Download Social Platform Seminar report on "Demographic change

Social Platform Capacity-Building Seminar:
“Demographic change and the financial sustainability of
social protection systems ”
16th November 2005 –10.00 – 16.00 h
SEMINAR REPORT
Contents
1.
Introduction
2.
Key issues of the presentations and discussions
3.
Participant list
1. Introduction
The Social Platform decided to hold a seminar on demographic change in the context of its
work programme for 2005. It was agreed that the specific focus should be on the link
between the ageing of society and the financial sustainability of social protection systems in
Europe. As demographic change will remain on the European policy agenda in the next
years, the seminar aimed to develop the knowledge of members in this field in order to be
better prepared for current discussions such as the debate about the future European Social
and Economic Model.
Members expressed their expectations for the seminar on the registration form. The main
interest was to learn how social protection systems can be modernized in order to better
integrate the needs of specific vulnerable groups such as people doing unremunerated work
(most often women), children, young people etc.
The seminar was structured around three presentations. A fourth presentation by Michelle
Lewis, Trades Union Congress (UK) on Pension Reforms in the UK was cancelled at the last
minute.
- 1. presentation: Professor Jos Berghman (K.U. Leuven) presented a general
introduction to the main challenges in relation to demographic change and the
funding of social protection systems
- 2. presentation: Nicole Fasquelle (Belgian Planning Bureau) explained the way
the Belgian state tries to calculate the long-term perspectives of the sustainability of
its social protection system.
- 3. presenation: Pascale Vielle (Institut pour l’égalité entre les hommes et les
femmes, Belgium) discussed the political discourse of demographic change and
social protection from a gender perspective
2. Key issues of the presentations and the discussion
European social protection system and the challenges of demographic change
Jos Berghman gave a comprehensive introduction to the key issues of the debate.
Demography
Jos Berghman stated that demography in itself is not important for social policy; what matters
are the socio-demographic aspects that will have an impact on the relevant policies. The
relationship is determined by the birth rate which determines the number of people available to
work, the work then determines the income and the income has to be sufficient in order to pay
for the living of the people, including the people who are not able to work and have income.
Demographic trends
Two different discussions have to be distinguished. Firstly, there is a structural trend. Life
expectancy is growing and the structure of society is changing (end of the male-breadwinner
model). Secondly, there is a transitory phenomenon which is the baby-boom generation. This
specific situation will change again as birth rates are going down.
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Social Protection Systems
Health Care – Ageing alone has not a very big impact on health care expenditure, as people
need most of the money during the first and the last month of their lives. However, the intensity
of care is changing. Long-term care is very expensive because it is very labour intensive. The
possibilities for cost containment in this area are limited.
Pensions – Jos Berghman recalled that pension systems are insurance systems and not savings
systems. Two systems can be distinguished – funding and pay-as-you-go-systems (PAYG
systems). In funding systems the money is invested over the years in order to accumulate
capital that the pensioner will spend gradually. The main weak point of this system is the risk of
inflation that would diminish the capital (experience of the two World Wars).
In PAYG systems the pension contributions paid in one year are directly used to pay the current
pensioners. The main weak point of this system is that there has to be balance between
contributors and pensioners. If this is not the case, the state can either increase the contributions
or cut in benefits. While the funding system is based on individual responsibility, the PAYG
system is based on solidarity which makes it more open for redistribution purposes. The PAYG
system has to be organized in a state structure as only a state can impose on its citizens to
contribute now and believe that when they are old the new generations will pay for them.
Most European countries have mixed systems that combine a PAYG system with funding
elements. Three pillars of pensions can be distinguished: 1. pillar – state pension; 2. pillar –
occupational pensions, 3. pillar – private pension. A general trend in recent pension reforms is to
favour the 2. and 3. pillar and to diminish the first pillar. This implicitly favours people with
higher income as only they can afford to have a 2. or 3. pillar.
Jos Berghman advised social NGOs to work around the concept of “social cohesion” that is at
stake in the current debates about pension reforms. Without social cohesion a society cannot
work properly.
