Current affairs

Older entrepreneurs to the rescue of pensions

Thursday, 20 de April, 2017

By Rafa Bernardo, journalist at Cadena Ser

A book is currently being presented publicly, one of the authors of which is the former Minister of Employment Valeriano Gómez, under the eloquent title “Will we get our pension?” Without a doubt, it is a key topic of the current legislature: balancing a system, namely Social Security, in which costs have grown and income has dwindled for many years, in such a way to ensure decent pensions. Any contribution towards achieving this objective is important and it is crucial that we do not lose sight of a key sector of the economy: older entrepreneurs.

The GEM research network on the entrepreneurial phenomenon has just published a report that reveals that 16% of the world’s population are 55 years old or over, so the issue of economic activity among older people concerns 1.2 billion people around the planet, a figure that is far from negligible. In Spain, according to the Active Population Survey, there are currently around 1,200,000 self-employed workers older than 50 years old, nearly 400,000 of whom are over 60 (accounting for more than 10% of all self-employed workers). However, the Social Security system of which they form part is in deficit. How is the system failing?

The design of the social contribution system in Spain encourages self-employed workers to pay the minimum base level, which enables a lot of freelancers to contribute less to the system. However, later on, they obviously receive a lower pension. This explains why there are so many older self-employed people: it is simply the fact that the contributions they have made do not allow them to retire with a decent pension. This is the main problem that we have to deal with: If we want entrepreneurship to contribute to the people who live it and the system that they take part in, it has to be voluntary. This is the political challenge that needs to be tackled.

The bones of the solution are there: partial retirement formulas have been successful in terms of extended the working lives of people who would otherwise have retired completely, as shown  by Eurofound’s analyses. The best idea would be to design them in a way that is tailored to entrepreneurs: incentivizing them to continue, not only as project leaders but also in other capacities (investors, advisors, intrapreneurs) who benefit the startup ecosystem and the country as a whole by generating wealth and salaries that feed the coffers of the Treasury and the Social Security system.

When promoting the participation of older workers, they should also be asked what they want. According to the GEM report, they are more risk averse that entrepreneurs in other age groups and more inclined to undertaking social entrepreneurship projects. An effective safety net against failure and incentives to work on initiatives that generate benefit for the entire community could be two of the key factors in preventing the loss of the contribution to the economy of thousands of people with ideas and the experience to make them a reality.

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