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Franz Rothenbacher

European Indicators of Social Security

In this edition indicators of social security for European countries are presented in order to assess the living conditions of European populations from the input side of efforts to produce welfare.

Living conditions of European populations are highly influenced by the systems of social security and social security spending. In this issue of "European social indicators" the activity of the state as one important actor in welfare prodcution - and the most important one in social protection - is presented with the use of social indicators. In the field of comparative social security there have been early efforts to monitor systems of social security on the part of the International Labour Organization (ILO) with its "The cost of social security" and the OECD with its Social Policy Studies series. On the level of the European Union, the European System of Social Protection Statistics (ESSPROS) was based on the Social Accounts, which were established as early as the 1960s. ESSPROS is at the moment the most elaborated monitoring system at the international level.

Some data from ESSPROS will be presented below. The volume of social protection expenditure increased throughout the period after World War II. In some countries it reached such a high level that in the 1990s reductions in social protection expenditure became necessary. Social protection expenditure in per cent of the GDP to some degree depends on the material wealth of a country, which is measured by the GDP per capita, but cannot completely explain its extent. In the European Union, the most advanced industrialized countries spend around or over 30 per cent of their GDP for social security. The southern European countries and Ireland - due to the fact that they are countries with a low level and different type of industrialization, namely a high proportion of family agriculture and import dependency regarding manufactured products - are not able to spend such large sums of money for social security as the more industrialized countries of central and northern Europe are.

The changing demographic situation of Europe which is illustrated by birth decline, ageing of the population, immigration and population implosion changes the distribution of social protection expenditure by function. Thus, old age spendings have become the largest part of expenditure, followed by health expenditure. Both account for two thirds of all social protection expenditure and are expected to rise in the future. On the other hand, public spending on family and maternity makes up for a very low proportion of social security spending and has been declining in relative terms over the last decades. The rise in unemployment expenditures in the last few years corresponds with the rising level of unemployment in Europe. The huge differences in unemployment figures within Europe, with unemployment rates being very high in Spain, Finland and Ireland at the moment, also influence the social security budgets negatively. Within Europe, there are still significant differences in social security systems which also heavily influence the distribution of social protection expenditure by function. While consequences of ageing populations require every country to maintain a certain income level for pensioners and to provide health care, other social policy fields such as family benefits are influenced by a set of different motives ranging from pro-natalism over promoting women's work to combating poverty.

In addition, the social protection systems in Europe differ regarding their financing. There are systems based on social security contributions by the employers and the employees plus contributions by the government, a system which prevails in most continental countries. Secondly, there is a system where most social security receipts are taken from taxes, and employers' and employees' contributions are raised only for, e.g. occupational pensions or survivors pensions in the public service (Nordic countries). A third model - United Kingdom and Ireland - combines low flat rate benefits with means testing.

Social protection receipts by sector of origin show that there are only three main sectors which in their specific combination make up the principle system characteristics. The social contribution system finances itself from receipts coming from the enterprises and the households. The universalistic social security system finances itself mainly from receipts coming from central and local governments.

The large extent of social protection expenditure of nearly one third of GDP poses the question how social security as well as redistribution by the state shapes the living conditions of people. A first indication could be the share of social protection expenditure as a proportion of final national consumption. In 1965 this proportion was roughly 20 per cent for the countries of EU6; until 1993 the proportion rose by 15 per cent to 35 per cent for EU12.

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Dr. Franz Rothenbacher is a sociologist at the Mannheim Centre for European Social Research and manageing editor of this Newsletter.

EURODATA Newsletter No. 5 Article 7, p.23