Welfare State Models
Jos Berghman distinguished between different welfare models. The Beveridgean model is
based on a concept of a generalized minimum protection for everybody (eg UK). In the
Bismarckian model benefits are earnings related (eg Germany, France). Originally, the
main purpose of this system was to pacify labour relations as wages are negotiated between
social partners and employers. Jos Berghman pointed out that the Bismarckian model is in a
crisis as social partners do not represent many citizens any more. The role of NGOs
becomes more and more important as they represent diversified interests and identities.
A third model is the Nordic Model (eg Sweden, Denmark) where the social partners work
in close relationship with the state and a lot of emphasis is put on education, reinsertion in
the labour market and vocational training.
The New Member States did not follow any of the Western European models but built up
private social protection systems according to the recommendations of the IMF and the
World Bank. However, some of the countries are moving back towards models reflecting the
pre-WW II situation due to the failure of these IMF/World Bank models.
The Southern European States have followed more or less the ‘continental’ model.
However, their social protection systems remain less developed.
Jos Berghman explained the logic of social protection systems in general. The normal way to
be socially integrated is to become educated, to find a job and have an income. Social
protection systems constitute a bypass to remain or become socially integrated if work is
not possible, either because there is not the sufficient capacity of a person to work or there
is no suitable work available.
Discussion
During the questions and answers session participants argued that the existing social
protection systems and currently debated reforms are based on the assumption that one or
even two people are working. This approach neglects the fact that more and more
households have no income at all. More focus should also be put on the gender
perspective. How can social protection systems be organized in order to allow both, men
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and women, to work and have family responsibilities at the same time?
The question was raised whether or not there is actually enough work for everybody who is
willing and able to work. Jos Berghman presented a comparison between the United
States and Europe. In the USA more people work but they also do more hours and more
unproductive hours. In Europe the single working hour is more productive as only the best
skilled people work while many of the lesser qualified people do not work at all. As a
consequence, the USA and Europe do have comparable outcomes regarding the GDP but the
USA does it in a more unequal way.
Regarding the issue of best practice transfer, Jos Berghman explained that there is not
one best way for all countries. For instance, not all European countries will be able to
reproduce the Nordic model as it is based on a general acceptance in the population to
make huge contributions to the state which are redistributed afterwards. Such a system will
not work in all European countries.
The financial sustainability of the Belgian social protection system
Power Point presentation of Nicole Fasquelle – click here
Belgian Federal Planning Bureau
Nicole Fasquelle explained that the Belgian Federal Planning Bureau is responsible for
analyses and projections for Belgium in three fields: economics, social issues and
sustainable development.
In order to calculate the long-term sustainability of the social protection system, the Bureau
uses the so-called “Maltese” model. Regarding pensions, this model only takes the first pillar
into account. At the international level, the Bureau reports to DG ECFIN that collects and
analyses the long-term perspectives of all Member States. Other international organizations
dealing with long-term calculations are the IMF and the OECD.
Demographic change in Belgium and challenges for the social protection system
While the total population of Belgium will still increase between 2005 and 2050, the main
challenge for the social protection system in Belgium results from an increasing
dependency rate (relationship between – 15 and + 65/ 15 – 65 year old people) during
this period. In the past, Belgium had to deal with a very high public debt (almost 130% of
the GDP in 1993). Since then, the debt has been reduced significantly. Nevertheless the
debt is still about 95% of the GDP in 2005. In 2001, a law was adopted which guarantees a
continuing reduction of the public debt and foresees the creation of an “ageing fund” in
order to finance the demographic gap. Indeed, a reduction of the debt will give more
financial means (less interest charges to pay) to finance the expected increase of social
expenditure in the future.
Possible future scenario for Belgium
The Belgian scenario is based on a set of long-term hypotheses. The hypotheses are
based on demographic indicators (eg birth rate, life expectancy, migrations), sociodemographic indicators (eg school attendance rate, activity rate, pension rate), macroeconomic indicators (eg structural unemployment, productivity growth, long term interest
rate), social policy decisions (eg wage ceiling, welfare adjustement), budget policies (eg
revenues, targets of net financing capacity).
Nicole Fasquelle stated that there are three main problems for the social protection in
Belgium in relation to its sustainability.
