The public pension system is the backbone of the welfare state of a country and the intergenerational solidarity of which we are, those that were and those that are to come. The system in Spain is centennial but its development came with democracy. In 1975, when Franco died, we spent 4% of GDP on public pensions and now 11%. With the largest increase in GDP in the history of Spain, we have tripled the effort in the payment of pensions.
In Spain, the system is split and most, even its critics, recognize that it is not viable to change it through a capitalization system. This is the exception of Vox, which, like FAES and Aznar in the 1990s, proposes that individual accounts of current workers destined to pay their future pension be created. What they do not say is how they plan to pay millions of pensioners each month. The debates about the privatization of the public pension system occupy space in the media but are a useless energy consumption.
The sustainability of a pay-as-you-go system depends on two variables. Demographic: number of pensioners over the total number of workers and number of years that we receive a pension. In 1975, the life expectancy of retirees was close to 70 years and now over 80 years old. The Social Security contribution is one third of the salary. Therefore, those who retired at 65 and quoted 40 years have paid their pension approximately up to 79 years. If they live longer, the system pays for it and helps explain the 18,000 million deficit.
The other variable is the ratio between salary and average pension. In the long term, the increase in wages has a high correlation with the increase in productivity. Since 1960 in Spain productivity and wages have grown more than in most countries of the world. But in this century the real estate bubble concentrated capital and employment in a very low productivity sector that caused the biggest debt crisis in our history.
The average pension grows 2% each year, since new pensioners charge more than those who die. In 2011, before the labor reform and wage deflation, the system was balanced and there was 6% of GDP in the Reserve Fund. Today the system has a hole of 18,000 million, the Reserve Fund is over, the deficit has increased since 2015 with employment growth of 3% and pensions are financed with public debt that our children will pay.
The Airef has proposed to limit early retirement as much as possible and that the effective age approaches the legal age. And extend the period of calculation of the pension to 35 years. Only with these two measures, spending on pensions on GDP would remain constant in the medium term. And if we get more innovative companies and productivity increases, it would decrease.
We will see what the political parties propose in the campaign.