January 18, 2022 11:20 pm

Labor market and pension system, two problems that intersect

The occupational situation and the pension issue are two of the many problems that Argentina faces, with both short-term and long-term aspects. They are serious problems, complex solutions and that, moreover, are linked to each other.

Let’s start with the employment situation. The latest Permanent Household Survey, surveyed by Indec and published on December 21, indicates that of the total population, 46.7% correspond to the economically active population (EAP), who work or actively seek work, and the The remaining 53.3% is inactive. In turn, the unemployment rate reached 8.2% of the EAP, representing 3.8% of the total population. In other words, only 43% of the total population are active workers and, in some way, support the rest, whether they are inactive or unemployed. Although the coverage of the survey is large urban centers, we will assume the hypothesis that its results are valid on a national scale. This picture of the situation has short and long-term implications.

Among the first, there are two that stand out: i) few active workers in relation to the total population (a high proportion of inactive ones) and, at the same time, a high unemployment rate; ii) if the dimension of job quality and high informality is added (only two thirds of wage earners are considered formal), the picture darkens even more.

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Looking at the long term, the population growth rate of Argentina has been falling and that in the long run will affect the increase in the EAP. In terms of the growth of its economy, although the most urgent need is to increase the stock of capital, that is, investments, in the future it will need a sustained growth of the stock of skilled labor to handle and service these machines.

For this reason, there are several alternatives: to attack the problem of structural unemployment and gradually incorporate part of the economically inactive population today, which requires an effort by society to improve the quality of education and to rebuild the culture of work. Another alternative is to increase incentives to attract people who are not in the labor market and are not part of the EAP. A third is to postpone the retirement or retirement age.

Let’s move on to the pension issue. Argentina spends about 11% of GDP on retirements and pensions. It is a system that covers about 7.5 million people. In approximate figures, 3 out of 4 beneficiaries belong to the general regime and the remaining to a conglomerate of ad hoc regimes outside the general one that includes provincial and professional funds, teachers, Armed Forces. and Security, Judicial Power, Congress, etc.,. These regimes have, in general, particular conditions (and more beneficial with respect to the general regime) in aspects such as retirement age, amount of contributions, number of years of service required, amounts of benefits, etc. However, in total pension spending, the proportion of the percentage that corresponds to the schemes to this grows significantly. The obvious conclusion is that on average the beneficiaries of the schemes to this They receive a credit that is significantly greater than that of the beneficiaries of the general scheme.

The beneficiaries of the general scheme can be divided, in turn, into two large groups more or less equivalent: those who complied in a timely manner with the contributions throughout their working lives and those who entered through a moratorium. The latter enlarge the spending base and contribute to a lower average credit. Indiscriminate moratoriums have many antecedents in the pension history of Argentina, but this does not mean that it ceases to be a terrible practice in the vast majority of cases.

The intertemporal sustainability of the system is precarious (as is the case in many countries) because the number of retirees is high and grows at higher rates than the employed population does. Population aging (lengthening life expectancy) and informality aggravate the financial situation of the pension system. This is the point where the problems of the labor and retirement market converge: it is necessary to increase the activity rate (the EAP) and productive employment so that the inactive / active ratio improves and thus gives greater sustainability to the system.

In conclusion, the pension regime requires a revision to update it to the new times in which the life expectancy of 65-year-olds has been extended, simplify the multiplicity of regimes without affecting acquired rights, and resolve the inequities that are observed. The severity of the problem leaves no room for corrective actions to be long delayed.

Consulting with the titular professor UADE


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