New Managerial Challenges in European Social Security MANAGING SOCIAL SECURITY IN EUROPEAN COUNTRIES SOME CONTEMPORARY CHALLENGES by: Jean-Victor Gruat Senior Expert EUCSS Reform Project 1

New Managerial Challenges in European Social Security New types of challenges - Scope of coverage (risk definition, categories of insured persons) - Computation of Benefits (qualifying conditions, absolute and relative levels) - Organizational structure (private vs public sector, mobility and vesting) - Financing (fraud and adverse selection, central vs local government)

New Managerial Challenges in European Social Security THE EVOLUTION OF SOCIAL PROTECTION With the evolution of social protection in Europe from assistance to insurance and beyond assistance towards promoting individual development, new managerial challenges have emerged

New Managerial Challenges in European Social Security BLURRED FRONTIER AMONG RISKS The distinction among risks is no more as clear cut as it used to be. In fact, incapacity to make his/her own living starts becoming the overarching global risk which requires rules to ensure continuity in protection – and avoid abuse of the system. Examples of uncertain frontiers are: the distinction between unemployment/retirement/disability; medical/maternity; occupational/non occupational accident

New Managerial Challenges in European Social Security EXTENSION OF PERSONAL COVERAGE Social security protection is applicable or not to all citizens (what part is social responsibility, and what is linked to employment status is as much a political as a technical decision, and may vary historically) With extension of coverage, protection applies to higher percentages of the population, closer than ever to 100 %. There is a risk if protection awarded through a variety of schemes that individuals may enter into a number of schemes for over-coverage. % of population with not full coverage in health care by age group, France (selected years) 5

New Managerial Challenges in European Social Security BENEFIT FORMULAE Selected European countries – Main pension credit provisions Benefits are not necessarily related to previous contribution records (citizenship periods, equivalent periods, credit periods; matching employer’s contributions)

New Managerial Challenges in European Social Security REDISTRIBUTION Similar benefits may be obtained despite very different levels of previous contributions (result of corrective factors such as lump sum component, minimum benefit, ceiling for benefits, investment of personal assets) A number of provisions have been introduced to alter the proportionality between contributions and cash benefits – this in order to ensure that social security actually acts as a redistributive tool (“three principles”: affordability, equity and efficiency) Social security short term benefits, UK - replacement rate, according to decile

New Managerial Challenges in European Social Security MULTI-LEVEL VS COMPREHENSIVE PROTECTION Delivery may happen through different structures with different types of ownership (insurance companies) (employment agencies) (self liability) * It is important to ensure that protection provided under different types of insurance carriers are comparable and provide the required level of protection * Also, that if protection is to be achieved under different layers (different pillars) ascertain that those pillars affordable to all do provide overall satisfactory level of protection % of insured persons not enjoying full coverage for health care, breakdown by income level, selected years, France

New Managerial Challenges in European Social Security PUBLIC VS PRIVATE For many risks, in a growing number of European countries, there is a kind of social protection competition between public and private insurance carriers – this may apply for pensions, health care, accident injury, unemployment, even social care.

New Managerial Challenges in European Social Security MOBILITY AND VESTING Workers mobility has never been so high in Europe, increases with the number of member countries and discrepancies in economic and demographic patterns among members. European social security systems agree to facilitate vesting, but avoid adverse selection (common identification methods, adopt rules about conflicting eligibilities)

New Managerial Challenges in European Social Security TEMPTATION FOR CHEATING Under-declaration, non declaration, clandestine work, non compliance with training requirements, accumulating disability pension and income from work are most common fraud patterns found across European countries social security schemes. A European Code of conduct was adopted already in 1999 for improved cooperation between authorities of the Member States concerning the “combating of transnational social security benefit and contribution fraud” and “undeclared work”, and concerning “the transnational hiring-out of workers”. It includes: - direct communication between competent bodies; - designation of national liaison offices in the Member States with a view to facilitating cooperation, and their notification to the other Member States and to the Commission; - forwarding of any request for cooperation to the competent body of a Member State; - reciprocal provision of administrative assistance between the competent bodies (supply of information, transmission of documents).

New Managerial Challenges in European Social Security FINANCIAL CONSIDERATIONS It is common knowledge that, in social security financing, the higher the social need, the lower the resources (social need increases with economic slowdown or restructuring, population ageing, poor living conditions, etc. all elements provoking simultaneous decreases in contributory bases) Globalisation and ageing have increased the demand on social security protection in European countries. Other financial means than contributions assessed on salaries had to be identified – notably concerning guarantee of minimum living standards, directly targeting persons with very limited contributory resources.

New Managerial Challenges in European Social Security RELEVANCE FOR CHINA With an active population with increased mobility – across geographical boundaries, across social categories – China’s social security is confronted with challenges comparable to those identified in Europe over the past couple of decades. A number of these challenges have been recently recognized in the China Social Insurance Law. It is hoped that the relevant European experience here summarily described will in some aspects help in the proper implementation of the Law.

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