Social protection in Europe


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Social protection and social security



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European Commission :V Directorate-General Employment,
Industrial Relations and Social Affairs
* * * Social protection
in Europe
ft * ft
ft ft
European Commission Directorate-General Employment,
Industrial Relations and Social Affairs
ft Cataloguing data can be found at the end of this publication
Luxembourg: Office for Official Publications of the European Communities, 1995
ISBN 92-827-5497-9
© ECSC-EEC-EAEC, Brussels · Luxembourg, 1995
Reproduction Is authorized, except for commercial purposes, provided the
source is acknowledged.
Printed in Italy Foreword
improve it, seeing it is an essential ocial protection has become make more informed choices about Sa major issue for debate in means of maintaining social cohe­ policies and courses of action.
Member States. Slow economic sion.
growth, the persistence of high un­
The report confirms the analysis employment, an ageing population,
Following a Commission proposal, the problems of controlling the which led the Commission in 1991 to
the Council three years ago adopted growth of health expenditure, all im­ propose a strategy of convergence of
two recommendations to Member pose strong pressure on systems of objectives and policies. It shows
States, one on the convergence of social protection and their financing. clearly that beyond the differences
objectives and policies, the other which exist in the organisation of the
on common criteria concerning suf­ various national systems, the prob­
At the same time, there are more fun­ ficient resources and social assist­ lems which confront them are very
damental questions about the role ance in social protection systems. In largely the same: to restructure the
and purpose of social protection in the text of these two recommenda­ financing of social protection to alle­
European societies. On the one hand, tions the Union reaffirmed that each viate the indirect costs on employ­
social insurance is regarded as being Member State remained solely re­ ment — particularly on that of
too costly for our economies, impos­ sponsible for the design, organisation low-paid workers — while maintain­
ing a heavy burden on labour costs and financing of its own social pro­ ing where necessary some element of
especially. On the other hand, the tection system, but defined common contribution; to redefine the condi­
unquestionable success of systems in objectives as a guide to national pol­ tions governing retirement and the
combating poverty is considered in­ icy in this area. At the same time, the calculation of pensions to enable
sufficient and there is a demand for Council asked the Commission to pension schemes to adapt to the sig­
social protection in future to do more, 'submit regular reports (to it) on pro­ nificant ageing of the population
to be a force for integrating those gress achieved in relation to the ob- which is in prospect; to reform health
threatened by exclusion into society jectives set out (in the systems in order to contain the
and, in particular, into the labour recommendation) and to determine growth in their costs while maintain­
market. and to develop, in cooperation with ing quality and equal access of all to
the Member States, the use of appro­ treatment and preventative care; to
priate criteria for that purpose'. organise systems of income support A large majority in Europe, however,
for the unemployed to prevent them regard social protection as a major
being trapped in unemployment, to achievement of modern society and
give them a financial incentive to believe that it is the responsibility of The present report is the second
look for work and undertake active society — and specifically of the presented by the Commission in re­
measures of assistance to help them state — to ensure that no-one is left sponse to this request, the first having
find a job; to target expenditure without support if they are poor, sick been published in 1993. As before, I
where appropriate more on those or disabled. Public opinion polls hope that it is widely disseminated so
who are most in need without crea­show that European citizens, over­ that it can help those involved in the
ting a 'poverty trap' andt alie­whelmingly, are attached to the pres­ management and provision of social
nating public support for the system ent system and wish to preserve and protection in the Member States to
-3 Foreword
of income transfers: to achieve a bal­ administration is likely to be. The This is why the Commission has
first report tried to provide some in­ proposed that the Community ance between statutory protection,
sights into this question. Because of institutions and the Member States obligatory for all, and supplementary
the lack of new information, how­ should join in a process of common protection that maintains social cohe­
ever, we have not been able to go any reflection on the future actions which sion while responding to the growing
further here. Nevertheless, the new might be taken to make social protec­need for flexibility in modern econ­
statistical tool which Eurostat has de­ tion systems more favourable to em­omies.
