The Government expects that in ten years half of the 65-year-olds will continue working to sustain pensions

The demographic puzzle that the pension system is going to become in the coming years will make it increasingly common to see older people working in offices, shops or factories.. The sustainability of the pension system, which will have to support a sharp increase in spending in the coming decades, depends on workers extending their working careers as much as possible.. This is what the Government expects, which predicts that in just ten years half of citizens aged 65 will be working.. A proportion that more than doubles the 20% of the population of that age that currently works.

This is reflected in the projections of public spending on pensions, a document with which the Executive concludes the reform of the pension system.. In it, the Government defends with dozens of formulas, tables and graphs the viability of its proposal, which has the approval of Brussels, but casts doubt on organizations such as Airef or the Bank of Spain.

The main measure to save on pensions that the Government has proposed is the incentives for delayed retirement, with which the Executive intends to reduce spending by 1.4 points of GDP (about 18,850 million in 2023 euros).. Among these incentives, the reform proposes penalizing early retirement more and encouraging workers to prolong their professional careers longer in exchange for a higher pension in the future or making it easier to combine employment with a pension.. Added to this is the delay in the legal retirement age, which will be 67 years in 2027.

With all these elements in hand, the Government trusts that the elderly will quickly increase their participation in the labor market. The expectations are striking. If the forecasts are met, almost a third of the population between 65 and 74 years old will continue working in 2040, a proportion that would quadruple the current rate of 7.6%. By 2050, half of people aged 65 and 66 should have a job.

However, for these figures to materialize, workers and companies would have to radically change their behavior.. In recent years, only 5% of workers have chosen to delay their retirement, although it is true that so far in 2023, 8% of retirements have been delayed. However, to achieve the savings sought by the Government, this percentage would have to increase to 55%, according to estimates by the Independent Authority for Fiscal Responsibility (Airef).

In fact, the Tax Authority disagrees considerably with the Government's forecasts and is betting that the containment in spending that will come in this way will be 0.8 points of GDP in 2050 (10.8 billion).. Analysts like Fedea go further and point out that the measures to delay retirement proposed by the Government will have a neutral effect in 2050. That is, in the long run it would not mean any savings. It must be taken into account that, despite the incentives, not all workers will want to retire later and many, in fact, will not be allowed by their company.

Full employment, migrations and productivity

Although delaying retirement is one of the bases of the reform, the numbers that support the Government's plans also outline other key assumptions. For the system to be sustainable with all the measures that the Executive has introduced, the Spanish economy would have to reach full employment in the coming decades.

The unemployment rate would have to be halved in 20 years, from the current 12.2% to 5.5% by 2050 and around 80% of Spaniards would have to be working on that date. Records that Spain has never come close to, even in the years of the real estate boom, but that in principle should be more feasible to achieve in the future due to demographic change.. Since there is less labor available due to the increase in retirements, to maintain current employment levels, employment rates would have to be higher.

In this sense, the Government has high hopes that the labor market reforms will have permanent effects in the future.. Specifically, the Executive expects that the increases in the SMI, the labor reform or the emergence of the underground economy will contribute 0.8 points of GDP (about 10.8 billion euros) in income by the year 2050.

Finally, another of the great keys to achieving full employment and the success of the reform is immigration.. The Government has drawn a demographic scenario in which migratory flows will rebound in the coming years, adapted to the needs of the labor market. Specifically, net arrivals of migrants (excluding departures) are expected to exceed 400,000 starting in 2045, double what the INE expects for the entire prediction horizon.

Furthermore, for pensions to be sustainable according to the plan designed by the Government, the economy and work productivity will have to grow robustly in the coming years. The Executive proposes that the economy will advance at a rate of 2% annually for the next 27 years. 2% annually is what the Spanish economy has grown, on average, in the last 22 years. However, Airef expects GDP to advance at a rate of 1.1% in that time.