Government experts warn that the plan is actuarially “unsustainable”
06/10/2024
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Adroaldo Portal (center) and Luiz Marinho (right) — Foto: Bruno Spada/Câmara dos Deputados
Despite ongoing discussions about the necessity of reforming Social Security to address its escalating deficit, the Lula administration has proposed legislation to regulate “four-wheeled vehicle app drivers” such as Uber, 99, and InDrive, aiming to integrate them into the social security system. However, the cost implications for the public finances remain unclear.
In Congress, government officials conceded that the bill is “actuarially unsustainable” yet proceeded to fast-track its vote. The proposal was advanced without short-term financial projections and, according to responses obtained through the Access to Information Act (LAI), it lacks any long-term impact studies on Social Security.
The reply from the Ministry of Social Security to an LAI inquiry stated, “supplemental legislation PLP No. 12, of 2024, […] aims to foster social security inclusion and enhance working conditions, although the SRGPS [General Social Security System Secretariat] did not conduct the requested studies and technical notes for this analysis.” Similarly, the Ministry of Labor provided technical insights on the draft’s preparation but did not include these essential financial evaluations.
The proposed legislation establishes a formal category for app drivers, setting a minimum hourly wage of R$32.09, along with mandated social security contributions—1.8% from the worker’s income and 5% from the company, and rules for exclusion and suspension of platforms. This inclusion in the National Social Security Institute (INSS) entitles drivers to benefits such as retirement, death or disability pensions, maternity leave, and accident coverage.
Originally, the government introduced the bill without providing financial impact assessments. Subsequent inquiries prompted a response detailing expected annual revenues of R$279 million from these contributions. This projection is based on data from the Brazilian Institute of Geography and Statistics (IBGE), which identified 778,000 individuals in 2022 whose primary occupation involved passenger transportation apps.
However, the government has yet to disclose the potential cost impact of these contributions on Social Security expenditures, which surged by 17.2% last year, totaling R$306 billion. To illustrate, if each of the 778,000 workers were to receive the minimum INSS pension today, the annual cost would amount to R$14.2 billion.
During a public hearing in the Chamber of Deputies in April, Adroaldo Portal, the secretary of the General Social Security System, expressed significant concerns about the proposal’s impact on social security’s sustainability. Despite these concerns, he defended the proposal as a commitment by the current government to ensure minimum rights for app drivers. “By proposing this text, the Brazilian state is addressing a financial need in social security. Essentially, the state is assuming responsibility for a fiscal gap. From an actuarial standpoint, this contribution model is unsustainable,” he remarked.
Rogério Nagamine, an economist at the University of São Paulo’s Economic Research Institute, concurs on the necessity of providing worker protection but emphasizes the importance of sustainability. He points out the lack of supporting studies as “a significant concern.” “Creating a model that jeopardizes the system’s funding is futile. Schemes like rural pensions and the Individual Microentrepreneur (MEI) are already financially strained. Looking ahead, the country faces high expenditures with minimal revenue,” he cautions, suggesting that platform fees should be increased to offset the reduced worker rates.
Despite the subsidy, the government is struggling to pass the proposal. The driver community is split between those advocating for Social Security affiliation to secure enhanced accident protection and those resisting the deduction of contributions from their earnings. The government has withdrawn its request for urgent processing, and the bill has been referred to committees, where drivers are lobbying for contributions to be optional or channeled through the MEI system, which allows for voluntary participation.
The bill’s rapporteur in the Economic Development Committee, Congressman Augusto Coutinho, explained that while making the contribution optional is not feasible, the legislation will accommodate drivers who supplement their income through platform work but already contribute to the INSS through other professional activities. These drivers will not be required to pay additional social security charges for their platform earnings. “From the perspective of Social Security, these workers are already covered,” he stated.
Senator Rogério Marinho, leader of the opposition in the Senate and former special secretary for Social Security under the Bolsonaro administration, criticized the Lula administration for its handling of the bill, accusing it of flouting fiscal responsibility by not providing impact estimates. “Given a government whose social security minister [Carlos Lupi] denies the existence of a social security deficit, this does not come as a surprise,” he remarked.
When approached for comment, the Ministry of Finance deferred inquiries, suggesting that “questions should be directed to the advisors” of the ministries of Social Security and Labor and Employment, who have not yet responded to requests for clarification on the bill’s potential impact on Social Security.
*Por Raphael Di Cunto, Marcelo Ribeiro — Brasília
Source: Valor International