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History of social security in Europe Quick view on EU history of social security Medieval - Renaissance times: Poorhouses & charity Controlling role of the State Guilds, fraternities and commons Craft guilds; in particular in the Low Lands Both “employers organisations and trade unions” Unite members of the same occupational group Serving members’ economic interests And the general well-being of their group Achieving agreements: negotiation and collective action Income security and social security Contributions to secure income 2 We’re getting closer…. Industrial revolution 1750-1850 Classical liberalism (A. Smith): Economic doctrine of free enterprise Urbanisation From family economy to industry economy: workers – no correction mechanisms Child labour Rightless Need for organisation of workers’ interests 1848… 3 Beginning of institutionalised social security 1850-1900 Upcoming socialism (Marx) Upcoming trade unions: First priority for wages and working hours and Christian social thinking (Rerum novarum): First labour laws (child labour and women) Laws for the poor 1889 Germany (Von Bismarck): Retirement benefits (70 years) Disability benefits Sickness insurance 4 Beginning of institutionalised social security 1900-1950 Trade unions: Funds for income support unemployment & sickness WW 1: this never again…. Beginning social dialogue (Low lands, Nordic countries) Beginning overarching international institutions Russian revolution: state communism Crash of 1929 John Maynard Keynes 5 Beginning of institutionalised social security 1938-1950 WW II … this never again…. Rebuilding Europe: (Nordic & Rhineland countries) Institutionalisation social partnership Strict, central policies: economy rules Social security arrangements and laws Social security institutions Start “Europeanisation”: ECSC 6 Social Security Models Bismarck 1880 Germany Beveridge 1942 United Kingdom Mixed 1950-1960 Nordic Defence against socialism Economic competitiveness Result controlled wage policy Sector organisations Government Both Assuring standard of living, income stability Securing subsistence level Standard of living, followed by social assistance - Employees are Insured - Entire population is insured - Schemes for both - Financed via income-related contributions - Primarily financed from the state budget - Contributions and state budget - Benefits based on wages - Uniform, lump-sum benefits; flat rate - Benefits based on wages and minimum 7 8 Initial concept and basis social security continental Western-Europe 1950-1980 Mostly based on (non-extended) family with one breadwinner Tendency to cover “each risk” – limited personal risk Open-end arrangements: cradle to grave Wage related Division between general social security and employee insurances Sharp division responsibilities employer - SSI Mostly financed by contributions employer – employee Building initial systems finalised 1960-1970 9 Europe: one and undivided? Economic models in Europe Subjects (Socio-) economic models in Europe: Rhineland Anglo-Saxon Mediterranean Nordic Exercise… Performances of the models Where does Turkey stand? 11 Size of EU countries EU parliament seats o o o o o o o o Germany France Italy UK Poland Spain Romania Netherlands Belgium Cczech Greece Hungary Portugal Size of national GDP Germany France UK Italy Spain Turkey Netherlands Belgium Sweden > Poland Austria Greece Denmark Ireland 12 Many differences in Europe Differences in: Economic characteristics Stage of development and Performances Differences in history and applied economic models Two illustrative indicators: GDP and Minimum Wages 13 Gross Domestic Product per head GDP per capita PPS 2008 35000 30000 25000 20000 15000 10000 5000 0 14 Minimum wages 1/1/2009 1600 1400 1200 1000 800 600 400 200 0 NL BE FR IE UK ES EL* PT EE LT LV PL CZ SK HU SI MT RO BG TR 15 4 economic models (A. Sapir) Nordic Denmark, Finland, Netherlands, Norway, Sweden, 1730 Billion USD Rhineland Austria, Belgium, France, Germany, Luxemburg 6750 Billion USD Anglo-Saxon UK, US, Australia, Ireland, some Eastern European countries 2425 Billion USD Mediterranean Spain, Italy, Portugal, Greece 4120 Billion USD 16 Nordic model Productive, well educated work force Strong state, balanced with strong labour actors High public spending (social protection and education) Unregulated labour markets, though with big public sector Flexicurity Universal welfare. Low wage inequality High grade of institutionalization Strong trade unions / social partnership Public private partnerships in social security 17 Rhineland model These countries typically have: Stake holder economy (owners, government, employers, employees, costumers) Market economy based, striving for balance between free market forces and social responsibility Unemployment benefits and easy access to government payments. Public-funded pensions, early retirement wages. High taxation Social partnership, active social dialogue, government interventions Strong trade unions that variably strive for high labour protection and/or high wages. 