Redalyc.A First Approach to a Pay-As-You-Go Model for a Social
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Cuadernos de Gestión ISSN: 1131-6837 [email protected] Universidad del País Vasco/Euskal Herriko Unibertsitatea España Peña-Miguel, Noemí; De la Peña Esteban, J. Iñaki A first approach to a pay-as-you-go model for a social benefit in Spain Cuadernos de Gestión, vol. 17, núm. 2, 2017, pp. 175-191 Universidad del País Vasco/Euskal Herriko Unibertsitatea Vizcaya, España Available in: http://www.redalyc.org/articulo.oa?id=274351241008 How to cite Complete issue Scientific Information System More information about this article Network of Scientific Journals from Latin America, the Caribbean, Spain and Portugal Journal's homepage in redalyc.org Non-profit academic project, developed under the open access initiative A rst approach to a pay-as-you-go model for a social benet in Spain Una primera aproximación a un modelo de reparto para una prestación social en España Noemí P eña -miguel 1 J. iñaki D e la P eña esteba N1 Universidad del País Vasco UPV/EHU (España) Recibido el 7 de noviembre de 2014, aceptado el 17 de octubre de 2015 Publicado online el 4 de mayo de 2016 Nº de clasicación JEL: H83, M48 DOI: 10.5295/cdg.140506id Abstract: In recent years various domestic and international organisations have proposed nancial coverage for the population as a whole. This does not mean that there is currently no coverage: aid in different countries extends to different levels. In this context a universal basic social benet could be one way of responding to those in - ternational proposals. However, such a scheme might be too expensive to be viable, which might lead instead to partial benets payable to non-workers being considered, as the group in most need of coverage. This paper seeks to analyse whether a model of nancing can be found under which a basic minimum social benet can be implemented in a way that is socially and nancially viable and sustainable and can be maintained over time. Following the usual system for the distribution of budget allocations by public administrations, this model uses a multi-year period – in this case 12 nancial years. Spain is presented as a case study, based on a number of forward-looking demographic and economic assumptions in which the various aid systems used in the country’s autonomous regions are brought together to provide a minimum coverage. The main conclusion drawn is that the current level of contributions is sufcient to provide a viable, sustai - nable partial social benet. However, a universal benet would require a considerable increase in extraordinary contributions to meet its cost, though those contributions could be replaced in part by extraordinary state contri - butions or funding from other sources. Keywords: Social Welfare, pay as you go, basic social benet, Social Security cost. Resumen: Existen organizaciones tanto nacionales como internacionales que en los últimos años proponen una cober - tura económica general para la población. No es que no exista un grado de cobertura, sino que los países dispo - nen de unas fuentes de ayudas que alcanzan a ciertos niveles. Ante ello, una prestación social básica universal, 1 Departamento Economía Financiera I. Facultad de Economía y Empresa de Bilbao, Avda. Lehendakari Agirre 83, 48015 Bilbao (España). [email protected]; [email protected] ISSN: 1131 - 6837 Cuadernos de Gestión Vol. 17 - Nº 2 (2017), pp. 175-192 175 A rst approach to a pay-as-you-go model for a social benet in Spain puede ser la respuesta a las anteriores propuestas internacionales. Sin embargo, podría ocurrir que un excesivo coste implicase su no viabilidad y se buscasen coberturas parciales, como una prestación social a abonar a los no trabajadores, al ser éstos los que inicialmente demandarían la cobertura. El objetivo del presente trabajo es analizar un modelo de nanciación que haga viable y sostenible económica, social y temporalmente la implanta - ción de la prestación social básica mínima. Este modelo aun siguiendo un sistema de reparto habitual en los presupuestos de la administración, tiene en cuenta un periodo plurianual de varios años -12 ejercicios económicos. Se realiza una aplicación práctica al caso español bajo una serie de asunciones demográcas y económicas a futuro, donde se constata una pluralidad autonómica de ayudas que se aúnan para conseguir una cobertura mínima. Como principal conclusión se obtiene que haciendo uso de las cotizaciones actualmente existentes se consta - ta la viabilidad y sostenibilidad de una prestación social parcial. Sin embargo, una prestación universal requiere un aumento considerable de las cotizaciones extraordinarias necesarias nanciar su coste, si bien éstas podrían sustituirse en parte por aportaciones extraordinarias del Estado u otros recursos que permitan nanciarla. Palabras clave: Bienestar social, reparto, prestación social básica, coste de la Seguridad Social. 