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What Can We Learn about Social Welfare Institutions by Analyzing 'The Cost of Social Security'? The Case of Portugal

Mathias Maucher

This article has a double purpose. On the one hand, it intends to report on an ongoing joint EURODATA/ILO project which aims at building up a data infrastructure on 'The Cost of Social Security' (COSS), an ILO survey on financial transactions of social security institutions. A first evaluation of the progress made will focus on the extent to which the database has already been implemented. On the other hand, this contribution seeks to screen the options for an institution-oriented welfare state research based on COSS, using Portugal as a sample case for analyses of the distribution of expenditure by functions or institutions. First results are embedded in a general description of the main lines of development of the Portuguese system of social protection and its configuration for three main periods. The text concludes on an evaluation of the way and the accuracy with which these institutions are statistically reported on by COSS.

Brief presentation of COSS

The feature in the previous edition of the EURODATA Newsletter outlined the concept for building up a machine-readable version of ILO's cross-country inquiry into the financial transactions of schemes, funds, agencies and programmes of social protection, 'The Cost of Social Security', covering the period 1949-1993 (cf. Maucher 1999). It has been carried out in the form of a questionnaire-based survey. As a rule, the responses are given by the national ministries in charge of social security. In several cases, however, the task of completing the tables has been assigned to the national statistical offices.
In accordance with the inquiry's concept, inspired by a combined functional and institutional approach, all social protection schemes and welfare provisions meeting three conditions are to be included: The individual schemes should either maintain or grant incomes or provide medical care by giving individual rights to or by imposing specified obligations on a public, semi-public or autonomous body and should also be administered by such agencies. The inquiry's focus is on nine contingencies for eleven types of social welfare institutions (cf. Maucher 1999, Graph 2). Except for two amendments, the categories of expenditure and receipts have remained unchanged since 1949 (cf. Maucher 1999, Table 1).

News from an ongoing project

Within the last few months substantial progress has been made with regard to data entry and processing. In the case of Germany, France, Portugal and Spain, the documentation of sources, datasets and institutions has been terminated. For other countries such as Belgium, Czechoslovakia, Finland, Ireland, the Netherlands and Norway, this task has mainly or partly been accomplished. As for the core part of the database, its contents and components, i.e. the datasets containing both the original documentation and the basic tables as well as the documentation apparatus (cf. Maucher 1999, Graph 4), only minor adaptions had to be made. The same holds for the database structure. Of both dimensions, especially the segment reporting on institutional stability and change needed a redesign. A user interested in analyzing the development of amount and/or structure of expenditure and receipts over a longer span of time is now enabled to retrace schemes, funds, agencies or programmes. The database will store information on the period of time those institutions have been integrated into the inquiry, the name of the schemes they have been integrated into or split off from, either in real, administrative terms or in their representation by COSS, as well as references to institutions preceding or succeeding the considered scheme, fund, agency or programme. Figure 2 provides two illustrations. It is only from 1958 on that 'Social insurance' and 'Voluntary social insurance'-i.e. mutual benefit societies-are reported on separately. Both sectors, however, always have formed sectors apart from each other, working on independent administrative structures. In 1979, formerly institutionally fragmented medical and social services were integrated into a National Health Service and consequently can be labelled as 'succeeding institution' to 'Health Services' (cf. Figures 3 and 4). Additionally, the corresponding institution(s) in the basic tables can be looked up for each institution contained in the original documentation (cf. Maucher 1999, Table 3).
A new technical solution for giving future users access to data and the meta information on countries, inquiries, datasets and institutions has been investigated and already realized to a large extent. We now intend to provide a browser-based online access on the database, from the project's final phase onwards, i.e. by the end of 2001. A test version, containing at least selected datasets as well as the complete documentation for Germany, France and Portugal, will probably be launched as early as the end of this year (please visit the project's homepage, for updated information).

