Development: On 15 July O Estado de São Paulo, the Brazilian daily, published a study by LCA Consultores which shows that the number of Brazilian homes in which more than 75% of income comes from pensions grew by over 12% in the last year.
Significance: Brazilians’ increasing dependence on pension income explains some of the difficulty that the administration led by President Michel Temer had in trying to reform the social security system. It also highlights how challenging any pension reform will be for the next government due to be elected in the 7 October general election. Given how heavily pension liabilities are weighing on the country’s overstretched public accounts, almost all of the pre-candidates running for the presidency accept the need to reform the pension system - but none have given a clear indication about how they intend to do so.
- The number of households which rely on pensions for over three-quarters of their income grew from 5.1m in 2017 to 5.7m in 2018. Dependency is highest in the north-east area of the country, traditionally the poorest part of Brazil, where over 23% of households are now dependent on pensions for the vast majority of their income. In the country as a whole, the rate is now 18.5%, according to the consultancy Tendencias.
- In those households where over 75% of income comes from pensions, the number of unemployed persons is almost double the national average. The phenomenon is not exclusive to Brazil; it was also widely observed during the 2008 financial crisis in Spain, where grandparents financially supported their children and grandchildren.
- “Grandparents are becoming the backbone of the family”, Alexandre Kalache, a specialist in longevity, told O Estado de São Paulo. “They are absorbing the impact of unemployment and economic instability. The generation that today depends on their parents could have difficulty in retiring. Soon, they will be elderly, and without income”, he added.
Looking Ahead: Unemployment in Brazil remains stubbornly high, at close to 13m people. The underwhelming economic recovery, with domestic economic growth now looking set to come in at around 1.5% this year, does not look as if it will provide a big uptick in employment any time soon.