History of social security in Europe

Quick view on EU history of social securityMedieval - 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:

Rightless workers – no correction mechanisms Child labour

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

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

11

Subjects

(Socio-) economic models in Europe: Rhineland Anglo-Saxon Mediterranean Nordic

Exercise… Performances of the models Where does Turkey stand?

Size of EU countries

Germanyo France o Italyo UK Poland Spain Romania Netherlandso Belgiumo Cczecho Greeceo Hungaryo Portugal

Germany France UK Italy Spain Netherlands Belgium Sweden > Poland Austria Greece Denmark Ireland

12

EU parliament seats Size of national GDP

Turkey

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

14

Europe

an U

nion (

27)

Denmark

Finlan

d

Netherl

ands

Sweden

Austria

Belgium

France

German

y

Irelan

d

United

King

dom

Greece Ita

ly

Portug

alSpa

in

Estonia

Latvi

a

Lithu

ania

Poland

Czech

Rep

ublic

Slovak

ia

Hunga

ry

Sloven

ia

Croatia

Malta

Cyprus

Roman

ia

Bulgari

a

Turkey

0

5000

10000

15000

20000

25000

30000

35000

GDP per capita PPS 2008

Minimum wages 1/1/2009

15

NL BE FR IE UK ES EL* PT EE LT LV PL CZ SK HU SI MT RO BG TR0

200

400

600

800

1000

1200

1400

1600

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

22

Nordic

Rhineland

Anglo-Saxan

Mediterranean

0.00 10000.00 20000.00 30000.00 40000.00

GDP per capita 2009In USD, average, Eurostat

Nordic

Rhineland

Anglo-Saxon

Mediterranean

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0

Unemployment rateAverage 1998-2009, Eurostat

Nordic

Rhineland

Anglo-Saxon

Mediterranean

0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0

GDP per capita PPSIndex EU27=100, average 1997-

2008, Eurostat

Nordic

Rhineland

Anglo-Saxon

Mediterranean

50.0 55.0 60.0 65.0 70.0 75.0 80.0

Employment rateAverage 1997-2008, Eurostat

23

Nordic

Rhineland

Anglo-Saxon

Mediterranean

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0

Implicit Tax rate on labourAverage 1996-2007, Eurostat

Nordic

Rhineland

Anglo-Saxon

Mediterranean

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0

Tax wedge on labour costsAverage 1997-2008, Eurostat

Nordic

Rhineland

Anglo-Saxon

Mediterranean

80.0 85.0 90.0 95.0 100.0 105.0 110.0 115.0

Productivity per working hourin GDP pps, Index EU15=100, average 1997-2008 Eurostat

24

Nordic Rhineland Mediterrenean Anglo saxon50

55

60

65

70

75

80

Participation rate

GDP cp pc 1970-2008

25

1970 1975 1980 1985 1990 1995 2000 2005 20080

10000

20000

30000

40000

50000

60000

MediterreneanRhinelandNordicAnglo-Saxon

WHERE DOES TURKEY STAND?

26

Employment

27

Mediterranean

South East Europe

Turkey

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Unemployment rateAverage 2006-2008, Eurostat

Greece

Bulgaria

Croatia

Romania

Turkey

0 2 4 6 8 10 12 14

Unemployment rate 2009

Mediterrenean

South-East Europe

Turkey

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

Employment RateAverage 2006-2008, Eurostat

Greece

Bulgaria

Croatia

Macedonia

Romania

Turkey

0 10 20 30 40 50 60 70 80

Employment Rate 2008

Economic growth

28

Mediterrenean

South-East Europe

Turkey

0.0 20.0 40.0 60.0 80.0 100.0 120.0

GDP per capita PPSIndex EU27=100, average 1997-

2008, Eurostat

Greece

Bulgaria

Croatia

Macedonia

Romania

Turkey

0 10 20 30 40 50 60 70 80 90 100

GDP per capita PPS 2008Index EU27=100, Eurostat

Mediterrenean

South-East Europe

Turkey

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

Real GDP GrowthAnnual average 2000-2009,

Eurostat

Greece

Bulgaria

Croatia

Macedonia

Romania

Turkey

-8 -7 -6 -5 -4 -3 -2 -1 0

Real GDP Growth 2009

Taxation

29

Mediterranean

South-East Europe

Turkey

37.0 37.5 38.0 38.5 39.0 39.5 40.0 40.5 41.0

Tax wedge on labour costsAverage 1997-2008, Eurostat

Greece

Bulgaria

Romania

Turkey

30 32 34 36 38 40 42

Tax wedge 2008

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

31

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.

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.

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

Who profits most from EU?

32

1970 1975 1980 1985 1990 1995 2000 2005 20080

500

1000

1500

2000

2500

GDP cp development 1970-2008index 1970=100

MediterreneanRhinelandNordicAnglo-Saxon

33

1970 1975 1980 1985 1990 1995 2000 2005 20080

5000

10000

15000

20000

25000

30000

35000

40000

GDP pc cp 1970-2008UNDATA

GreeceItalyPortugalSpainTurkey

34

1970 1975 1980 1985 1990 1995 2000 2005 20080

500

1000

1500

2000

2500

3000

3500

GDP pc cp development 1970-2008index 1970=100

GreeceItalyPortugalSpainTurkey