The Portuguese System of Social Protection

The description of organizational structures, the personal scope of social protection schemes and the central benefits provided by them will focus on social insurance. This paragraph is should illustrate structure and contents of the country chapters planned in the data handbook 'European Social Security Systems since 1945' to be produced within the series 'The Societies of Europe'. Social services (acção social), especially for the health and family function, are only treated to the extent necessary for the evaluation of the statistical information made available by COSS, showing gaps regarding the inclusion and irregularities in terms of the functional attribution of social assistance benefits, especially for hospital care. A statute of social assistance (Estatuto da Assistência Social), voted by Parliament as Law No. 1998 of 15.05.1944, for the first time sytemized the main regulations for this function. The basic piece of legislation still in force dates from 1971. Applying a modernized terminology, Decree-law No. 413/71 of 27.09.1971 shifted the emphasis to clients' participation in the production of benefits for persons with specific needs, deficiencies or disadvantages, preventive action, and the development of local structures of welfare provision (Maia 1985: 24ff). It encouraged a closer coordination of public and private assistance and aimed at strengthening a complementary role to social insurance for all, means- or income-tested public social assistance services (assistência social pública) (Ahrens 1998: 107f). In contrast to Scandinavian or central European patterns of welfare provision, social assistance, however, rather seldom means 'cash benefits', especially in a historical perspective. Sharing a general trait with the other Meditarranean EU member countries (cf. Ferrera 1997: 14ff, enumerating seven general characteristics of the Greek, Italian, Portuguese and Spanish welfare state), the Portuguese system of social assistance lacks a general minimum income scheme for persons in precarious financial situations without access to social insurance benefits (Leienbach et al. 1994: 145).

When the first legislative steps in order to shape the system of social welfare were undertaken by the new regime in 1933, the 'New State' (Estado Novo) was able to build on four elements: First, on a system of protection in case of work accidents, extended in 1919 to cover all employed persons. The patronal responsibility for occupational injuries had already been established six years earlier. The agency structure for this contingency has never approached or even been merged with other public or semi-public administrations. Since the 1980s it has been run by private insurance companies-and is therefore no longer reported on by COSS. Second, on systems of privately organized social protection, either in the form of company funds or organized as mutual benefit associations, both building on the solidarity of clearly delimited groups. By the mid-1930s, approximately 30 company retirement schemes existed, catering for about 75,000 individuals (Guibentif 1997: 52). In this segment, fragmented by company affiliation and/or occupational status, several pension funds (caixas de pensões de reforma) had already been created around the turn of the century for workers of specific private companies or public enterprises, mainly due to selective patronal activities (Maia 1985: 35). A third element to fall back on had been administrative expertise. Even if the introduction of an obligatory social insurance system covering sickness, workplace accidents, old-age, invalidity and survivors' pensions-based on five decrees of 10.06.1919-had failed completely due to an unstable political and economical environment, a qualified staff could be taken over. In addition, the assets of funds which had been institutionalized without ever having paid any benefits could be transferred into the new structures.

The Constitution of 1933 (Article 41) reaffirmed the State's obligation to promote conditions favourable for the development of institutions of social welfare and solidarity, including the mutual benefit societies (Maia 1985: 45). This general clause, however, did not entail the State's responsibilty to participate in social welfare financing or administering. The National Labour Statute (Estatuto do Trabalho Nacional), promulgated in September of the same year, clearly showed the preference for corporatist arrangements in the field of labour relations and social welfare. Articles 48 and 49 already mentioned the main characteristics of the system of social welfare to be built up in the following years: its corporatist organization, its financing by employers and employed persons, the risks to be covered and-at least a formal-co-determination by representatives of employers' associations and trade unions.

