Universal Coverage of Social Security System and Adaptation to Mobility Dr. Koen Vleminckx

Coverage & Entitlement

Ideal-typical models of Social Insurance

Coverage Targeted model: low coverage, although this depends on the severity of the means-test used to identify the needy. Voluntary state subsidized: low coverage, because of self-selection, myopia and/or categorical nature. Corporatist: Although mandatory, coverage is not perfect because of categorical nature. However,sometimes high coverage can be reached by complementary categorical schemes that, together, cover almost the entire population. Basic security: full or quasi-full coverage, with exception of schemes with contributory or employment conditions. Encompassing: full or quasi-full coverage, with exception of schemes with contributory or employment conditions.

Ideal-typical models of Social Insurance

Classification of OECD Countries Type Countries Average Spending (% GDP) Targeted Australia 9.9% Voluntary State Subsidized Unemployment: Denmark, Sweden Sickness Benefit Insurance Self-employed: Switzerland - Corporatist Austria, Belgium, France,Germany, Italy Sickness Insurance: Netherlands 22,5% Basic Security Citizen Canada, Denmark, Pensions: Netherlands, 19.1% Insurance Ireland, UK, US Encompassing Finland, Norway, Sweden 26.3%

Interesting case: Danish voluntary public unemployment insurance program Voluntary, subsidized (Ghent system), but still requiring a significant premium payment Coverage rates for the voluntary program is surprisingly high, approximately 80 percent of the workforce. Possible explanation: (i) extreme risk aversion among those in secure jobs, (ii) worker solidarity, and/or (iii) the tied-in early retirement scheme (efterløn). But the program has predictable selection effects, as it is difficult to induce widespread participation in such programs because of consumer myopia and adverse selection.

Atypical employment

What is“atypical work” A standard employment relationship exists when an individual is in a dependent employment relationship for at least 35 hours weekly and has a permanent employment contract. Part-time employment is employment with less than 35 hours a week (substantial: 20 hours and more a week; marginal: less than 20 hours a week). Fixed-term employment exists when the period during which a contract is valid is limited (can be part-time). Self-employment exists when an individual’s main economic activity is not dependent employment.

Coverage of “atypical work” Part-time employment: Unrestricted coverage by citizenship based schemes, while in insurance based schemes coverage uncertain as entitlement can depend on the number of hours worked , the income earned, or contributions paid (usually lower for part-time workers). A European court of justice ruling helped part-time workers to have the same rights to join occupational pension schemes as their full-time colleagues. Fixed-term employment: Full coverage by citizenship based schemes, even during periods of unemployment. In contributory insurance based schemes no guarantee of continued insurance, although continued insurance is occasionally provided for those covered by unemployment insurance etc. Self-employment: Full coverage by citizenship based schemes. In some countries categorical social insurance for the self-employed is in place, but not always and not for all social risks.

Mobility

EU nationals residing in another member state (% of total population)

EU Social Security Coordination The EU provides common rules to protect your social security rights when moving within Europe (EU 28 + Iceland, Liechtenstein, Norway and Switzerland). The rules on social security coordination do not replace national systems with a single European one. All countries are free to decide who is to be insured under their legislation, which benefits are granted and under what conditions.

Principles of EU Social Security Coordination Legal residents in the EU are covered by the legislation of one country at a time (e.g. they can only pay contributions in one country). The decision on which country's legislation applies will be made by the social security institutions. Legal residents in the EU have the same rights and obligations as the nationals of the country where they are covered. This is known as the principle of equal treatment or non-discrimination. When they claim a benefit, their previous periods of insurance, work or residence in other countries are taken into account if necessary. If they are entitled to a cash benefit from one country, they may generally receive it even if they are living in a different country. This is known as the principle of exportability.

Bases of entitlement and mobility Equal treatment, but each country determines which benefits are granted and under what condition. Citizenship based schemes are more accessible since they also apply to those legally residing in the country. Contributory or labour market participation based schemes are more restrictive, but previous periods of insurance, work or residence in other countries should be taken into account if necessary. Benefits, incl. retirement benefits, are in principle exportable.

Problems related to mobility Countries with citizenship-based access to social benefits or social services sometimes claim that they are more ‘vulnerable’ to social benefit ‘tourism’. For instance: Over time the UK has tried to restrict or exclude access to mainstream welfare benefits for EU citizens (sometimes specifically for citizens of ‘new member states’) migrating into the UK. See also ‘new settlement’ (February 2016) In practice: many EU citizens struggle to meet the UK residence test because they are only able to obtain transient or casual work associated with certain industries, for example, agriculture, catering, hospitality etc. which pay minimal earnings under zero hours contracts. Further many EU citizens are unable to produce the necessary documentation needed to establish an entitlement to benefit.

European Pensions Portability Directive (PPD, adopted in 2014)* The PPD will need to be transposed into member states' legislation by 21 May 2018 at the latest. The EU Portability Directive is intended to make it easier for workers to gain preserved rights to occupational pensions and to retain these rights if they move between member states. Thus, its focus is more on the acquisition and preservation of pension rights rather than the methods of allowing those rights to be transferred. It does not apply to pension schemes (or subsections of those schemes) that have been closed to new entrants or to individual pension arrangements other than those concluded through an employment relationship. It will not affect any arrangements for insolvency guarantee or compensation arrangements that aim to protect workers’ pension rights in the event of the insolvency of a company or pension scheme. *The directive on minimum requirements for enhancing worker mobility between member states by improving the acquisition and preservation of supplementary pension rights

Challenge of Universal Coverage Various types of employment to be covered Formal, salaried employment Informal dependent employment Non-agricultural self-employment Agricultural self-employment Stable Unstable Formal Mandatory coverage Continued coverage Informal Imposing coverage Hard to cover

Principles of Social Protection Social Assistance Based on needs Social Insurance Creation of risk pools within which risks and resources are shared Demogrant Based on purely demographic principals such as age and sex