Social security funding was the topic of the panel that opened the work of the 7th Lisbon Legal Forum on Tuesday morning, an initiative of the Getulio Vargas Foundation (FGV) in partnership with the Brazilian Institute of Public Law (IDP) and the Faculty of Law of the University of Lisbon (FDUL). João Marcos Amaral, PhD in Law from the University of São Paulo (USP), reaffirmed the importance and relevance of the topic today not only in the Brazilian debate. He coordinated the discussion with Professor Marcelo Proença, PhD in Law, State and Constitution from the University of Brasilia (UnB) and Federal District Attorney.

The reason for this, Amaral said, is due to the fatigue of the existing institutional political consensus arrangements in what has been conventionally called the social state of law, including the social security funding model. The topic is dear to any country that claims to be developed because it pays homage to the principle of human dignity.

Leonardo Rolim, Social Security Secretary at the Ministry of Economy, the first speaker, emphasized the urgent need to adjust the Brazilian social security model - especially the social security system -, based on the knowledge of the country's numbers. The National Constitution includes the concept of social security with sources of funding and a division between Social Security, Health and Assistance. In Rolim's view, there is no doubt that there is a deficit in both social security and social security and the most important thing is that this deficit will grow a lot, considering the accelerated aging of the population, faster than that of other countries.

The reality points to a declining fertility rate and, at the other end, the extension of life. The survival expectancy of those reaching retirement age increased by more than 6 years, considering data from the 80s. Today, the average retirement age is below 60 and there are many exceptions precisely for those with higher-quality jobs and higher incomes. For Rolim, “something is very wrong with this system”.

Luiz de Mello, PhD in economics from the University of Kent, as Director of the Political Studies section of the Department of Economics of the Organization for Economic Cooperation (OECD), gave an account of the challenges within the organization, showing the impact of social security deviations in most of these countries, which face different regimes and situations, but share the need to face the aging of their populations, just like Brazil.

In addition to the natural negative consequences to be faced on public spending on health, pensions and the need for reforms, there are, according to Mello, indirect impacts of aging on the labor supply and the potential growth capacity of these economies, encompassing the need for complementary employment and income policies. Demography is adverse even in currently young countries. In some cases, spending on reforms is already high in relation to demographic conditions. The simulations show that the direct impact will be very strong and, without changes, a great fiscal effort will be necessary in the future. If there is no change, with complementary policies to increase productivity, growth will slow down.

José Roberto Afonso, PhD in Economic Development from the State University of Campinas (Unicamp) and Professor at FGV and IDP, who spoke after Mello, focused his speech on the immense changes in processing in modern societies. There is a digital revolution under way, not only technological changes, but important social and labor changes. If before the concern was to have a job and salary, in a second moment the fight takes place for social protection and rights, giving rise to social security and unemployment insurance. Today, we are entering a new era, 4.0, where work is not necessarily linked to employment.

If an employment-based security concept was built in the past, it is time to rethink because the costing of the wage-based system is already on the decline and this will be aggravated by the trends of automation and the new economy, which makes it difficult to finance classic pension provision. Even private pensions are compromised since individuals show a low savings rate for old age. The great challenge, Afonso points out, is how to avoid the social insecurity that stems from this generation where less and less work will mean employment. Costing, which today is based on payroll, will have to migrate to other tax sources and expand policy concepts that go beyond social security to pay attention to health care.

Bruno Dantas, Minister of the Federal Audit Court (TCU), emphasized that the pension debate is filled with taboos and that the TCU has the experience to help destroy myths. Dantas noted that maturation must take place with a greater circulation of information. The debate, for him, unites the federation, but divides society, which is why transparency is fundamental: “Everyone wants us to improve social security accounts, but no one wants to increase their share (...)”. Dantas said that sincerity is needed in this debate and that the government should not shy away from presenting the inputs and data that supported its reform proposal. Only then can society be convinced that this is the time to make changes.

Check out the full panel Social Security Financing at the 7th Lisbon Legal Forum:

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