SER explores the future of the AOV on Curaçao in relation to various migration scenarios

WILLEMSTAD - On Wednesday, March 11, 2020, the Social and Economic Council (SER) of Curaçao presented its Outlook on 'The Future of the AOV on Curaçao; a comparison between different migration scenarios' to the Prime Minister, the other Members of the Cabinet, the President of Parliament, the Central Bureau of Statistics (CBS) and the Social Insurance Bank (SVB).

 

The Study focuses specifically on the future financial sustainability of the provision for old age, the General Old Age Insurance (AOV). Based on various population projections with different assumptions about the development of migration, scenario-based projections have been made of the future financial situation of the AOV.

The issue of the future sustainability of social services is a subject of growing concern with the increasing deficits in social funds. The risk that the current level of social security provision will already become unsustainable in the short term is increasing if the underlying causes of these deficits are not addressed and policy choices are not made.

This Outlook of the SER is the first in a series of Studies with the overarching theme 'Migration and Socioeconomic Development Curaçao'.

Socioeconomic issues related to migration have been the focus of the SER's attention for some time now. In May 2019, SER Aruba, SER Curaçao and SER Sint Maarten jointly organized the two-day symposium 'Migration and Socioeconomic Development, Policy Challenges and Options' on Curaçao. The symposium highlighted the many sides of migration, and labor migration in particular. The symposium provided valuable insights, knowledge and networks that are important for further policy development in the field of labor migration.

With this Outlook, the SER of Curaçao wants to make a follow-up contribution to the discussion about a future-proof pension system that is better suited to a changing society.

Central to the Outlook is the question whether future pensioners can be guaranteed a certain pension income, based on CBS projections of the future population up to 2050 with different assumptions regarding migration. This Outlook does not include recommendations on policy measures, but it does provide points of reference. The Outlook has a signaling function, namely that policy measures are unavoidable and have to be implemented urgently. A social dialogue is necessary in order to arrive at supported policy measures.

The main conclusions of the Outlook are as follows:

1.            High (labor) migration may have a dampening effect on the increase of the AOV deficits, but as a policy measure in itself it is insufficient to make the AOV financially sound. An integrated approach will be needed to make the AOV pension provision future-proof. A package of coherent measures in various policy areas for the short and medium term is needed.

2.            The projections show that policies aimed at the structural deficits of the pension system can no longer be postponed. At present, choices are still available, but they will soon diminish because of the trends described in the Outlook and the rapidly growing undermining of the system. It is about choices, about burden-sharing between young people and pensioners, between high and low incomes, between working and inactive people, about an increase in the contribution and tax burden or a reduction in benefits, about promoting immigration and about introducing measures now or later.

3.            Doing nothing is not an option, as the structural deficits will widen so rapidly that the foundations of the whole system will break down.

In a sequel to this Outlook, healthcare costs in Curaçao will be examined. As with the current Outlook, migration scenarios will be related to future healthcare costs. A third Outlook in this series provides policy points of departure with regard to migration from the perspective of the contribution that migration makes to the socioeconomic development of Curaçao. In this context, the focus is on the contribution of various migrant populations to the labor market.

In the subsequent Outlook, various policy options are discussed in which the coherence between policy in the area of migration, the labor market, and education is established.

The Growth Agreement agreed upon in July 2019 between the government of the Netherlands and the government of Curaçao underlines the importance of such a policy framework.

The Outlook can be found on the website of the SER: www.ser.cw.




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