How will COVID-19 and the economic crisis affect the retirement system?

21/05/2020
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09:18
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How will COVID-19 and the economic crisis affect the retirement system?
Thousands of workers have lost their job amid the public health crisis - Photo: File Photo/EL UNIVERSAL

How will COVID-19 and the economic crisis affect the retirement system?

21/05/2020
09:18
Mexico City
Editorial
-A +A
The COVID-19 pandemic is having a devastating effect on the economy 

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After the government announced the halt of economic activities to contain the COVID-19 pandemic, hundreds of companies have been unable to pay their employees for up to three months since they haven’t generated profits. This is one of the most expected effects of the pandemic but it’s also one that wasn’t considered by the government. 

Now, after thousands of people lost their jobs amid the public health crisis, people have started to file for unemployment aid, which is sourced from their savings and retirement funds. 
 
Along with the series of problems faced by thousands of workers who can’t re-join the labor market since the public health crisis is affecting all sectors. However, there are more negative effects: now that workers are withdrawing their savings funds, this will have an impact on the retirement system since its financial capacity will be compromised at the time when the first generations under the Afore scheme will retire.
 
Recommended: Mexicans drain their retirement funds before becoming pensioners
 
Furthermore, this will also have consequences for the development of the country because the Afores are invested in productive projects; therefore, if thousands withdraw their resources, the investment will no longer be possible. This is perhaps the most negative effects generated by the government’s refusal to help companies, as the majority of them provide benefits to their workers.
 
Maybe the government hasn’t understood that by handling the economic crisis and saving a large number of jobs, the government is helping itself by making sure it will receive resources and taxes from workers, which benefits everyone. 
 
The federal government must stop considering the private sector and companies as foreigners, and instead as an essential complement that plays a crucial role in the Mexican economy. For these reasons, refusing to help or rescue companies that create jobs will have negative effects for all because the resources generated by the business sector and its workers will allow money to circulate and will end up in the public purse, which will allow the continuation of government projects.
 
Recommended: COVID-19: Mexico faces a grim economic outlook 
 
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