THE REFORM OF SOCIAL SECURITY IN MEXICO José Antonio Vital Galicia Alliance of Health Workers and Public Employees (Speech presented at the VIII Tri-National Conference in Defense of Public Education, Los Angeles, California, 18 - 20 April 2008) THE NEW LAW OF THE INSTITUTE OF SOCIAL SECURITY AND SERVICES OF STATE SERVICE WORKERS On 22 March 2007, with the backing and promotion of official union representatives of the Teaching Profession and of the Federation of State Workers, Mexico’s National Congress approved the disappearance of the public, integral, solidary and redistributive social security regimen which had been conquered over the previous half century, affecting 2.4 million teachers, health workers, and federal and state government and judicial and legislative sector workers. In its place was established an individual and commercial system, managed by the financial sector, with elevated defined contributions and uncertain benefits. The State thereby abandoned its social function, and as employer eluded the protection that the Mexican Revolution had installed as a right of all Mexicans. The broad social response to the social security reform led to the presentation of more than 700,000 judicial appeals against the new law that privatizes the funds of the Institute of Social Security and Services of State Workers (Instituto de seguridad y servicios sociales de los trabajadores del Estado – ISSSTE). Repudiation also grew toward the union leaders who agreed on the reduction of benefits to 10 million Mexicans, specifically against Elba Esther Gordillo, leader of the National Union of Education Workers (Sindicato Nacional de Trabajadores de la Educación - SNTE) and Joel Ayala Almeida, president of the Federation of Unions of State Service Workers (Federación de Sindicatos de Trabajadores al Servicio del Estado - FSTSE). The social security system in Mexico covers only a third of the economically active population and close to 50% of the population. It is financed three ways with a cost born by public finances equivalent to close to 1% of GDP. The social protection of state workers included 21 coverages and benefits related to medical care, retirement and pensions, professional risks, accidents and illnesses, and economic, social and cultural benefits including housing, daycare, funeral services, personal and mortgage credits, and recreational and sports centers. The new ISSTE Law was approved without consulting the public employees, ignoring the constituents of the legislators, and with no accountability of the pension funds, medical services, or social benefits. The diagnosis was based on the demographic shift, epidemiological transition, and the supposed high cost of pension payments. The strategy followed to impose the new law was focused on the de-financing of social security, the argument that public workers enjoyed privileged benefits, and attacks against the democratic organization of the workers, in particular the democratic teachers and health workers. Parallel strategies were oriented to undermine labor stability through illegal hiring of workers without job stability, without social security registration, and without union organization. Another strategy followed was the reengineering of institutions, regional or state fragmentation of social security, and division of the management and insurance of the education, health, and other State employee sectors. Differentiated schemes are established between basic versus upper-education workers. Employees holding management-level posts or career professionals are assigned mixed coverage plans with private medical services. The characteristics of the new law can be summarized in the reduction from 21 to 4 insurances and benefits and in the establishment of individual accounts managed by private financial insurers, fixing a minimum guaranteed pension equivalent to two minimum wages (USD 300 per month). The amount of pensions for the new generations is estimated to represent 30% of the base wage. The retirement standard based on 28 years of service for women and 30 years for men was eliminated, and retirement ages and years of service minimums were raised. Disability and death pensions were eliminated; protection will now depend on the workers’ savings. The retirement savings and housing funds will no longer be received at the moment of retirement. Social, economic and cultural benefits will now be allocated within criteria of profitability and productivity. The new ISSSTE law is estimated to have a high financial cost which will be borne by the State from the taxes paid by all Mexicans, given that it commits to pay the pensions already in effect, and the profit of the private insurers must also be assured. The estimated amount is 2.8 million pesos, equivalent to just over 30% of GDP. The social cost will represent the impoverishment of pensions, primarily affecting education workers. THE NEOLIBERAL REFORMS OF SOCIAL SECURITY Neoliberalism has fomented the reform of the State, free trade, and militaristic national security policies, which have translated into trade opening, privatization of public companies and services deregulation in private investment and in labor contracting to flexibilize use of the labor force, and processes of administrative decentralization and concentration of financial control and policy design. The international institutions such as the World Bank, OECD, and IMF have been the instruments to pressure governments and societies to subordinate themselves to the logic of the transnational companies and in particular the international bank. Social security reforms in globalization have three fundamental axes: cheapening of use of the labor force, privatization of social services, and generation of a capital market to sustain the international financial system. Reduction of labor costs has focused on increasing job precarity and State abandonment of its social function. Employment without stability or professional development