TACOMA — Brazil’s aging population has increased substantially in recent decades. The population of Brazilians older than 60 has jumped from 5% of the population in the 1970s to 15% by 2018 and is expected to reach more than 25% by 2050. Overall, Brazil is projected to have the world’s fourth-largest elderly population behind India, China and the United States by 2050. With such demographic trends, elderly poverty in Brazil is a pressing long-term challenge to address. This has implications for the country’s public pension and health care systems that provide socio-economic security for elderly Brazilians running the risk of crippling deficits without necessary reforms to sustain the fight against elderly poverty in Brazil.
Great Strides but Long-Term Problems Persist
Brazil has been largely successful in raising living standards for its elderly population in recent decades. Improved health care from the creation of the Unified Health System (SUS in Portuguese) in 1988 guaranteeing near-universal, cost-free health coverage coupled with the creation of public pension systems in the 1980s improved the socio-economic security of citizens to combat elderly poverty in Brazil.
From these reforms, life expectancies improved dramatically from 60 in the 1970s to 76 as of 2018. Brazilians also rely less on numerous children for financial support due to pension programs as the average child per woman dropped from six in the 1970s to 1.8 as of 2018.
The nation has made much progress in combating elderly poverty in Brazil through pension and health care systems, however, these improvements have created collateral problems that, unless addressed, could reverse the progress of recent decades.
Brazil’s aging population relative to the shrinking labor population poses significant fiscal problems for these programs. Without reforms, by 2050, the International Monetary Fund (IMF) projects that pension and health care spending with current demographic trends will equate to 40% of Brazilian GDP. Such an unsustainable fiscal strain underscores the need to reform these systems to ensure Brazilians can continue to build off the progress made in reducing elderly poverty in Brazil.
Labor Participation Can Boost Revenue for Elder Care Programs
Brazil’s pension programs are inefficiently funded compared to other countries. About 46% of the working population contributes payroll taxes to support pension programs in comparison to 86% in “advanced economies.” This is largely because the retirement age for Brazilians is quite low, 48 for women and 53 for men.
Because of this, the labor force is simply too small to support funding for these pension programs if current demographic shifts continue, posing major issues for combating elderly poverty in Brazil. Increasing the labor participation rate is essential to increase revenue to salvage the pension system and gains made by older Brazilians.
Increased female labor participation can play an important role in this. In the 15-64 age group, the female labor participation rate stands at 62% compared to 80% for males as of 2019. Even halving the gender labor participation gap could save Brazil 2.2% of its GDP on pension funding by 2050 through increased opportunities for women in the workplace. Encouraging early retirees to continue working is also important.
Brazilians aged 55-64 had a labor participation rate of 56% in 2014 compared to 81% for those aged 25-54. Decreasing this gap by 50% could save Brazil 1.3% of its GDP in pension funding by 2050. Raising the retirement age to above 60 could be the most prudent means to increase labor participation and make pension systems more sustainable and efficiently funded, enabling it to continue supporting elderly Brazilians and avert fiscal catastrophe that would threaten progress to reduce elderly poverty. Such reforms could reduce fiscal resources directed toward pension programs by 11% of GDP by 2050.
Cost Effective and Practical Health Care Reforms
Health care plays a critical role in combating elderly poverty in Brazil. Like the pension system, however, Brazil must implement reforms to sustainably support Brazil’s elderly population in the future. Health care spending as a percentage of GDP is projected to more than double from 4.6% in 2015 to 9.5% of GDP by 2050 without reform, placing further fiscal strain on Brazil and threatening the health care system that undergirds the progress made for Brazil’s elderly.
Practical on-the-ground reforms, however, may make the system cost-effective and ensure it continues to benefit Brazil’s elderly. Some of these reforms could include focusing on chronic, non-communicable diseases that people become acutely vulnerable to in old age and “abolishing tax deductibility of private insurance contributions” that undermine SUS funding. Furthermore, Brazil could implement education programs emphasizing healthy lifestyles and renegotiate pharmaceutical drug pricing to ensure Brazil’s health care system can remain solvent and focus on safeguarding living standards for elderly Brazilians. Improved health care has helped to reduce elderly poverty in Brazil and can continue doing so with reforms focusing on fiscal sustainability.
Brazil has made much progress in combating elderly poverty in recent decades. To safeguard these gains, the systems driving those positive changes must prioritize sustainability. Although such reforms could be unpopular politically, Brazil must find the courage must to ensure retirement remains a bridge to socio-economic security and enjoyment for Brazil’s elderly population. Brazil managed to establish a sophisticated apparatus for combating elderly poverty that has produced tremendous gains, because of this it has the capability to reform it once the willingness is there among Brazil’s leaders.
– John Zak IV