The Effects of the Crisis in Social Security Systems ACTRAV Torino 15/07/2010 Fabio Durán Valverde Jesús García Jiménez

THANK YOU VERY MUCH! DEATH PERMANENT DISABILITY TEMPORAL DISABILITY ACCIDENTS AT WORK MATERNITY ILLNESSS MEDICAL ASSISTANCE UNEMPLOYMENT DISABILITY AGEING PENSIONS FAMILY ALLOWANCES SHORT-TERM BENEFITS LONG-TERM BENEFITS THANK YOU VERY MUCH!

BENEFICTS BASED ON THE FAMILY SOCIAL CONTROL OF MANAGEMENT TRIPARTISM - PARTICIPATION C102-121-128-130-168 FULL HEALTH CARE FOR THE WHOLE FAMILY, And right to economic benefits in illness situations. C. 102 – 130 – R134 Y 69 MATERNITY PROTECTION C. 183 R191 RIGHT FOR SOCIAL SECURITY BENEFITS OF PROTECTION TO FAMILY AND CHILDREN. C. 102

BENEFICTS BASED ON THE JOB SOCIAL CONTROL OF MANAGEMENT TRIPARTISM - PARTICIPATION C102-121-128-130-168 RIGHT FOR JUST PENSIONS (Retirement - Disability - Widowhood) C. 102 -128 – R131 RIGHT FOR HEALTH AND ECONOMIC BENEFITS   FOR OCCUPATIONAL ACCIDENTS AND DISEASES C. 102 – 121 - R121 PROMOTION OF PRODUCTIVE EMPLOYMENT AND RIGHT FOR UNEMPLOYMENT BENEFITS C. 102 -168 – R176

COMPONENTS/PILLARS OF A THEORETICAL SOCIAL SECURITY SYSTEM COMPLEMENTARY AND FREE LEVEL PRIVATE (Or by collective bargaining) INDIVIDUALLY FUNDED SYSTEMS CONTRIBUTORY LEVEL Funded by the quotations from Workers and Employers PAY-GO SYSTEMS SOCIAL FLOOR NON CONTRIBUTORY BENEFITS FUNDED BY TAXES (f.e: HEALTH CARE; NON-CONTRIBUTORY PENSIONS)

General Implications of the crisis (different way ♀ / ♂) Lower rates of economic growth Recession in various countries Increase in unemployment and underemployment rates (it is estimated 50 millions ) Less employment opportunities Probable increases in situations of precarious work Impact on social security systems Other impacts: poverty, inequality, social conflict, etc.

Impact on social security systems (different way ♀ / ♂) Reduction in the level of funds of systems that work under collective and individual capitalization – financial crisis Increase in contributory evasion and delinquency – easy escape valve for enterprises – financial and economic crisis Contraction of affiliation to social security in the formal and informal economy – employ crisis Contraction of collection – economic and employ crisis Reduction of substitution rates systems of individual accounts – between 10% and 30%, depending on the type of fund – financial crisis Increase beneficts by unemployment, increase spending. Employ crisis Reduction of the real cost of health – social security institutions – effects of quality and quantity of attention given

Elements for discussion and analysis – an ILO position Paygo Systems vs individually funded systems: demographic risk versus financial risk The sustainability of the system: ageing and coverage Individually funded Systems, of public or private administration, depends more on capitalization to guarantee certain levels of benefits. The crisis affects those systems that are most capitalized. Social Security as a human right: Universal Declaration of Human Rights. Philadelphia Declaration. Nature and object of an instrument for protection. It is not about conventional financial instruments. They are not savings accounts.

Elements for discussion and analysis – an ILO position (continuation) Public nature of social security systems, independently from how they are financed and managed. The system’s mission: provide protection. ILO’s position: “benefits must be secure and non- discriminatory”. The instruments must guarantee not only solidarity but SECURITY as well. If individuals are obliged to forecast through contributions, the State must ensure the security of funds. The position of the ILO: ILC 2001. The State is the ultimate financial guarantor.

Some data

Nominal returns to date of reserve funds selected OECD countries Nominal returns to date of reserve funds selected OECD countries. Source ISSA

Nominal returns to date in pension funds selected by the OECD Nominal returns to date in pension funds selected by the OECD. Source: ISSA

The most important social security problem in Latin America is low coverage…the crisis can decrease contributory coverage (%)

In facing the crisis, the state must play an important role In facing the crisis, the state must play an important role ... and in facing with the structural problems of social security The State as the ultimate financial guarantor. Responsibility of the State and of its administrators, respect to transparency in providing information to members. Prohibit misleading information: rates of return and substitution rates. Responsibility of the institutions of regulation and supervision (Superintendents). The State must assume responsibility of minimal profitability for soon-to-be retirees and those people that dealt with changes in their retirement expectation, be it in in either in pension amounts and retirement age . The State should assume responsibility for minimum return for people who are close to retirement who were abruptly changed their pension expectations, either in amounts of pensions or retirement ages. Implement a means of ensuring a minimum return over the long term, collective and individual: guaranteed minimum return and minimum benefits.

In facing the crisis, the State must assume an important role… (…continuation) Eliminate or regulate the instruments that compromise the security of benefits: “programmed rent”, “high-risk funds”, etc. Strengthen the pressure to combat tax evasion and improve coverage to pay ... or at least maintain the level of coverage during the crisis Facilitate the access and duration to unemployment benefits (where they exist) Minimize the impact on poverty. The crisis will greatly effect those whom do not have social protection. Basic floor for social protection - strengthen systems aimed to the poorest – creation or strengthening of assistance programmes.

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