Social Report AnalysIs section

Transcription

1 Social Report AnalysIs section

2 IMPRINT Owner and publisher: Federal Ministry of Labour, Social Affairs and Consumer Protection (BMASK) Stubenring 1, 1010 Vienna Editor-in-chief: Department V/B/4 Translation: Michael Delaney Layout: SHW Stephan Hiegetsberger Werbegrafik-Design GmbH, Vienna Place of publication and production: Vienna Printed by: BMASK Date of publication: May 2013 ISBN: All rights reserved. The brochure is available through the BMASK s order service at No part of this publication may be used without the written consent of the publisher. This includes any form of repro duction, translation, microfilming, TV or radio broadcast as well as processing and storage on electronic media, e.g. Internet or CD-Rom.

3 Preface The present social report outlines the BMASK s activities in the years 2011 and Furthermore, it provides analyses of the structural development of social policy in Austria. As in the previous years, the analysis section (Chapters 11 through 16) has been translated for this English edition. References to the activities report (i.e. Chapters 1 through 10) relate to the German edition (Sozialbericht Ressortaktivitäten). During the reporting period, effects of the economic and financial crisis continue to be present. At the same time, the success of measures and policies set by the Austrian government in the fields of labour market, social security and pensions to face the impact of the crisis and the demographic challenges becomes visible. As the international comparison shows, Austria has chosen a promising strategy to manage these challenges. Unemployment remains low while employment rates continue to rise. Social expenditure has developed moderately during the last decade in spite of the ageing of society. Austria s employment and social policy has proven to be an important mainstay of poverty reduction, and at the same time it contributed to stabilising the economy. Additional investments improve labour market opportunities for young and older employees, inter alia by guaranteed training or further education opportunities for young people ( Ausbildungsgarantie ) and a broad package of measures to boost employment in line with the Arbeitsmarktoffensive. Equal labour market opportunities for women and men remain a substantial target of the BMASK s policy. By means of reforms of invalidity and early pensions and via the expansion of labour market opportunities for persons with health limitations the retirement age shall be increased, and thus the welfare state shall be secured. In spite of necessary consolidation measures, the social security schemes could be maintained and even partially extended: additional funds for the long-term care fund up to 2016 have been provided to expand in- and outpatient care. The means-tested minimum income scheme ( Bedarfsorientierte Mindestsicherung ) has been introduced nationwide, and foundations for improved reconciliation of work and family life have been laid. The government s Beschäftigungsoffensive focuses on the labour market integration of people with disabilities. Moreover, the national action plan on disability containing 250 measures was adopted by the Austrian Government in I am grateful to the staff and the authors who contributed to this extensive report. Rudolf Hundstorfer Federal Minister of Labour, Social Affairs and Consumer Protection

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5 Contents Social Report Summary... 5 Analysis section 11. The development and structure of social expenditure in Austria The development and distribution of income Facts about the distribution of wealth in Austria Poverty and social exclusion The economic and financial crisis: monitoring of the social impact by the BMASK Types of transition to retirement Note: The report on the ressort s activities (Chapters 1-10) has not been translated and is available in German at the BMASK s homepage: > Soziales > Allgemeine Sozialpolitik > Sozialberichte. 3

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7 Summary Summary The social report is published biannually and contains both the activities report and the socio-political analyses, the latter also being translated. These analyses allow for detailed insights in the general social conditions and the living circumstances in Austria. Included in the present social report are studies on incomes, wealth and poverty, as well as analyses of the impacts of the economic crisis, pensions and Austria s social expenditure. In light of the analyses the effects of labour market and social policies as well as the further political need for action are outlined. The development and structure of social expenditure in Austria Compared to other EU countries, the effects of the financial and economic crisis on social cohesion and the standard of living of the population have been relatively moderate in Austria. This has been facilitated by economic, fiscal and employment policy measures but also by the social expenditure as significant factors for stabilising the economy. Social expenditure as automatic stabiliser In 2009, the social expenditure/gdp ratio in Austria rose sharply compared to 2008 as a result of the financial and economic crisis, as it did in all EU countries. This increase facilitated a stabilisation of material living conditions, and was, thus, one of the preconditions for the economic recovery. Consequently, the social expenditure/gdp ratio has been decreasing again since In 2011, 29.3% of the gross domestic product (GDP) was spent on social and health benefits and services. In spite of ageing no increase in social expenditure/gdp ratio Although the number of older people is rising and the average per capita social expenditure for elderly persons are six times as high as the expenditure for persons below age 65, real annual growth of social expenditure has, with the exception of the crisis year 2009, declined noticeably since the 1990s. Change in the societal age structure inevitable influences the dynamics of social expenditure, still, the increase in age-related additional costs has been compensated for by cost-containing consolidation measures. In this way, the social expenditure/gdp ratio has been kept constant over the long term in spite of the ageing of society. Welfare state remains affordable in future The development of the social expenditure/gdp ratio is not only shaped by demographic factors, but is also significantly influenced by economic trends and political reforms. The ageing of society does not necessarily pose insolvable problems in financing the welfare state: considering economic growth trends and reform measures, the social expenditure/gdp ratio will only rise moderately until Structure of social benefits According to social risks (functions), half of social benefits is accounted for by the functions old age and surviving dependents, one quarter by health. Family benefits make up 10% of social expenditure, invalidity benefits 8% and labour market benefits 5%. Financing Considering all social protection systems, more than a third of their financing takes place via allocations from the budgets of the regional administrative authorities and via employers contributions, respectively. More than a quarter of social benefits is financed by the contributions of the insured persons. In international compar 5

