MORATORIUMS SHOULD NOT BE RENEWED, SOCIAL PROTECTION SHOULD BE ORDERED

The Argentine social protection system originated in the middle of the last century. It was conceived as a contributory system where access to benefits (retirement, family allowances, unemployment insurance and social security) are conditioned to salary contributions. This design became less effective as informality and labor marginalization became more widespread. In response to this process, families with informal and/or unemployed adults were incorporated into the contributory system. 

Thus, in 2000, the Mandatory Medical Program (PMO) was granted to small taxpayers. In 2005, pension moratoriums were created to grant contributory pensions to people without contributions. In 2007, welfare benefits were created to provide unemployment benefits to families with informal or unemployed breadwinners. In 2009, the Universal Child Allowance (AUH) was created for informal and/or unemployed households. Thus, the contributory social protection system was distorted by granting benefits without distinction between contributors and non-contributors but requiring formal families to maintain their financing.

The question is how consistent and sustainable this organization is. According to the INDEC urban household survey, it is observed that:

• 35% of households are fully formal, i.e., both the head and spouse have formal employment as a registered wage earner or professional self-employed.
• 32% of households are mixed in that one breadwinner (either the head or spouse) is formal and the other is informal or not employed.
• The remaining 33% of households are completely informal in the sense that both household breadwinners are informal or unemployed.

These data show that only one-third of households are supported entirely by formal employment. Another third combines a member of working age with a formal job and another informal or without employment, and the other third are households entirely informal. Two important implications emerge from these facts. One is the inconsistency of pretending to provide coverage to all families when only a third contribute to the financing with their salaries. The other is that returning to a contributory system is not socially sustainable because most families have no contribution capacity. 

The alternative to keep on improvising is to reorganize the social protection system. The core point is a redesign of the benefits contemplating a floor of access for all families and additional benefits on top of that floor for families that contribute with their salaries. The goal is, on the one hand, not to leave any family unprotected and, on the other, not to discourage job formality as is currently the case. 

Under this logic, it is necessary to stop extending the pension moratoriums. Simultaneously the minimum requirement of 30 years of contributions to access a pension should be written off. The scheme should allow people to retire at the pension age with the contributions they have made calculating their benefit based on their contributions, regardless of their quantity. If the resulting benefit is low, the Universal Old Age Allowance (PUAM) should be granted. But always recognizing that the effort to contribute has a recognition with a higher benefit. The same logic applies to family allowances, simplifying the benefit system (which currently provides informal workers with double AUH, food stamps, Milk and Health Care) and leveling the amounts for families with low formal salaries. Following the same criteria, contributory unemployment insurance should operate as a part of the severance pay for long-serving workers in order to encourage the creation of formal jobs. In the same vein, a basic PMO should be regulated for small taxpayers and low-wage families with options for more and better benefits for higher-wage formal families.

Decades of economic decline have caused this social degradation that leads the majority of households to live on informality. Improvising mechanisms for people without contributions to enter “through the window” to the contributory regime is a perverse alternative. The priority is for families to return to formal employment. In the transition, a protection system that balances solidarity with incentives in favor of formality should be established.