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Prof. Dr. Jozef Pacolet Hoger Instituut voor de Arbeid HIVA Katholieke Universiteit Leuven

9th EUCDW Congress For a Europe of social market economy Vienna, 2-4 September 2005. Maintaining the social market economy and the welfare state in Europe. Prof. Dr. Jozef Pacolet Hoger Instituut voor de Arbeid HIVA Katholieke Universiteit Leuven. Content

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Prof. Dr. Jozef Pacolet Hoger Instituut voor de Arbeid HIVA Katholieke Universiteit Leuven

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  1. 9th EUCDW Congress For a Europe of social market economy Vienna, 2-4 September 2005 Maintaining the social market economy and the welfare state in Europe Prof. Dr. Jozef Pacolet Hoger Instituut voor de Arbeid HIVA Katholieke Universiteit Leuven

  2. Content • Construction and conservation of the social market economy: ‘trente glorieuses’ • The mixed economy in crisis: search for boosting the European and economic integration: is the welfare state in danger? • Place for social protection in European construction • Welfare pluralism of Europe • Robustness of social protection • Social protection: peoples desire and how to respond • Efficiency, sustainability and adequacy pensions • Efficiency, sustainability and adequacy of health care and long term care • The future: will there be a cornucopia? • Governance and communication

  3. 1. Construction and conservation of the social market economy 1.1 GDP at current market prices per capita (PPP US =100), 1960-2006: In the ‘trente glorieuses’ 1945-1975 the social market economy was established

  4. 1. Construction and conservation of the social market economy 1.1 Comparison EU 15 and USA: trade off between time or money?

  5. 1. Construction and conservation of the social market economy 1.2 General government expenditure by COFOG function,as % of GDP, 2003

  6. 1. Construction and conservation of the social market economy 1.3 Total employment in the private and public non-profit sector, per 1 000 inhabitants, 2004 (2e quarter)

  7. 1. Construction and conservation of the social market economy 1.4 Total employment in the private and public non-profit sector, as % of total employment, 2004 (2e quarter)

  8. 2. Economy in distress and boosting European integration • Since the first two oil shocks in the seventies already further expansion of social protection was needed, has been created but increasing doubts about viability • Since two decades run up of European economic integration took place • ‘Der Staat ist in Gefahr’: is the welfare state in danger?

  9. 3. Place for social protection in European construction

  10. Beveridge oriented Nordic Countries Finland Sweden Beveridge oriented Bismarck oriented United Bismarck oriented Mediterranean Countries Kingdom Denmark Beveridge oriented Baltic Countries Ireland The Netherlands Beveridge oriented Central/Eastern Countries Germany Belgium Bismarck oriented S/E Mediterranean Countries Luxembourg Austria France Bismarck oriented Central/Eastern Countries Italy Portugal Greece Spain 4. Welfare pluralism of Europe

  11. Stylised Profile of the development of the Welfare State: a common European way? 5. Robustness of social protection Expenditures 2000 1970 1985 1990 1995 Quantitative Rationalisation Further quantitative expansion Innovation expansion but also because new risk is accepted Diversification because demographic pressure Differentiation

  12. 5. Robustness of social protection

  13. 5. Robustness of social protection 5.3 Total social protection expenditure as % of GDP, 1992-2002

  14. 6. Social protection: peoples desire and how to respond 6.1 Support for constitution for the European Union versus Priority for employment and social inclusion

  15. 6. Social protection: peoples desire and how to respond 6.2 Support for constitution for the European Union versus Trust in a better social welfare situation

  16. 6. Social protection: peoples desire and how to respond 6.3 Support for constitution for the European Union versus lack of trust in future pensions

  17. 6. Social protection: peoples desire and how to respond 6.4 Support for constitution for the European Union versus Satisfaction with the national health care system

  18. 6. Social protection: peoples desire and how to respond 6.4 Need to increase social expenditures for demographic reasons Social protection as % of national income Present level National income

  19. 6. Social protection: peoples desire and how to respond 6.5 But also as richer economies afford themselves more expenditures, as in USA today Social protection as % of national income USA today Present level National income

  20. 6. Social protection: peoples desire and how to respond 6.6 It is also peoples desire Social protection as % of national income Peoples desire USA today Present level National income