Political sustainability – In the wage earner scheme (70% of the total number of
pensioners), the calculation of the pension takes account of the earned wages but ceiled to
a certain amount (the wage ceiling). This wage ceiling has not been increased between
1982 – 1998 (except for inflation adjustment) which has long-term effects on pensions that
are less and less proportionate to the actual payment contributions made.
Social sustainability – Due to partial welfare adjustements, there is an increased gap
between on the one hand the average pensions and the average wages and on the other
hand between the different pension levels according to the age of the pensioner
(degradation of the replacement ratio).
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Financial sustainability – Pension and health care expenditure will increase significantly. In
Belgium, a financial effort will be necessary before 2010 in order to assure that the
public debt has sufficiently been reduced and there is a budgetary surplus to guarantee the
financial sustainability of the social protection system.
The Belgian strategy
Nicole Fasquelle explained that the Belgian state will try to reduce the public debt and feed
into the ageing fund. In addition to other measures, it will try to increase the employment
rate (eg increase the age for early retirement).
In her conclusions, Nicole Fasquelle pointed out that the final scenario depends very much
on the evolution of some crucial indicators like the productivity growth and the
employment growth. Therefore, the results vary each year.
Discussion
In the following discussion, participants pointed out that an increase of the retirement age
does not appear to be a sustainable reform proposition. Employers continue using early
retirement as a mean to get rid of older employees who are perceived as being less
productive as young employees. In reality, the actual retirement age is far below the legal
retirement age.
The political discourse of demographic change and social protection from a gender
perspective
Lisbon Strategy
Pascale Vielle situated the discussions on demographic change and the modernization of
social protection systems in the overall debate on the Lisbon Strategy. She pointed out that
the subliminal aim of Lisbon is first of all to make considerable savings. This should not be
forgotten when discussing possible reforms in the Member States.
Demographic change and social protection systems
Pascale Vielle stated that the main challenge regarding the ageing of society will be to
change the relation between active and non-active people. In order to achieve this, a key
issue will be to make it possible for women as well as men to reconcile a full-time work and
a family life.
Pensions
Looking at current pension systems from a gender perspective is a possible starting point in
order to discuss and question the sustainability of the whole organisation of society. In all
pensions systems there is a gender gap, which is however different according to the
models.
The Bismarckian model is the traditional “single (male) breadwinner model”. Pensions are
related to earnings and married persons (usually men) used to get a higher pension (eg
75% instead of 60%) for the (often entirely dependant) spouse. As a consequence, even
spouses who did work abstained from their individual right to pensions as most of the times
the 15 % of the husband were higher than the 60% of her own pension. These systems
therefore structurally favour the income of the men while women often remain financially
dependant.
The Anglosaxon and the Nordic pension model differ from the continental model as
pensions are not related to earnings but to the fact of being a resident/citizen.
Nevertheless, also these systems have a gender gap because the state pension covers only
the first pillar. The second pillar also is entirely related to earnings, which again indirectly
penalises women who in general have a lower or no income at all.
Possible reform solutions
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Endogenous factors for reform
One possibility is for people that take care of children and therefore do not participate in the
labour market to get a fictive salary. This would create an individual right to pensions which
creates a better equality between men and women. However, the recognition of childcare as
a task that provides you with the individual right to pension reinforces traditional gender
roles. In addition, the fictive salaries for people staying at home are generally far lower than
for people doing remunerated work. Finally, this system does not take the problem of
financing such a fictive salary into account.
Nevertheless, the pension system has to be changed in order to facilitate the participation
of women on the labour market. Unfortunately, current reform propositions often do not
take the existing gender gap into consideration. While for instance the increase of the legal
retirement age is favourable for women who had stopped to work in order to take care of
children for several years, current reforms generally link this with an increase of the time
necessary in order to benefit from a full pension which implicitly discriminates against
women. The same is true for proposed bonus-malus systems which favours people who
have been able to work more years than other people.
