1. 1 ESPAnet The Network for European Social Policy Analysis Summer School 2007 INCOME PROTECTION Principles and practices Wim van Oorschot ESPAnet / RECWOWE Summer School 2007, Edinburg

2. 2 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Welfare state WS offers services WS protects (disposable) income - Tax credits - Cash transfers (mostly if no/little income from work) … to substitute/supplement income (income protection, social security) … to compensate expenses (subsidies, allowances)

3. 3 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Income protection – social security Why necessary? ……Market failures of private insurance Private insurance: Premium is F(chance,damage) Market fails if no insurance offered (risk selection by insurers, un-insurable risks) premium too high (for bad risks, for low incomes: not insured, under- insured)

4. 4 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Income protection – social security Society intervenes with social security benefit schemes, which deviate from the logic of private insurance by: covering un-insurable social risks and/or having partial or full risk equalization and/or having income related premiums Social security thereby creates a re-distribution between good and bad risks (horizontal solidarity) and/or between higher and lower incomes (vertical solidarity)

5. 5 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Income protection – social security Types of social risk (mostly connected with issue of work) ‘Traditional’ social risks old age, survivors, unemployment, disability (short, long), children/family, poverty ‘New’ social risks care responsibilities, single parenthood (Beck: ‘risk society’, ‘manufactured’ risks)

6. 6 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Income protection – social security Pattern variables of social security schemes The benefit eligibility: access to the benefit? entitlement: if so, what benefit, how long? obligations: if so, what conditions? Responsibilities financing administration policy design

7. 7 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Income protection – social security Pattern variables of social security schemes The benefit eligibility: population covered by the scheme workers (work record), citizens (categories) entitlement: level and duration level: wage-related, flat rate, social minimum duration: fixed, ‘unlimited’ obligations: attached to benefit receipt jobseeking

8. 8 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Wage-related Flat-rate AB Means-tested: A: including people below social minimum: social assistance B: excluding the rich B B B Previous Y Y Y

9. 9 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Income protection – social security Pattern variables of social security schemes Responsibilities financing: taxes, contributions (pay-as-you-go, capital funded) national government, employers, employees, municipalities administration: financial, assessing claims national government, employers and employees, municipalities, quango’s, private organisations policy design national government, employers and employees, municipalities

10. 10 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Social security tradition social assistancesocial insurancecategorical benefits universal benefits Needs definitionbelow minimum standard reduction of poverty loss of achieved standard below standard of general well-being promotion of well- being (quality of life) Types of social rights poverty based reciprocity based citizenship based Alternative terms for principles in social policy selectivitycontributory-, equivalence -, insurance principle reciprocity universalism unconditionality Ideal-typical scheme characteristics (pattern variables) - tax funded - state responsibility - means-test - minimum benefits - contribution funded -state, social partners - risk and contribution test - benefits flat-rate or wage-related - tax funded - state responsibility - risk and citizenship test - benefits (near) flat- rate Welfare regime liberalconservativesocial-democratic Three traditions of social security provision General aim of social security preservation of status

11. 11 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Income protection – social security Typical issues in separate traditions Social assistance means-test (re. entitlement, eligibility) which/whose means; poverty- and unemployment trap; non-take-up (awareness, stigma, complexity) administrative discretion tailor-made support, often local level admin. level of the social minimum effectiveness of anti-poverty goal (short, long term), special needs

12. 12 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Income protection – social security Typical issues in separate traditions Social insurance risk tests: unemployed, incapacitated contribution test: work-record (age) benefit level: replacement rate (and ceiling issue), family additions benefit duration: from wage related to flat rate / assistance? insiders – outsiders

13. 13 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Income protection – social security Typical issues in separate traditions Universal benefits risk test: citizen (‘waiting years’), unemployed, incapacitated benefit level: flat-rate (level?), +/- earnings related component inefficient?

14. 14 ESPAnet The Network for European Social Policy Analysis Summer School 2007 Income protection – social security Typical issues Pension schemes Pilars: Basic security (national pensions), occupational pensions, private pension provision Financing: Pay as you go, capital funded Pension formula: contribution years, defined benefit (% of final/average pay) - defined contribution