According to a study by the BBVA Foundation and the Ivie, the demographic dependency rate will climb to 53.7% in 2050
MADRID, 6 Nov. (EUROPA PRESS) –
Social Security would need almost 6.4 million additional affiliates in 2050 for the system’s contributory balance to register a zero deficit, according to a study by the BBVA Foundation and the Valencian Institute of Economic Research (Ivie).
According to this report, the most relevant data to know the health of the Social Security pension system, leaving out the passive classes subsystem, is its contributory balance, which mainly includes income from contributions, without including transfers from the State; and contributory expenses, whose main component is contributory pensions.
The study indicates that the balance for non-financial operations offered monthly by Social Security “has been moving away from the contributory balance since the increasing difference between benefits and contributions forced the use of transfers to finance both the so-called improper expenses, as well as part of the existing deficit”.
“As of 2020, both series begin to be separated and, with the latest available data (June 2023), the annual deficit for non-financial operations is about 3.6 billion, while the annual contributory deficit, with the December data of 2022, is 1.98% of GDP, which represents 26.3 billion euros,” the study states.
The BBVA Foundation and the Ivie point out that this amount can be related to the number of additional affiliates that would be necessary to achieve a contributory deficit equal to zero.
According to their calculations, assuming that entry into the system occurred with a contribution base equal to the current average base, in 2022 some 3,780,000 additional affiliates would have been needed to achieve zero deficit.
Taking into account that in December 2022 the number of unemployed was 3,024,000, the report assures that it would be necessary that in addition to all the unemployed becoming affiliated, it would be necessary to search among the population of working age, but inactive, for some 750,000 additional people, which represents an extra 3.2% of the active population.
“The solution to achieving a contributory deficit equal to zero is difficult to achieve by resorting to such a large increase in the number of affiliates,” says the study, which specifies that the maximum deficit was reached in March 2021 and implied a number of additional affiliates. needed 4.8 million people.
Although the authors find it difficult to make projections about what may happen in a pension system immersed in reforms, they remember that the 2022-2072 population projections of the National Institute of Statistics (INE) suggest that certain demographic factors will reduce the weight of the pension system by 2050. active group (between 16 and 64 years old), which will go from 64.9% in 2022 to 56.5% of the total population in 2050.
On the contrary, the percentage of people over 64 years of age will go from 20.1% in 2022 to 30.4% of the population in 2050 due to the retirements of the ‘baby boomers’, the aging of the population and the increase in hope of life, which for 67-year-old individuals will go from 19.98 years in 2023 to 21.88 years in 2050 and 22.60 years in 2070.
The study indicates that migration “will not be able to compensate for the need for contributors either”, with an expected migratory balance of 487,000 people in 2023, which will drop to 250,000 in 2050 and rise to 294,000 in 2070, according to the same INE projections.
All of this, the report points out, will bring with it an increase in the demographic dependency rate, defined as the ratio between people over 64 years of age and the population between 16 and 64 years of age, which will go from 31% in 2022 to 53.7 % in 2050, with a slight decrease thereafter.
Using historical data on the relationship between working-age population, active population, affiliates and Social Security GDP deficit, the report projects the additional affiliates necessary to reach zero deficit in the future, as well as the percentage of the active population It means the difference between additional affiliates and unemployed.
The central scenario, which is based on an unemployment rate of 7% and a deficit of 4%, indicates that in 2050 6.38 million additional affiliates would be necessary so that there was no contributory deficit. Given that the estimated number of unemployed would then be 1.58 million, 4.8 million additional affiliates would be needed, which represents 21.33% of the active population. In 2070 the situation improves slightly, although in the central scenario 5.77 million additional members would be needed.
“The magnitude of these figures gives us an idea of the difficulty of achieving a zero deficit by increasing contributors. The starting situation of the pension system is worrying, but the future deficit projections are even worse. Except in 2030, it would be necessary an additional number of affiliates that would even be higher than the number of unemployed,” the study concludes.
