The 2.8 percent increase in Social Security benefits, which will come into effect next year, will help meet the basic food and medicine needs of the 845,440 beneficiaries in Puerto Rico, according to three economists and a sociologist yesterday.
People older than 65, who receive money from Social Security in Puerto Rico, will obtain an average increase of $ 29.62 per month, which is equivalent to $ 355.63 per year.
Although the increase is not significant, given the broad framework, the island would be adding $ 276 million to the local economy, economist José Alameda estimated. "Under the assumption that it will be spent and following the general pattern of consumption, most probably because they are elderly people, services will be the most affected, especially medical services," he said.
If these beneficiaries spend their additional income under the same parameters of the average Puerto Rican spending, it would be equivalent to $ 145 million in consumption, $ 106 million in non-durable items and $ 25 million in durable goods, Alameda estimated.
The economist Martha Quiñones agreed that the food and pharmacy sectors will be the most benefited ones of the economy as an indirect consequence of this increase. "People are going to be happier because they are going to cover a little more expenses. It has its multiplying effect logically moving sectors where that money will flow," she said.
In total, there are more than 530,000 households with Social Security income, according to the Census Community Survey.
Héctor Cordero, professor of Public Administration at CUNY, stressed that the adjustment would also have an indirect impact on other generations, because in many cases, grandparents help subsidize the costs of their children and grandchildren. "Any increase in the amount that an elderly person can receive in their income has a positive benefit in them and their capacity to consume," he added. Cordero, doctor in demography, said that poverty in the elderly population is slightly lower than among the general population, precisely because they have more access to programs that support their income, either by retirement or social welfare programs.
Meanwhile, economist Francisco Catalá said that the cost-of-living-adjustment (COLA) "partially compensates for the increases in prices." He indicated that this does not mean that beneficiaries are going to be better than they were a few years ago because the prices of medicine and other items have continued to increase gradually. "It's a strictly marginal change."
He still noted that "an increase, modest as it is, will always be positive, especially if it is about Social Security beneficiaries who in the vast majority receive a very small compensation."
In fact, many retirees and their advocates say that the cost-of-living adjustment, which applies to Social Security, is too low and does not reflect the reality of healthcare expenses for the elderly.
By law, COLA is based on a broad consumer price index calculated by the government. Representatives of older adults say that the general index does not accurately reflect the rise in prices that they face, especially for healthcare and housing. They would like the government to change to an index that reflects the spending patterns of the elderly, according to the stories compiled by Associated Press.
What they don´t measure
Alameda said that this adjustment to inflation is applied based on how the US economy behaves, so it does not reflect the reality of Puerto Rico, due to Hurricane María. "In December 2017, after the hurricane, there was an increase in the standard of living in Puerto Rico. Possibly, an adjustment would have to be made in prices in the case of Puerto Rico," he said.
He also questioned that the Consumer Price Index- Elderly (CPI-E), which is generated in the US is not used. "People 65 and older tend to have a different pattern of consumption. Medical care tends to be higher," he noted, referring to 12 percent of spending, compared to the other groups, which have about 6 to 8 percent of spending on medical services.
Likewise, Catalá stated that Puerto Rico should think of a universal retirement system, which will accommodate public, private and self-employed employees, for which all of them contribute money, regardless of their employers.
This is the largest increase in seven years, according to financial analysis sites. The last increase occurred in 2012, and was 3.6 percent.
President Donald Trump has repeatedly pledged not to cut Social Security or Medicare. But the government is registering deficit for $ 1 trillion , partly as a result of the Republican tax reduction bill that the President affirms as one of his main achievements.
Beyond the problems of the federal budget, Social Security faces its own long-term financial problems and will not be able to pay full benefits after 2034, according to Associated Press.
Reporter Frances Rosario collaborated with this story.
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