EN
ENEN
/ COMMISSION OF THE EUROPEAN COMMUNITIESBrussels, 5.2.2010
SEC(2010) 98 final
COMMISSION STAFF WORKING DOCUMENT
Joint Report on Social Protection and Social Inclusion
accompanying document to the
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS
Proposal forthe Joint Report on Social Protection and Social Inclusion 2010
Supporting document
COM(2010)25 final
SEC(2010)99
TABLE OF CONTENTS
1.Scope and Outline of the Report
2.The social situation in the EU-27
2.1.The social impact of the crisis
2.2.Poverty and the crisis in public perception: main results from EU wide opinion polls
2.3.Situation of the Member States' before the crisis: the role of social protection in addressing inequalities and poverty
2.4.Employment growth doesn't automatically lead to a reduction of poverty
2.5.The adequacy and sustainability of pension systems
2.6.Health care and long-term care: ensuring sustainability and access to quality services for all
2.7.Social protection over the economic cycle
3.Responding to the crisis and preparing for recovery
3.1.First evaluation of policy responses
3.2.Overview of main policy measures taken in response to the crisis
3.3.The need for effective and efficient social inclusion policies during and after the crisis
3.4.Supporting the integration of the most excluded in the labour market and in society as whole: the role of activation and access to services
3.5.Income support: the specific role of minimum income schemes
4.The use of the European Social Funds to support social objectives during the crisis and in the long term
4.1.ESF support for social protection and inclusion: actions responding to the crisis
4.2.ESF support for social protection and inclusion: long-term actions
4.3.The European Globalisation Adjustment Fund (EGF)
5.The importance and extent of homelessness and housing exclusion
5.1.Housing vulnerability: the importance of housing in the context of the current economic crisis
5.2.Housing exclusion –- an important challenge for the EU population at large and particularly for those at risk of poverty
5.3.The overall policy response — comprehensive strategies and better governance
5.4.Causes of homelessness and housing exclusion and instruments
5.5.Monitoring and evaluation
6.Effectiveness and efficiency in the health sector: some considerations at a time of economic crisis
6.1.Why more effectiveness and efficiency in health care is needed
6.2.Improving effectiveness and efficiency in the health sector: a look at a number of areas
6.3.Conclusions
7.Long-term implications of the crisis for the sustainability and adequacy of pensions
7.1.Outcomes of pension reforms prior to the crisis
7.2.First effects of the crisis
7.3.Long-term implications of the crisis
7.4.Policy implications
8.Governance
9.Annexes
9.1.Indicators
9.2.Data sources
9.3.Annex to part 6 on Health
9.4.Statistical tables
1.Scope and Outline of the Report
This supporting document was prepared by the Commission services to accompany the 2010 Joint Report on Social Protection and Social Inclusion [Commission proposal: COM(2010) xx]. It provides an assessment of the social situation in the 27 Member States, with special emphasis on the impacts of the economic crisis and Member States' responses to it. Against this background, and in addition to more general topical discourse, specific aspects of social protection and social exclusion of long-standing concern are explored; the sustainability and adequacy of pensions; homelessness and housing exclusion; and the effectiveness and efficiency of healthcare spending.
As this was not a year for formal cyclical reporting by Member States on Social Protection and Social Inclusion, the document draws largely upon material and analysis produced for the Social Open Method of Coordination (Social OMC) under the aegis of the Social Protection Committee (SPC). In 2009, the SPC carried out important work to improve understanding of the context and nature of the policies and reforms that will be needed for successful recovery leading to a sustainable and inclusive social market economy. In the spring and autumn, two reports reviewed the social impact of the crisis and the policy responses of the Member States. The report on Growth, Jobs and Social Progress looked back at ten years of the Lisbon Strategy and sought to draw lessons on how the social dimension of the strategy for 2020 could be strengthened (see box at the end of chapter 2). Learning from the experience of Member States in past downturns, the report also points to the long-term challenges that will accompany recovery. Member States’ specific reporting on their strategies to fight homelessness and housing exclusion brings a timely focus on a key dimension of social exclusion that has become more acute in the crisis. The SPC adopted a new update of the report on theoretical replacement rates of future pensions. The health chapter is based on previous Joint Reports in this area as well as WHO and OECD work (including the 2008 Joint EC/OECD conference on improving the efficiency of health systems). It also draws on recent Czech presidency conferences on this topic and the 2007 Luxembourg seminar on the rational use of resources in the health sector.