Those principles finally found their concrete realization in Law No. 1884 of 16.03.1935. State action was to be confined to the tasks of structuring and legally framing the development of institutions offering social protection. It defined four types-called 'categories'-of institutions of social welfare, virtually unchanged until the first major reform in 1962. For the next three to four decades to follow one can distinguish between a corporatist (1st category), privately or state-initiated (2nd category), associative (3rd category), and public (4th category) sector (cf. Table 1). The first pillar consisted of trade union funds, established from 1935 onwards, social welfare institutions for agricultural workers, functioning from 1940 onwards, and funds for persons working in the fishing industry, starting their activities in 1937. The personal scope of the agricultural 'system' was later extended to cover other groups of persons in similar socio-economic conditions and living in rural areas. The legal framework conferred the task of implementing one core part of the system, the trade union benefit funds, to the parties to the wage agreement-by means of sectoral agreements between trade unions and employers' associations (Guibentif 1997: 51). Although the terminology used suggested that those funds were the backbone of the system, they only became important in terms of membership and benefit payments with a time lag of several years. For all employed persons, the adherence to the occupation- or company-based schemes was compulsory. Benefits were provided in cases of sickness, invalidity, old-age and death, generally based on insurance principles, to be supplemented by some social assistance elements. The distribution of social contributions was fixed by law at a ratio of 2:1 between employers and insured persons. By the mid-1950s the financial burden amounted to 13.5% of gross wages or salaries, divided into shares of 8% and 5.5%, however (Leão 1955). The welfare funds of categories Ib and Ic, operating on a thin financial basis, for many years only provided meager benefits for surviving family members.
All other types of social protection agencies with a tradition reaching back to a time before Law No. 1884 were integrated into the legal typology and classified under categories II to IV. The social welfare funds of category II basically showed the same organizational and actuarial principles as those based on collective agreements. Those pensions or social welfare funds (caixas de reforma ou de previdência), however, could be established either on the basis of a private initiative of persons interested in a common social protection or by government action. All civil and military public service personnel was covered by specific funds (instituições de previdência dos servidores do Estado e dos corpos administrativos), united under category IV, providing for the same types of benefits as the trade union funds, but under the supervision of the Ministry of Finance. Even if company funds and mutual benefit societies (associações de socorros mutuos), a core element of intermediate structures within the welfare state, were integrated into the legal typology of social welfare institutions by Law No. 1884 of 1935-namely as social welfare institutions of the 2nd and 3rd category, cf. Table 1)-, this basic legislation would not offer coordination mechanisms with regard to membership rules, entitlement conditions and benefit regulations in the different types of institutions. In 1896, the State had intervened with a first definitive regulation, several adaptions to this legal framework were implemented in 1931 and 1932 (Maia 1985: 42), remaining in force until 1981. These mutual aid societies, often named 'montepios', showed a high degree of spatial concentration in the urban centres, i.e. especially in the Lisbon and Porto regions. Form and level of benefits in case of invalidity, old-age and death were fixed in the statutes and could consequently differ to a certain extent. Confronted with the 'promotion' of corporatist structures by state authorities after 1935, their importance in relative and absolute figures did consequently not cease to decline within the following decades. It is only with the establishment of the National Health Service after 1979 that the mutual aid societies could record a certain upswing, attributable first to system deficiencies and second to a growing share of costs to be met by the private households.

