A little over two and a half months from the first of the year’s electoral events, the municipal and regional elections on May 28, and after the many fronts against which the social-communist coalition in government has open, few doubted that the second part of the pension reform would be carried out without envisioning the slightest hint of cuts in spending committed, albeit long-term. An expense that is already around 12,000 million euros per month, almost double –every month– than in 2010 (6,867 million). But since Spain has committed a reform to deliver to Brussels before that May election date to guarantee the long-term sustainability of the system if it wants to receive the 10,000 million of the fourth tranche of aid, Yes, there will be cuts, on workers’ salaries, and increases in labor costswhich penalizes employment and companies, according to what business representatives were quick to denounce yesterday, who announced a “not resounding” to this second part of the reform of the Minister of Inclusion, Social Security and Migrations, Jose Luis Escriva.
To begin with, Escrivá has had to give up a crucial part of their claims: the extension of the computation period, the number of years of contributions over which the amount of the pension is calculated, currently 25 years. Those 25 years will remain in force. despite the fact that at first Escrivá launched an ordeal on which to start debating that showed his cards: extend it ten years, up to 35. The unions and Podemos put the cry to heaven and warned the minister that they were not going to accept it and that this extension was not included among the recommendations of the Pact of Toledo on the reform of the system.
Escrivá lowered his claims to 30 years, ruling out the two worst contributions in working life and finally, to have the approval of Podemos, it has been established that the 25 years remain in force with the option for workers to extend them to the best 27 of their working life, for non-linear professional careers. In other words, those workers who have suffered the ravages since the Great Recession that began in 2008 and whose careers have been affected in recent years with lower Social Security contributions, either as a consequence of lower-paid jobs or unemployment, can benefit from some flexibility over the last 25 years of contributions to opt for a calculation period over the last 29 years of contributions, excluding the two least favorable ones.
Escrivá announced on Thursday that it was practically closed with the European Comission the reform referring to the sustainability of the system and that is why he quoted the social agents yesterday. However, in itself this measure does not guarantee sustainability of the system since it would not mean a cut in pension spending. In fact, it will cost more by granting new retirees with non-linear careers –those in which each year the highest value is quoted– the possibility of taking the most favorable 27 years. This «dual system» will be in force from 2026 to 2044, when the only calculation period will be over 29 years excluding the two least positive ones.
This increased spending would not have an impact thanks to the uncapping of social contributions. To date, the maximum contribution base stands at 28.3% and those salaries above 4,495.5 euros per month do not contribute more. He Progressive cutback will allow Social Security to fatten its income with a scenario in which, although these uncapped contributions will accumulate rights for higher pensions in the future, they will start to collect them when the “tsunami” of spending caused by the retirement of the “baby boom” has passed, around mid-century.
In this sense, it is necessary to solidarity fee for the part of the salary that currently does not contribute due to exceeding the maximum contribution limit. This quota will be 1% in 2025 and will increase at a rate of 0.25 points per year until it reaches 6% in 2045.. Thus, to a person who earns 500 euros above the maximum contribution limit, the quota would only apply for those 500 euros and not for his entire salary, quoting an additional 5 euros in 2025. This quota will only apply to salaries greater than 53,946 euros in 2023, the maximum contribution base today in Spain.
In addition, the agreement contemplates progressively double the current overpriced price of the Intergenerational Equity Mechanism (MEI), from the current 0.6% to 1.2%. Employers would pay 1% and workers the remaining 0.2%.
The businessmen’s malaise continues due to the rise in the prices of the maximum bases, which will be done between 2024 and 2050 by adding a fixed amount of 1.2 percentage points to the annual amount of the CPI. The maximum pensions will also be revalued year by year with the annual amount of the CPI plus an additional increase of 0.0115 cumulative percentage points each year until 2050. From 2050 to 2065 there will be additional increases. Some improvements are also included in the coverage of periods without contributions, which especially affect women; and an additional 10% improvement in the gender gap supplement of the pension in 2024 and 2025.
All these measures imply higher contribution costs for companies. The bosses criticized “the government’s tax collection voracity” and pointed out that workers “will see part of the increases in their pay absorbed.” In a joint statement, the business organizations CEOE, Cepyme and ATA accused Escrivá of presenting a “populist” proposal, which “will undermine the efforts of companies in wage negotiations.” The employers denounced that the maintenance of the system “falls on the workers and the companies with a general increase in contributions” that, as they warn, “will reduce the wages of the workers and increase labor costs, endangering employment.” “The proposal is regressive because it implies more years of work, more effort and less pension”, they stressed.
In statements to this newspaper, executives of the employers’ associations consider the proposals that “they don’t even guarantee the sustainability of the system”. “It’s about what the pension party is paid by the workerswith a wage penalty that will make it impossible for them to gain purchasing power, and the businessmen. They are making business activities unviable», indicated from the leadership of the CEOE. “It is prolonging the agony of the system, which has a spending problem,” they added from the employers’ association.
For their part, both Podemos and Escrivá himself celebrated their agreement on pensions yesterday, which has the approval of the union. According to Escrivá’s department, the second part of his reform “guarantees the sustainability of the system through a reinforcement of resources, avoiding any type of cut. The measures contained in the second part of the reform of the pension system will collect between 1.2% and 1.3% of annual GDP, once the maximum contribution bases, the solidarity quota and the intergenerational equity mechanism (MEI), according to sources from the Second Vice Presidency of the Government and United We Can. Based on the current GDP, the new pension reform would mean a «injection of 15,000 million euros.