Of all the formulas launched for several weeks as probes by the Spanish Minister of Inclusion and Social Security, José Luis Escriva, it is ultimately that of the increase in contributions that was retained. A first in Spain. On Tuesday 16 November, the Minister was able to announce this new “Intergenerational equity mechanism”, on which he obtained the agreement of the unions but not of the employers.
Concretely, the formula adopted, which has yet to be validated in Parliament, plans to increase social contributions by 0.6 point for ten years, from 2023, to replenish the pension reserve fund. Employers should bear most of the increase, up to 0.5 point, while employees should bear 0.1 point.
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From 2023, the level of contributions will therefore drop from 23.6% to 24.1% for companies and from 4.7% to 4.8% for employees. On an average salary of € 2,000 per month, the increase in contributions will reach € 12 per month: ten at the expense of the company and two for the employee.
The unions welcome this agreement, like the general secretary of workers’ committees, Unai Sordo: “The future of pensions is not approached with a logic of reduction but a logic of increasing social security revenue. On the side of the CEOE employers’ confederation, the story is radically different. “This will be insufficient and it will not guarantee the system which will need additional measures in the future”, she warned in a statement. Companies clearly fear “Negative effects on employment” while addingthan “Now is not the time to increase costs and jeopardize the recovery by undermining productivity and competitiveness.”
Conversely, according to the Spanish Minister José Luis Escriva, this new calculation would make it possible to increase the pension reserve fund from two billion euros to fifty billion by 2032. At the height of growth, before the 2008-2013 financial crisis, it had even reached sixty-seven billion euros.
“We have a demographic problem of size, of aging of the population which calls into question the pension system », Recalls Jose Ignacio Conde-Ruiz, professor of economics at the Complutense University of Madrid and deputy director of the Foundation for Applied Economics Studies (Fedea).
The challenge is big. Spain has to cope with the retirements of the Spanish baby boomers, born between the 1960s and the end of the 1970s. During this period, fourteen million people were born, four and a half million more than during the following twenty years . The majority of these baby boomers will therefore retire around 2030.
Raising the retirement age
While the birth rate remains low (1.2 children per woman), experts are worried. “This reform will not be enough, considers José Ignacio Conde-Ruiz, at most it will bring in two billion euros per year, we are going in the wrong direction, it will increase the cost of labor and will not help for jobs for young people, companies will end up increasing their prices ”.
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Spain has already adopted other measures in the past. The retirement age has been raised. Now 66, it will be raised to 67 by 2027. “But all this will not be enough, considers José Ignacio Conde-Ruiz, all we do is postpone the harsh measures that we will have to take one day or another, and in the end it will always be the same ones who will pay: the employee and the consumer ”.