8 Summary ison, the insured persons proportion of financing is higher and the state s share is lower. Share of social benefits for women and men Around half of social expenditure is accounted for by women, and half by men. Due to their more disadvantaged position in the labour market, women receive a markedly lower proportion of the social benefits which are dependent on work history. However, they receive a higher proportion of universal health and care benefits and services, largely due to their longer life expectancy. The development and distribution of income Shift from wage to non-wage incomes During the last decades particularly since the 1990s the total sum of wages has risen more slowly than corporate earnings and incomes from assets and rents in spite of increasing employment. Thus, the gross wage ratio, i.e. the wages proportion of national income, is declining. The ratio has fallen markedly from 75.7% in 1994 to 67.3% in The continuous decrease of the wage ratio was interrupted in the year of the crisis 2009 but has continued since then. Due to the increasing tax and contributions burden (income tax, social insurance contributions) on wage incomes, the net wage ratio fell even more than the gross wage ratio. Growing inequality across wage incomes The increase in atypical employment relationships, particularly the rise of part-time jobs, and the varying distribution of productivity growths across income groups are accompanied by a growing inequality between lower and higher incomes. Within 15 years ( ), the lowest income quintile s share of total gross income has been reduced from 2.9% to 2.0%. In the second lowest income quintile, the share has also been reduced from 10.9% to 9.2%. In contrast, the proportions of the two upper quintiles have risen. The best-earning income quintile increased its share from 44.4% to 47.4%, i.e. the 20% earning the highest incomes gain almost half of total incomes, while the 20% earning the lowest incomes only earn 2% of total incomes. Income tax reduces income disparities within net wages compared to gross wages. The proportion of net incomes of the lowest income quintile increases from 2% to 2.6%, while the share of the top income quintile decreases from 47.4% to 43.7%. However, income disparities also grow between net wage incomes. Structural shifts on the labour market particularly the increase of part-time employment facilitate a decline of gross wages in real terms in the lower income groups between 1995 and Real growth in gross wages could almost only be reached in the two upper income quintiles, where the increase was highest for the best-earning 20%. Considerable gender-specific disparities remain The average (median) income of women is lower than that of men by one third in When adjusted by the hours worked, women earn by 13% less than men. During the last 15 years, the women s income gap for actual median incomes has not been reduced. This is due to the fact that, although wages for women have been improved in general, this development has been counteracted by an increase in female part-time employment. Social transfers reduce income disparities To analyse incomes at household level, social transfers are included next to incomes from employment. Activities of the state (taxes and social transfers) correct the distribution of gross wages considerably. The 20% of households with the lowest household incomes account for 6

9 Summary 11% of total disposable incomes, the top income quintile accounts for 35% here. In spite of growing disparities between lower and higher individual wage incomes, the distribution of disposable household incomes largely remained unchanged. The reasons for that are redistributional effects of social transfers and direct taxes on the one hand, and the higher contribution to household incomes by women s employment, even though often part-time, on the other. Facts about the distribution of wealth in Austria First data on total wealth In all countries of the euro area, a survey on i.a. wealth of private households was commissioned by the national banks upon the initiative of the European Central Bank in 2010 (Household Finance and Consumption Survey HFCS). With the HFCS, Austria has for the first time a source of data, which contains real and financial assets as well as the debts of private households in a single data set. As the HFCS is a voluntary household survey, the estimates particularly of the upper range of distribution of wealth can, consequently, only be viewed as the lower limit of actual unequal distribution. The surveyed gross wealth covers a household s real assets (property, company ownership, vehicles, valuables) and financial assets (saving deposits, current accounts, life insurance policies, building society saving plans, investments funds, interest-bearing securities, stock-exchange listed shares, debts owed to the household). A household s net wealth is calculated by deducting indebtedness from gross wealth. Pronounced unequal distribution of wealth Private households in Austria are broken down into four groups according to their wealth: Half of households only hold a small net wealth of averagely 18,000 EUR. Additional 30% of households hold an average wealth of 178,000 EUR. For 15% of households, the average wealth sums up to 497,000 EUR. 5% of households are situated at the top of income distribution. Their average wealth accounts for 2.57m EUR per household. The average wealth of the wealthiest 5% is 139 times higher than that of half of all households. The top 5% hold 45% and the lower half hold 4% of total assets. Within the top 5%, half own property not used by themselves; 68% have company holdings; 30% hold investment funds; and 12% and 14% respectively hold shares, bonds or other financial assets. Within the lower half, 3% own property not used by themselves; 2% have company holdings and between 1% and 3% respectively invested parts of their assets in shares, bonds or other financial assets. Unrealistic assessment of own wealth The survey also inquires the self-assessment of households regarding their position in the distribution of wealth. Particularly households with large wealth position themselves in the middle of wealth distribution. Only 1% of the wealthiest 20% count themselves among the top wealth quintile. Less pronounced, this self-allocation also applies to persons at the bottom margins of wealth distribution: a proportion of persons with very little wealth assume to be in the middle of wealth distribution. Self-assessment severely contrasts with the actual inequality of the distribution of wealth. 7

