by John Fitzpatrick

The press always likes a good story involving an old person e.g. “Battling Granny Fights Off Muggers” or “Pensioner Sets Off on Trip to the Amazon Jungle”. These stories are generally written by young people who believe that anyone over the age of 40 is practically physically decrepit and on the verge of senile dementia. The fact that an older person can go to the toilet, do a pee, wash his hands and come out without tripping over the rug and breaking a leg is an achievement to these youngsters.

The Brazilian media is no different and sees any pensioners as a helpless victim. Over the past year it has had a great time showing how badly old people are treated by the lazy, overpaid, heartless bureaucrats who only exist to make people´s lives a misery. We had the saga of the pension registration, which led to the sight of pathetic old men and women aged over 80 queuing for days outside social security offices to prove that they were still alive and, therefore, entitled to receive their pensions. We saw similar queues recently following a bureaucratic mistake which showed that many pensioners had been underpaid over the last 10 years and were entitled to a rebate. Another recent case involved the refusal of some bus operators to obey a law allowing people aged over 60, with a monthly income of around R$480 (US$160), to travel free between states. Many of the operators said they could afford to provide free seats for these people since they would not be recompensed for the lost income. 

In these two latter cases your correspondent had less sympathy with the pensioners. Why, for example, should someone be allowed to travel for nothing between São Paulo and Bahia simply because he is 60 years old? An article on the Estado de S. Paulo recently interviewed people who were spending money on presents for their relatives in other states and then getting a free bus ride. Why should the rest of us subsidize this kind of person?  In most countries a man of 60 is still regarded as an active part of the workforce and generally does not retire until he is 65. A number of Brazil´s top entrepreneurs – and politicians who pass such stupid laws- are still working in their 70s and 80s.

Many of the beneficiaries queuing up for the pension rebate were not that old but in their 50s and early 60s. There are even people in their 40s who are receiving public pensions. This is thanks to Brazil´s absurdly generous pension scheme under public employees can retire after only 20 years´ service and receive a pension equivalent to their final pay packet. This pension is indexed to inflation and the minimum wage. Private sector workers have no such right and have to rely on the normal INSS pension plus their employers´ private schemes. The self-employed have to look after themselves since the taxes their companies pay go into the common pot. A company may be run by one person but he or she gets nothing in return.

It is this huge pension bill that has made Brazil one of the most indebted and highly-taxed countries in the world. A recent supplement in the Gazeta Mercantil newspaper[1] reported that the average age of retirement and life expectancy after retirement in Brazil was 54 and 20.2 years respectively, compared with 63.8 and 15.8 years in other countries.  Life expectancy for Brazilians after retirement was also an average of four to seven years longer than in other Latin American countries.

To finance the relatively generous benefits and the longer time of retirement, taxes in Brazil are twice as high as the Latin American average. Pensions take up so much of government spending that the state has little left for other social benefits. Since there are not enough contributors to fund this long-term generosity, the government makes subsidies amounting to more than 5% of GDP to keep the system solvent. The government´s subsidies amount to almost R$ 25,000 (US$ 8,000) a year for former public employees. The subsidy for other pensioners who get the ordinary state pension is less than R$ 1,000 (US$320).
      Since the government does not have this money it has to borrow and pay sky high interest rates to do so. That is one of the reasons why Brazil is in such an economic mess.

...a Powerful Press Group

The government of President Luiz Inacio Lula da Silva has taken measures to reform the system by extending the minimum period of membership and capping the highest pension. However, the effects of this reform (which was not as radical as it should have been thanks to the political clout of the public service employees who include judges and army officers) will not be felt for many years to come. For the time being the public service pensioners will continue to be cosseted and retain their privileges.

I know a woman who is a good example of the wastefulness of this system in financial terms to the country and in human terms to herself. She is her mid-50s and has been retired for about five years. She was a teacher in the public school system for more than 20 years. She believes she deserves the pension she will receive until she dies because she worked hard during those years and also raised a family. Well, with all due respect to her, the world is full of people who have worked hard for decades, raised children and ended up with nothing comparable to her pension. If this woman lives to her mid-80s then she will actually have been a pensioner for a longer period than she was a worker.

Like many others, this woman sees nothing wrong or immoral in receiving a generous pension from the earnings of other people because, in her view, she worked hard for more than 20 years and paid her own contributions. When I asked her if she felt that this system of early retirement was not depriving Brazil of experienced talent she was not interested. Like many Brazilian public service workers she had spent a lot of her working life looking forward to retiring at an early age and doing nothing. This is a cultural trait which we have no time to go into here and one which Europeans and Americans find difficult to accept. About a year ago I saw a job agency poster announcing several hundred clerical vacancies in a government department. The poster listed all the benefits in terms of pay, 13^th salary, travel and meal vouchers, holidays, pension and the possibility of retiring while young. There was not a single reference to the social value of the work, job satisfaction or the possibility of career development.    

Having said this there are many ex-public employees receiving pensions who also work and are, in fact, receiving two or more incomes. I can think of one former public servant who continued to receive an income from another source after he retired – former President Fernando Henrique Cardoso. This was one of the reasons why he was severely criticized some years ago when he rightly described some pensioners as “vagabundos”.  

All of us look forward to a well deserved, secure old age but Brazil´s Dorian Grays can look forward to a not so well deserved, secure young old age. 

August 8, 2004

(c) John Fitzpatrick 2004

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