There is a detailed table of contents, but in summary the report is organised as follows. Section 2 contains an overview of the social situation in the Member States, including the effects of the crisis. It considers the importance of social protection and the need to preserve adequate but sustainable protection. It also looks at public perceptions of poverty and separately considers pensions, healthcare and long-term care. Section 3 surveys Member States’ policy responses to the crisis and looks at the need for strong policies for inclusion, activation, social services, and minimum incomes both during and beyond the crisis. Section 4 covers the role of the European Social Fund and the European Globalisation Adjustment Fund. Section 5 considers homelessness and housing exclusion in more depth. Finally, section 6 looks at healthcare expenditure,section 7 the sustainability and adequacy of pensions; and section 8 matters of governance.
2.The social situation in the EU-27
2.1.The social impact of the crisis
As the EU was been hit by the most severe global recession in decades, strong policy intervention has focused on recovery with automatic stabilisers playing a major role in absorbing the shock and in mitigating the economic and social consequences of the crisis. However, the human costs of the crisis are difficult to evaluate fully as yet.Despite the prospect of economic recovery, the full impact of the crisis on labour markets and public finances is still unfolding and there are risks of jobless recovery.
2.1.1.Forecast 2009-2010
The latest economic forecast published by the Commission on 3 November 2009 points to the first signs of economic recovery. The dramatic fall in EU GDP has come to an end. GDP in the European Union is projected to fall by 4.1% in 2009 and to grow again by 0.7% in 2010 and 1.6% in 2011. However, the full impact of the crisis on labour markets and public finances is still to emerge. Looking ahead, employment is expected to contract by about 2.3% in 2009 and by a further 1.2% in 2010, resulting in nearly 8 million job losses over the two years, in contrast to the net job creation of 9½ million during 2006-2008. Unemployment is likely to reach 10.3% in 2010, and social expenditure may rise from 27.5% to 30.8% of GDP between 2007 and 2010.
Public finances have also been hit hard. The total EU government deficit is projected to triple this year (from 2.3% of GDP in 2008 to 6.9% in 2009) and to rise further in 2010 to 7.5%. This deterioration follows in part from the working of automatic stabilisers, not least on the revenue sideand from the discretionary measures taken to support the economy.
The scope, magnitude and effects of the crisis vary greatly among the EU Member States. According to the Commission forecast, all Member States but Poland (+1.2% in 2009) will experience a fall in GDP in 2009, with estimates ranging from -18% in Latvia and Lithuania to -0.7% in Cyprus. Gradual recovery is expected for 2010, as GDP growth is expected to turn positive again in two thirds of the EU countries. Among the five largest EU economies, real GDP is expected to contract this year by about -5% in Germany, -4.7% in Italy, -4.6% in the United Kingdom, -3.7% in Spain, and -2.2% in France. Of these countries, Germany, France, Italy and the UK are expected to return to positive growth in 2010.
2.1.2.Labour market trends
At EU level, employment growth has come to a standstill, with the employment rate contracting in the second quarter of 2009 to reach 64.8% in the EU-27 as against 66%one year before. Unemployment rates increased from 6.7% in March 2008 to reach 9.5% in November 2009 and could go up to 10.3% in 2010 if policies and labour market behaviour remain unchanged.
At national level, the impact of the crisis varies greatly. Between the second quarter of 2008 and the second quarter of 2009 employment contracted in most EU countries. It fell considerably – by 4pp or more – in Ireland, Spain and the three Baltic States, but remained stable in Germany, Luxembourg, the Netherlands and Poland.
In some Member States, the rise in unemployment has been especially stark. In Spain it reached 19.4% in November2009, as against 9.5% in March 08. During the same period it also more than doubled in Ireland (12.9% as against 5.2%), in Estonia (15.2% as against 4%), Lithuania (14.6% as against 4.3%) and Latvia (22.3% as against 6.1%).
Some categories of workers have been particularly hit by the crisis, including the young, the low skilled, employees ontemporary contracts, EU mobile workers, migrants and the elderly. Youth unemployment rate reached 21.4% in the EU27 in November2009 compared with14.7% at the end of 2007. Since the start of the crisis, the unemployment rate of non-EU workers grew faster than for other workers and reached 18.18.9% in the third quarter of 2009,as against 13.6% one year before.
Data available from a few Member States show that the number of workers withflexible working time arrangements varies greatly across countries. In Belgium, 185000 workers were on reduced time in August 2009as against 120000 one year before. In Ireland the number of workers on reduced working time rose from 20880 in Q32007 to 89250 in Q32009. In Austria, similar schemes covered 62000 workers in June 2009, up from 8800 in December 2008 (falling to below 40000 workers in September 2009). In Bulgaria, 20000 workers have come undera similar scheme since its launch in January 2009. In Germany, short-time working was dramatically expanded to cover more than 1.4 million in June 2009, compared with 50000 one year before. The results of such differences in scope and magnitude can be seen in the differences in the impact of large GDP drops on unemployment. In Germany,in particular, the significant drop in GDP led only to a moderate increase in unemployment(from 7.2% in August 2008 to 7.6% in November 2009). Luxembourg also notes that the sustained promotion of part time work arrangements may have containedthe growth in unemployment rates observed in the last quarter of 2008 and limited the number of unemployed.
2.1.3.Take-up of benefits
The direct impact of the recession is apparent in the growing numberof unemployment benefit recipients during 2008 and into the third quarter of 2009. The crisis has had no clear impact on the percentage of older workers claiming early retirement benefits, apart from upward trends reported in May 2009 in LT, PL and EL.
Table 2.1a: Countries thathave reported significant increases in unemployment benefitsclaimant since the outset of the crisis
AT: +32.6% between 09-08 and 09-09 / ES: +46% between 08-08 and 08-09BE: +7.6% between 08-08 and 08-09 / IE: +80% between 09-08 and 09-09
BG: +27.8% between 07-08 and 07-09 / FR: +18% between 07-08 and 07-09
CZ: +80% between 08-08 and 08-09 / LV: + 98.7% between 12-08 and 09-09
DK: +85% between Q4-08 and Q2-09 / LT: +216% between 09-08 and 09-09
DE: +6% between 09-08 and 09-09 / LU: +37% between 08-08 and 08-09
EE: +188% between 08-08 and 08-09
Source: SPC/ISG questionnaire on the social impact of the crisis
The impact in terms of social assistance claimants became clear in the second and third quarters of 2009 (See Table 2.1b).The pressure on last-resort schemes depends both on how early the crisis hit the different countries, and on the varying coverage and duration of unemployment schemes. Claimant numbers continued to increase in the countries first hit or most affected by the crisis. Pressure on last resort schemes has also started increasing significantly (by more than 10%) in another five countries. In Denmark and Slovakia, this surge followed a period of strong decline. In Hungary, Poland[1], and the UK the percentage dropped slightly.
Table 2.1b: Countries thathave reported significant increases in the claimants of social assistance since the outset of the crisis
Countries already reporting a surge in social assistance claimants in spring 2009AT: +10.6% between Q3-08 and Q3-09, /
Countries reporting a surge in social assistance claimants in the autumn 2009
/ CZ: +11% between February 08 and February09
CY: +15% between 2008 andSeptember2009
Source: SPC/ISG questionnaire on the social impact of the crisis
2.1.4.Housing
The impact of the crisis on housing markets and the housing situation of people varied greatly across the EU.Housing prices have continued to fall in Ireland(-18% between Q1-08 and Q1-09), Spain (-8.34between Q2-08 and Q2-09), and LV (-10% between Q1-08 and Q1-09), NL (-5.6% between August 08 and August 09) and FI (-1.5% between Q2-08 and Q2-09). In the United Kingdom, prices have started recovering after the initial fall observed in 2008 (+7% between January and September 09). Rents have increased more than general inflation in BG (+66% between Q2-08 and Q2-09),LV (+23%), and the Netherlands (+2.9%). Increases in the number of non-performing housing loans were recorded in Belgium, and Latvia.
The number of housing repossessionshas increased in Denmark (+46.3% in 2009), Spain (+126% in 2008), Greece (+17% in 2008), Ireland (+30% between June 08 and June 09), the Netherlands (+14.5% between June 08 and June 09) and the United Kingdom (from 10000 in Q2-08 to 11400 in Q2-09). This indicates the potential severity of the crisis, even though repossessions still concern limited numbers of mortgage holders (e.g. 1594 mortgage holders in Denmark, 58686 in ES, 0.38% of mortgage holders in the UK).
