The Economy of Catalonia

enefit is known. It is common knowledge that the most important benefits
include retirement pensions and benefits for the unemployed, the
disabled, widows and orphans.
The viability of pensions
One of the messages one hears in circles opposed to an independent Catalonia
is that it will not have enough resources to cover the pensions of its
pensioners. This claim can arouse significant concern and unease as it runs
contrary to the fundamental right of every citizen to receive a pension after
contributing throughout their working life to make this right effective. It
should also be borne in mind that the recipients of any kind of social benefit
are highly vulnerable on account of their particular circumstances.
Moreover, lack of information and ignorance about the issue of pension
payments in an independent State lead some citizens to reason as follows:
I have made my Social Security payments to the Spanish government all
my life in order to receive a retirement pension and this money is now in
a fund that is under the aegis of the Spanish government. So, if Catalonia
becomes independent from the rest of Spain, will I lose the money that
has been paid into the fund?
The proliferation of such messages makes it necessary to offer certain
clarifications in order to avoid misunderstandings.
First we should note that the current pension system in Spain, as in most
developed countries, is a PAYG (Pay-As-You-Go) system (similar to the
UK PAYE, pay-as-you-earn). This means that current pensions are paid
out of the contributions being made by workers who are now active. It
is a mistake to think that pensioners are paid from a fund formed by the
capitalisation of all the contributions they made throughout their working
lives: in fact the amounts they paid in when they were working were
used to cover the pensions of those who were retired at the time. So if
Catalonia becomes independent, Catalan workers will pay for the pensions
of retirees through their Social Security contributions.
Secondly, an independent Catalonia will be able to finance all Social Security
benefits (pensions, unemployment, etc.). In order to substantiate
this claim, we have to calculate the overall income and expenditure of
the Social Security system, including the Social Security General Treas-
Pensions in an independent Catalonia 177