ANOTHER LOOK AT THE FINANCING OF SOCIAL SECURITY IN BRAZIL: THE KEY ROLE OF FORMALIZING WORK, INCREASING PRODUCTIVITY AND ENHANCING REVENUE MANAGEMENT

ABSTRACT

This article analyzes a set of variables deemed relevant for the financing of social security in Brazil, which have been overlooked in the recent debate on the subject. At first, we introduce a theoretical model that highlights the key role of increasing productivity, expanding formal employment, and enhancing revenue efficiency in the financing of social security. We then analyze the trajectory of these variables in Brazil and suggest measures to stimulate them. Finally, we perform a simulation exercise to test the effects of changes in the selected variables on the outcomes of social security. The results indicate that in face of positive shocks in labor productivity, formal employment, and pension income, the General Social Security System (RGPS) results become a surplus. A key implication of this result is that problems in the financing of social security cannot be solved exclusively by cutting benefits.

KEYWORDS:
pension reform; revenue efficiency; labor productivity; formal employment; Brazilian economy