Between August 2013 and August 2023, 25,705 private salaried jobs were lost in Panama. However, during the same period, 77,234 government officials and 235,480 new informal workers were added to the economy. This situation has been described by expert René Quevedo as an unprecedented process of labor precarization and statization, generated by the loss of confidence in private investment.
Quevedo points out that for every formal private worker who lost their job in the last decade, they were replaced by three officials and nine informal workers. This transition has led to a situation where, out of every four jobs created, three are informal and one is held by an official in the mentioned period. Currently, eight sectors represent 70% of jobs in the economy, contributing entirely to informal employment.
The high rate of labor informality and the lack of contributors pose a serious challenge to the Invalidity, Old Age and Death Program of the Social Security Fund. Current reforms seek to address a crisis anticipated for 2025, which could severely compromise the pensions of numerous Panamanians.
René Quevedo, in his statements, emphasizes that the challenges facing the Invalidity, Old Age, and Death Program are not political or ideological in nature, but rather mathematical. The Panamanian economy seems to primarily generate informal employment, as formal employment is largely driven by the government, often with borrowed funds, and only 18% of informal workers contribute.
The situation becomes more complicated when the government's current revenues are below what was budgeted. The expert highlights that historically, for every $1 invested by the government, the private sector contributed between $5 and $6 to the economy.
The question of how the government will contribute $966 million to the CSS, with tax collection lower than budgeted and compared to the previous year, becomes relevant. Improving the climate for private investment is presented as a crucial element to increase the number of contributors and strengthen the social security system in the country. Without private investment, the risk of continuing to generate informal employment and weakening the CSS is looming.
In summary, the Panamanian economy faces significant challenges arising from the high rate of informal employment and the lack of contributors, which raises alarms about the future of the CSS and the viability of pensions in the country. An objective analysis of the situation is key to identifying the necessary measures to ensure the long-term sustainability of the social security system.