In addition, the consequences of repossessions on families vary greatly across Member States, depending on the support mechanisms in place when people lose their homes. The number of beneficiaries of specific support schemes to renters has increased in IE (+41% between Q2-08 and Q2-09) and PT (+40% between June 08 and June 09 even though it concerns a limited number of families benefiting from the Social Integration Income: 21381) as well as the number of beneficiaries of schemes to support mortgage holders in IE: (+144% between Q2-08 and Q2-09). Finally, the requests and waiting time for social housinghave increased in Ireland, Luxembourg and the UK.
2.1.5.Over-indebtedness
Over-indebtedness can be monitored through administrative data on applications for loan arrangements or the number of ‘non-performing’ loans. Worsening over-indebtedness of households was initially reported in Greece, Latvia, Lithuania, Austria and Portugal. New evidence shows that over-indebtedness and applications for loan arrangements arenow increasing in Belgium, Bulgaria, Luxembourg, Austria and (to a minor extent) Portugal. These increases also partly reflect long-term trends in the consumption pattern of households.
According to the spring report, debts linked to utility bills have also increasedin Lithuania and Latvia. In Latvia, for example, unpaid bills for heating energy at the end of the heating season amounted to 15.8 million lats, which is about 66.3% higher compared to the previous heating season, when debts amounted to 9.5 million lats. At the beginning of the 2009 heating season, total unpaid heating billsin Latvia came to 1.63 million lats, about 54% higher than in 2008. Over-indebtedness has increased in FR and HU, and difficulties in accessing credit are reported in LT and PL.
2.2.Poverty and the crisis in public perception: main results from EU wide opinion polls
According to a Flash Eurobarometer conducted in early July for the European Commission, citizens’ perceptions are that the economic crisis has had a serious impact on their lives. Although primarily viewed in this way in some of the southern and eastern European countries, the crisis has also made a deep impression in previously economically sound countries, such as Ireland. Overall, about onefifth of Europeans say their householdsare facing financial difficulties and a similar percentage say that, on occasion, they have had no money to settle ordinary bills or to buy food in the last 12 months. A quarter of EU citizens expect the situation to get worse in the coming year, while just over half foresee no change and about one in six think that things will improve. The proportion of Danish, Finnish and Swedish citizens who are optimistic about both the present situation and future economic prospects is greater than in the other EU Member States.
Another Eurobarometer survey, carried out in September 2009, sheds some light on the many facets of poverty and social exclusion in the context of the crisis. The survey examined, among other things, people’s awareness of the extent of poverty within the European Union, the perceived personal and societal reasons behind poverty, who is thought to be most at risk, if people feel somehow threatened by the possible prospect of poverty, how poverty may prevent people from taking full advantage of society, as well as how easy or difficult they perceive access to financial services to be. People’s perception of the urgency of government action to combat poverty is also examined, together with the level of administration felt to be mainly responsible for taking action.
EU citizens are strongly aware of the problem of poverty and social exclusion in today’s society: three out of four Europeans (73%) feel that poverty in their country is widespread. However, the extent to which poverty is seen as widespread differs greatly from country to country. In Bulgaria, Hungary, and Romania 90% or more of citizens perceive it to be widespread. Conversely, fewer than four in ten think that poverty is widespread in Denmark (31%), Cyprus (34%) and Sweden (37%).
High unemployment (52%) and insufficient wages and salaries (49%) are the most widely perceived ‘societal’ explanations for poverty, together with insufficient social benefits and pensions (29%) and the excessive cost of decent housing (26%). Meanwhile, a lack of education, training or skills (37%), as well as ‘inherited’ poverty (25%) and addiction (23%) are the most widely perceived ‘personal’ reasons behind poverty.
Over half of Europeans (56%) believe that the unemployed are most at risk of poverty, while 41% believe that the elderly are most vulnerable, and 31% see those with a low level of education, training or skills as most at risk. Other social categories considered most vulnerable by Europeans are people in precarious employment, people with disabilities, and those suffering from some form of long-term illness.