Hey there VisualPolitik community, it is often said that the national sport in Spain,
even more than football, is shooting themselves in the foot.
Be that as it may, here on VisualPolitik every time we have talked about Spain
the general comment has been that we are very pessimistic about what is, currently,
the fourteenth largest economy on the planet. Now, hold on a minute. There is also another
side of the story that deserves to be told. Over the last four decades,
Spanish society and its economy have undergone an enormous transformation.
Since democracy came to Spain in the late 1970s, things have changed a lot.
The country has modernised and integrated into the global economy at full speed.
For example, during this time, the employment rate has grown by 15 points,
which has meant millions and millions of new jobs; foreign direct investment in the country
relative to GDP has multiplied by no less than 27 times, from less than 2% of GDP to almost 54%.
Meanwhile Spain has also become one of the countries in the world with the most
investments abroad. For years, Spanish companies have been investing tens and tens
of billions of dollars all over the world. Particularly, of course, in Latin America.
And that's not all. Trade openness, that is the weight of exports and imports over GDP,
is at record levels; the ratio of employment to capital has doubled and
the country has built one of the ten best land, port and air infrastructure networks
in the world. In other words,
Spain is a rich and developed country that is highly integrated into global economic flows.
But we're not just talking about the economy.
Over the last few decades, the education of Spaniards has also improved,
both in quantitative and qualitative terms. In fact, although it may seem surprising,
according to OECD data, since 1980 the mastery of basic skills such as reading
and mathematics has increased more than in any other European country except Finland.
What’s more, the average life expectancy is now the third highest in the world,
behind only Japan and Switzerland. But stop. That’s about the end of that story.
The intention of this video is not to be an advertisement of the Spanish brand
or anything like that. On this occasion we want to investigate the main storms brewing
that threaten the future of the country. Threats and challenges so significant that
Spain must take action as soon as possible unless it wants to suffer an economic tsunami.
So VisualPolitik fans, these are, in our opinion, in the opinion of VisualPolitik, the main threats
facing Spain and, by extension, the economy and the stability of the European Union itself.
And do you know what? All of these threats have one common denominator.
(THE BURDEN OF AGE)
Whether it is due to improvements in healthcare, the Mediterranean diet, the beer or the tapas
that Spaniards love so much, the fact is that Spain is the country with the third highest
average life expectancy in the world. Which on one hand is a blessing,
but on the other hand could become a major burden, especially when you have the second
lowest fertility rate of all developed countries. (Demographic disaster. The pandemic has aggravated
in Spain the problem of a population in which there are fewer and fewer births. El País)
And of course, longer life expectancy and fewer children... The result is an aging population.
In fact, with the exception of the microstates, Spain is already in
the top 10 countries with the highest average age. We are talking about just over 43 years.
Looked at another way, in Spain there are 125 people over the age of 64 for
every 100 children under the age of 16. But none of that is the worst thing, the
worst thing is that the ageing of Spanish society is going to accelerate over the next few decades.
That means, if by the end of the 1990s, people aged 65 and over accounted for 13% of the entire
population, today they represent almost 20% and by 2050, 1 in 3 Spaniards will be in this age group.
By that time it is expected that the number of people of working age will have been
reduced by almost four million people, so that Spain will have barely 1.7 people of
working age for every person over 65. If not remedied, this is something
that could substantially reduce growth and therefore the country's economic prospects.
And that is provided that life expectancy does not increase
faster than expected thanks to new medical and technological advances. If it does,
the numbers will be even worse. But wait a minute, because the potential
loss of workers, while significant, will be far from the biggest problem.
The biggest problem of all has to do with the enormous bill that having an aging population
entails. This is by far the great challenge, the great threat, the great tsunami that Spain
may face and that, as we have already told you, may even spread to the rest of Europe.
We are talking about pensions, healthcare and care services.
(The Court of Auditors certifies a new record deficit in Social Security:
53.16 billion euros. El Mundo) (The state spending marks record
highs after assuming the deficit of Social Security. El Confidencial)
(The autonomous communities will need 35 billion euros (additional)
until 2030 for social spending. Expansion) And take note, because these are not paltry
amounts. Think about it for a moment, in just a few years Spain will have,
on the one hand, much fewer citizens of working age and, on the other hand,
millions and millions of new retirees who will be demanding a lot of public services and benefits.
How on earth are the bills going to be paid? What exactly are we talking about?
And the most important question of all by far: What can be done about it – is Spain
irretrievably doomed? Listen up.
(A MORE AND MORE WEIGHTY BILL)
What generally happens to people when they pass the age of 65 or 67?
Most of them are starting to retire, that is, they stop working and start living on their pensions.
Well, in Spain the pension system is eminently public and pay-as-you-go.
Today's workers pay for today's pensions with their contributions.
Pensions whose portion of public budgets has not stopped growing to the point that
the central State is essentially becoming a payer of pensions.
We are already talking about 1 out of every 2 and a half euros.
A quick side note, since 2000 the cost of pensions has increased by 160%.
And Social Security has gone years without balancing the budget. Between 2017 and 2020
alone, the deficit was more than 80 billion euros. And it is expected that in 2022 alone
it will exceed 40 billion euros. But as we have said, the challenge
ahead is even greater, much greater. As we have already seen, the forecast is
that by 2050 the working-age population will shrink by almost 4 million people, while the
number of people over 65 will increase by at least 6 million. And all of them will have higher and
higher average pensions.So if the math doesn't add up today, you can get an idea of the challenge the
country faces. Houston, we have a problem! But that's not the end of it.
The elderly demand not only pensions but also health resources and spending on care services.
