Brazil’s pension system
The Economist
In a young country, a pay-as-you-go system should yield surpluses, which can be invested in infrastructure and education. But Brazil’s is already in deficit. Investment is only about 20% of GDP, and just 2.9% of GDP comes from the government.
Children get particularly slim pickings after pensions are paid. Taking income levels and differing demographies into account, Brazil spent twice as lavishly on each pensioner as the OECD average, but only two-thirds as generously on the education of each child. The only handout a poor child can hope for is the Bolsa Família, a grant averaging 115 reais per family per month. If he were over 65 his family would receive over five times as much. As a result, very few old people are below the poverty line, but a third of children are.The price for such distorted priorities is already high. But soon it will be unpayable. Payroll taxes for pensions are already greater in Brazil, at 32% of gross salary, than in all G7 countries except Italy. According to Bernardo Queiroz of the Federal University of Minas Gerais, without reforms, by 2050 they would have to reach a crushing 86% to keep the system going.
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