For the CCS, the seven-point increase in contributions for employers “could reduce formal employment by up to 3.4% and decrease wages by around 5%.”
Sofofa and the Santiago Chamber of Commerce (CCS) were two of the unions that reacted to the approval of the Pension Reform on Wednesday afternoon.
The union headed by Rosario Navarro said they valued the approval of the project "after more than a decade of discussions, which allows for improving retirement conditions and increasing savings in Chile."
However, Sofofa emphasizes that “the business sector will be the main contributor to the proposed changes,” which is why it is “urgent” to push for a more ambitious agenda to restore competitiveness, achieve “a reduction in the tax burden and promote a dynamic labor market.”
“There is also an urgent need to create an agenda for technological adaptation to disruptions such as artificial intelligence. We call for the creation of a climate conducive to growth, investment and the creation of quality jobs,” said Rosario Navarro.
Sofofa and CCS react to pension reform
On the other hand, the CCS was more critical and extensive in its analysis of the approved Reform.
Although they valued the efforts to improve pensions, and highlighted as positive the increase in pension savings and the progress in social protection due to the increase in the PGU, the capital's trade union warns that the increase in contributions by seven points for employers "could reduce formal employment by up to 3.4% and reduce salaries by around 5%."
On the other hand, they claim that labor-intensive sectors, along with SMEs, would face higher labor costs, and although “the tax mitigation package offers some relief, it does not neutralize the effects on employment or the salary adjustments” that companies will have to make.
CCS President María Teresa Vidal said that “the reform has positive elements in terms of increasing pension savings and improving workers’ pensions, but it is essential to consider the impacts that could compromise those same objectives.”
"The impacts must also be mitigated with a labor agenda that simplifies investment and creates important incentives for the creation of formal employment," he added.
The CCS also pointed out that the increase in the PGU generates an "incentive towards informality" that should be analyzed more thoroughly, in addition to the fact that the additional contribution of 1.5% to compensate for women's pensions reinforces -according to the union- the need to review retirement ages.
Finally, they questioned the efficiency of the deferred contribution with protected profitability - the "loan" -, together with the doubts regarding fiscal sustainability following the warnings of the Autonomous Fiscal Council.
The position of the AFPs
AFP Chile said: “We value the fact that this new law seeks to increase savings in the individual capitalization accounts of members, incorporating attributes highly valued by citizens such as the ownership and inheritance of pension funds, and the freedom to choose who manages their savings.”
However, they warned that some measures could harm workers' pensions and other problems could arise in the long term.
“We believe that: incorporating 1% or more of pay-as-you-go to the pension system to finance defined benefits; allocating 1.5% of remuneration to a mandatory loan; opening up the State's entry into the administration of pension savings, together with the participation of the IPS as an actor in the administration with the potential risk of unfair competition and unfair treatment with respect to current participants; introducing a bidding mechanism focused on commissions without knowing the express will of the members, or establishing effective incentives that stimulate the search for greater profitability; and relaxing the levels of support required for administrators, are all measures that will weaken the pensions of today's and future workers," they explained.
Along the same lines, they were critical of the financing. “We reiterate that solidarity, although desirable and necessary, should be achieved through general taxes, or through transparent state debt in the financial markets. Solidarity should not be financed through workers’ remuneration or through the incorporation of pay-as-you-go, since this ends up harming the pensions of those who, with great effort, contribute and work formally.”
"We must not forget, moreover, a key element in the discussion on pensions, which is greater longevity, which in turn is making pay-as-you-go systems unviable around the world," they added.
AFP Chile also noted that since the pension system operates in the long term, “the cost will be paid by entire generations of pensioners and, once the effects have been produced, correcting them also takes long periods of time.”
“There are still many administrative regulations to be issued for the implementation of the recently approved reform, which may also be crucial for the future of pensions and the country, so we hope that the political system and the technical authorities responsible for issuing them will work with the technical rigor that is required,” they concluded.
