The IMF says that social spending in Spain helps little to low incomes and young people | Economy

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Now that the new government has set social policy as a priority, the IMF publishes on Thursday a report assessing the effectiveness of social spending in Spain. And he believes that there is scope to reorder it, coordinate it between communities and improve it. Little help is given to low incomes and young people. In contrast, pensioners and middle classes are favored. We need to “improve redistribution by focusing on the most vulnerable,” he concludes. In a context of high debt and pressure on aging spending, the Fund admits that it is necessary to increase disbursements in some areas. But he adds that it is not enough just to improve social spending: the labor market must also be reformed to end the duality between fixed and temporary.

“An efficiency review could give better results for the same cost,” says the International Monetary Fund. The study indicates that pensions are the main public item and that they are “quite generous”. As a percentage of GDP, it is spent in line with the EU average. However, according to the Fund, they are higher if you look at the benefit on the average salary or how much is maintained from the last salary. Those of widowhood are also above. As a result, the poverty of the elderly is low. “Pensioners have been well protected from the crisis,” recalls the Washington-based agency.



Population at risk of poverty

In percentage of the total

Poverty hits young people especially since the crisis

How does social spending affect

to inequality?

Reduction of the Gini coefficient achieved by increase social spending a point of GDP. The Gini coefficient is an indicator of inequality in which smaller values ​​indicate less inequality.

The effectiveness of social spending to reduce inequality is lower in Spain than the European average

Source: Eurostat, EuroMOD.

THE COUNTRY

Population at risk of poverty

In percentage of the total

Poverty hits young people especially since the crisis

How does social spending affect

to inequality?

Reduction of the Gini coefficient achieved by increase social spending a point of GDP. The Gini coefficient is an indicator of inequality in which smaller values ​​indicate less inequality.

The effectiveness of social spending to reduce inequality is lower in Spain than the European average

Source: Eurostat, EuroMOD.

THE COUNTRY

Population at risk of poverty

In percentage of the total

Poverty hits young people especially since the crisis

How does social spending affect inequality?

Reduction of the Gini coefficient achieved by increase social spending a point of GDP. The Gini coefficient is an indicator of inequality in which smaller values ​​indicate less inequality.

The effectiveness of social spending to reduce inequality is lower in Spain than the European average

Source: Eurostat, EuroMOD.

THE COUNTRY

The IMF says that social spending in Spain helps little to low incomes and young people

However, the institution believes that the sustainability of pensions is at risk unless action is taken. The reforms of 2011 and 2013 would have kept spending controlled despite an adverse demography, the IMF defends. But at the same time it confirms that these measures have not been socially accepted. And this despite the fact that the benefit rate offered by the system would still have exceeded that of most European countries. If nothing is changed, the cost of pensions will skyrocket at three or four GDP points – up to 50,000 million today. It would almost triple the public deficit. In order to ensure retirement benefits, the Fund prescribes lengthening working life, raising incomes without increasing already high contributions and encouraging complementary savings.

On the other hand, the document considers that contributory unemployment benefits are “adequate”. According to some comparisons, they can even be judged “quite generous” in the duration and amounts granted. And its expenditure is high due to the high unemployment.

However, there is a lack of a network to assist when these legs of the welfare state fail. Little is spent on social policies aimed at those at risk of poverty. For those who are left without benefits, there is a national unemployment benefit and minimum regional income. But with the crisis access has tightened and “the objective of social inclusion seems to have been relegated to a second level of priority,” he says. In addition, the results of these programs depend heavily on the ability of regional employment services to provide personalized assistance. And this has been very unequal by communities, he emphasizes.

The minimum income aid barely manages to bring the income of the beneficiaries to 30% of the average disposable income, except in a few communities. And the coverage stays well below the homes that need it. In many autonomies they only cover between 1% and 3% of families. In the IMF’s opinion, the weakness of these protection schemes is that factors such as whether the household is single-parent, the number of children, disabilities or the need for housing are not well considered. Few benefits are given to children who need it, he regrets. To top it all, the administration of these grants has complex rules, lacks clear eligibility requirements and faces difficulties in determining true income, in a veiled reference to the abundant submerged economy.

In short, the expense is below that of similar countries in the fight against social exclusion, in aid to families and in housing policies. And “social assistance has not been fully effective in alleviating poverty,” he says. The IMF points out that Spain has a high ratio of children at risk of poverty and that a significant number of unemployed people and people with low training are concentrated in the south.

“While pensions and the contributory unemployment system remain centralized, the rest of the social protection has become a complex mosaic of support networks at different levels due, above all, to its decentralized structure,” he emphasizes. And he adds that there are large differences in minimum incomes by communities, partly because of the cost of living and partly because of political decisions.

In general, there is little redistribution and inequality is corrected little after taxes and social transfers compared to other countries. The pensions “aim to maintain the income of the beneficiary” and, therefore, redistribute little by preserving the income of those who already have. And the same goes for unemployment benefits: pay more the more you have worked and earned. The report says that “the middle classes tend to earn from redistribution in a proportion equal to or greater than low incomes.” And another fact as a result of not conditioning income support enough: the poorest 40% only receive 30% of the benefits to families.

“Pensions are those that help sustain the income of families and not social assistance,” explains Svetlana Vtyurina, author of the report. The Fund claims that an intergenerational problem is being created to the extent that thanks to public pensions, redistribution is better for the elderly. Young people are left at a disadvantage, he says. And he adds that maintaining such a level of retirement benefits without making reforms is not sustainable and would occur at the expense of already disadvantaged youth.

The minimum income proposed by the Tax Authority may be a solution. But in the IMF’s opinion it must be combined beforehand with a review of the group that achieves gains in efficiencies, eliminates overlaps and coordinates communities. And any increase in spending must be financed sustainably, he says. Unlike what happens in other countries, in Spain there is little private financing of these policies, in particular in pensions and health.

Education, health and labor reform

Regarding public health, it has good results, contributes to equity and shows great efficiency in spending, although there are some regional disparities. The IMF points out that the system of co-payments in medicines penalizes low-income workers, who do not receive the help that pensioners with similar incomes do get.

Although education must ensure equal opportunities, spending is relatively low and its results are worse than in other European countries. In addition, there are barriers to intergenerational mobility: 55% of the children of parents with low education fail to improve the level of education of their parents and fail to pass secondary school. Dropping out of school is one of the highest in the OECD and university students have difficulty finding suitable jobs for their studies, the report said. It also affects the persistence of regional differences and that the quality of teachers should be improved. The Fund recalls that political disagreements have halted reforms in this area. And that policies to recycle and reinstate unemployed are also not particularly effective.

In short, the most vulnerable are those who receive less support. But social spending should not be the only tool, warns the institution run by Kristalina Georgieva. It is essential to make the labor market more inclusive. “The big difference in layoff costs between fixed and temporary continues to be the cause of companies offering few indefinite contracts,” says the analysis. And he recommends that these differences be shortened without increasing compensation. To do so, he argues that the Austrian backpack proposed by Vice President Nadia Calviño can be developed: a personal account of the worker in which the company would pay a part of the dismissal in advance and that the employee can take it with him.

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