veloped in collaboration with na­ ployment and more efficient. While
tional statistical offices — the this is a medium-term process, it This report contains new insights into
European Household Panel Survey needs to begin without delay. I all of these problems — and a few
— should hopefully enable us very believe that this second Social others — focusing, in particular, on
soon to throw more light on this ques­ Protection in Europe report will the major changes which have oc­
tion. prove an invaluable point of depar­curred in Member States since the
ture for this joint reflection. beginning of the 1990s. An analysis
of these is presented in Chapter 2,
At the same time as it published this
after describing in Chapter 1 themain
report, the European Commission
features of the different systems. The
proposed a new initiative to the
most recent Eurostat figures on social
Council and the European Parlia­
protection expenditure and receipts
ment — The future of social protec­
are analysed in Chapter 3, while
tion: a framework for debate
Chapter 4 examines the benefits and
(COM(95) 466). While reiterating
assistance payable to the unem­
that each Member State should re­
ployed and their families, in various
main responsible for its own system
circumstances, in relation to their
of social protection, for determining
earnings when they were working.
its scope, sources of finance and its
The final three chapters are devoted
operation and for defining the level
to a detailed review of selected
of benefits as well as the conditions
issues: recent health system reforms
for eligibility, we believe that the
(Chapter 5), social protection for the
time has come to intensify the dis­
self-employed (Chapter 6) and the
cussion of future developments in
effect on social protection entitle­
this area at the European level. There
ments of interrupting paid employ­
are considerable advantages in the
ment to take care of a child or
future of social protection in the
dependent relative (Chapter 7).
Union being widely discussed in a
coordinated way. Since Member
States are facing common challenges There are, as always, aspects which
in this area, they can only gain from are not covered in the report. I would
cooperating with each other to ident­draw attention to one in particular
ify common potential solutions. which seems important to me. This
Moreover, since the Union has re­concerns the impact of social trans­
sponsibility for the free movement of fers on the income and living condi­
people, the unrestricted supply of tions of those who receive them and,
services and competition in general, especially, on the alleviation of pov­
it has a keen interest in promoting an erty. A key question is how far it is
integrated approach so that social ob­possible to target payments on people
jectives are taken into account when most in need and what the price in
these issues are considered. terms of complexity and the costs of Padraig Flynn
4-Table of contents
Table of contents
Summary and conclusions
Chapter 1 Systems of social protection in the Union
Chapter 2 Adapting to change: recent reforms
and key developments
Chapter 3 Trends in social protection and its financing
Chapter 4 Unemployment compensation and incentives
to look for work
Chapter 5 Reforms in health care
Chapter 6 Social protection and the self-employed
Social protection and caring responsibilities Chapter 7
Sources and methodology
- 5 Table of contents
6-Summary and conclusions
Summary and conclusions
he development of extensive when the systems were designed. any of the other risks covered. At the Tsystems of social protection to The costs of maintaining the systems same time, in most Member States, a
support and assist people in need and of providing extensive support minimum level of income and basic
has been a prominent feature of have, therefore, risen significantly support is guaranteed to everyone irre­
European societies over the post-war throughout the Union. At the same spective of whether they can afford to
years. The systems which have been time, the income available to finance pay anything or not.
established differ in detail in terms of these costs has become increasingly
their organisation and methods of constrained as long-term economic As such, systems of social protection
funding, reflecting the cultural, his­ growth across Europe has slowed contribute significantly to maintain­
torical and institutional differences down markedly in relation to the ing social cohesion and strengthen­
which exist between Member States. rates prevailing before the mid-1970s ing solidarity within the Union. They
Nevertheless, they share a common when most of the systems were estab­have arguably played a major role in
characteristic of protecting all those lished. The financial constraints have helping societies cope with the in­
who require support, whether tempo­ been particularly evident in recent creasing strains imposed on them by
rarily, because they fall ill or lose years because of the recession of the the significant economic and social
their job or have a baby, or on a early 1990s and the prevailing con­changes which have occurred over
longer term basis, because they retire cern of policy to reduce budget the past two decades in particular,
from paid employment, become per­ deficits and limit public expenditure which have been accompanied by
manently disabled or have children to growth in order to contain inflation­high and rising unemployment, in­
bring up, irrespective of their ability ary pressure, to avoid imposing ex­creased uncertainty and instability of
to pay. cessive costs on businesses facing employment and income, the influx
increasing competition in markets in­of large and growing numbers of
side and outside Europe. women onto the job market, an
It is the universal nature and extent of ageing population as life expectancy
this support, and the scale of redistribu­ has risen and substantial changes in
tion of income entailed, which distin­ Although the commitment to pro­the structure of households, with a
guish systems of social protection in moting a high level of social protec­marked growth in the number of
Europe from those in most other parts tion throughout the Union, as people living alone and in lone-
of the world or, indeed, from private enshrined in the Maastricht Treaty parent families.
