We often hear it said that the pension system is in crisis and that it will be impossible for Social Security to meet its payment obligations in the more-or-less near future. The actuarial calculations are very complicated, and to predict what will happen in the future with a minimum of seriousness, even more so. With these limitations, my intention is to give the reader a simple and reasonable picture of the dimension of the problem that we are facing, and of the consequences that we can expect.

We have to start from the fact that the Spanish Social Security system is already in disarray, because the pensions and benefits being paid out are 22% higher than the contributions being collected. This difference is being covered, in part, by drawing down on the "bank" of surpluses that was accumulated between 2000 and 2011.

The goal of having contributions cover pensions depends, fundamentally, on the birthrate of the previous generation (how many people there are of working age in relation to those in retirement), the unemployment rate (how many of those who should be working are doing so), and productivity (the relationship between the salaries of those who are working and the former salaries of retirees, as the former determine the collection amount and the latter, their pensions).

As to the first point, we live in a very favorable time, because the highest birthrate was in 1974, which corresponds to people who are now 40 years old and in the prime of their working lives. Our problems stem from productivity (which has grown too slowly), and especially the unemployment rate: it's absurd to expect a country where only 3 out of 4 people work to meet its pension obligations.

From now on, the demographics go against us: this year 84,000 more people will leave the working age range than those who will enter it, and in a decade this difference will be 670,000 if the retirement age stays at 65. It may not seem like a high number, but it has a double effect: it reduces the number of potential workers and increases the number of potential pensioners.

Now let us imagine ourselves in 2029, 15 years from now, the latest date for which the INE (1) dares to make detailed demographic predictions. In that year, the ratio between the working age population and the retiree population (despite the fact that the retirement age will then be 67 and not 65) will have gone from 3.6 to 3. If we assume that productivity will have evolved as it has done over the last 20 years and that unemployment will have dropped to 10%, the deficit will continue to be 20%, the same as now. The "bank" will have been exhausted, and to balance the system either the pensions will have to lose 20% of their purchasing power or the retirement age will have to be raised to 70. This age might seem scandalous, but it's worth recalling that the first in-depth study on the sustainability of the system, done by Barea in 1995, concluded precisely that the retirement age would have to be raised to 70 unless measures were taken. Such measures were introduced by the Toledo Pact but, as we have seen, we are back to square one.

Thus, the problem of pensions is nothing but another example of the productive model of unskilled and poorly paid labor that was adopted after the industrial reconversion of the 1980s. Without a reorientation toward a more productive model, the pensions system will only be sustainable by delaying the retirement age.

It has been said that the position of Catalan pensioners will be more favorable in an independent Catalonia than within the Spanish system. On the other hand, Minister Báñez warns us that Catalonia will not be able to meet its benefit payments because right now they exceed the contributions being collected. Both things are true. The system is now in deficit in Catalonia, but only half as much as in the whole of Spain: 10%. The fundamental reason is that the unemployment rate is lower in Catalonia (the activity rate is also a little higher, but only very slightly). As the problem is only half as big, it's not surprising that in a parallel situation to the example presented above, in 2029 we would only have to apply solutions at half strength: either the pensions will be reduced by 10% or the retirement age will be raised to 68.5. That is, the starting point in an independent Catalonia is better than if we remain within Spain, but the benefits of independence are not so great as to forget the need to construct a better governed country (where, for example, public funds are invested more sensibly). This conclusion is no different from that obtained by analyzing our economic prospects from other points of view.

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1 N.T. Spain’s Instituto Nacional de Estadística