At the latest in the 1950s, an evaluation of the system established until then made obvious that there were several insufficiencies (e.g. the low benefit levels) and inadequacies (e.g. scarcely 12% of all residents aged 15 to 64 were affiliated to a social welfare fund of categories I or II by the end of 1953). State authorities tried to tackle them with a twofold strategy (Maia 1985: 51f): First, the aim was to increase fund membership by enlarging the personal scope of already existing funds or by establishing them for professions or branches not yet covered by government initiative. As a consequence of the observed lack of initiative on the part of trade-unions and employers, as early as 1940 the State had been conferred the right to act, a competence confirmed in 1943. However, the gap between legal regulations and social reality remained rather deep until the 1970s, when most of the employed persons had been affiliated to one of the more then 1,000 funds. In 1962, of all employed about 30% in urban and 80% in rural areas-outside the fishing industry, with full coverage-had not yet been members of any fund (Ahrens 1998: 105). This deficiency also held for most of the self-employed outside the liberal professions. As a second 'reaction', entitlement conditions were improved (e.g. the entitlement to family allowances as well as to medical and pharmaceutical assistance was maintained for old-age or invalidity pensioners), benefit regulations were designed more generously (e.g. with regard to the medical protection in 1960) or new types of benefits created. The introduction of minimum pensions in case of invalidity (1960) or old-age (1961) quite well illustrates this last approach.
Even if the new basic legislation-the Law on Social Welfare (No. 2115) of 18.06.1962-continued the typology of four 'categories' of social welfare institutions, in its wake a 'discrete renunciation of corporate ideas' (Guibentif 1997: 52) became obvious. The first step in a series of organizational reforms during the next decade was undertaken by means of a redefinition of the membership structure of categories I and II. Whereas the caixas sindicais de previdência from then on exclusively covered employed persons, the affiliation in caixas de reforma ou de previdência was restricted to independent workers. Second, Law No. 2115 offered an instrument to apply model rules to a growing number of funds, referred to as general scheme-'a phrase that was to become commonplace' (Guibentif 1997: 55). Third, during the 1960s the largely corporatist social welfare system organized on a national or two-tier (north-south) level by occupations, branches or on the company level, continuously overlapped with and was finally replaced by a combined regional-national-level configuration, independent of occupation, employer or occupational status. The first district funds had already been set up in 1947. In the 1960s they became a vehicle for gradually achieving a (quasi) nationwide coverage of the workforce. From 1977 on they were transformed into 18 regional social security centres (reduced to 5 in 1993), one major step to implement the concept of unified and decentralized social security. Additionally, from 1942 onwards, the government had decided to establish a number of family benefit funds with district offices. After 1977, those two agencies were integrated. Another important change concerned the management of benefits. Whereas the district funds became responsible for the short-term financial transfers-i.e. sickness, maternity and family benefits-, a new National Pension Fund (Caixa National de Pensões) (category Id of phase 2), had to administer the long-term cash benefits (old-age, invalidity and survivors' pensions). In 1977 it was absorbed by the National Pensions Fund (Centro Nacionais de Pensões). Additionally, a national occupational diseases fund (Caixas Nacional de Seguros de Doenças Profissionais) had been established. A financial reform introduced a pay-as-you-go-system, still to be supplemented by elements of capitalization-facilitated by a transfer of capital investment from the social welfare funds. In 1970, all trade union funds had to pay survivors' pensions, a consequent extension of spouse supplements to old-age and invalidity pensions, introduced in 1963. In the same year, the range of benefits-at a rather low level-for members of the rural funds (category Ib) was enlarged to include old-age pensions, and, finally in 1975, by invalidity pensions. In the four years prior to the revolution of 1974, reforms concerned to a lesser extent the structures, but rather the benefits-with the exception of public health and assistance. In 1973, e.g., uniform rules for family benefits were elaborated, presenting a first step of harmonizing the schemes for those employed in the private and public sector.
