Trade unions strike over proposed pension reforms

The Spanish government has put forward a reform proposal for the pension system, the most controversial aspect of which is to postpone the retirement age. This reform aims to reduce the cost of pensions, bringing the deficit down to 3% by 2013, while securing the sustainability of the pension system, which the government considers to be at risk due to population ageing. Trade unions responded by calling for industrial action between 22 February and 7 March 2010.

The pension system that is currently in force in Spain originates from what is known as the Toledo Pact (Pacto de Toledo), a process that derived from the publication of a report prepared by a parliamentary committee created in 1994. This committee was responsible for assessing structural problems in the pension system as well as the main measures that need to be taken. The proposed measures were approved by parliament in 1995, introducing reforms of great significance such as extending the computation period (ES9710220F). More significant, however, was the commitment made by all of the parliamentary groups to maintain the public pension system and steer any debates on its reform away from political confrontation. A year later, trade unions joined the agreement, thus including the debate on pensions in the framework of social dialogue.

One of the most consequential results of the Toledo Pact was the creation of a monitoring commission that gathers information from the most representative economic and social partners, the government and other European Union and state institutions on a yearly basis and puts forward recommendations.

Details of pension reform proposals

Pending the conclusions reached by the Toledo Pact Commission regarding pension reform, the government has presented its proposal in a document that was approved by the cabinet on 29 January 2010. The main points of the pension system reform are the following:

• the reform of social security contributions – simplifying the contribution rate by reducing it to three or four kinds of contributions; extending the possibility of paying contributions to recipients of postgraduate grants and domestic workers; and reviewing contributions of self-employed workers in order to reach a more precise estimate of real performance obtained in the exercise of their profession;

• promoting the capitalisation of pensions and offering tax incentives for private pensions set up for spouses who are not active in the labour market;

• reviewing family support schemes for self-employed workers and incorporating in the contributions any relatives working in family businesses;

• including new civil servants under the social security general regime, while keeping on those who already hold a position under the special regime;

• concluding the separation process regarding financing sources, separating the pension contributory benefits of the social security system from the health and welfare benefits paid by the state;

• reforming the social security law to ensure that it is restricted to contributory benefits and the means test of individuals who do not qualify, dissociating social welfare benefits from contributory ones;

• substituting widows’ pensions in cases of ‘short cohabitation with no children’ for one single compensation payment. The document leaves open this reform for further elaboration in the future, subject to more assumptions – considering that changes occurring in society may outdate the concept upon which ‘death of the family support’ has been based;

• reforming orphans’ pensions, granting a benefit to the individual irrespective of family units;

• progressively deferring the legal or ordinary retirement age from 65 to 67 years starting in 2013. Accordingly, those who reach 65 years of age in 2013 will retire two months later, and so on until the measure is fully implemented by 2025.

Besides this proposal, it is worth drawing attention to the controversy that has arisen as a result of the first draft of the Stability Programme Update 2009–2013 sent to the European Commission in Brussels; this update contemplated extending the pension computation period from 15 to 25 years of social security contributions as an effective measure to reduce the financial deficit. The trade union protests unleashed after the Ministry of Economy and Finance (Ministerio de Economía y Hacienda) posted the document on its website obliged the government to delete that particular part of the text within four hours, merely setting the legal age of retirement at 67 years and stating that ‘other parameters of the current system would be modified accordingly’.

Views of social partners

The most representative trade union organisations – the Trade Union Confederation of Workers Commissions (Confederación Sindical de Comisiones Obreras, CCOO) and the General Workers Confederation (Unión General de Trabajadores, UGT) – responded to the government’s proposal by calling for industrial action and demonstrations between 22 February and 7 March 2010. These were scheduled in different cities and regions including the capital city of Madrid, the northeastern city of Barcelona, the eastern city of Valencia, the northwestern autonomous community of Galicia, the central autonomous community of Castilla La Mancha and the northeastern autonomous community of Aragón. The trade unions have positively assessed the participation rates, although no official statistics are available.

The trade unions reject the compulsory postponement of the retirement age, instead proposing measures that encourage workers to stay on voluntarily in the labour market. In addition, the trade unions propose an increase in minimum pensions as well as a new income structure that will guarantee social security financing without having to resort to deferring the age of retirement.

The leading employer organisation, the Spanish Confederation of Employers’ Organisations (Confederación Española de Organizaciones Empresariales, CEOE), is in favour of the government’s initiative, describing it as highly positive, mainly because it involves an effort to rationalise and reduce public expenditure.

Pablo Sanz de Miguel, CIREM Foundation