Social security in Europe

Setting the pace for universalism, solidarity, redistribution and equity

Europe is known for its comprehensive social security systems. In spite of being confronted by numerous shared challenges, a key conclusion of a new ISSA report – Ten Global Challenges for Social Security: Europe – is that European social security continues to set the pace for the values of universalism, solidarity, redistribution and equity.

In 2016, the International Social Security Association (ISSA) published a ground-breaking report Ten Global Challenges for Social Security. This report has since been instrumental in broadening the strategic outlook of many social security institutions. One outcome of this has been to motivate social security institutions to roll out more innovative solutions to the challenges they face.

The ISSA has published a follow-up report focused on the Europe region: Ten Global Challenges for Social Security: Europe. Incorporating feedback provided by the region’s ISSA member institutions – covering countries in Western, South and Central Europe and in Eurasia (comprising the former-USSR Central Asian and Eastern European countries, except the Baltic States) – the report takes stock of innovative administrative and policy solutions. Not only do these adjustments aim to permit the region’s social security systems to progress in a sustainable manner, but they also support the region’s contribution to meeting the global objectives of the 2030 Sustainable Development Goals.

A context of uncertainty and change

Europe is dealing with complex technological, labour market, demographic and epidemiological transitions, which present challenges for the design, financing and policy priorities of social security systems.

In response to a recent ISSA survey, social security institutions in Europe were asked to rank the challenges they faced by level of importance. From a list of ten global challenges, the survey ranked the challenge of labour markets and the digital economy as the most important. This was followed by population ageing, the technological transition, and health and long-term care.

The nature of these top-four ranked challenges underscores that all social security systems are operating in a context of unprecedented uncertainty. In some cases this has necessitated a recalibration of the core objectives of social security programmes.

Operational and design issues

To confront the challenge stemming from labour markets and the digital economy, an observed shift in social security programme objectives has led to greater investment in human capital. Primarily this is to support active inclusion in the labour market, but it is also to ensure a digitally literate workforce that is capable of satisfying employer demand and the needs of Europe’s evolving labour markets. A double-edged challenge to confront is the growing reality of labour shortages in some sectors while high levels of unemployment limit career opportunities for many European workers.

The increasing penetration of the digital economy in European societies presents a paradox for the region’s social security programmes. Some concern has been expressed about the future nature and quality of work, and thus a possible drop in workers’ coverage and contribution density. But opinions about the likely pace and sectoral effects of digital technology and increasing automation on possible job destruction, as well as likely job creation, have become more balanced. Certainly, the absolute figures of potential job losses are debatable. On the whole, it appears that the world of work is confronted by a process of slow evolution, rather than of calamitous revolution. Moreover, for certain forms of work, the importance of the human touch, discretion and empathy, as well as the technical dexterity of skilled hands will not diminish.

The ageing of Europe’s population is a generalized trend, the consequences of which threaten to be multiple and far reaching for European societies, labour markets and social structures. Greater urgency is now being given to the need to better protect and empower all people, young and old, in a seamless manner across the life course.

Policy choices about how national income is distributed in society have wide and lasting impacts. Across the region, there is no single model for the distributional role of social security programmes. Some systems may be weighted more in favour of older generations, especially the growing number of elderly and frail, while others may seek to push forward investment in the human capital of younger generations, infants, children as well as younger workers.

In the search for innovative responses, the development of new information and communication technology (ICT) – the technological transition challenge – has been a boon for the redesign of many social programmes. Social security institutions have adopted ICT to realize improvement in operational efficiency and to more effectively meet client needs. ICT also widens the operational spectrum of what is possible. But as a strategic enabler of social security services, ICT also brings new challenges related to the collection, storage, and protection of personal data.

Positively, the collection of personal data, and the possibilities that ICT opens up for data mining, holds the potential for interconnected and holistic public services tailored to each and every person. New technology can also facilitate coverage extension and enable people to take up their existing social security rights. Real-time access to vast quantity of personal data heightens the importance of ensuring that regulation keeps pace with technological changes to guarantee the protection of privacy and prevent the misuse of data.

One aspect of the challenge associated with the delivery of health care and long-term care is that the costs of health systems are rising. One factor is the increasing elderly dependency ratio, including a growing frail population aged 80+. The rising incidence of chronic noncommunicable diseases is another, as is the higher costs of new medicines and state-of-the-art medical technology. The goals of ensuring equitable and affordable access to appropriate health protection for all, as well as investing in an adequate health workforce and accessible health services, continue to be priority objectives. The growing use of e-Health service delivery options is emerging as one ICT-enabled response with remote health monitoring expected to play a central role in enabling ageing-in-place policies. The latter is acknowledge as being an important factor in reducing pressure on the health system and delaying as much as is reasonable institutionalization in a long-term care facility.

As a health policy challenge, it is notable that healthy life expectancy has not kept pace with increased average life expectancy. In spite of improvements in many health indicators, this would suggest that the social determinants of unequal health outcomes remain important.

