Debate on minimum pensions intensifies

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The debate on the level of minimum pensions in Spain has been prominent during summer 1999. Pressure from trade unions and others to increase these pensions has been mounting against a background of some 3 million pensioners living below the poverty line. The issue is also important in the context of the forthcoming general election in spring 2000.

In 1995, representatives of Spain's political and social spheres reached an agreement on pensions (known as the "Toledo Agreement"), according to which they agreed not only to maintain a stable public pensions system but also to improve minimum pensions and to adjust them to the annual increase in the cost of living. They also agreed to respect pensions as a question of national interest, over and above partisan squabbles (ES9710220F).

In December 1998, the President of the regional government (Junta) of Andalucia unilaterally raised non-contributory pensions (pensiones no contributivas) - those that are not paid as a result of the contributions made during working life but come from the state budget. These pensions are granted to people who, for various reasons, have not contributed from their own income, or who have not done so for sufficient time. The conservative Spanish central government objected to this move and took the matter to the Constitutional Court (Tribunal Constitucional). The issue arose again in August 1999, when the President of the regional government (Generalitat) of Catalonia promised, and then granted, an extra payment to the region's 70,000 non-contributory pensioners to compensate for the fact that inflation in Catalonia has been higher than in Spain as a whole over the past few years.

Policy and reality

These two incidents, in addition to the threat of other regional presidents to take similar action, have led to a heated debate in which there have been accusations of electioneering, government threats to take the matter again to the Constitutional Court, and accusations by the Prime Minister that social cohesion is being threatened.

The reality of the matter is that about 782,000 Spanish pensioners have non-contributory pensions, most of which (460,000) stand at ESP 38,000 per month and the rest at ESP 40,000. Moreover, in 1999 a large proportion of the contributory pensions received by 1,360,000 beneficiaries are no more than ESP 67,000 per month for pensioners who support spouses and ESP 58,900 for those who do not support spouses. That is to say, all these pensioners have incomes below the minimum wage, which in 1999 was ESP 69,270 and has consistently been criticised in some quarters as being too low (ES9801240N).

In other words, almost 3 million pensioners, including both those who receive non-contributory pensions and those who receive contributory pensions, have such low incomes that they fall clearly below the poverty line.

This is by no means a residual social group - low incomes are the common fate of these and many other pensioners. This is shown by the fact that the average pension in May 1999 was ESP 84,422, which is above the minimum wage, but not by much. The gap between this level of pension and the average purchasing power of the employed population is demonstrated if we compare it with the average wage, at present ESP 240,000 gross per month. Of course, this latter figure hides the fact that a very high proportion of wages are below ESP 100,000 gross per month. Therefore, pensioners are widely seen as being, objectively and without reservations, the proof that Spain is not performing so well as claimed by the government.

The position of the social partners

The figures presented above explain why, amid great public expectation, at a meeting with the Ministry of Labour at the beginning of September 1999 the trade unions demanded an immediate meeting of the signatories of the Toledo Agreement. Their aim is to design a plan to raise all low pensions to at least the level of the minimum wage within a few years. They also want the state Budget for 2000 to begin to apply these increases (ES9909249F). The trade unions have been calling for higher pensions for many years, and as far back as 1985 they called a general strike for this reason when the Socialist Party was in power.

Also following a meeting with the Ministry of Labour, the CEOE employers' confederation recognised that many pensions are low but added that the priority is to reduce employers' contributions in order to create more employment; employment generates more funds for the social security system, which in turn could pay higher pensions. The paradox of this argument, according to critics, is that the social security system already shows a surplus.

Government response

The Prime Minister, José Maria Aznar, has agreed to convene the signatories of the Toledo Pact and to raise pensions by more than the rate of inflation in the whole of Spain in the 2000 Budget - according to him, raising them on a region-by-region basis would involve "breaking with social cohesion". He also agreed to set up a reserve fund with the surplus of the social security system in order to continue to guarantee solvency and "pensions for all" in the future. This last measure was already provided for four years previously in the Toledo Agreement but up until now the Government had refused to implement it.

It seems, therefore, that the debate on pensions will continue for the rest of 1999, particularly in view of the fact that the general elections are only five or six months away. The political opposition wants pensions to be raised now because there is money available, and feels that the Toledo Agreement parties should draw up a plan for future improvement beginning with the 2000 Budget. The trade unions will be satisfied with an increase in the budget allocation, but by a much larger amount than the government wishes. The government is debating whether to raise pensions (for which there is great public support that cannot be ignored), please CEOE or introduce the reserve plan for the future.

Commentary

It is difficult not to see electioneering in the actions of most parties to the pensions debate: by the regional presidents who have autonomous government elections soon; by the central government which is thinking of the March 2000 elections and therefore wants an equal rise for all Spanish pensioners; and in the opposition Socialist party which wants pensions to be raised now, independently from the 2000 Budget. This is the way things are and it is unavoidable. However, the true problem is the fact that a large proportion of Spanish pensioners receive pensions that condemn them to poverty and sometimes to social exclusion. This is what must be remedied, even if it is done through flagrant electioneering.

It is true that in the past few years pensions have not lost purchasing power, and may even have gained a little. However, the initial level of many of them was so low that without special action it will not be possible to raise millions of pensioners above the poverty line. The current government and its predecessors have arguably tried to make people forget this poverty when they have presented official programmes of leisure and trips for senior citizens. The question at stake is one of reducing social inequality, and it is therefore alarming that when this problem is raised many claim that the social security system is in danger of financial collapse (Fausto Miguélez. QUIT-UAB).

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