is more than welcome to stay." They tell me that most of the money she makes goes to her grandsons. However, they also tell me on many occasions, tourists and interested locals still come out to the neighborhood in hopes of finding the famous nightclub. They say Tía can often be found selling her jewelry to them. She also takes her grandsons to many of Havana's craft fairs where they sell her jewelry. It seems that no matter where one travels in Cuba, the locals find ingenious ways to make money and survive in this often times harsh economy.

Over a bowl of black locoquetta soup in one of Havana's greatest diners, Orlando tells me about his plans to teach piano lessons to support he and his family. He admits that one of the main problems with the youth in Cuba today is the lack in understanding of Cuba's great musical heritage. He puts signs up in many of Havana's more affluent areas displaying his phone number and a brief description of his piano playing services. He also admits that not too many accessible people own pianos in Havana, but says that of those that do, he has almost cornered the market. He also lends his talents to some of the local bars and jazz clubs in downtown. He mostly plays for tips. We joke that the garlic from the soup will scare away any potential clients we may meet. But, so far, Orlando is making enough to support his family and would like to open up his own studio one day. He keeps his eyes open for an available studio and hopes that the economy will improve.

Omara was born in a little town near Santiago, Cuba called San Luis. She moved to Havana near a neighborhood translated into English as Bone Key. Her father used to play for the New York Mets professional baseball team and was one of the first Cubans to play baseball outside of Cuba. Omara sings duets with Orlando while he plays the piano. The two have become quite well known in the neighborhood of Bone Key. If things go well for them they plan on opening up a studio where Orlando can teach piano lessons and Omara can teach dancing and singing. She credits her "authentic Cuban voice" to her father, the baseball player, who used to sing with her when she was much younger. She left San Luis, and her father, years ago and is making a fair living as one of Havana's true nightlife talents.

Manuel makes enough money to get by playing guitar in the red light district of Havana. As well as playing guitar, Manuel has picked up extra money here and there as a bouncer for some of the nightclubs in downtown. Although it is illegal for Cubans to have more than one job, Manuel is a genuine entrepreneur dabbling in music, club security, and he also shares time driving a taxi with his cousin Vladamir. Manuel and Vladamir are happy with the way things are in Cuba. They both tell me that although certain things in Cuba are unfair, especially when they here from some of there family who has moved to America, they feel that life in Cuba will not drastically change when Castro is gone. They have made the best of what life has to offer. When asked what they would do if some of America's freedoms were bestowed upon Cuba they both admitted that they would like to open up a nightclub of their own.

Barbarito is an ice cream vendor in one of the cities local parks. He awakens every morning at dawn when he rides his bike to the warehouse to pick up his ice cream vending cart. By eight o'clock he is set and ready to sell ice cream. Although he admits that he has never and will never get a second job to support he and his young wife, he dreams of opening up his own hair salon one day in addition to selling ice cream. He tells me that nobody quits a job in Cuba because they are sometimes very hard to come by. He and his wife both have an affinity for styling hair. Although they feel it is inappropriate at times to accept cash from some of their neighbors for styling hair, they appreciate it just the same.

If there is one thing that Carlos loves about being a tour bus driver in Havana it is all the wonderful tourists he meets along the way. Carlos makes about eleven dollars a month driving the same bus he has driven for over twenty years. He tells me that he knows Havana better than any other driver in the world. He may be right. On our way up a winding road Carlos tells me of a little secret he has been keeping for years. As he talks I feel nervous because he is barely paying attention to the road. He seems to know every twist and turn that will eventually lead us, according to Carlos, "to the most spectacular view in Havana." His secret is this. Carlos does not wish to work any more. He has saved a bit of money and would love to travel. "Meeting all these wonderful people," Carlos continued "has sparked in me a fascination with visiting every continent on earth." As soon as he is able, and as soon as his country will allow him, he will quit his job and buy a plane ticket to Europe. Carlos also dreams of operating his own travel company and taking tourists on safari trips through Cuba's jungles. But he admits that he is a long way from achieving his goals, so he continues to work.

Maria works as a security guard in one of Cuba's most prestigious museums. She works from Tuesday to Saturday at the Casa de Africa museum in Old Havana, Cuba. The museum is very special to her for several reasons. Many of the artists featured are from Africa. She feels that the museum is rich with African culture that has assimilated itself into Cuban culture. To Maria, the study of different cultures is important. Suffice it say from talking to her I can tell that she is very proud of her museum.

Her father helped revamp the museum in 1986 when it opened to the public. She is proud of her standing as one of the museums oldest employees. Maria is 66 years old. Her father was 70 when he helped build the museum in 1986. Soon after the colonial palace was revamped into the museum, her father got her a job in the cafeteria. She admits that tourism suffers as a result of America's ban on her country. She hopes that when the Castro regime leaves power the two countries can somehow reunite. She knows that Americans would learn a lot from her museum and hopes that she is still around when they finally come because as she says "she has much to teach them."

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