Evaluating the sustainability of Spanish social security system

Abstract

Social security has remarkable relevance in the general context of Spanish economy. This system is viable if the volume of active population increases at a higher rate than the number of pensioners does and if, in addition, active population is employed by the productive system. The reports of the National Institute of Statistics about Spanish demography demonstrate how these conditions are not met as of today, because our society has one of the highest aging rates and also a remarkable increase in the dependency rate. Through various techniques of time series analysis, this paper reveals the current economic trends in Spain to demonstrate the need for structural reforms of the system so as to make it more sustainable in the long term. To achieve this, it is necessary to change the financing model to a mixed one where the capitalization method plays a significant role, and also to implement urgent measures in order to reduce the barriers to business and employment development.