The recently approved pension reform provoked a sharp reaction from experts. The scientific consensus casts doubt on whether the measures included in it will be able to offset the increase in spending that will occur over the next 30 years as generations retire. baby boom — as well as repricing those benefits for inflation — would hit public accounts hard.

The Government’s decision, on which the last part of the reform rests, is as follows: increase social contributions, i.e. contributions which all employees and companies pay monthly to the social security fund and which are used to calculate the state old-age pension.

In addition, a fixed rule is also being introduced that will gradually increase the limit currently in place for these contributions, the so-called maximum contribution bases, since today a salary of 54,000 euros per year makes the same contribution as a salary of 100,000 – and the so-called “solidarity fee”a temporary tax on the highest incomers, precisely because they do not contribute to the pension fund to the same extent as the lower ones.

This is another aspect in which experts and the executive branch clash: while the responsible minister, José Luis Escriva, claims What mentioned measures will not have any impact on the labor market, prestigious economic institutions such as Fedea and BBVA Research and experts interviewed by the newspaper believe that this will lead to job losses – up to 200,000, according to BBVA – and will also influence the hiring decisions of Spanish businessmen, although it is too early to know for sure. calculate to what extent it will be.

And this is the data that Independent Financial Responsibility Authority (AIReF) still hesitant to publish. According to him, the impact of pension reform on employment is still very difficult to measure, as it affects many different aspects of the labor market, and the reaction of companies is somewhat unpredictable, although it is known what behavior they tend to lead to higher taxes. for labor.

Labor taxes will increase by 10 points on incomes over 70,000 euros

But what he calculated is how the reform will increase the contributions that workers at various income levels will make to the social security system over the next few years, between now and when the measures are fully rolled out. And the conclusion is 65% of the cost of the reform will come from salaries over 54,000 euros per year, and this will increase by 10 points social contributions, which pay wages in the amount of 70,000 to 80,000 euros per year.

Of the aforementioned ten points, one will be due to the intergenerational equity mechanism (MEI, the aforementioned increase in quotas for all workers), almost 9 due to the increase in maximum contribution bases and a few tenths due to the solidarity quota. So, this salary range will be the biggest blowas for higher salaries the hack to increase the maximum contribution bases would be somewhat less high, and although initially they would also pay a solidarity contribution, this measure would be temporary and would end in 2045.

Specifically, a salary income of €70,000 would result in an increase in labor taxes of €7,500 gross per year, and if wages reached €100,000, the tax increase would be €9,700. From my side, wages less than 54,000 euros will support 35% of the reform. “While they are only affected by the MEI, they represent the largest group in which the majority of wages in Spain are concentrated,” AIReF emphasizes in its report. Opinion on the stability of AA. page long-termpublished this Friday.

Employment hit could be ‘small’, 30,000 jobs

With regard to the specific impact on employment, although the Office prefers not to give specific figures until it has examined the situation in more detail, the agency ensures that for every percentage point increase in social security contributions, employment is reduced by about 0.2 points. percentage of GDP. This will result in approximately 30,000 job losses, which the agency described as a “reduced” impact.

“But our economy may be more exposed to such an impact. At the macro level, the impact is small, it is not more important, employment growth far exceeds it, but it really requires a much deeper analysis,” Esther Gordo, director of AIReF’s economic analysis department, estimated. In the same sense is included in the report.

“The academic literature describes various channels through which an increase in labor costs can affect employment levels and productivity. So, payroll income tax and social security contributions will have disincentive effects on both the demand for labor, by increasing the cost of labor for companies, as well as job offers, by reducing the real wages of workers and discouraging participation in the labor market,” the text says.

In Spain, there is a rigidity in the labor market, which leads us to expect that the increase in contributions will have a stronger impact than in other countries.”

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“Empirical evidence at the international level suggests that He
an increase in social contributions negatively affects employment. However, specific effects vary from country to country depending on the complex interactions with institutions.
labor market (…). In Spain, labor market rigidity is combined with productive specialization in labour-intensive sectors, which leads us to expect that the increase in contributions will have a stronger impact than in other countries,” he insists.

Among the possible effects, he points out that incentives to learn can be reduced among workers with higher skills, or increase their mobility to countries with lower taxes, while reducing the attraction of more productive migrants, “which may end negatively affects competitiveness and potential growth of countries. On the other hand, it also highlights that the increase in social security contributions is not uniform across wage levels.

In addition, AIReF emphasizes that social security contributions are not the only tax on earned income, as employees pay personal income tax on their income, after discounting contributions and applying a number of reductions to them. Also remember that the reform introduces a new spending rule, which means that social contributions will automatically increase if pension spending is exceeded, so tax levels can increase even more. And with it, the impact on employment.