10 Summary Poverty and social exclusion Prevention and reduction of poverty and social exclusion are important targets of social policy both at national and EU level. One target of the Europe 2020 strategy is to significantly reduce the number of persons at risk of poverty or social exclusion from 2008 until In spite of increasing risk-of-poverty threshold decrease of people at risk of poverty or social exclusion in Austria In spite of the economic and fiscal crisis in 2009 the real household incomes increased by 2.4% on average between 2008 and This was due to the marked wage increases in 2009 as well as to tax reform, labour market and family support measures. With the wage increase the risk-of-poverty threshold also increased: for 2010, it amounted to 1,031 EUR (12x annually) for one-person households. Still, the number of persons at risk of poverty or social exclusion decreased also during the crisis. The at-risk-of-poverty rate of women is above 18% and that of men is just under 14%. Measures aiming at equal labour market treatment and at improved reconciliation of care duties and employment can significantly reduce risk situations not only for women but for the population in total. Although the number of people at risk of poverty or social exclusion is decreasing, a consolidation of certain risk situations within this group is to be noted, visible in the growing number of persons in extreme exclusion situations. National indicators for social inclusion Alongside the EU-wide definition of poverty and social exclusion national indicators for five areas of living (household income and standard of living, housing, employment, education opportunities, and health) are used for the monitoring. In spite of increasing disposable household incomes in real terms and a slight decrease in private indebtedness, there is some significant worsening in the area of standard of living: consistent poverty has been rising constantly since 2005; the number of persons in persistent financial deprivation has doubled since 2005 and was at 10.2% of total population in In the area of housing, both improvement and worsening are recorded. Positive declines are found for overcrowding in multiple person households and for precarious housing conditions, while the number of registered homeless has increased by 8% (2010: 12,300) and the number of persons perceiving stress situations in the residential environment by nearly 10%. Also, the proportion of people with very high housing costs increased slightly. In the field of employment, the number of persons with low wages was reduced by 10%, the number of workless individuals was reduced by 3%. Yet, the number of long-term unemployed has risen as well as the proportion of persons hindered from employment due to care duties (mainly women). Indicators for education and health register improvements: educational activities increase in all age groups, particularly for elderly persons; the proportion of children up to age 4 in preschool facilities is rising continuously. The share of youth school leavers is declining. The number of persons with multiple health limitations is decreasing in spite of the ageing of society. Differences between people at and people not at risk of poverty Part of the persons at risk of poverty or social exclusion had to cope with loss of purchasing power in real terms in 2009 (in contrast to people not at risk). Almost half is affected by very high housing costs (people not at risk 11%), the rate of workless individuals (48%) and low wages (40%) are far above the values of people not at risk (9% 8

11 Summary and 12%, respectively). People at risk of poverty or social exclusion are twice as often multiply limited in their health status as are persons not at risk (16% and 8%). The economic and financial crisis: monitoring of the social impact by the Federal Ministry of Labour, Social Affairs and Consumer Protection (BMASK) The national monitoring of the social impacts of the crisis complements the EU-reporting by means of specific national indicators. The Austrian concept of crisis monitoring has been singled out as a positive example in EU reports. Alleviation of impact of crisis by social policy In the year of the crisis 2009, domestic demand was supported by comparatively favourable wage agreements in 2008, the tax reform in 2009 and the expanding of specific social benefits (e.g. free kindergarten year, 13th family allowance). Social benefits proved their function as automatic stabilisers and, alongside specific measures (e.g. short-time work), made up a concerted form of mitigating the effects of the crisis. The strengthening of purchasing power lead to decisive synergy effects between welfare state and economy during the crisis. The extensive social security systems added to Austria reaching growth again faster than other EU states as well as to reducing the increase in social expenditure due to the crisis. