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Financing of social protection in Europe: Overview of the main issues Mechelen, 13 February 2006

Financing of social protection in Europe: Overview of the main issues Mechelen, 13 February 2006. Monika Queisser, Principal administrator OECD, Social Policy Division (www.oecd.org/els/social) courriel: social.contact@oecd.org. Trends in OECD countries. Non-wage labour costs becoming an issue

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Financing of social protection in Europe: Overview of the main issues Mechelen, 13 February 2006

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  1. Financing of social protection in Europe:Overview of the main issuesMechelen, 13 February 2006 Monika Queisser, Principal administratorOECD, Social Policy Division(www.oecd.org/els/social)courriel: social.contact@oecd.org

  2. Trends in OECD countries • Non-wage labour costs becoming an issue • Atypical careers are be becoming typical • Scaling down of benefits requires more redistribution but • Tighter contribution-benefit links to increase work incentives

  3. Labour cost issue • Tax burden affects employment • Effects could be either on supply or demand side • On demand side: taxes paid out of labour, capital or transfers

  4. Reduction of burden on labour… • by reducing overall tax burden • by shifting the burden on capital • by shifting the burden on transfers but • effects will depend on adjustment of labour markets

  5. To what extent do countries rely on social security contributions ?

  6. Tax wedge: level of social security contributions and income taxes

  7. Level of social security contributions, % GDP, 1965-2003

  8. Pensions as cost factor • Germany: use of eco-tax to reduce contribution rate • France: use of CSG to limit increases • Solidarity contributions in LUX, BEL • Overall: state transfers for pensions frequent

  9. Adressing atypical careers • Tight contribution-benefit links require full careers • Interrupted careers partially protected through credits • Old-age safety nets/guarantee pensions will become more important • Potential conflict with Bismarckian insurance principles (e.g. Germany: constitutional issue)

  10. Redistribution in pension systems • Two distinct regional trends in pension reform • More redistribution in Western European countries • Less redistribution and very close contribution-benefit links in Italy and CEE countries • Preliminary OECD calculations show effects to be substantial

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