The recent sanction of the extension of the social security moratorium for which more than 4 million people have retired in the last two decades he put back on stage the X-ray of a system that suffers from endemic ills. The first is the difficulty in financing an increasingly onerous regime: according to an estimate by IDESA, ehe 80% of the national primary deficit (1.6% of GDP) was used in 2022 to sustain the pension red. In addition, the immobility in the face of demographic changes and new forms of employment, lack of incentives for formalization and overlapping systems and beneficiaries, are some of the points that cry out for modifications. But also that universal coverage was achieved without excluding any older adult.
The photo
This diagnosis, shared by all the experts, is aggravated by dealing with an issue whose operation ends up being verified, both in its problems and in its benefits, many years later. “The Argentine pension system has important virtues and problems. The virtue is that it had a very broad coverage, but the problem is that it was done through patches successive, short-term and without due attention to tax and equity aspects, through measures that last only a couple of years” explains the specialist Raphael Roffman.
The last one, for example, was the fifth moratorium in the last two decades, whereby people who do not have a sufficient amount of contributions (30 years at least) can “buy” what is missing in installments to access the retirement benefit. According to the ruling party, 800,000 people would access it, but Rofman questions it because he points out that since it is an extension of what is in force until December, the 100,000 new annual liabilities should be projected. “This is only for two years and then ‘let’s see’. It is something chaotic, expensive, inefficient and inequitable, because the one who contributed 29 years or one is treated the same“, Explain.
The explanation for dealing with the pension emergency is thatOnly 30% of the men and 10% of the women who reached the minimum retirement age had full contributions. In the case of women, the gap would be explained by care tasks and informal jobs that they access when raising their children and that do not generate the necessary contributions.
threats
Two exogenous issues are those that jeopardize the pension system. The first is the global demographic trend, which began later in Argentina but hit hard: the simultaneous drop in the birth rate and increased life expectancy at birth, which generated a longer duration of retired status (“life expectancy at retirement age”, according to the technical name). In our country, this magnitude extended to almost 24 years for women and 17 years for men, but it would continue to grow to stabilize until it reached 30 and 24 in half a century.
The aging of the population is a fact to consider, but it is not an infinite process: it has a ceiling in which the figures for each country would end up being unified. Japan, for example, which had 30% of its population over 65 years of age in 2022, will rise to 37.5% by 2050 while Italy (currently 24%) will reach 37% by that date. According to a study by the National University of La Plata, the replacement rate set by the ratio of people over 65 to those between 18 and that age (key to the sustainability of the system) decreased in Argentina from 5.8 in 1990 to 4.9 in 2020 with an estimate of continuing to drop to 3.3 by 2050. Our neighbor Brazil went from 11.9 to 6.5 in these years and will drop even further in 25 years: 2.2.
macro effect
For this reason, it seems inevitable that the current retirement age (60 for women and 65 for men in the national system) will tend to increase and become unified in the medium term. The first step was the recognition of one year of contributions for each child for women, which would contemplate the temporary exit from the labor market of the mothers.s. For Lucas PussettoProfessor of Economics at the IAE Business School, if formal work (basically private) does not increase, we are facing a central problem. “And that is achieved with economic growth (in the short term) and with economic policies that implement incentives to redirect work and capital towards the most productive and modern sectors,” he exemplifies.
For this reason, although they seem remote universes, the adaptation of the world of work (the labor supply) is linked to the new and dynamic needs of labor demand. In his opinion, expanding the tax base (trying to launder the entire economy, after all) is key to financing public spending and would also allow it to be reduced in terms of GDP. But, he maintains that it is difficult to execute it with the current Argentine tax pressure and without other long-term incentives to finance this transition, which in Argentina could only be done if there is political will and consensus. “With these demographic trends, the financing of the pension issue will become increasingly onerous and difficult to manage -we still have room to increase life expectancy in about 5 more years- but the formula should go through the laundering of the economy through incentives and not by moratoriums, to gradually but steadily close the drain on funds”he concludes.
unequal
The other characteristic feature is the plurality of pension schemes. There are 13 provinces, for example, that did not transfer their retirement systems to ANSES and that is precisely where the majority of public employees are located.. “Everyone has their own system for their own regime, some are in red and others are not because they impose more contributions from employees and employers (the province in question), with more generous benefits than the national regime, but with an impact on the Treasury of jurisdiction”, Rofman qualifies.
In short, it is another gap to finance and if one considers that almost 80% of own tax revenues come from Gross Income and Stamp taxes (the most harmful economically speaking), a vicious circle full of distortions is produced. “They should converge towards the general regime, like the rest of the exception systems. The case by case is very complicated, but it is the path marked out for the future, without touching present acquired rights”, synthesizes. In an economy infected with short-termism, thinking about the future sounds utopian. But everything comes and today’s threats will be tomorrow’s emergencies.
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