Pensioners’ assets have fallen by 31% in real terms in seven years

A few weeks ago, we warned that the real wages of formal workers had fallen by 24% since the peak observed in 2015. The deterioration in purchasing power over the past 7 years has affected 9.6 million people in employment , of which 6.2 million are salaried in the private sector and 3.4 million in the public sector. After the adjustment, the average pocket level closed 2022 at $460 at the free exchange rate.

The adjustment in pension assets was even more significant during this period. Retirements closed 2022 with a real decline of 1.3% on annual average, accumulating a loss of 31% in seven years.

Most of the loss in purchasing power of pensions was concentrated in three years, between 2018 and 2020. During this period, two “pension reforms” were carried out due to different political signs, which ended in both cases to structural declines in credit forecasts. The first reform resulted in a 20% drop (2018/2019) and the second added a 10% drop the following year.

The dynamics of the economy in five years traced a “V” between the crisis and its recovery, but that in the same period wages traced an “L”

In the recorded private wage report, it was noted that the economy had recovered, but the wage had not. The dynamics of the economy in five years traced a “V” between the crisis and its recovery, but over the same period wages traced an “L”. The purchasing power of wages has never recovered.

The same thing happened with retirements, but with greater intensity. If wages drew a “lowercase L”, pensions drew a “capital L” in the same period of time.

Over the past three years in particular, retirements have accumulated a loss of 12% in real terms, mainly concentrated in the impact of the latest pension reform as soon as the current government took office.

Formal employees represent 9.6 million people, while pensioners and pensioners represent 6.9 million. A ratio of 1.4 employees per pensioner, whereas it would have to be at least 3 to 1 so that the system does not break, nor impose expropriatory contribution rates for white workers (half of the total).

There is a ratio of 1.4 employees per retiree, whereas it would have to be at least 3 to 1 for the system not to break

With the various “social security moratoriums” since 2007, the number of retirees and pensioners has doubled. Only half of active people contribute, but all can retire from active life with different access facilities to the pension system, leading the system to a structural break close to the equivalent of 2.5% of GDP.

The strategy used by the government between 2007 and 2015 to fund the moratoriums was to “step on” the assets of everyone who contributed to the system. Flatten the pyramid: expand coverage and reduce average credit.

In 2001, the average pension was 2.4 times the amount of the minimum pension. In 2015, it was only 1.4 times. The figure implies that for each pensioner who has contributed for 30 years, the State has expropriated 40% of his pension, so that populism can withdraw another with its money.

In 2001, the average pension was 2.4 times the amount of the minimum pension. In 2015, it was only 1.4 times

This strategy generated a flood of millions of dollars in lawsuits against the state for more than a decade, but the government did not pay even with a final judgment in favor of the beneficiary. Only some received something in life with the “historical reparation” between 2016/2019. Others have received their relatives or are still awaiting payment of the sentence since 2020, for lack of “cash”.

Currently, the average credit of those who have paid all dues is around $270 at the free exchange rate, while those retiring with moratoriums charge a minimum of $150 free. The average monthly credit of the pension system is then around 200 USD currently. The minimum pension in free dollars and at constant prices is half of that of 1995.

In short, if white employment is dying in Argentina, nothing else can be expected from the pay-as-you-go system, which depends on contributions from registered workers.

Private white wage employment has not increased in over a decade. It still holds at 6 million jobs and only informality, monotax in the first categories and public employment are increasing (all together add up to about 4 million new jobs over the last decade, most with a productivity lower than that of private employees in the formality).

The pay-as-you-go system is structurally underfunded due to the lack of net private job creation, but it is reinforced by moratoriums where the state invites people to retire without contributions as each year approaches. electoral.

The pay-as-you-go system is structurally underfunded due to the lack of net creation of private empty jobs

For those who have contributed all their life, retirements fell from 2002 to 2015 almost continuously due to the policy of flattening the pyramid and socializing their wealth. With the “historical repair”, they managed to reconstitute their heritage in 2016/2017, to then see it fall by 31% over 7 years.

For those who joined the moratoriums, 31% of their assets were also liquefied with the “pension reforms” of the last two governments in 2017 and 2020.

The current economic model has brought the recorded salary to an average of 460 USD at the free exchange rate and pensions to 200 USD. These values ​​explain the structural advance of poverty and the new reality of the registered working poor.

To get the pension system out of agony, we have to get the economy and wages out of agony. Something that will only happen if the agenda of all pending structural reforms postponed for 20 years is tackled.

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