How much does the pension system lose in revenue due to the smaller number of contributing workers and the implementation of the FAL?

The labor modernization law incorporated the Labor Assistance Fund (Nicolás Stulberg) "Say goodbye to the pension system. By the first quarter of 2026, 54.5% of employed people do not make pension contributions, a trend that has deepened since the start of Milei's administration," posted economist Hernán Letcher on the X platform. "Added to this are the Labor Assistance Fund, which weakens the financing of the pension system, and the drop in the birth rate, which worsens demographic challenges," warned the director of the Argentine Center for Political Economy (CEPA). This Center calculated the impact on the decline in revenue from these factors—the growth of labor informality, the smaller number of contributors, and the implementation of the Labor Assistance Fund (FAL) starting in December—and estimated it at a loss of 7.8 trillion pesos over one year, at November 2026 values, equivalent to more than USD 5 billion. In the first quarter of this year, total employed workers numbered 13,471,636, according to INDEC's Permanent Household Survey. Of this universe, only 45.2% contribute to the pension system (6,084,751) and 28.3% do not (3,815,499). Another 26.2% (3,529,116 employed people) have no data, so the sum of those who do not contribute and those who would be working off the books amounts to 54.5%. Since 2021, the figures analyzed by CEPA show that employed workers who make contributions have begun to decrease and the number of employed people without registered contributions has begun to grow, as can be seen in the chart below. In the first quarter of that year, the proportion of employed people with pension contributions was 49.2%, while informal workers without contributions reached 50.1%. "The big question is whether the pension system's revenue will withstand the combination of the progressive transfer of salaried workers to the monotax regime, the loss of jobs, the increase in informality, and the Labor Assistance Fund. Together, those four reasons will substantially strain social security resources in a relatively short period," Letcher, who holds a master's degree in Political Economy (FLACSO), told Infobae. In the same vein, Jorge Colina, director of the Institute for Argentine Social Development (IDESA), also a master's in Economics (Georgetown University, USA/Chile) and in Finance (Amsterdam Business School, The Netherlands), warns about the impact on the system. "Since there are more and more people working in informality who will not make pension contributions in the future, the State will have to put money from general revenues toward paying future pensions. A large share will be the Universal Pension for the Elderly (PUAM), which is the pension accessed by people without coverage." Implemented in 2016, in October the PUAM involved a basic benefit of 348,598 pesos. With the extraordinary bonus of 70,000 pesos, the total take-home amount rose to 418,598 pesos, below the minimum pension which, this month, is 435,748 pesos, and with the extraordinary bonus of 70,000 pesos reaches a total of 505,748 pesos. CEPA estimated the loss in Social Security revenue from the increase in employed people without contributions based on data from the Customs Collection and Control Agency (ARCA), the Permanent Household Survey, and INDEC's Consumer Price Index. For the calculation, it took the monthly revenue from employer contributions and personal contributions in 2023 and adjusted it by the drop in the proportion of employed people with contributions, keeping the total number of employed people and the average wage constant. At November 2026 values, the higher proportion of employment without contributions implies an annual loss of 3.3 trillion pesos, equivalent to 5.3% of what is collected in contributions, according to CEPA's estimate. Of that total, 2 trillion pesos correspond to employer contributions and 1.3 trillion to personal contributions. On average, the loss is 277,780 million pesos per month, with a maximum of 454,093 million in July due to the effect of the mid-year bonus (aguinaldo). "The estimate should be read as an upper bound, since workers who move into informality usually earn wages below the formal average," CEPA warns. The Labor Assistance Fund created by the Labor Reform Law promoted by this Government is financed with a contribution of 2.5% of wages in the case of MSMEs and 1% for all other private employers. Regulated by ARCA General Resolution 5907/2026, it comes into force on December 1. "That contribution is not an additional cost for companies: it is deducted from the employer contributions that today fund SIPA, PAMI, the National Employment Fund, and Family Allowances. Therefore, everything that goes into the FAL is revenue that Social Security stops receiving," notes the CEPA report. In the first year (December 2026 to November 2027), the shortfall would reach 4.3 trillion pesos, at November 2026 values. Of that total, 3,472,969 million corresponds to MSMEs and 823,572 million to large companies. In the second year (December 2027 to November 2028), the loss would rise to 4.7 trillion pesos: 3,775,804 million from MSMEs and 889,071 million from large companies. Thus, over 24 months, Social Security would stop collecting almost 9 trillion pesos, always at November values of this