18 Anglo-Saxon model These countries typically have (or had): Share holder economy (stocks) Competition based Social assistance policies designed to serve as a safety net. Unregulated labour markets. Weak social partnership Limited government interventions Class oriented societies High income inequality, possibly without a minimum wage. Low ratios of public debt to gross domestic product. 19 Mediterranean model These countries typically have: Strong labour protection; highly regulated labour market Costly state pension systems; early retirement age Low level of social partnership Strong family-oriented income transfers – low social security Low participation rate (women) High public debt – GDP ratio 20 MODELS’ PERFORMANCES 21 GDP per capita 2009 GDP per capita PPS In USD, average, Eurostat Index EU27=100, average 1997-2008, Eurostat Mediterranean Mediterranean Anglo-Saxan Anglo-Saxon Rhineland Rhineland Nordic Nordic 0.00 10000.00 20000.00 30000.00 40000.00 0.0 40.0 60.0 80.0 100.0 120.0 140.0 Unemployment rate Employment rate Average 1998-2009, Eurostat Average 1997-2008, Eurostat Mediterranean Mediterranean Anglo-Saxon Anglo-Saxon Rhineland Rhineland Nordic Nordic 0.0 20.0 2.0 4.0 6.0 8.0 10.0 50.0 60.0 70.0 80.0 22 Implicit Tax rate on labour Tax wedge on labour costs Average 1996-2007, Eurostat Average 1997-2008, Eurostat Mediterranean Mediterranean Anglo-Saxon Anglo-Saxon Rhineland Rhineland Nordic Nordic 0.0 10.0 20.0 30.0 40.0 50.0 0.0 10.0 20.0 30.0 40.0 50.0 Productivity per working hour in GDP pps, Index EU15=100, average 1997-2008 Eurostat Mediterranean Anglo-Saxon Rhineland Nordic 80.0 90.0 100.0 110.0 120.0 23 Participation rate 80 75 70 65 60 55 50 Nordic Rhineland Mediterrenean Anglo saxon 24 GDP cp pc 1970-2008 60000 50000 40000 Mediterrenean Rhineland 30000 Nordic Anglo-Saxon 20000 10000 0 1970 1975 1980 1985 1990 1995 2000 2005 2008 25 WHERE DOES TURKEY STAND? 26 Employment Unemployment rate Unemployment rate 2009 Average 2006-2008, Eurostat Turkey Turkey Romania Croatia South East Europe Bulgaria Mediterranean Greece 0.0 2.0 4.0 6.0 8.0 10.0 12.0 0 2 Employment Rate 4 6 8 10 12 14 Employment Rate 2008 Average 2006-2008, Eurostat Turkey Romania Turkey Macedonia South-East Europe Croatia Bulgaria Mediterrenean Greece 0.0 20.0 40.0 60.0 80.0 0 20 40 60 80 27 Economic growth GDP per capita PPS GDP per capita PPS 2008 Index EU27=100, average 1997-2008, Eurostat Index EU27=100, Eurostat Turkey Romania Turkey Macedonia Croatia South-East Europe Bulgaria Mediterrenean Greece 0.0 20.0 40.0 60.0 80.0 100.0 0 120.0 Real GDP Growth 20 40 60 80 100 Real GDP Growth 2009 Annual average 2000-2009, Eurostat Turkey Romania Turkey Macedonia Croatia South-East Europe Bulgaria Greece Mediterrenean 0.0 1.0 2.0 3.0 4.0 5.0 -8 -6 -4 -2 0 28 Taxation Tax wedge on labour costs Tax wedge 2008 Average 1997-2008, Eurostat Turkey Turkey Romania South-East Europe Bulgaria Mediterranean 37.0 Greece 38.0 39.0 40.0 41.0 30 32 34 36 38 40 42 29 Exercise 1 Which model is closest to Turkey and why? (please do not let the performances be leading, motivate your answer relating to culture and social & economic structure) Is that the best model for Turkey’s development? Are there areas in socio-economic development where you see a need for change? If so: how? Where and how will this possibly effect social security? 40 minutes discussion, 10 minutes prepare report 10 minutes presentation.15 minutes plenary 30 Productive, well educated work force Strong state, balanced with strong labour actors High public spending (social protection and education) Unregulated labour markets, though with big public sector Flexicurity Universal welfare. Low wage inequality High grade of institutionalization Strong trade unions / social partnership Public private partnerships in social security Share holder economy (stocks) Competition based Social assistance policies designed to serve as a safety net. Unregulated labour markets. Weak social partnership Limited government interventions Class oriented societies High income inequality, possibly without a minimum wage. Low ratios of public debt to gross domestic product. Stake holder economy (owners, government, employers, employees, costumers) Market economy based, striving for balance between free market forces and social responsibility Unemployment benefits and easy access to government payments. Public-funded pensions, early retirement wages. High taxation Social partnership, active social dialogue, government interventions Strong trade unions that variably strive for high labour protection and/or high wages. Strong labour protection; highly regulated labour market Costly state pension systems; early retirement age Low level of social partnership Strong family-oriented income transfers – low social security Low participation rate (women) High public debt – GDP ratio 31 Who profits most from EU? GDP cp development 1970-2008 index 1970=100 2500 2000 1500 Mediterrenean Rhineland Nordic Anglo-Saxon 1000 500 0 1970 1975 1980 1985 1990 1995 2000 2005 2008 32 GDP pc cp 1970-2008 UNDATA 40000 35000 30000 25000 Greece Italy 20000 Portugal Spain Turkey 15000 10000 5000 0 1970 1975 1980 1985 1990 1995 2000 2005 2008 33 GDP pc cp development 1970-2008 index 1970=100 3500 3000 2500 Greece 2000 Italy Portugal Spain 1500 Turkey 1000 500 0 1970 1975 1980 1985 1990 1995 2000 2005 2008 34