Retirement by Length of Service in Brazil : Estimations of the Subsidies Received for Beneficiaries

This paper discusses the problems concerning the length of service retirement benefit in Brazil. Several social, economic and demographic figures are presented, showing the need to change the current system of retirement and the failures of some of the arguments used by their supporters. The paper calculates the implicit subsidy of some specific categories, due to the difference between the present value of the contributions and the pensions. Based on some hypotheses related to the replacement rate and to the real wage growth, it is concluded that, with a contribution of 31% of the wage and a yearly real interest rate of 4%, a woman and a man that work for 30 and 35 years receive, from the rest of the society, a subsidy of 38% and 16%, respectively, of their pensions. This subsidy can be of 53%, in the case of a female teacher that retires after only 25 years of job