The Spain 2050 report has put on the table the need to address a long-term national strategy to address both the main shortcomings that our country still has and the challenges that it must overcome in order to grow in a sustained and sustainable way in the future. One of those challenges is to reduce poverty and inequality and reactivate the social elevator. Although there have been undeniable improvements in terms of social welfare since the democratic transition, the shortcomings that persist are abundant. Spain continues to be a country with high levels of inequality in the comparative context and the social lift seems to have slowed down.
Reversing this portrait is important not only as a matter of social justice, but also of economic efficiency. If the aforementioned problems are not resolved, future economic growth will be very difficult and we will continue to be very vulnerable to changes in the economic cycle. Investing today in new foundations for economic development, on the foundations of higher productivity gains, quality employment, and solid social safety nets, is essential to reduce the impact of economic crises on social well-being.
The costs of not doing so are great. Without notable improvements in productivity and employment rates, it is easy to predict that the Spanish economy will register very modest rates of economic growth over the next few decades. This will mean lower salaries, a lower level of public income and a decrease in the equalizing effect of the benefits and services of the welfare state. Even if productivity improvements were not accompanied by advances in policies to favor education and social mobility, inequality could also increase. The same can be said of the increased progressiveness of the tax system and the development of social benefits and even the need to promote collective bargaining to ensure a fair distribution of these hypothetical productivity improvements.
Nor can the importance of other processes that may affect future social welfare be overlooked. All demographic projections point to an increase in the proportion of the population in advanced ages (in 2050, one in three Spaniards will be over 65 years old). Without a greater share of wage income in GDP, the financing of the public pension system will be compromised, affecting the amounts of future pensions. Added to this are the difficulties of covering the growing number of unconventional workers and increasingly discontinuous professional careers.
Another relevant process is the acceleration of technological change. The digitization of the economy has led to important changes in the occupational structure of high-income countries, leading to further increases in wage inequality and the weight gain of capital income over labor income. Although the uncertainty about the long-term effects of automation processes is great, the evidence seems to show a greater intensity of capital in production and a greater shift in demand towards more skilled workers, with effects on employment and the salaries.
Anticipating possible trends such as those described is important, but if this prospecting does not lead to far-reaching reforms, it would only be a technical exercise, with some utility to anticipate future scenarios, but without any transformation of social reality. If the will is to combine economic growth with higher levels of social welfare, new policies are necessary that reconcile both objectives. As the independent experts who have prepared the report point out, improvements in productivity and the quality of our human capital seem essential to change the pattern of growth and offer more and better economic and employment opportunities to our population, especially to the older generations. youths. In this task, education is key and is the main engine of the social elevator.
Achieving these goals also requires substantial reforms of the tax and benefit system. The avenues of reform being abundant, the most pressing are two. The first is to increase the collection and redistributive capacity of our tax system, which collects and redistributes income and wealth worse than that of other European countries. The most effective way is to broaden the tax bases by reviewing some of the current tax benefits and the treatment some incomes receive. In line with the recent debates in international taxation, it is also urgent to rationalize corporate taxation to avoid that small companies and traditional sectors bear the highest tax. Given the aforementioned technological change biased in favor of capital, it is also essential to adjust the tax system in order to tax its income with greater intensity.
Second, this increased allocation of budgetary resources should finance the expansion of social benefits and their adaptation to the new labor and demographic realities. Its current redistributive effect is less in Spain than in most European countries. The objective is to move towards a welfare state model more focused on the needs of people than on their working life, by extending coverage and the amount of non-contributory benefits, the reform of family benefits being key.
It will be difficult, without a doubt, to reach agreements on such important reforms, but without them we will not only be mortgaging our future and that of future generations, but also our present, given the association between low levels of equity and financial instability, a disincentive for innovation, barriers to improving the skills of the workforce, less political participation and less trust in institutions. The costs of inaction may be greater than those of the social investments that our country needs.
Luis Ayala is Professor of Economics at UNED and Olga Cantó She is Professor of Economics at the University of Alcalá de Henares.