2023-06-07 14:25:04
He The Bank of Spain does not believe the collection forecast presented in the pension reform of José Luis Escrivá, reducing expectations by two points, from 1.1% of GDP to 0.9% in 2050. A difference that could be even higher since the supervisor’s projections -in line with those already announced by AIReF and Fedean- do not have taken into account the effect that the increase in labor costs will cause on employment and wages, for which reason it warns that “the revenue-raising capacity of the reform could be even lower.”
The article -signed by Brindusa Anghel, Sergio Puente and Roberto Ramos- analyzes the impact of the three measures included in the last block of the pension reform, which aims to guarantee the sustainability of the pension system by raising social contributions. The first has to do with the progressive increase in the maximum contribution base, which will have a collection impact of 0.1% of GDP in 2030 and would grow until reaching 0.3% of GDP in 2050. In addition, it is will raise the effective rate between 0.8 and 1.6 points in 2025, and between 1.2 and 11.3 points in 2050. The second, referring to the intergenerational equity mechanism, would contribute less than 0.5% of GDP from of 2029. And the third, the controversial additional contribution above the maximum contribution base for wages, the projection is that collection will be around 0.1% of GDP in 2050. These three averages together would give a growth of income between 0.6% of GDP in 2030 and 0.9% already in 2050, below what the Executive expects.
Analysts believe that these measures will have an “asymmetrical” impact on the distribution of income, since “wages below the maximum contribution base will be affected only by the MEI”, while the highest incomes will have to face the “increase in contributions derived from the three aforementioned routes”. They also recognize the “great uncertainty” exists about the precise effect of these measures given that “the quantification horizon is very broad” and the “materialization of changes in the labor market and the very reaction of the agents will force us to reassess its scope in the future” and point out that that collection could be less “if the higher labor costs negatively affect competitiveness, wages or employment.” In this sense, they recall the clause that could be applied as of 2026 to raise the MEI, to the extent that projected average pension spending deviates from a reference value and additional measures to contain spending or growth in pensions are not approved. income. In such circumstances, the increase in the effective contribution rates would be higher in salary brackets below the maximum contribution base.
According to his calculations, with the additional contribution established as of 2025 to tax the amount of wages that exceed the maximum contribution base, the application of the rates would vary between 0.92% and 1.17% in 2025 and will increase year by year until reaching a minimum rate of 5.5% and a maximum rate of 7% in 2045. The minimum rate corresponds to salaries that are between the maximum base and an additional 10% of it, while the maximum rate will be applied to remuneration that exceeds the maximum base by 50%.
To exemplify the situation, the writers present a simulation to calculate the increase in effective contribution rates in 2025 and 2050 with respect to 2022 taking into account the increases in social quotas approved. The results show that the increase in the effective rate will vary between 0.8 and 1.6 points in 2025 and between 1.2 and 11.3 points in 2050. The effective contribution rate before 2023 would range between 10.2% for salaries of 200,000 euros and 37.75% for salaries below the maximum contribution base. The highest increases in the effective rate would be concentrated in the upper part of the income distribution. In particular, gross salaries of around 60,000 euros would increase their social contributions in a greater proportion under the contribution scheme established in 2025, while remunerations of around 80,000 euros would increase their contributions to a greater extent, as a percentage of remuneration, under the design for 2050. In cases where the salary remains below the maximum base, the effective rate would end up stabilizing at a constant value. For example, the maximum contribution base, which amounts to 53,946 euros in 2023, would exceed 60,000 euros in real terms in 2033, so that as of that year wages of 60,000 euros, which until then would have experienced increases in the rate Effective due to the gradual increase in the maximum base, these increases would be interrupted when they fell below it.
The Bank of Spain also explains the heterogeneity of the maximum contribution base between workers and companies. The growth of the maximum contribution base “it will have an unequal impact among workers”, since they are more common among men of middle age and with higher qualifications. As for the companies, Contributors for the maximum base are relatively more numerous in large companies, so some large companies would face the greatest increases in their labor costs as a consequence of the increase in the maximum contribution base and the surcharge established on the salary part above it. Based on the data from the 2021 Continuous Sample of Working Lives, approximately 1.3 million people contributed to the legal maximum, which represents 6.8% of all Social Security affiliates. The maximum contribution base would be more prevalent in men than in women (8.2% compared to 5.1%) and in middle-aged people, and in companies with more than 500 employees (13.8%) . These workers are mainly in financial services (54.4%) and consultancy (20.2%).
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