16/11/2021

Employers and pensions

2 min
José Luis Escrivá, during the interview.

BarcelonaThe Spanish government has announced this Monday an agreement with trade unions to increase Social Security contributions by 0.6% for 10 years as an exceptional measure to be able to pay the pensions of the so called baby boomers (those born between the late 50s and late 70s). Business associations CEOE and Cepyme have decided to dissociate themselves from the agreement and walked away from the table without presenting an alternative. In a statement they have simply stated that the measure "is insufficient, does not guarantee the balance of the system and additional measures will be needed in the future to ensure its sustainability".

After businesses walked out, the government and unions agreed on measures that are even more harmful to employers. Initially it was negotiated that employers' contributions would go up 0.4%, while workers' would 0.2%; in the end it will be 0.5% for the former and 0.1% for the latter. This is the second time that the government has ploughed on without taking employers into account. It already happened over the increase in minimum wage, when the government decided a €15 increase to monthly salaries, from €950 to €965, when the original proposals ranged between €12 and €19 increases.

Employers are right about one thing. Experts point out that this measure alone will not balance the pension fund and more sacrifices will have to be made in the future, but it is never a good option to walk away from a negotiation. The aim of negotiating with businesses and companies, however, has to be to find a balance between different interests, and to share the efforts out fairly. And here everyone has to do their bit and take joint responsibility. Workers will have to be aware that they will have to work longer or the system for calculating pensions will have to change, for example by extending the number of years used to calculate pensions, and employers will have to assume a higher cost in contributions. And society as a whole will have to understand that the Social Security should only pay for unemployment benefits, sick pay and pensions. The rest should be funded by regular taxation. Only with a combination of ambitious measures will it be possible to achieve the final objective, which is to make the system that has to guarantee pensions for the largest generation in history sustainable.

It is regrettable that these steps are now being taken under direct threat from Brussels, which has made them a condition in the reform plan for giving the green light to the Next Generation funds. For years different governments turned a blind eye and, especially under Mariano Rajoy, emptied the Reserve Fund which had more than €70bn to leave it with only €2bn. The proposed increase in contributions was, however, the easy part of the reforms. The difficulty will come when, as we said, a revision in the way pensions are calculated comes. Minister José Luis Escrivá has already said in an interview in ARA that Spain needed a "cultural change so people work from 55 to 75". The great challenge, then, is to limit early retirements (very widespread in sectors such as banking) as much as possible and to give citizens a variety of options that allow them, if they prefer, to work longer.

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