MEI, new government measures that will increase the contribution of workers and enterprises to the public purse.
The Intergenerational Equity Mechanism: Ensuring a Sustainable Future
Today, the concept of intergenerational equity has become a major issue on the political and social agenda. The need to ensure a sustainable and fair future for the next generations has led to the implementation of policies and mechanisms that promote intergenerational equity.
In this article, we will delve into the concept of intergenerational equity, the current challenges and the importance of the Intergenerational Equity Mechanism as a tool for its promotion.
Understanding the concept of intergenerational equity
The concept of intergenerational equity refers to the fair distribution of resources and opportunities between different generations, with the aim of ensuring that future generations have access to the same resources and opportunities as current generations. This involves considering the long-term impacts of current decisions and policies on the environment, the economy and society at large.
Intergenerational equity also seeks to avoid the unfair transfer of burdens and benefits between generations, especially in relation to issues such as social security and climate change. It is therefore important to consider the well-being of future generations when making decisions in the present to ensure a fairer and more sustainable society.
How the Intergenerational Equity Mechanism (IEM) is Implemented in Spain
In Spain, public policies are being implemented that seek to promote the mechanism of intergenerational equity. This approach focuses on ensuring that future generations have the same opportunities and resources as current generations.
The government has approved new social security contributions that will increase social insurance and the contribution of workers and companies to the public coffers.
MEI 2023
At the beginning of 2023, the new intergenerational equity mechanism (MEI) started to be applied. As a result, a contribution of 0.6 percentage points applicable to the contribution base for common contingencies (0.5% payable by the employer and 0.1% payable by the employee) is being made as of 1 January 2023.
MEI 2024
This amount has been updated in the recently approved pension reform. This regulation establishes that the amount will be gradually increased until reaching, in 2029, a contribution of 1.2 percentage points applicable to the contribution base for common contingencies. More specifically, 1% will be paid by the employer and 0.2% by the worker.
MEI 2025
Additional solidarity contribution
On the other hand, an additional solidarity contribution has also been approved. Note. Thus, from 1 January 2025, workers with a salary higher than the maximum contribution base will have to pay an additional solidarity contribution, which is the result of applying:
A rate of 0.92% to the part of the remuneration between the maximum contribution base and the amount 10% higher than the maximum contribution base.
A rate of 1% to the part of the remuneration between 10% above the maximum contribution base and 50%.
A rate of 1.17% for the part of the remuneration exceeding the above percentage.
Example: In 2023, the maximum contribution base is 4,495.50 euros. If the same base were to be maintained in 2024 and 2025, the additional solidarity contribution in 2025 for a worker with a monthly salary of 6,000 euros would be calculated as follows:
Between 4,495.50 and 4,945.05 euros (10% more than the maximum base): 449.55 euros x 0.92% = 4.14 euros.
Between 4,945.05 and 6,743.25 euros (50% more than the maximum base): 1,054.95 (difference between the salary of 6,000 euros and 4,945.05) x 1% = 10.55 euros.
MEI transitional regime until 2045
This additional solidarity contribution will be gradually increased each year, until it reaches the amounts resulting from applying the following in 2045:
A rate of 5.5% to the part of the remuneration comprised between the maximum contribution base and the amount exceeding the said maximum base by 10%.
A rate of 6% for the part of the remuneration between 10% above the maximum contribution base and 50%.
A rate of 7% for the part of the remuneration that exceeds the above percentage.
Distribution: This increase will be distributed between the company and the worker in the same proportion as the contribution for common contingencies. Attention! Currently, the contribution rates for common contingencies are 28.30%, with 23.60% payable by the employer and 4.70% payable by the employee. As a result, the employer pays 83.4% of the contribution and the employee 16.6%.
Current challenges and the importance of the mechanism
Intergenerational equity is an important concept for ensuring the well-being of present and future generations. However, implementing policies that promote intergenerational equity presents significant challenges today.
One of these challenges is the need to consider the different socio-economic realities of people at different stages of life, which can make it difficult to define fair and effective measures. In addition, it is also necessary to take into account the impacts of climate change and the need to promote long-term sustainable development.
In this context, the Intergenerational Equity Mechanism can be a valuable tool to ensure that public policies are equitable and sustainable over time.
The new pension reform has updated the amount of the contribution derived from the intergenerational equity mechanism and added a new concept of additional solidarity contribution.
