Young people do not reach an income equivalent to that of a retiree until they are 38 years old, according to a study

The loss of purchasing power not only in Spainbut throughout Europe, it is a reality more than confirmed by experts, who focus on conflicts such as the war in Ukraine or Iran to explain the rising prices of food, electricity or fuel. To this deficiency it would be necessary add that salaries by agreement remain stagnant, that new increases in the SMI of at least 7% or the promise by the Sánchez Executive of improve pensions before the 29-N elections.

Precisely this last point has been referred to in part of the report published by the Juan de Mariana Institute ‘The fiscal sacrifice of taxpayers’, signed by Diego Sánchez de la Cruz and Santiago Calvo López, and in which it is confirmed with objective data how young Spaniards must wait on average until they are 38 years old to have the income equivalent to that of a retiree.

The authors explain that in order to carry out this study they have based themselves on the distribution of taxes and benefits between the different generations based on the age accounts of Fedea (2022). During the first years of work, economic problems appear, which in many cases come hand in hand with the high cost of housing, low salaries and the need to change place of residence.

This does not stop them from being able to make a place for themselves in the world of work despite the fact that “they find many difficulties in emancipating themselves” even though they are “the most prepared generation, but also the one that takes the longest to achieve a comfortable income.”

Now, this comparison is oriented towards income by age and does not mean that when an employee is under 38 years old, he or she is earning less money on his or her payroll than any pensioner. Normally, the first job comes around the age of 25 on average and the salary is around 13,000 euros per year. “Salaries do not mature until well into the quarantine.”

Is there a relationship between what young people earn and the taxes they pay?

A key point appears in the report and it is the disruptive thinking that young people have in relation to the payment of certain taxes to the State. At 25 years old, a Spaniard pays an average of 6,000 euros per year in taxes and Social Security contributions, which is equivalent to 45% of market income.

“In the first years of your working career, the system takes almost half of the little you earn,” the report states. This distribution varies depending on age since between the ages of 30 and 60, citizens contribute more to the system than what they receive in monetary contributions (salaries, for example) and in public services such as health or education. But, in the case of retirement this is the opposite.

A 70-year-old person is paying an average of 6,000 euros a year in taxes, while they collect 17,000 euros in pensions and 7,000 in healthcare and other public services. The last amount is the one that has to do with the value of the services received and not with the money that you ultimately receive in your accounts.

Thanks to these numbers, the Juan de Mariana Institute has made a comparison with which it aims to explain the prevailing dissatisfaction among young people since analyzing a survey by the Institute of Fiscal Studies (IF) carried out in 2024, 31.6% of young people advocated not paying taxes to “live better.” In the case of those over 65%, this percentage drops to 9.7%.

Pension spending reaches 244.5 billion euros in 2024

The other side of this analysis is the one that focuses on the money that is collected and focuses on pension spending estimated by economists, which is at 244.5 billion euros in 2024. A fairly high amount if compared to the 169,000 million that were invested in Education and Health.

This means that pensions, on the national economic scale, have gained 9 weight points in total public spending between the years 1995 and 2024, once inflation and population growth have been discounted, leaving this measure at 4,300 euros per inhabitant during this period in which 2,260 euros went to pensions and temporary disability.

Health was 800 euros per person and education was 336 in total and, on the contrary, the investment per person in housing and transportation has decreased. These signs, for the Juan de Mariana Institute, show that the system needs an extra effort among those people who have low incomes while the weight of the older generations increases, partly caused by active aging.

Something that “should not make us fall into confrontation between generations because the pact between them is the basis of the welfare state.”