World population growth is slowing down and that, for the International Monetary Fund (IMF)will also be a factor of lower growth of the economies for the coming years. Population aging and demographic changes force the workforce to adapt to these changes: encourage labor participation realizing a greater life expectancy is one of the points in which Uruguay has already advanced.
He IMF warned about the effects on economic growth that demographic changes and the deceleration evident from population growth. According to data from the international organization, population increase will decrease from around 1% per year during the two decades prior to the pandemic to 0.6% per year in the next five years.
This leads to the demographic dividend decreasing as the population ages and the percentage of the active population reaches its maximums. That is, people capable of generating income are becoming less and less, and the relationship with the percentage of the population that receives passive assets It is increasingly unequal. Consequently, income falls while retirement obligations increase.
Given this scenario, the IMF considers it necessary to encourage labor participation through different tools, and some of them are aimed at the elderly population, also considering better life expectancies. In that sense, he postulates the raise the retirement age as well as the elimination of disincentives to work after retirement and the adoption of policies that facilitate employment of adults as measures aimed at supporting the economic growth of the countries in the new context.
Uruguay has already made progress in this sense, but it can go backwards
Uruguay is already facing the scenario warned by the IMF: according to the last Census —carried out last year—, the country is going through the beginning of a process of population decrease which was expected only in 2043, with just 1% more people than in 2011 and 3.4% less than the government’s projections regarding the number of citizens.
This situation – which ended up being more serious than thought – was one of the reasons that led to the promotion of the social security reform during the first quarter of 2023 and implement some of the measures that the IMF recently recommended. Among them, the most notable is the increase in the retirement age from 60 to 65 years, understanding the initiative as essential to guarantee the sustainability of the pension system.
The elimination of obstacles to continue participating in the workforce after retirement was also accomplished: since August 1, people can maintain their passivity and continue working at the same time legally, as long as they look for a new occupation after retirement. Another measure implemented was to incentivize those who postpone their retirement for a minimum of three years with extra income.
These achievements, designed in terms of a new population structure that, in Uruguay, develops faster due to the very characteristics of its demographic composition, are some of those who are at risk in the event that the PIT-CNT advance with its plebiscite, which seeks a constitutional reform in pension matters.
In this regard, the union center will deliver to the Electoral Court next Saturday the 27th the minimum of 270,000 signatures collected to enable the popular consultation that proposes three main axes: the retirement age at 60 years; the fixing of minimum salaries at the national minimum wage; and the elimination of AFAP, voluntary savings and profit.
That is, if the proposal advances and is approved, the Uruguayan pension system would suffer a significant and rigid setback, which would go in the opposite direction not only to the recommendations of the IMF, but rather the needs of the country’s social security so that it is sustainable, as specialists from all areas warn.
Source: Ambito
