The reform of the pensions approved during the current legislature by the coalition government will place a large part of the sustainability of the system on the higher salaries. To the point that the increases in quotes recently approved -part of it has already entered into force, part of it will do so progressively in the coming years- they will increase labor costs for companies almost 10 times more among their employees with higher salaries than among those with lower salaries.
This is how a report published this Wednesday by the Bank of Spain, which also anticipates that Social Security will collect somewhat less with the new ‘levers’ than what the Government calculates. The banking supervisor thus joins the Airefwho has already rebuked Escrivá for generating, in the medium term, more expenses than income with his reform.
From Social Security they insist that the reform will imply an increase “moderate” and “assumable” of costs for companies and that it will not be a burden for companies. According to their numbers, the rise in prices will imply an average increase in labor costs of 37 cents, going from the current 23.4 euros per hour at constant prices, 23.8 euros per hour in 2050. The Bank of Spain breaks down said average and confirms that the impact among the best-paid workers will be greater.
Objective: pay the pensions of the ‘baby boom’
The Minister of Inclusion, Jose Luis Escriva, completed its pension reform on March 16, approving the last link of it in the Council of Ministers. A battery of ‘levers’ to collect more and thus bring more resources to the Social Security coffers with which to pay for the progressive retirement of the ‘baby boomers‘.
This is a generation that is more numerous than its successors and that promises to tighten the balance of the public benefit system, as there will be a growing number of retirees over a period of about 30 years and fewer active contributors to maintain them.
In order to rebalance this tension between generations, Escrivá has designed a reform whose implementation will no longer depend on him and which will be rolled out progressively until 2050. A reform that, in its last chapter, did not have the support of the CEOE employers, due to to the increase in labor costs that it implied for companies, especially for the largest ones.
Bankers, doctors and consultants
the researchers brindusa anghel, Sergio Bridge and robert ramos In their analysis published this Wednesday, they confirm the robot portrait of the main person affected by this rise in prices: A man, middle-aged on the high side, employed in a large company and in the banking sector, in health or in a consulting firm. An extra cost that will fall on the companies, which will have to pay more to the State to be able to pay the same salary to their employees.
The published study quantifies the differential impact that the increase in maximum contribution bases and the solidarity rate designed by Escrivá will have. Broadly speaking, currently the highest salaries stop contributing after a certain amount and, from now on, said amount will rise and, in addition, a surcharge will be applied to the part of the salary that will continue to be unquoted.
The Bank of Spain quantifies that the effect of these mechanisms -which will be deployed progressively until 2050- will be negligible at the beginning and substantial at the end. To the point that the increase in the effective rate of social contributions will vary between 0.8 points (lower wages) and 1.6 points (higher wages) in 2025 and will gradually increase to a range between 1.2 points and 11.3 points, in 2050.
“This report highlights the redistributive component of the reform, showing that a moderate and manageable solidarity effort is requested above all from those who earn the most, without affecting the most modest wages and SMEs,” Security sources point out. Social.
Less resources than expected
Another conclusion that the Bank of Spain report leaves is that this increase in contributions will end up bringing less money to the Social Security fund than expected by the Government. According to the estimates of the banking supervisor, the reform will begin by collecting annually -through the new levers to generate income- the equivalent of a 0.6% of GDP in 2030. Then gradually increase until the 0.9%in 2050.
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Some estimates that underestimate those made by the Ministry of Social Security, which plans to enter a 1.09% more in 2050, almost two tenths more than what is anticipated by the Bank of Spain.
The weight of the different levers to generate income will vary over time and although at the beginning it will have a similar impact between groups, it will not be until well into the 1930s when the better-paid strata will begin to contribute with special intensity. To the point that of those 0.9 points of additional income calculated by the Bank of Spain, almost half will be fully contributed by the highest wages and the rest will be distributed among all workers, through the increase in contributions known as the Mechanism of Intergenerational Equity (MEI).