Transcript No Slide Title

Financing of social protection
in Europe:
Overview of the main issues
Mechelen, 13 February 2006
Monika Queisser, Principal administrator
OECD, Social Policy Division
(www.oecd.org/els/social)
courriel: [email protected]
Trends in OECD countries

Non-wage labour costs becoming an issue

Atypical careers are be becoming typical

Scaling down of benefits requires more redistribution
but

Tighter contribution-benefit links to increase work
incentives
2
Labour cost issue

Tax burden affects employment

Effects could be either on supply or demand side

On demand side: taxes paid out of labour, capital or
transfers
3
Reduction of burden on labour…

by reducing overall tax burden

by shifting the burden on capital

by shifting the burden on transfers
but

effects will depend on adjustment of labour markets
4
To what extent do countries rely on
social security contributions ?
Public social expenditure in % GDP
30
DNK
SWE
FRA
28
DEU
26
AUT
FIN ITA BEL
GRC
24
EU-19 POL
22
GBR
20
PRT
LUX HUN
NLD
ESP
18
CZE
SVK
16
14
IRL
12
0
10
20
30
40
Social security contributions in % total tax revenues
50
5
Tax wedge: level of social security
contributions and income taxes
60
Income tax
Employer contributions
Employee contributions
50
40
30
20
10
IR
L
D
N
K
C
H
E
G
BR
FI
N
LU
X
E
SW
P
ES
PR
T
IT
A
L
BE
AU
T
D
EU
FR
A
N
LD
0
6
Level of social security contributions,
% GDP, 1965-2003
20
20
18
18
16
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
0
0
1965 1970 1975 1980 1985 1990 1995 2000 2005
France
Sweden
Austria
Belgium
Germany
Netherlands
Italy
EU 19
United Kingdom
Denmark
7
Pensions as cost factor

Germany: use of eco-tax to reduce contribution rate

France: use of CSG to limit increases

Solidarity contributions in LUX, BEL

Overall: state transfers for pensions frequent
8
Adressing atypical careers

Tight contribution-benefit links require full careers

Interrupted careers partially protected through credits

Old-age safety nets/guarantee pensions will become
more important

Potential conflict with Bismarckian insurance principles
(e.g. Germany: constitutional issue)
9
Redistribution in pension systems

Two distinct regional trends in pension reform

More redistribution in Western European countries

Less redistribution and very close contribution-benefit
links in Italy and CEE countries

Preliminary OECD calculations show effects to be
substantial
10