176 Cuadernos de Gestión Vol. 17 - Nº 2 (2017), pp. 175-192 ISSN: 1131 - 6837 oem Pea-iguel . Iai e a Pea Esteban 1. INTRODUCTION The idea of a basic social benet is based on a proposal made by the International La - bour Organisation –ILO- (ILO 2012) in regard to basic national social welfare protection systems and a commitment by the European Parliament to see that governments guarantee the basic nancial security of their populations (European Parliament 2010). These pro - posals are in line with the recommendation made by the World Bank in 2005, with the incorporation of a “zero pillar” of social protection (Holzman & Hinz 2005) referred to as a “non-contributory basic pension”. In Spain the system of contributory social security payments includes the rst pillar in the World Bank’s proposal, and there is coincidence as to the second and third basic pillars of social protection in place. However, two further pillars are incorporated here: a “zero pi - llar” comprising a nancial allocation sufcient to ensure that all citizens of a country can, each with his/her own possibilities and characteristics, meet the minimum necessities for survival taking into account the demographic and economic circumstances of that country (Cichon & Hagemejer 2004; Kulke 2007); and a fourth pillar dealing with health services and housing provided mainly by family members. The ILO (ILO 2012) currently proposes a basic level of social welfare protection, acknowledging that social security is a vital tool for public sector social policies to prevent and reduce poverty, inequality, exclusion and social insecurity, promote equal opportunities and prevent discrimination on grounds of race and gender. In regard to the basic pillar of welfare provision, Spain is not starting from zero. There are already non-contributory minimum benets available within the Social Security sys - tem subject to the minimum nancial requirements of households, and the same goes for unemployment benets. Moreover, authority for managing guaranteed minimum income payments has been devolved to the country’s autonomous regional communities (ARCs). In spite of this network of benets there is no single, integrated system for assuring that all citizens have equal coverage and receive benets that guarantee a minimum standard of living. This minimum, common basic coverage needs to be backed by a funding model that can ensure the viability and nancial and social sustainability over time of universal basic minimum social benets (BSB). Those benets should reach most of the population, and should cover their basic necessities for living. This paper seeks to establish a funding model under which BSB is viable and nan - cially and socially sustainable over time. Accordingly, the following section examines the characteristics required of a BSB funding model. Section 3 then estimates the cost of im - plementing such a funding model for benet payable to the whole population of Spain in 2010. Section 4 looks at cost forecasts for the following 12 years under three different de - mographic and economic scenarios. Finally, the Conclusions section sets out a number of comments and points out the implications of setting the basic level of benet proposed by the ILO. The paper ends with a list of bibliographic references. ISSN: 1131 - 6837 Cuadernos de Gestión Vol. 17 - Nº 2 (2017), pp. 175-192 177 A rst approach to a pay-as-you-go model for a social benet in Spain 2. BASIC FEATURES OF THE FUNDING MODEL An actuarial nancial system is used to ensure proper coordination between the type and quantity of benets paid to beneciaries and the wages for remuneration of contribu - tors included in the provision, so as to forestall any problems of insolvency over time and cater for the resulting socio-economic vicissitudes (De La Peña 2000). The characteristics of the models used depend on the following parameters (ILO 2002): 1. the extent of group solidarity; 2. the level and method of nancing; and 3. the sources of funding. In general, there are three ways of providing nancing (ILO 2002): i. allocation, in which there is hardly any advance funding; ii. capitalisation; and iii. capitalisation of risk-bearing capital. Short-term pension systems are generally funded via the allocation method, because the benets involved are short-term promises and they can be adapted relatively quickly to changes in demographic and economic circumstances. This means that large nancial reserves do not need to be built up to meet funding obligations in the remote future. In recent years there has been erce debate in international circles concerning the pros and cons of increasing capitalisation in national pension systems (Beetsma & Oksanen 2007). Social Security pension systems do not really require the nancial security that high levels of capitalisation can provide for small, private systems, but other reasons for adopting capitalisation-based pension systems are frequently given. It is claimed that such systems can increase national savings, since high levels of savings may coincide with low levels of pension reserves and vice versa (Cadarso & Febrero 2003). Capitalisation is fre - quently claimed to stimulate growth in capital markets (Doménech 2014), but the proofs of that claim are far from categorical: emerging stock markets have obtained impressive growth rates in countries where there are few, if any, capitalisation-based pension plans.