The pension reform is on the horizon as an urgent task on the verge of the retirement of the “baby boom” generation, in what will mean a demographic and employment tsunami. The Bank of Spain calculates that to maintain the current level of pensions social contributions will have to be raised by eight points by 2050 Or, on the contrary, if it is desired not to increase labor costs further, the current retirement benefits would have to be reduced by more than 10%.
This was stated this morning by the General Director of Economics and Statistics of the Bank of Spain, Óscar Arce, in a conference organized by the Association of Economic Information Journalists (APIE), in collaboration with the Observatory of Financial Reality (Orfin) and with the University of Alcalá. In his words, this is an arithmetic calculation, based on the fact that by 2050 an employment rate of 80% – before the crisis was not even 60% – and a dependency rate of 58% – compared to 30.2 Current% – and as long as maintaining the level of pensions is not done by resorting to a higher public deficit.
«He eThe aging of the Spanish population will cause a very substantial increase in the dependency ratio», Has abounded Arce, who has urged to adopt “Ambitious reforms”. The median income – in the center of the distribution – of young people has thus gone from being almost 30,000 euros in 2007 to being around 23,000 euros in 2018. The pandemic has further sunk this wage devaluation. Meanwhile, those over 65, that is, retirees, are the only group that earned more in 2018 than in 2007.
The call from the Bank of Spain comes at a time when the Ministry of Social Security is trying to agree on a pension reform demanded by the European Commission. In his presentation, Arce highlighted that young people are the victims of the current economic crisis, to which is added the fiscal adjustment that will have to be faced in the coming years, and that will fall largely on their shoulders.
With a neutral policy, public debt would continue to be 125% of GDP in 2035, while if an adjustment such as the one included in the Stability Pact is adopted, of two points a year, it will barely fall below 100% of GDP. and as it was before the pandemic in that year.
Young people, victims of the crisis
“Young people have a lower employment rate than the rest of the population and a significantly higher rate of individuals without labor income, a key element for the purposes of analyzing the evolution of inequality,” says the agency, which underlines that the pandemic has increased generational inequality, already latent before the crisis: if in February 2020 more than 30% of those under 30 years of age did not have individual income – compared to 13% of the total population – that percentage shot up ten months later to over 35% –Which is less than 20% in the whole of citizenship–.
George is Digismak’s reported cum editor with 13 years of experience in Journalism