insurance schemes. While systems are (Article 2), remains undiminished
based on insurance principles in va­ and although attachment to the exist­
rying degrees throughout the Union, so All of these developments, however, ing system of social support re­
that in many cases the amount received have equally imposed strains on mains deeply entrenched in popular
in benefit is related to the contributions social protection systems themselves opinion, financing problems and
which have been made, there is no as the demands on them have esca­ the growing demand for support,
direct link between what each person lated and, more especially, as the coupled with the high and increasing
pays as their contribution to financing numbers of people requiring long- level of long-term dependency on
the system and their vulnerability to term support and assistance have in­ social assistance, have given rise to
illness, disability, unemployment or creased to levels never envisaged fundamental questions being asked
7-Summary and conclusions
in many Member States about the and Cannes, have drawn attention to measures which should be taken to
function, scope and means of funding the links between social protection make social protection systems more
systems of social protection. and the way it is funded and incen­ conducive to employment growth and
tives both to offer and to accept work. more efficient, to ensure that they
facilitate the free movement of labour Equally, there is growing awareness
between countries as well as the reali­Against this background, there is not of the substantial economic, social
sation of the potential benefits of the only general recognition that, despite and demographic changes which
internal market and increasing econ­their diversity, social protection sys­have taken place since the systems
omic integration and their equitable tems across the Union are facing were, for the most part, developed
distribution. common problems and a common and which are still occurring and of
need to adapt to changing circum­the very different context in which
stances and priorities, but also a they have to operate. In particular,
growing awareness of the potential economies in the Union are becom­
advantages of cooperation. This was Aims of the Report ing ever more closely integrated,
already evident in the adoption by the though at the same time more open to
Council in 1992 of two Recommen­competition from outside. Partly, as his Report is intended to contrib­
dations to work towards the conver­a result, increasing economic flexi­ Tute to that process by analysing
gence of social protection policies bility and the promotion of individual not only the way in which social pro­
and objectives and to establish com­initiative have become major objec­ tection systems are developing
mon criteria for defining minimum tives of policy, aims which systems across the Union but equally the
levels of income and social assist­of social protection can either work problems which they face and the
ance. The present Report, which is against by adversely affecting incen­ forces toh they have to respond
aimed at describing and analysing the tives or help to achieve by providing and so increase mutual under­
systems operating in the different support in the event of failure, so standing of the options for develop­
Member States and the way they are encouraging greater risk-taking. At ment, in the light of their diverse
developing, is a product of those the same time, the costs imposed on forms of organisation and institu­
Recommendations. businesses by the need to finance so­ tional characteristics.
cial protection are a growing cause of
concern, and prevailing demographic
The focus is in pail on the links be­
trends threaten to add significantly to
tween social protection and employ­
the need for income transfers and for A new framework ment. As such, it is intended as a
support throughout the Union in 10
complement (published every two for debate to 15 years time as the baby boom
years) to the annual Employment in generation reaches retirement age.
Europe Report, the latest issue of here is now, however, widespread
which was published in July. This Tagreement on the desirability of
examines trends in employment and going beyond the exchange of infor­Moreover, in the context of the in­
unemployment across the Union, the mation on policies and their effects, creasing emphasis of policy across
changes which arc occurring in the important as this is, to joint consider­the Union on raising employment,
nature of jobs and in the pattern of there is a growing focus on the poten­ ation on the future development of sys­
work, the factors which influence the tial links between prevailing systems tems of social protection in the Union
process of job creation and the of social protection and the process and the appropriate responses to the
measures taken in Member States to of job creation. The 1993 Com­ common challenges which they face.
increase the number of people em­mission White Paper on Growth, In consequence, the Commission has
ployed. competitiveness, employment called proposed that the Community institu­
for more detailed analysis of this tions and the Member States should
embark together on a process of co­issue, while successive Community In particular, it analyses — in Chap­
operative reflection on the future Summits in Brussels, Corfu, Essen ter 4 — rates of unemployment benefit