Study projects that, if current conditions are maintained, there will be more beneficiaries than contributors as of 2051

05/03/2024

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Leonardo Rolim — Foto: Edu Andrade/Ascom/ME

Brazil has fewer than two contributors for each Social Security beneficiary, a ratio expected to deteriorate in the coming decades. By 2051, there will be more insured individuals than those contributing to the pension system, according to a study published this week by the Institute for Applied Economic Research (IPEA).

The estimate considers all pension schemes—for public servants, military personnel, and private-sector workers—as well as the so-called BPC (Continuous Cash Benefit, a pension for poor elders and disabled people). Still, it does not consider other benefits such as maternity aid and the former sickness benefit, now called temporary incapacity aid.

The study shows that the ratio of contributors to beneficiaries fell to 1.97 in 2022, the most recent data available, from 2.26 in 2012. Projections indicate that this ratio would drop to 0.99 by 2051 and 0.86 by 2060, the last projected year. In other words, if conditions remain unchanged, there will be more beneficiaries than contributors to Social Security from 2051 onwards.

In absolute numbers, it is estimated that the total number of beneficiaries from retirement, survivor’s pensions, and BPC would grow from 31.4 million in 2022 to 61.2 million in 2051, and would reach 66.4 million by 2060, more than doubling over nearly four decades. Meanwhile, the projected number of Social Security contributors would decrease from 61.8 million (2022) to 60.6 million in 2051 and 57.2 million in 2060. That is, the total number of contributors is expected to decline over time, while the number of insured more than doubles.

Researchers Rogério Nagamine and Graziela Ansiliero, authors of the study, note that the worsening ratio of contributors to beneficiaries is due to the natural maturation of the pension systems and the rapid and intense aging of the population. Another factor contributing to the deterioration of this indicator is the increase in the number of non-contributors, due to informal employment, unemployment, and inactivity.

More than half of the population (55.5%) of working age (men from 20 to 64 years old and women from 20 to 61 years old) were not contributing to Social Security in 2022, according to the researchers. In absolute terms, out of a total of 129.5 million people of working age, only 58.9 million were contributors (45.5% of the total) and 70.7 million were non-contributors (55.5% of the total).

“With these demographic trends, it is expected that in the coming decades, the increase in the total number of beneficiaries will not only continue at a pace superior to that of the total number of contributors but could also lead to a situation of stagnation or even contraction of the latter group given the expected decrease in the population of working age,” the researchers wrote.

The study was based on data from the Continuous National Household Sample Survey (PNAD), population projections made by the Brazilian statistics agency IBGE in 2018 (complete data from the 2022 Demographic Census is still unavailable), and administrative records from pension systems. “The trend of worsening in the ratio between contributors and beneficiaries is the main diagnosis and is expected to persist even with a new population projection, the results of which could further worsen the indicator,” the researchers said.

Social Security experts agree that the ratio of contributors to beneficiaries has been declining over the years due to the aging of the Brazilian population and lower fertility rates. If measures are not adopted, the situation could deteriorate further in the view of experts consulted by Valor, especially with the increase in the number of temporary workers with fixed contracts or from online platforms, what has been termed as gig workers.

In the study, Mr. Nagamine and Ms. Ansiliero also calculate an estimate of the rate needed to fully fund Social Security, considering the contributions made by workers and employers. This rate would be 32.2% in 2022 and would reach 73.6% by 2060.

Luís Eduardo Afonso, a specialist in Social Security and associate professor at the School of Economics and Administration at the University of São Paulo (FEA/USP), said that the ratio between beneficiaries and contributors is what makes the rate needed to fund Social Security estimated at over 70% by 2060. In his assessment, one solution to avoid this would be to increase the minimum age and institute an automatic hike mechanism for this age as life expectancy increases. “There are no silver bullets,” he said.

Mr. Afonso also recommends that the government adopt measures to encourage formalization to increase the number of contributors, with an evaluation of the results of these policies, unlike what happens today with the Individual Microentrepreneur (MEI)—a program for certain professionals who work alone and wish to have their business taxpayer’s number, which grants them some rights, such as social security.

Former Social Security Secretary Leonardo Rolim advocates the implementation of a capitalization regime for private sector workers, to ensure the system’s sustainability in the long term. “The most sustainable systems in the world have a capitalization layer,” he said, recalling that the original 2019 Social Security reform proposal included this provision but the measure was eventually removed from the bill.

To increase the fertility rate, Mr. Rolim proposes that the government promote a policy in the labor market that provides greater protection for women, such as extending maternity pay for longer and offering a larger pension benefit for women with more than one child. He said that it is unlikely that women will return to having six or seven children, but measures like these could contribute to improving the indicator.

All the projections made by the study serve as a warning of the need for measures to ensure the long-term adequate financing of social security. “Currently, the political debate seems to be focused on short-term agendas, with no concern for financing in the medium and long terms,” the researchers wrote.

*Por Jéssica Sant’Ana, Edna Simão — Brasília

Source: Valor International

https://valorinternational.globo.com/