Mexican millennials carry financial burden

Millennials face the biggest social and economic inequality: those who are lucky enough to be employed work in a precarious labor market while supporting a tax system that is not focused on their demographics

Mexican millennials carry financial burden
Millenials comprise those born between 1980 and 1999 – Photo: File photo/EL UNIVERSAL
English 31/08/2019 16:10 Mexico City Economíahoy.mx Actualizada 16:29
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Millennials are the generation of youths born between 1980 and 1999, which means that most of them are around 20 and 39 years old. They are also those who face the biggest inequality, both socially and economically. They are employed in the most precarious labor market with less social security while also being responsible for supporting the current tax system. But, who will support them in their old age?

“This generation is paying taxes in exchange for poor public services, besides, they have to save money for their pension, are paying the ones of other generations, and are working on a labor market that has worse paying, more uncertain, and volatile jobs,” said Héctor Villareal, director of the Economic and Budgetary Research Center (CIEP).

According to information of Mexico’s National Geography and Statistics Institute (INEGI), these youths represent over half the members of the Economically Active Population (PEA) and concentrate the biggest part of taxpayers, but as part of the complex labor picture they face, they also represent over 60% of the unemployed.

A study in charge of María Sol Corral in which the pollster Demotecnia, Social Log, and the University of Guadalajara, among others, revealed that the youths of this generation desire the same things as their fathers when they were their age: they want to study, getting married or living as a couple, getting a job and making a career of it, having children, having a pension, owning a home, a car, but the only difference is that they know that the economic and social system do not work in their favor.
 

Villareal explained that Millenials are who support and will keep supporting security services for the generation of baby boomers and generation X (their parents and grandparents). Nevertheless, due to the socio-economic conditions they are living, having kids is not a priority for them and that would complicate their old age even more.

The expert lamented that Mexican public policy does not have a demographic perspective; if that does not change, this system and those who are currently young will face a “very adverse” scenario.

Concern about the collapse of fertility rate. The director of the CIEP commented that there is the probability of a collapse of the fertility rate in Mexico, which is currently of 2.07%.

“In 7 or 8 years, there could be a collapse of the fertility rate down to 1.6 or 1.5%. What is going to happen is that the generations underneath, in which generation Z, which contemplate those who were born between 2000 and 2019, would be a kind of buffer, but generation alpha, those who will be born from 2020, would be really small compared to what we are used to in Mexico,” he warned.
 

He explained that millennials face a scenario where the petroleum income from 2003 to 2014 does not exist anymore, there is a reduction of fiscal space, and when they reach old age, they will have another sociodemographic family structure, which foresees a dim fiscal future.

Sociodemographic changes – the rise in life expectancy, the collapse of fertility rate, the increase of chronic degenerative diseases – involves youths in complex fiscal dynamics because as the base of taxpayers reduces, the fiscal pressure will increase, that is, there will be fewer resources for social programs and sectors such as health, education, and infrastructure, among others.

“Sensitive” topics. One of the most complex and heaviest topics for this generation is the payment of pensions, for which this year almost MXN $948.5 billion were used, which reduced the fiscal space for the new government. Pensions absorbed 17% of the Project for Federal Expenditures Budget (PPEF) and represent 3.95% of the gross domestic product.

The problem is not only what is paid for pensions, but that these are quite unequal. Nearly MXN $877 billion are distributed among 5 million pensioners, while MXN $107 billion are distributed among 7.7 million seniors and people with a permanent disability.
 

“Things that are not pleasant must be checked. If you include retroactivity to the pensions system, it will certainly affect someone, but it is also outrageous that public finances are destined to benefit 1.5 million people,” asserted Villareal.

Alejandra Macías Sánchez, researcher of the CIEP, commented that there are persons who receive pensions of almost MXN $1 million a year, and that these, which were granted through a pension system of defined benefit, will be paid until 2100, while the commitment the federal government has to pay them makes it allocate fewer resources to sectors such as education or health.

Villareal commented that the best thing that could happen is that this generation, which is the most vulnerable in the fiscal strategy implemented until now, “move up” and demand a public policy with demographic perspective, “just as there is an urgency for public policies with gender perspective, there must also be public policies with age perspective,” he said.
 

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