For example, in Spain there is already a huge network of residential homes,
day centres and home services providing care for more than one million elderly people.
Even so, the percentage of elderly people with places in residential homes or with home care
services is still below European standards, which means that public spending on elderly
care in Spain is currently below the EU average. So 1+1= 2. As there are more and more elderly
people, Spain will have to spend more, and if, on top of that, the demand for services begins to
approach the levels of other European countries, that will mean spending even more, but when I say
more, I’m talking about so much, much more. And then we have health spending.
To give you an idea, the average per capita expenditure of people between 65
and 74 years of age is double the total average expenditure. And if we’re talking about people
over 75 years old, then the cost triples. So, you can start to see how healthcare
spending is going to evolve in an increasingly ageing country.
Pensions, care services and healthcare. Forecasts suggest that at least the burden of these three
budget items will increase between 7 and 12 points of GDP by 2050. And you know what often
happens with official forecasts of public spending: they almost always fall short.
We are talking about tens and tens, perhaps hundreds of billions in increased public
spending over the next few years. All this at a time when the working age population is shrinking.
Do you now understand the challenge Spain is facing?
But at this point the question we can ask ourselves is: Have they passed the point
of no return?... Are you saying [Name of Host] that Spain is irremediably condemned to crisis
and economic and social collapse? Well, obviously not.
In fact, what we are experiencing could be the moment of opportunity,
at least in the search for solutions. VisualPolitik fans, let's move on to the big
question: What course could Spain take to escape the economic tsunami that threatens it?
Listen up. (SAILING IN STORMY WATERS)
Let's not fool ourselves, there are many steps that Spain will have to take if
it wants to avoid falling flat on its face under the weight of economic insufficiency.
And the first thing to do, if you have fewer and fewer people of working age,
and a much larger population over 65, would be to get workers to retire later.
This would reduce pension expenditure while increasing revenue.
Wait a minute, retire later? Are we talking
about old people working until they keel over? Well... Obviously not.
When the retirement age of 65 was established in Spain back in 1967, things were very different.
People reached that age in worse condition. But of course, since then, life expectancy
beyond 65 has doubled from 12 to 24 years. Despite this, in today's Spain, the activity
rate after the age of 65 is much lower than the average for both the European Union and the OECD.
Just by approaching the levels of countries such as Sweden, Switzerland or Denmark,
Spain could gain more than one and a half million people in employment between now and 2050.
This alone would compensate for more than 40% of the expected fall
in the working-age population. And of course it could be taken even further.
The question, the big question is, how to do this? Well, in this matter we have a few examples.
Do not think that we are the only ones suffering from this problem. Countries
like Sweden, Japan and New Zealand have been working on this issue for years.
For example, in Sweden, which has the highest average exit age from the
labour market in the whole of the European Union,
they have been working on this almost since the end of the 1990s.
Over the last decades they have made early retirement more difficult,
they have modified the pension system which now requires more years worked and
tax incentives have been introduced such as tax credits on the social contributions of companies
that have employees over 65 years of age and also on the income tax of these same older workers.
But perhaps a good example can be found in what you know is one of Visualpolitik's favourite
countries: New Zealand. VisualPolitik community,
to give you an idea, in this country 20% of the population over 65 continues to work,
compared to only 5% in the case of Spain. And they do it with a high quality of life and
by personal choice. Because in fact, in New Zealand, from the age of 65 onwards, you receive
the public pension whether you work or not. Despite this, it is one of the countries in the
world where the labour participation of people over 65 years of age is growing the most.In
addition to the advantage of being able to freely combine the full public pension with
wages or professional income, there are also other important incentives.
One of these has to do with nothing less than the system for retraining
workers. Fifty percent of workers and unemployed people over the age
of 50 receive vocational training to update and, where necessary, retrain.
This is one of the highest levels in the world and is something that allows
workers to reach the age of 65 in a better position to remain highly productive.
In fact, the government stimulates this training with subsidies and participative
financing. They see it as a kind of investment, better workers will mean more public revenue.
And yes, we are talking about very specialized and quality training.
No generic courses. There is a very competitive market of public and private training centers.
And that’s not all. Contractual freedom for the over-65s allows companies and workers
to negotiate very flexible working models adapted to each circumstance.
At the same time, since the late 1990s it has been forbidden for companies to
discriminate against a worker on the basis of age or to force him or her to retire.
Exactly the opposite of what many collective bargaining agreements do in Spain,
where labor bargaining is heavily unionized.
But getting more people over 65 to continue working is not the only thing that can be done.
Promoting savings systems complementary to the public pension, promoting qualified immigration
or trying to take advantage of the so-called Silver Economy are other possibilities that exist.
For example, Spain has a great climate, good beaches and practically everything
retirees demand and want. That means they could move,
for example, towards an economy that caters to Spain as a destination for retirees,
why not attract millions of retirees from the rest of Europe and make money out of it?
Well, that is precisely what the Silver Economy is all about: specializing and
turning a challenge into an opportunity. And then, of course, there is also an urgent
need to increase the labour insertion and the employment rate of the working age population
and particularly of younger workers. This is a key issue that we will talk about in a future video.
So VisualPolitik community, Spain faces great challenges in the future,
challenges and threats that we need to start dealing with as soon as possible.
Otherwise, the coming decades may be rocky.
But having reached this point, it's your turn: How do you think Spain should deal with the
challenges ahead? What other threats do you perceive? Will it manage to overcome them?
Leave us your answer in the comments and if you find this video interesting don't forget to like
and subscribe to VisualPolitik. Take care and see you next time.