The revolution of 1974, initiated by the Movement of the Armed Forces, led to a fundamental reshuffling of the social welfare sytem, first with regard to its conceptual basis, second in organizational terms, and third regarding the range of benefits. It took, however, a decade until these major amendmends became effective and could be moulded into a new structure, laid down by Law No. 28/84, the legal framework still under application up to the present time. The constitution of 1976 reintroduced a right to individual social protection, Article 63. In the same article it fixes the guiding lines of the new concept of social protection, obliging the state to promote and coordinate the establishment of a tendentiously universal, rather uniform and decentralized system (Maia 1985: 88ff). Trade unions, employers' associations and the insured persons were 'invited' to cooperate in the reorganization of social welfare institutions and given a central role in their management. The constitution stipulated that the system of social protection had to cover the risks of old-age, invalidity, death, sickness and unemployment as well as to ensure a minimum income for persons in precarious economic situations. Article 108 for the first time stipulated the State's participation in the financing of social protection. This was the fundament for the establishment of a universal, tax-financed scheme in addition to categorial, social contribution-based schemes, with elements of individual and derived social protection. These changes had to entail repercussions on the government level, well illustrated, e.g., by Guibentif 1997 and Monte-Stolberg 2000.
Article 2 of the new framework legislation, Law 28/84 of 14.08.1984, definitively dismantling the administrative structures linked the corporatist organization of social welfare, names the two aims of the redesigned system: On the one hand, it should provide for the social protection of employed persons and their families in case of the provider's restricted ability to earn his/her own living on the labour market, his/her unvoluntary unemployment or death. On the other hand, persons outside the protected workforce lacking sufficient financial resources should not be left without a 'safety net', either. The actual system structures having evolved since the mid-1980s reflect this dichotomy. Contributory schemes are juxtaposed to, but at the same time coordinated with non-contributory schemes (cf. Table 1). The public service employees (around 634,000 persons in 1990, i.e. 14% of all insured persons) continue to be covered by specific agencies with distinct entitlement conditions and benefits regulations, which, however, are harmonized with the rules of the general scheme. An exhaustive overview of the components of the macro-system of social protection is given by das Neves 1993: 20ff.
Within the schemes, mainly financed by social contributions, a 'concentration process' was to be observed. Members of sectoral and company funds had gradually been transferred to the General Scheme (Regime Geral), which became more and more defragmented. In 1993, only a dozen special schemes (regimes especiais) had survived, covering specific professional groups (cf. Table 1), with about 150,000 persons as of 31.12.1990 (Ahrens 1998: 128). They are to be phased out in the medium term. The categories Ia, Ib, Ic and II of phase 2 now form the general scheme (phase 3, type 1a) in the proper sense, bringing together employed and self-employed persons, about 3.75 million in 1990, 83% of the insured. The system for agricultural workers and other categories of rural inhabitants (category 1b of phase 2) became part of the general scheme in 1986, however, still is administered as a sub-scheme. Its management had be handed over from the casas do povo to the regional social security centres. The institutions referred to as category Ia in phases 1 and 2 were partially transferred to industrial and occupational schemes (regimes profissiais complementares) which now offer additional group-specific advantages in cash or kind. As the last element in this tissue of contributory schemes, a voluntary (pension) insurance (seguro social voluntário) was set up by Decree-law 380/89 of 27.10.1980. It has not played a significant role ever since, neither in terms of membership nor in terms of benefit provision.
The so-called non-contributory scheme (Regime não contributivo), offering means-tested benefits, had its roots in the tax-financed social pension (pensão social), introduced in 1975. Within the next few years it had been improved and supplemented with other benefits for families and the unemployed. Those benefits finally were integrated into a new framework, based on Decree-law No. 160/80 of 27.05.1980. The other innovation outside the social insurance schemes took place in the field of health. In 1979, a National Health Service (Serviço Nacional de Saúde) was established, giving universal and principally cost-free access. This service succeeded an exclusive and fragmented system of health care, run by the medico-social services of the social welfare funds and limited to their members. In addition, those funds had partially covered hospital care.
In the immediate wake of the revolution, the range of benefits had been enlarged to include transfers for unemployed persons in the form of assistance payments (subsídio de desemprego), based on Decree No. 411/74 of 05.09.1974. This new scheme was rebuilt to form an unemployment insurance in 1985. Further adaptions on the level of benefits are closely linked to efforts aimed at harmonizing or at least making more compatible the Portuguese legislation with European social law. After having attained this goal, even at inadequate benefit levels, stabilization and continuity became and still are the prior concern for the decade to come.

