Agreement on pensions, disagreement on unemployment

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In October 1999, the debate in Spain on increasing minimum pensions ended with an agreement between the government and the trade unions over the contents of the 2000 state Budget. However, there is still disagreement on benefit coverage for unemployed people.

Following several months of heated debate between the political parties, in October 1999 the Spanish government and trade unions reached an agreement on increasing minimum pensions. However, the issue of increased social protection for unemployed people remains deadlocked.

Agreement to increase minimum pensions

The polemic on increasing minimum pensions (ES9909248F) had been dominating the political debate in the pre-electoral period (regional and national elections are due soon). However, the government's response was quick and effective: it reached an agreement with the trade unions to increase minimum pensions in the 2000 state Budget by far more than had initially been planned.

The agreement affects the 3 million pensioners who receive contributory or non-contributory pensions and have incomes below the minimum wage. In 2000, the pensions for this group will be increased by an average of 5.4% instead of the initially foreseen 2% (the inflation forecast), which will still be applied to the other 8 million pensioners with incomes higher than the minimum wage. In total, the cost of this measure is calculated at ESP 61 billion. In addition, ESP 60 billion has been allocated to a reserve fund that will guarantee future pensions, a measure that was foreseen in 1995 but had not yet become effective.

The trade unions take a positive view of an agreement that will meet one of their long-standing demands - an immediate increase in the lowest pensions. However, the debate has not come to an end with this agreement. In spite of the agreed rises, pensions for this group of people are still very low. Around 830,000 people will receive monthly pensions of between ESP 40,000 and ESP 42,000; 1,765,000 will receive pensions of between ESP 52,000 and ESP 62,000; and 350,000 will earn a pension of ESP 70,000, the level of minimum wage. All of these people are still on or below the poverty line. This problem not only affects this group, but also the rest of pensioners who receive the minimum wage, which is considered by the unions to be clearly insufficient.

With the new agreement, the debate on pensions will now focus on the renewal of the "Toledo agreement" signed in 1995 by all the political and social forces in order to guarantee the viability of the public pension system (ES9710220F). Four years later, the time has come to revise this pact, and the revision will therefore form the framework for debate on this subject. However, political tension has relaxed after the agreement with the unions and the debate will probably not begin until after the general elections in spring 2000.

Disagreement on protection for the unemployed

Protection for unemployed people has not received the same amount of attention in the political arena as pensions and this may be why there are no major changes in this area in the 2000 Budget.

The trade unions have been calling for an increase in social protection for unemployed people for some time (ES9810183F). Since the reforms of 1992 and 1993, the rate of benefit coverage among the unemployed has gone down from 67% to the current 50%. That is to say, half of the unemployed people officially registered by the National Employment Institute (Instituto Nacional de Empleo, INEM) receive no income. To deal with a situation that they consider unacceptable, year after year the unions have been calling for the extension of the right to receive unemployment benefit to the unemployed people who most need it: those that have a family to support or are over 45 years of age - slightly more than 300,000 people. The unions feel that this measure is at least as necessary as the increase in minimum pensions, because this group currently receives no income (ES9909249F).

The cost of this measure is calculated at approximately ESP 210 billion, an amount that the trade unions do not consider excessive in view of the fact that the real surplus of unemployment contributions received over benefits paid out will reach ESP 500 billion at the end of 1999. Despite the Toledo agreement, the sources of social security funding have not been separated and employers' and workers' contributions finance unemployment protection, active employment policies and the supplements to the minimum pensions.

The government's position is very different. Once again, it has refused to consider the unions' proposal, stating that the government's objective is to promote active employment policies rather than passive ones. However, with general elections just around the corner, it has not been able to ignore this question entirely, and the 2000 Budget includes an item of ESP 50 billion under the heading of "active integration income". This is an integration programme providing individual counselling to long-term unemployed people, those over 45 years of age, those with families to support and those who have exhausted their rights to benefit. This measure has been severely criticised by the trade unions for several reasons: the "insufficient" amount; the fact that it does not create any concrete rights (and therefore it is not guaranteed to everyone); the fact that it links benefit to obligations that the unemployed person will not always fulfil; and the fact that it leaves out the vast majority of long-term unemployed with families to support.


The debate on the 2000 Budget has had a clear social component, which is partly due to the pre-electoral period, with the regional elections in Catalonia in October 1999 and a general election in March 2000. For the first time since the signing of the Toledo agreement, the political and social forces recognise unanimously that minimum pensions are below the poverty line and that they urgently need revising. The agreement between the government and the trade unions is only a first step: this path must now be continued with the renewal of the Toledo agreement, if possible with the same consensus as in 1995. The agreed increase in minimum pension is positive, but insufficient, and a question of this magnitude cannot be approached through rivalry between political parties: this is precisely what the Toledo agreement tried to avoid.

The renewal of the Toledo agreement is also an opportunity for dealing with another major problem: social protection for unemployed people. The separation of contributory and non-contributory sources of social security funding should clarify the financial situation of the unemployment protection system, but it is even more important to recognise that it is also a problem of social equity and that appropriate action must be taken (María Caprile, CIREM Foundation).

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