MISSOC Analysis 2013/1 - Overview of means testing in MISSOC countries MISSOC NETWORK MEETING Dublin, 15 & 16 May 2013 MISSOC Analysis 2013/1 - Overview of means testing in MISSOC countries Prof. Jean-Philippe Lhernould Academic expert

Test of means plays a minor part in European social protection BACKGROUND Test of means plays a minor part in European social protection 11.2% of total social protection expenditure Part of means-tested benefits varies widely among MISSOC countries Proportion of means-tested benefits slightly increased in 10 years

Not an international law concept BACKGROUND Not an international law concept Neither ILO conventions, nor Council of Europe, nor EU refer to the expression “means test”, “means testing” or ”means-tested benefits” Tight links with social assistance European Convention on Social and Medical Assistance Complex interactions with Insurance and universal models Non-contributory benefits

Benefit amount is inversely dependent upon beneficiary’s resources DEFINITION Entitlement is made conditional upon the beneficiary’s income/resources falling below a specified level Benefit amount is inversely dependent upon beneficiary’s resources

WHAT IS MEANS TESTING USED FOR? Means test: a technique to fight poverty and address basic needs Impact on ceiling, benefit amount/calculation Absolute / relative poverty Not having a standard of living acceptable in the society where they live MISSOC countries usually have an « official administrative poverty line » Food, housing, access to energy, cultural goods, reading materials, means of transportation, communication tools…

WHAT IS MEANS TESTING USED FOR? Earning replacement benefits Granted to persons with insufficient periods of contributions, persons whose entitlements have expired, persons who have not yet entered job market… Inability to make decent income temporary/permanent Beneficiary at work or not Additional costs compensation Family, LTC, job research

WHY IS MEANS TESTING CHALLENGED? Efficient? Poverty/inactivity trap Worsen state of poverty? Better redistribution of resources? Non-take up ratio Administrative costs Risks of fraud Stigmatising effect? Against self-support principle? Undermine « social contract »? Better alternative policies? Social insurance / universal schemes, tax policies

METHODOLOGY & STRUCTURE OF REPORT Focus on risks most susceptible to means testing GMR (general social assistance), unemployment, sickness in kind, LTC, family, invalidity & old age Comparative analyse 2004/2012 Resources: MISSOC data MISSOC countries classified into groups inspired by Esping-Andersen’s welfare state classification Overview table per risk/country (in annex)

MEANS TAKEN INTO CONSIDERATION FOR THE TEST

MEANS TAKEN INTO CONSIDERATION FOR THE TEST Work income and other income All countries include job earnings In full or partly Other income sources Property income, cash and savings, interests Social security benefits Most countries remove some benefits from overall resources Family, unemployment, disability allowance

MEANS TAKEN INTO CONSIDERATION FOR THE TEST Other assets Dwellings and estate properties In full or partly (depending on value, size, habitual place of living/secondary home …) Movable assets Usually counted, but exceptions apply (basic needs, work tools, threshold, percentage…) Scope of means in relation to risk Hard to draw conclusions

MEANS TAKEN INTO CONSIDERATION FOR THE TEST Household approach Dominant model Better targetting of poor families, but harder to assess « family members »? Pragmatic view: spouse (same sex?), partner, children, dependent persons… Variation per risk / per « country model »? Individual approach More focused on the beneficiary’s needs

MEANS TAKEN INTO CONSIDERATION FOR THE TEST Exhaustion of other rights Means-tested benefits usually granted only if other rights exhausted: « safety net » Scope of claims to be exhausted is flexible Other social benefits Pension rights Civil law rights, like maintenance claims

MEANS TAKEN INTO CONSIDERATION FOR THE TEST Scope of means depends on Goals Absolute/relative poverty Other objectives E.g. family policy, return to work policy Coordination with other means-tested benefits Avoid unfair overlapping Administrative burden Exclusion of « hard-to-assess » means, flat-rate assessment

TRENDS BEYOND DIVERSITY

TRENDS BEYOND DIVERSITY: ANALYSIS PER RISK GMR: usual Unemployment: rare LTC: depends on structure of scheme Family: minority of countries One among many benefits Old age / invalidity Separate means-tested benefits GMR with elderly people specific rules Sickness Copayment/remainder based on income, access to supplementary coverage

TRENDS BEYOND DIVERSITY: ANALYSIS PER RISK Evolution 2004/2012 Slight increase Sickness in cash / family benefits Variable changes Some countries have tightened access to means-tested benefits Some countries have made access easier

TRENDS BEYOND DIVERSITY: ANALYSIS PER COUNTRY UK/IE Frequent users Southern countries Frequent users, for family & LTC CEEC Depends on risk (GMR, family) Western European countries Depends on risk (rejected for family) Nordic countries Reluctancy, except for « basic pension »

Threshold impact on benefits

THRESHOLD IMPACT ON BENEFITS Cliff edge effect Claimants with resources above a level are not eligible for support whereas those with resources under receive the « full package » Not very popular Except for family benefits

THRESHOLD IMPACT ON BENEFITS Gradual decrease of benefit Differential benefits « Taper method » Rate at which benefit is reduced to take accounf of extra income Resources brackets Highest income may receive a low benefit or no benefit

Means-testing not widely used by MISSOC countries CONCLUSIONS Means-testing not widely used by MISSOC countries Perverse effects: effectiveness, administrative complexity, frauds/errors Alternative solutions: insurance/universal schemes, tax policies When used, impression of diversity Per risk, per (or even inside) country Reasons: economic/political history, social security background, weight of alternative policies, economic development, political context

Common trends « Income-tested » benefits CONCLUSION Common trends « Income-tested » benefits Participate in « relative poverty » fight Mainly present in social assistance In social security, family and sickness in kind benefits are most concerned No striking evolution between 2004-2012, but Many reforms involving means testing Scope of resources Thresholds