With the formula vetoed by Javier Milei, the minimum retirement would be $317,000

With the formula vetoed by Javier Milei, the minimum retirement would be 7,000

The The law vetoed by President Javier Milei would have increased minimum pensions to $317,000 and that would have allowed to reach levels similar to those of the previous mobility law, A report from the Eforo Foundation.

The work indicates that “With Law 27,756, later vetoed via Decree 782/2024, the minimum salary would have been $317,000, while, in the current mobility scheme, the salary floor plus the confirmed bonus of $70,000 is set at $304,000.”

“With this recently vetoed rule, retirees would have experienced a partial recovery of their purchasing power that they will bring us closer to the values ​​that preceded the 2021 reformbut it would not have been enough to recover what was lost after the 2017 reform,” the report states.

According to the Argentine Center for Political Economy (CEPA), “In September, if the previous formula had continued, the Minimum retirement (without bonus) would be $253,225, 7.4% lowerWith the help of the bonus, it would be $323,225.

The recent history of retirements

According to the Eforo Foundation, minimum pensions have evolved as follows since 2010:

  • Prior to the 2017 reform, an oscillating but growing trend is observed in the minimum retirement pension, with values ​​that fluctuate between $275,449 in August 2010 and a peak of $443,136 in September 2013.
  • Since the 2017 reform, the minimum retirement pension showed a downward trend in real terms, starting at $430,211 in September 2017 and gradually declining to $364,844 in August 2018.
  • The January 2021 reform introduced an update of the pension pension based on the evolution of wages and tax revenues. From a value of $332,107 in February 2020, the minimum pension pension continued to decline until reaching $280,364 in November 2022. The implementation of the 2021 reform did not prevent the erosion of retirees’ purchasing power.
  • The current mobility mechanism established by Decree 274/2024 determines that the update of the minimum retirement pension is carried out solely based on past inflation.

The projected values ​​for 2024 and 2025, under this decree, show a stabilization around $230,572 in December 2024 and $232,205 in December 2025. These values ​​remain at considerably low levels compared to the historical peaks prior to 2018.

How does pension expenditure behave based on each formula?

Based on the background, experts believe that the update formula that was approved in 2017during the government of Mauricio Macri, tended to diminish the effects of the business cycle. It covered 70% of inflation and 30% of wage variation. Therefore, If inflation falls, it is compensated by the salary increase partl. The differences between Spending peaks and valleys tend to flatten out staying in a limited range based on GDP. It is the same formula that the opposition voted for.

The formula before that of lThe 2017 reform, which was in force between 2021 and 2023, had a tax collection component and a salary variation component. As a result, in a recessionary cycle of the economy deepens the fall in spending and assetswhile, during the periods of economic expansion, tends to increase spending, since tax collection and wages rise. That is to say that any fiscal improvement should be applied to pay pensions, which becomes unsustainable for the system as a whole.

The formula currently in force by a DNU, tends to consolidate spending at a GDP levelregardless of whether wages improve and there are more fiscal resources. Assets recover as long as inflation falls, since it is adjusted with the Consumer Price Index (CPI) of two months ago. But, as long as inflation rises, assets will lose purchasing power.

Source: Ambito

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