Options for an institution-oriented analysis of social policy

Serving as a basis for research on social protection financing and expenditure, COSS offers several options of analysis. First, differentiated by the social risks to be covered by the inquiry which normally correspond to social policy functions. Figure 1 reflects the distribution of expenditure for social welfare by functions. Both 'strong points' and problematic aspects are highlighted by the histogramme. On the one hand, one might mention the long historical period covered, the continuity with which the different functions can be looked at. On the other hand, functions are not always reported on separately, and-what is even more important-the attribution of specific cash transfers, social services or benefits in kind is not made transparent in the documentation accompanying the questionnaires filled out by the national agencies replying to the ILO. For example, it is not possible to 'isolate' the expenditure for the first three functions listed in Figure 1, for long periods of time. Only from 1965 on are the first two and the third category clearly separated. Finally, invalidity pensions are to be detached from the other types of pensions only for the decade starting in the end of the 1970s. Attributing benefits to functions is hardly ever a great challenge for 'unemployment' or 'employment injuries'. However, it is often far from clear which social welfare activities are summed up under the heading 'social assistance' of 'family benefits'. Which services are included, which agencies skipped? A more general problem resides in the fact that certain benefits or services or even complete functions are not continuously or comprehensively reported on. An illustration is given for 'social assistance' for the years 1961 to 1963 by Figures 1 and 2. In the table for 1961 a remark states that it has not been possible to include the same institutions as in the years before. The fact that this has not been considered leads to a cut of its relative share by 50% in 1963. For the years 1962 and 1963 no data were made available, entailing 'artificial' increases for all other functions. One major potential' of COSS, however, resides in its long 'tradition'. Long-term developments can be grasped well, e.g. the continuous relative decrease in importance of family and social assistance benefits. Their high share up to the end of the 1950s indirectly hints at the state of development of the Portuguese social protection system, especially at the low 'maturity' of social insurance schemes. The growing relative share of 'sickness/health care' after 1979 can mainly be explained with the establishment of the National Health Service.
The second main line for analysis, namely of institutions, is already suggested by the inquiry's concept, focusing on central schemes, funds, agencies, or programmes of social protection. Organizational reforms are normally reflected in the structure of reporting, leading to ruptures. As can be learned from a comparison of Table 1 with Figures 2 to 4, the degree of correspondence between 'real' organizational patterns and the system as reported on by COSS is fairly high. All major schemes are represented statistically, all newly arranged schemes clearly reflected. Especially the results for the period 1984-1990 (Figure 4) show great stability. Although COSS from 1988 onwards separately reports the 'voluntary social insurance', no data are visible in the graph due to very limited weight. In case an institution is to provide for a broad range of different benefits for diverse target groups, i.e. if it is not restricted to a certain field of social protection by name or legal definition, cross-tabulations of institutions and functions, however, are not generally possible. This difficulty might be rather negligible if data for 'sickness' and 'health care' are not indicated separately. At least estimations are possible, because the latter as a rule is mainly provided in the form of medical care and other benefits in kind, whereas cash benefits to compensate for periods of temporary absence from work should make up for the 'lion's share' for the first function mentioned. A distinction, however, is no longer possible if 'sickness/health care' are not distinguished from benefits to be attributed to the 'invalidity' function. In the Portuguese case, a user is confronted with this limitation up to 1963 regarding 'social insurance'. For 'public service employees', a distinction, however, has already been made from the start, but has been discontinued e.g. in the periods 1978-1983 and since 1991. As a consequence, this scheme had to be subsumed under the residual category 'other schemes', cf. Figure 1. Nonetheless, COSS normally shows a degree of correspondence between legally defined and statistically reported institutional structures. Even if a consistency over time can hardly be achieved over the whole span of time covered by COSS, data are fairly appropriate for analyses limited to medium-term periods of time. Both strategies of analysis might be impeded to a certain extent by gaps, incomplete data, intransparent statistical information or inconsistencies regarding the way and extent, schemes that should be taken account of according to the concept actually are covered. Background knowledge of institutions and organizational structures and their changing role or importance over time, however, remains central, both for an understanding of data and documentation contained in the database on COSS and for a case-specific evaluation of the problematic aspects mentioned.


Ahrens, Ulrike (1998). Alterssicherung in der Europäischen Union IV: Alterssicherung in Portugal. Eine institutionelle und empirische Analyse. Berlin: Duncker & Humblot.
Barreto, António (Coordinator) (1996 and 1999). A situação social em Portugal, 1960-1999. Volumes 1 and 2. Universidade de Lisboa, Instituto das Ciências Sociais (ICS); base.htm.
das Neves, Ilídio (1993). A Segurança Social Portuguesa: Problemas, Realidades e Perspectivas. Lisbon: Instituto Superior Politécnico Internacional (ISPI).
Ferrera, Maurizio (1997). 'General Introduction'. In MIRE, ed. Comparing Social Welfare Systems in Southern Europe. Volume 3. Paris, 13-24.
Guibentif, Pierre (1997).'Changes in the Portuguese Social Security System'. In MIRE, ed. Comparing Social Welfare Systems in Southern Europe. Volume 3. Paris, 47-66.
ILO (several years). The Cost of Social Security. Geneva: ILO;
Leão, António (1955). 'Die Sozialversicherung in Portugal'. Internationale Revue für Soziale Sicherheit. 8(12): 403-24.
Leienbach, Axel, et al. (1994). 'Portugal'. In Leienbach, Axel, et al. Soziale Sicherung in West-, Mittel- und Osteuropa. Baden-Baden: Nomos, 137-45.
Maia, Fernando M. (1985). Segurança Social em Portugal. Evolução e Tendências. Lisbon: Instituto de Estudos para o Desenvolvimento.
Maucher, Mathias (1999). 'A Database on ILO's 'Cost of Social Security''. EURODATA Newsletter 10: 1-13.

Mathias Maucher
Mannheim Centre for European Social Research, EURODATA/AB I
L7,1, 68131 Mannheim
Tel: 0049(0)621-181-2830
Fax: 0049(0)621-181-2834

Mathias Maucher has graduated in administrative sciences and works as researcher at the EURODATA Research Archive. He is manager of the MZES Family Policy Database. Last autumn he started work on a database on the financing of social security.