The Future of Social Protection and the Welfare State in the EU

The Future of Social Protection and the Welfare State in the EU

A High level group was set up by the European Commission to look at ways to reinforce social protection both at national and European levels to respond for instance to demographic change, the impact of new forms of work, and the digital and green transitions. The group
presented its work last February.

Great crises which Europe went through this past decade (such as the financial breakdown, coronavirus, inflation) taught us that welfare state and social protection are crucial for our continent to go forward, overcome ordeals and build back better. But even if crises were not around, our century’s mega trends would keep render welfare state’s reform the indispensable pillar of a resilient European economy.

Decline of great powers, the rise of the rest, reshaping alliances, movement of people, unorthodox economic players increased leverage as well as the crises we’ve been experiencing the past years are bringing about severe challenges to competitiveness of Europe’s products and services.

However, even if this was not the case, our economy’s function is indeed influenced by the commanding presence of digitization, shrinking demographics, climate crisis and the changing future of work.

Digitization and AI strengthens citizens’ links to state social protection. At the same time the very nature and forms of firms, human interaction, labour markets and even Democracy itself even are changing.

Climate crisis and natural disasters affect especially european middle and lower class’s health and properties and demands quick transition and “greenskilling” of our labour force.

Demographic crisis changes traditional family structures, boost intra-EU mobility and migration, disrupts labour markets and challenge the sustainability of social protection and insurance systems.

The change of the world of work includes high share of non-standard forms of employment, which brings about wide insecurity and new risks which require new forms of social protection. Here an upskilling and reskilling revolution is needed to have our human capital cope with new realities.

Standard employment’—understood as regular, full-time, and subject to labour law—remains the prevailing form of employment in high income countries, however, new forms of employment have been rapidly gaining ground. While new forms of work enabled by digital technologies have rapidly been expanding in more advanced economies, they are also spreading to emerging economies, where the effects on the labour markets are likely to be different. For instance, studies show that platform work, one of the new forms of work, has the potential to increase employment opportunities, promote formalization, and reduce gender gaps in emerging economies. Despite the lack of harmonized concepts and definitions, digitally enabled new forms of work are flourishing and the number of people engaged in them is increasing rapidly.

We need welfare policies which! have to reach beyond income protection and emphasize services provision to enable participation in social and economic life and also boost employment.

As we conclude in our Report, social protection policies should be dealt with through a life course perspective.

Starting from supporting family and children as well as youth, especially gen Z and A. Here’s needed a new approach to education and labor market entry.

Policies for working life adults are the next step. New policies for self employed and non standard workers as well as life long upskilling and reskilling methods as the main active labor market policies which have to take place horizontally; and most importantly, green skills, digital skills and care skills.

Last but not least, we have the old aged people. We need longer careers, with flexible working time arrangements, adequate pensions and adjusted work places and training. We need new policies for healthcare and empowerment of old age people, which has as prerequisite the development of public long term care systems.

Catering for the increasing needs requires adequate fair and sustainable financing for social protection. This means improving progressivity and fairness of the overall tax and benefit system as well as alternative sources of financing such as special taxes. Tackling tax evasion at the national and european level is also of utmost importance.

The fundamental precondition for sustainably financing social protection is the increase of employment rates and by consequence increase of the tax base and decrease of state subsidies and benefits.

The fundamental priority is investing in children. Risk of child poverty in Europe is 19,5%. Child poverty is a grave danger for our economic growth and social peace. To the opposite, supporting children is crucial for their integration in the educational system, their entry into the labor market, better pensions and more stable health.

An important goal is to guarantee access of children in education and healthcare services in an affordable, way for those who cannot afford it.

Policies should be holistic. The challenges mentioned before are intertwined and solutions hence must respond to all of them. Competitiveness and labour market are interdependent, hence labour market reform is necessary to take into account the necessity to boost competitiveness. The same applies with dealing with migration and refugee flows in the future. Policymakers should take into account future inflows of migrants in Europe and focus on including them. Because our labour markets need their hands.

In the EU, we well know – and it was proved during the pandemic- that welfare state and social protection are factors of growth and social cohesion.

Growth requires social peace, well educated labour force, necessary for firms’ productivity and competitiveness. So, financing the welfare state and social investments, especially in our aging societies, is an indispensable prerequisite for growth. A well designed welfare state can absorb asymmetric economic shocks, provide insurance against new social risks, and ensure people receive high-quality social services through all the stages of their lives.

But welfare state has also to evolve to adapt to new circumstances.

According to our work, there are policies to follow, based on a life long cycle approach which will contribute towards maximising employability and helping to raise productivity, they, among other things, support fiscal sustainability and foster social inclusion in ageing societies.

A. Children first .Supporting the youth

1 – Affordable early childhood education and care
2 – Income support and services to prevent child poverty
3 – Support to enable starting a family
4 – High quality jobs for the youth, complemented by financial support for further education and training

B. Ensuring inclusive social protection and lifelong learning. – No workers excluded from social policies.

5 – Access to social protection for all people in employment irrespective of their status
6 – High quality of work throughout working life
7 – Opportunities for up- and re-skilling for the digital and green transitions
8 – Inclusion of migrants through social and labour market policies
9 – Job retention schemes for all to protect income, jobs and skills during crises

C. Supporting adequate income and high-quality care in old age. Supporting old aged people, we liberate middle aged and give hope to the youth.

10 – Flexible working-time and adjusted workplaces for longer careers in good health
11 – Chance for everyone to earn an adequate pension and decent minimum benefits to tackle poverty in old age
12 – Pension credits for care giving periods
13 – High-quality and affordable long-term care services D. Promoting inclusive and high quality services including energy efficient housing and transport

New type of PPP required

14 – Affordable, energy-efficient and universal-design housing
15 – Energy-efficient public transport accessible to all
16 – High quality and inclusive social services, better involving non-profit and social economy organisations The Financing Adequate financing in an investment. Poor financing is a debt generator.

We have to aim at:

17 – Broadening the tax basis through progressive taxation on income, consumption, capital, carbon and energy
18 – Considering minimum tax rates on capital in the EU
19 – Golden rule in the EU for public finances to secure social protection and investment in social infrastructures

Stepping up EU capacity to secure social protection in the future

20) Additional EU legislative initiatives to fulfil all principles of the European Pillar of Social Rights and ensure consistent enforcement across the Union
21) Minimum package of social rights, based on the European Pillar of Social Rights, guaranteed at national level