  21. 6. Social protection: peoples desire and how to respond 6.7 Will we only fill it in partly with a first pillar Social protection as % of national income Peoples desire USA today first pillar Present level National income

  22. 6. Social protection: peoples desire and how to respond 6.8 And leave the rest to a substantial second and third pillar Social protection as % of national income Peoples desire USA today second third pillar first pillar Present level National income

  23. 6. Social protection: peoples desire and how to respond 6.9 Or will we let expand the first pillar even more Social protection as % of national income Peoples desire USA today second third first pillar Present level National income

  24. 7. Efficiency, sustainability and adequacy pensions 7.1 Economic reasons for social insurance pensions • People have differences in income but also factor endowments • Public intervention needed for minimum pension • But should not be limited to low income • Should be insurance based, actuarial fair what implies in favour of Bismarck oriented systems • There is some argument for diversification in PAYG and funded system • But there is growing doubt about feasibility funded systems • Some doubts about the need: optimal funded system should have the same characteristics of first pillar (annuitisation, redistribution) what makes distinction blurred • Some doubt about public need for public support of private pensions • Cost second and third pillar underestimated (contributions, state support, return) • In growing fragmented labour market and career, need for universal systems

  25. 7. Efficiency, sustainability and adequacy pensions 7.2 Expenditure on old age (as % of GDP), 1992-1997-2000-2002

  26. IT IT GR DE SE AT SI UK GR DK UK DE DK FR FR NL AT FI NL LU HU ES PT BE B CZ ES FI MT SK PT LU IE Old Member States 1992 IE Old Member States 2002 New Member States 1992 New Member States 2002 7. Efficiency, sustainability and adequacy pensions 7.3 Expenditure on old age (as % of GDP) versus GDP (euro PPP/capita in current prices), 1992-2002 14 12 10 8 Expenditure on old age (% of GDP) 6 4 2 0 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GPD (euro PPP/capita in current prices)

  27. 7. Efficiency, sustainability and adequacy pensions 7.4 Expenditure on old age (as % of GDP) versus population 65 years and above (% total population)

  28. 8. Efficiency, sustainability and adequacy of health and LTC 8.1 Economic reasons for intervention in health and LTC • External effects of public health • Moral hazard would lead to over consumption • Adverse selection: high risks only look for insurance • Risk selection: only low risks are offered insurance • All cost elements should be insured • There are no reasons to limit it to basic provisions • There is a growing awareness how it contributes to economic growth • And employment • There is growing interest to underline the value of gained life expectation • Increased longevity contributes to economic growth • Increase care and health expenditures increase value of live and increase further demand for care

  29. 8. Efficiency, sustainability and adequacy of health and LTC 8.1 Expenditure (benefits in kind) on sickness and health care (as % of GDP), 1992-1997-2000-2002

  30. FR FR PT SI DE DE UK FI NL AT AT SE NL CZ IT IE IT IE GR SK B BE ES DK UK PT FI HU LU ES DK LU GR MT Old Member States 1992 Old Member States 2002 New Member States 1992 New Member States 2002 8. Efficiency, sustainability and adequacy of health and LTC 8.2 Expenditure (benefits in kind) on sickness and health care (as % of GDP) versus GDP (euro PPP per capita in current prices), 1992-2002 9 8 7 6 5 Expenditure in kind on sickness/health care (% of GDP) 4 3 2 1 0 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GPD (euro PPP/capita in current prices)

  31. 8. Efficiency, sustainability and adequacy of health and LTC 8.6 GDP and total health expenditures, OECD, 2002

  32. 9. The future: a cornucopia? 9.1 Actual and future health and LTC expenditures as % of GDP, 2000 - 2050 in the EU (EPC)

  33. 9. The future: a cornucopia? 9.2 Growth and social protection: 'cornucopia‘, ‘cuerno de la abundancia’ 'hoorn des overvloeds', 'corne de l'abondance', 'Füllhorn'

  34. 10. Governance and communication • National policies and stake holders should keep ownership of those ambition, and take advantage and ownership again of European initiatives in this field • Organising an OMC between stakeholders • Communication to the citizen could make European integration and social protection a self fulfilling prophecy

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