Exogenous factors for reform
Pascale Vielle emphasised that a reform of the pension system alone will not adequately
address the challenges related to demographic change. A reform that is truly aiming for
sustainability should rethink the way the society is organised as a whole. In order to
increase the participation of women on the labour market and at the same time encourage
young couples to have children, more fundamental changes have to take place. First of all,
men have to be encouraged to participate much more in the tasks at home. Secondly,
rather than cutting in benefits the state should invest massively in care facilities, education
and vocational training in order to increase the participation of women on the labour
market. Although the willingness of Member States at the moment to make such an
investment is highly questionable, it should be emphasised that this investment would also
create many jobs. Pascale Vielle pointed out that the discussion on “demographic change”
can actually be used as a tool to promote gender equality. More and more governments will
be encouraged to think about the organisation of our societies as a whole.
Prospects for reform
In the discussion, participants very much welcomed the approach to demographic change
brought forward by Pascale Vielle. However, the prospects for the necessary investment in
care facilities etc. to promote the participation of women on the remunerated labour market
are not very high. In the daily political life, it is more politically rewarding for governments
to propose reforms that will have an impact on the short-term rather than on the long-term.
However, NGOs should work on this approach and try to network as much as possible with
other stakeholders, including governments, social partners and the private sector.
“Good” social policy
Pascale Vielle stressed that a “good” social policy is a policy that is based on the “norm” of a
single parent (most often a mother) with two children. If these people are able to have a
career that allows them to be financially independent and to take care of their children at
the same time, the policy is well designed. This indicator should substitute the current
“norm” which is a “two-person household with one or one and a half income”. In this
perspective, Pascale Vielle highlighted again the need for extensive investment in care
facilities.
Part-time work
Although part-time work often is presented as the ideal form to reconcile family life and a
job, Pascale Vielle argued that it should not be promoted as such. As part-time work does
not lead to full individual pension rights, the person usually remains financially dependant
on another person or on state benefits. In addition, part-time work reinforces gender roles
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as many high level jobs are (understandably) given to people that are able to work full-time
and more.
Economic approach
Participants also discussed whether it is useful or not for social NGOs to use the economic
terminology that many stakeholders use when talking about the issues at stake, such as
‘employability’ and ‘human capital’. While all participants agreed that these words imply
rather inhuman connotations, Pascale Vielle pointed out that in certain circles the use of
these terminologies could help you to make you heard. However, it is necessary to work a
lot on the definition of these words in order to make sure that they have an acceptable
content. A current debate in which social NGOs should be involved is the discussion about
the European Social Model.
Evaluation of the seminar
Most participants were satisfied with the seminar and stated that they have been able to
develop their knowledge about demographic change and the challenges related to European
social protection systems. Participants particularly appreciated having a political vision on
the debate from speakers, something to bear in mind for future seminars. In addition,
participants would like to have more time for in-depth discussion about the role of the EU
level and possible strategies for social NGOs within this. As demographic change will remain
on the political agenda also in the following years, participants expressed their interest to
continue working on this issue.
3. Participant list
Paul Tréhin (Autisme Europe), Maxime Cerutti (European Youth Forum), Peter Herrmann (ESAN),
Nathanaël Caillaux (ATD Quart Monde), Ariane Rodert (ETWelfare), Elisabeth Muschik (MHE),
Marielle Helleputte (FEFAF), Carola Lenz-von Traitteur (AWO/Solidar), Rosella Pinetti
(CECODHAS), Patrick de Bucquois (Caritas-Europa), Uta Stitz (International Council on Social
Welfare), Lina Pennlert (EWL), Kathleen Spencer-Chapman (Social Platform Secretariat), Silke
Paasche (Social Platform Secretariat), Clarisse Delorme (EWL), Samara Jones (Social Platform
Secretariat), Guiseppe Sapio (EAPN), Fintan Farrell (EAPN), Fanny Muller (MHE), Nicole Fasquelle
(Belgian Planning Bureau), Liliane Cocozza (ESAN), Susanna Heinäsmaki (Eurodiaconia), Jos
Berghman (K.U. Leuven), Pascale Vielle (Institut pour l’égalité entre les hommes et les femmes,
Belgique).
For further information contact: Silke Paasche, [email protected]
Tel: +32 (0)2 508 1639
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