Friday, January 21

Young people at the center of the reforms

Our country has not treated young people well in recent decades. Despite having been participants in an extraordinary educational revolution, they have faced two almost consecutive crises when starting their working careers, and the rules and habits of the labor market, with high rates of unemployment and temporary employment, have been detrimental to them. Along with this, for too long, public policies have not responded to their concerns and demands.

Fortunately, things are changing.

This government is making youth its priority from the get-go. And the best example of this is perhaps not only remembering the initiatives specifically aimed at them, but also analyzing how the major reforms that are going to define the functioning of our economy and our society for the coming decades are being designed with them at the center.

The fundamental objective of the labor reform that we are addressing is the fight against what is perhaps the main pathology of our labor market: the excess of temporary employment, which undermines the productivity of our companies, erodes the resources of the pension system and, above all, , makes the lives of young people, their main victims, precarious. Temporality makes their income volatile and their careers less predictable. And this structural uncertainty prevents them from making long-term decisions and, ultimately, consolidating their vital projects due to this anomaly. Combating temporary employment is, therefore, not only vital for our job market to be more efficient and dynamic. It is crucial to improving the present and future lives of those who are young today.

We are fighting this battle against temporality and precariousness from many angles. First, it is necessary to redesign the hiring modalities to generalize the use of the permanent contract for all workers. It is also important to use the tools available to Social Security to discourage the abusive use of short-term contracts, and also to readapt our legislation to avoid extending the precariousness of labor relations to platform workers. But, ultimately, what we also need is for our companies to adapt to the ups and downs of the economic situation, not through temporary employment and the use of dismissal, but with new tools for internal flexibility.

That is why it is essential that we take advantage of the experience of the pandemic and, as we committed ourselves in the Recovery Plan, we permanently incorporate the use of ERTE as a flexibility tool to protect employment when business activity temporarily drops. Although it might seem that ERTEs serve to protect the employment of older workers with more consolidated careers, our data show that, in fact, of all age groups, the youngest workers benefited the most from this policy. employment protection.

We must also take advantage of this opportunity to promote training within the company. This is an area in which Spain has significant room for improvement, and which will be essential to ensure the requalification of our young people. It is also something that the very high temporality made difficult, and that is much easier to promote and sustain in the new employment protection model, as we are doing with the training incentives that we have deployed for those companies that have workers in ERTE.

Also in the recently approved pension reform, we have put young people at the center. It is common to read and hear opinions that say that when debating and legislating on pensions only current pensioners and those who are close to retirement are taken into consideration, who ignore the needs of those who have just entered the market work or are about to. Faced with these voices, I think it is necessary to clearly show why this reform has taken the younger generations into account.

To begin with, I want to emphasize that the Spanish pension system, like that of most neighboring countries, is a pay-as-you-go system, which means that current pensions are paid with the contributions of current workers, whose pensions are they will pay with the contributions of the next generation. For this reason, it is important that this intergenerational pact is consolidated with measures that reinforce the sustainability of the pension system, so that no generation has doubts about their future right to a pension, and that the efforts to finance the system fall back in a balanced between generations.

One of the main threats to this intergenerational pact was the uncertainty about the future evolution of the value of pensions. How to achieve the commitment of those who today contribute to the system under the shadow of a permanent and systematic devaluation of future pensions, as the 2013 reform foreshadowed? For this reason, the Toledo Pact, in its recommendations approved by consensus a little over a year ago, demanded that this uncertainty disappear and that the purchasing power of present and future pensions be permanently guaranteed.

The second major change introduced by this reform is the Intergenerational Equity Mechanism, which seeks a balanced distribution of effort among all generations to reinforce the sustainability of our system in the years when it will need more resources due to the arrival of more populated generations to the retirement age. Demographic projections show that this problem improves naturally starting in the late 2040s, so our goal has been to temporarily strengthen the system over the next few decades.

Thus, from 2023 and for ten years, social contributions will increase slightly with a finalist contribution that, for an average salary, will be less than 12 euros per month. Regardless of the age of the worker, their contribution will depend solely on their contribution base (being a percentage of the contribution base, those with higher salaries will pay somewhat more than those with lower salaries), and of course excludes those who have not entered the labor market.

It is important to compare the impact of this intergenerational equity mechanism with that of the sustainability factor it replaces. The attached table compares the effects of the new mechanism and the old sustainability factor in people of different age groups based on average contribution and identical job careers. As can be seen, the new mechanism means, for a young man who is now 18 years old, to pay 12 euros per month for the next 10 years, while the sustainability factor implied reducing his pension, throughout his retirement, by 313 euros per month.

Was it reasonable for someone, just for the mere effect of being born in 2003, to access a retirement pension more than 200 euros lower than someone with the same contribution career, but born four decades earlier? Is it fair that the contribution of each generation is so different, and that it falls so disproportionately on young people? Isn’t an equitable and time-limited contribution better than a cut that penalizes you just for being younger?

Another element that improves the pension system for young people compared to what existed before is a measure that the Government already approved in February: the supplement to combat the gender gap. This supplement, unlike the maternity supplement that it replaces, is paid from the first child, which is the moment from which the data show that the careers (mostly, of women) suffer. And it also encourages co-responsibility, since it is perceived by the parent, male or female, whose career has been harmed. Therefore, it adapts to the new types of family, in which, fortunately, the burden of care does not fall solely on women.

In addition, this supplement is much more equitable than the previous one, as it consists of a fixed amount per child, compared to the previous model, in which the supplement was more generous for larger pensions, helping to amplify the problems of income inequality. that our country has.

Finally, there are other elements, on which there is still pending work, that also make the system that we are designing ends up being more fair and equitable for young people. For example, the contribution of trainees, something that up to now did not occur in the case of unpaid internships, which meant that many people who entered the labor market through these internships have actually worked years that did not They will end up being considered as listed.

In the second block of measures, we will also address how to adapt our pension system to the current labor market, in which careers tend to be more irregular or less linear than before. Our current system was designed for those who throughout their working lives had a constant and upward trajectory, in many cases even in the same company. But we know that this profile is less representative of the new entrants in the job market, where there is a greater variety of types of job careers. That the system recognizes this diverse reality in order to treat everyone more equitably will be something that will especially benefit those who are younger today.

We are convinced that neither our labor market nor our public pension system will work if they do not work for young people. From this conviction stems our obsession to put young people at the center of these great reforms. It is the way for your preferences to continue to count, for your problems to continue marking our agenda, and for your ambitions and desires to continue to shape our policies.