increases, in violation of existing labor legislation. Flexibilization and polyvalence of labor functions or activities is developed without providing social protection to labor by not enrolling workers in social security regimens or by providing partial coverage. Precarious employment is now estimated to account for more than 50% of the labor force in health services, and more than 330,000 precarious jobs are recognized in the public sector as a whole. The third-generation structural reforms are oriented to privatization of health and social security, education, and the energy sector. A market has been generated in the health and social security sector through State subsidy to insure high-income labor sectors. The insurance, services, and finance sectors have been segmented, leaving management of the most profitable sectors and upper-income workforce to the private sector. The case is such that priority is focused on privatizing hospitalized medical care in the health field and upper-middle and upper-level education. The transfer of social security funds to finance the stock-exchange market, and the millionaire transfer of pension, medical service, social benefit and housing funds, constitute appropriation of the social savings bank to generate a capitals market which far from producing productive investment to generate employment, has transformed into speculative capital for rapid profit, transforming part of labor savings into national internal debt. The privatization of profits and socialization of losses is the slogan of capital in globalization. THE SOCIAL AND UNION RESPONSE The reform is being legally challenged with a broad union and social response headed by the democratic teaching profession. The struggle against the new law has been met with repression, the fragmentation of demands, and efforts to wear down the protest. Indiscriminate and abusive use of the mass communications media has been an obstacle to expand the movement and has fractioned the response. The repressive blows against the democratic teaching profession and the attrition from the election processes of the democratic representations of education and health care workers have been the reiterated resources of the government and corrupt union leaders to impose their privatizing reforms. Such offensives have been waged against teachers in Oaxaca and other states, against Social Security workers of the valley of Mexico, and workers of the “20 de Noviembre” national Medical Center, ISSSTE, and Health Services workers. The democratic movement has been able to present more than one million legal suits against the new ISSSTE law; in other words, more than 50% of State workers have filed legal challenges. The unity between the workers of the Social Security system and the citizen rights-holders enrolled in the institution is especially noteworthy. The significant number of suspensions of application of the new law has obligated the judicial sector to review the constitutionality of the new law. However, sufficient pressure has not been generated to avoid the tortuously slow pace and the partiality of the Supreme Court in the penal processes against the new law. The Mexican union movement and the progressive political forces have given their solidary support but have not reached a definitive commitment to halt the social security reforms and the whole of neoliberal changes. The limitations of the movement. The repeal of the new ISSSTE law unifies the opposition movements. However, alliances of some contingents with the corrupt union sectors have limited the unitary strategies to overturn the neoliberal reforms. Another element is the dispersion of the pressure on state actors. On one hand, the democratic teachers have directed efforts against the ISSSTE director who is a puppet of Elba Esther Gordillo, while health sector and university workers have focused their protests toward the Supreme Court. The lack of alternative proposals to the neoliberal social security model has produced a vacuum of contents of the struggle, which coupled with the definition of the primary interlocutor, has reduced the impact of the important mobilizations carried out to date. THE CHALLENGES OF THE STRUGGLE Sustaining a movement for more than a year has been the primary achievement of the Mexican democratic and class forces. A challenge is the construction of a proposal to reinforce social protection that would be assumed by the whole of Mexican society. The right to health and social security as a constitutional right was established as result of the revolution of almost a century ago, as a universal human right and as part of the international agreements on social protection of the peoples of the world. Another challenge is the development of a national reconstruction project in a country devastated by free trade and financial voracity. This is a central task in the challenge to redistribute wealth, along with the re-foundation of the organization of workers, which in addition to defending the guild, must also maintain high social content and influence on national decision-making. The revaluation of labor forms part of the nucleus of the struggle for defense of integral, solidary, and public social security. The right to dignified work, full employment, and professionalization of work, are further key elements. The responsibility of societies in the social protection of their members, from cradle to grave, translates into the State obligation to safeguard the most important value of its members: the worker, and not the protection of capital and voracity of profits. In Mexico today we face the challenge to rebuild the workers’ organization, re-establishing principles, programs and practices that lead to the recovery by the working class of its leadership role in the steering of the country and in the creation of historic horizons for the improvement of our society and our ties with sister movements and peoples in the shared struggle for a better world.