year. According to this CEPA estimate, on average, the FAL subtracts 373,392 million pesos per month, with peaks in the months when the aguinaldo is paid out. To estimate its impact, this Center projected the private sector payroll by employer size based on the Social Security Bulletin and applied the corresponding rates from the accrual period, December 2026. If the annual shortfall from the smaller number of workers with contributions and the implementation of the FAL starting in December are added together, the loss in Social Security revenue over one year amounts to 7,814,070 million pesos, at November 2026 values. This equals about USD 5,065 million per year, according to CEPA's calculation, converted at the wholesale exchange rate estimated for November 2026 (1,542.8 pesos per dollar). Of this figure, the FAL accounts for USD 2,904 million annually, taking the average of the first two years in force (USD 2,785 million in the first and USD 3,024 million in the second), that is, 57% of the total. The increase in employment without contributions adds another USD 2,161 million per year, the remaining 43%. "These are two overlapping processes: one is a policy decision that diverts employer contributions into a severance fund, and the other is a consequence of the deterioration of the labor market," reads the estimation work done by CEPA. An IDESA study published these days under the title "Aging Wrecks Public Finances" shines a spotlight on the increase in public spending allocated to the elderly as a result of greater longevity and the reduction in the active population contributing to the system. The combination of these factors raises questions about fiscal sustainability in Europe due to the persistent growth of pension and health spending to serve the elderly, even above the rest of public spending. Public spending on old age—both pensions and PAMI—has grown above other expenditures "Standing still in the face of demographic change explains a secular trend of old-age spending growing above the State's other expenses. Paradoxical as it may seem, today's student protests are the consequence of past protests against pension reform," the study warns. In Argentina, old-age spending "also shows a sustained upward trend with a decisive impact on the dynamics of public finances," notes the report prepared by Colina. "Today ANSES pension spending is 6.8% of GDP. And counting the provincial pension funds, it amounts to 8.9%. By 2050, it is projected that paying pensions will cost the national Executive an additional 1% of GDP," Colina maintains. Colina compared the trend of old-age spending—made up of pensions paid by ANSES and PAMI—against the rest of public spending, both as a percentage of GDP. "After the adjustment applied by the current government, public spending not related to old age is only 5% higher, in terms of GDP, than in the average of the 1980s. Old-age spending, by contrast, is 73% higher." "The last structural reform of the pension system was in 1993. It was in response to the sharp increase in pension spending observed since 1980. Then, in the face of runaway pension spending, the common strategy of governments with different ideological orientations was to erode spending through inflation. High inflation combined with manipulation of the mobility formula was the mechanism," notes the study prepared by Colina. As for PAMI, the main health care system for the elderly, it has an approved budget of 10.17 trillion pesos for this year. Colina warns that "it was never adapted to demographics since its creation in 1971" and that "the common element of all governments is de facto limitations on coverage, a process facilitated by the referral of retirees' care to provincial public hospitals." For Colina, the overhaul of the pension system comes down to two central pillars. On the one hand, he proposes adopting a "notional accounts" mechanism, whereby the pension amount is based on contributions made throughout one's working life and life expectancy at the time of retirement. "ANSES should do that calculation. It is a system that started in Sweden and later spread to other advanced countries, and it is the way to contribute to the financial sustainability of the system," he explained to this outlet. On the other, he suggests turning the pension derived from the death of a retiree or worker into a voluntary coverage subject to a special contribution intended to finance it. "For the widower or widow to receive that pension, the holder must have made an additional contribution, added to the 11% that goes to ANSES while working. A specific beneficiary is designated in order to avoid overlapping claims when a person separated and has a new partner but never legally divorced," Colina elaborated. Among the changes for old-age health care, he proposes that people keep the coverage they had as active workers when they retire, and adapting the benefits of the Mandatory Medical Plan (PMO) to the available financing. "The problem is not only revenue due to high labor informality, but that spending grows due to demographic dynamics. That is why reforms that contain old-age spending are essential. Otherwise, as has been happening at both the national and provincial levels, postponing reforms means postponing important spending not related to old age," Colina concludes. Data visualization: Daniela Czibener Loading and fact-checking: Desiré Santander