Growing and widening levels of inequality across Europe, the fifth-ranked challenge, represents a more general concern that is also driving changes to social security programme design. Gender-neutral old-age social security benefits help address the gendered inequalities in earnings often experienced during the working life, which is not the case in private pensions markets. As health indicators reveal, the observed growth in inequalities cuts across different sectors. Nonetheless, a key perennial concern is income inequality. Questions are being asked of the current ability of social security systems in Europe, alongside progressive tax systems, to meet their conventional role of redistributing income, as well as their capacity to mitigate risks and to support rehabilitation and inclusion. There is disquiet that growing inequalities are often most pronounced amongst the most vulnerable in society.

Higher expectations

A general observation that accompanies the ranking of challenges in Europe is the distinction made between contextual challenges that pose fundamental operational risks (economic, technological, demographic, and epidemiological shifts) and challenges that are linked more to expectations regarding the broader adequacy of coverage.

We know that new communication technologies foster not only new means of communication but also novel mechanisms to enable political participation and inclusion. With social media increasingly used to communicate and inform on matters of general public interest, social security administrations are aware that they, too, must respond rapidly to satisfy public expectations.

To better meet higher public expectations, the sixth challenge, social security administrations are thus seeking out new avenues to improve service quality, which position the user as the central focal point of all services. Social innovation strategies are being used in some European countries to solicit the views of beneficiaries, and even to shape personalized services to the voiced needs of the individual.

Closing the social security coverage gap is major global challenge. As the seventh-ranked challenge in Europe, the nature of the coverage challenge is more nuanced. It is defined more commonly in terms of partial effective coverage as well as the relative adequacy of coverage. As one broad measure, in the European Union (EU) nearly 50 per cent of workers in non-standard work and self-employment have inadequate access to social security and public employment services. Labour markets are becoming more fragmented and precarious, and more workers have part of their economic activity shaped by digital platform work. Importantly, the loss of coverage that this can imply translates as lost contributions and tax receipts, but creates a likely higher future demand for tax-financed social protection. The challenge of providing and maintaining adequate coverage has thus risen on the agenda.

Among vulnerable workers, young workers (aged 15–25) transiting from full-time education to full-time work present specific challenges. Representing the report’s eighth challenge, younger workers have greater difficulty in entering formal stable employment than other age groups, and young people have a higher probability of being employed in the informal economy than do older workers. Over a third of all young workers in the region are engaged in the informal economy.

For younger workers – as for all workers – the digital transition presents an additional hurdle to overcome. To support employer demand for digital skills and to meet the continuous learning needs required for the knowledge economy, investments in human capital formation by government, social security administrations, public employment services, the social partners and education and training services present a way forward.

As for the previous challenge, the ninth challenge (migrant workers) concerns how to better meet the social security protection needs of a specific part of the workforce. All too often, discussions about migration focus on questions of irregular and illegal migration flows. As the report underlines, care should be taken not to overlook the social security rights of migrant workers – the legal basis of which dates from a bilateral agreement signed between France and Italy in 1904. The EU’s multilateral experience and the bilateral agreements to which many countries of Western Europe are signatories offer good practice examples to help other countries in Europe better protect growing numbers of legal migrant workers.

As international migration shows, in an increasingly global economy, national economies have become more interconnected and interdependent on many levels. This reality frames the importance of the tenth challenge: new risks, shocks and extreme events.

As for other regions, Europe is exposed to environmental, social, health, political and economic shocks. However, the frequency and severity of such shocks are perceived to be increasing, and new risks and sources of external shocks are emerging. These exacerbate the uncertainties associated with the conventional life-cycle and labour market risks covered by social security systems, and they demand a wider appreciation of risk in society.

The different responses required to meet these new challenges and risks act as an important reminder that the roles of social security have always been multiple. Dealing with new risks, just as for old ones, requires the tracking and assessment of identified risk factors, the design and implementation of preventive actions, the availability of adequate income compensation and mitigating measures, as well as forward planning to support rehabilitation and prevent the future reoccurrence of downside risk events.

One might say that these multiple roles define in large part, what we refer to as, comprehensive European social security.

Take-home message

The report shines important light on the fact that European social security systems are confronted with a broader palette of risk and a greater number of emerging threats to social cohesion. Risks also exist that might test the future sustainable development of social security institutions. These institutions are equally confronted with the need to satisfy higher public expectations for adequate, equitable and sustainable social security protection. All of this, however, must be achieved in a context of limited resources. These are the challenges.

Ultimately, the report’s take-home message is a simple one: the multiple roles played by Europe’s comprehensive social security systems have never been so important.

Sources

ISSA. 2016. Ten Global Challenges for Social Security. Geneva, International Social Security Association.

ISSA. 2019. Ten Global Challenges for Social Security: Europe. Geneva, International Social Security Association.


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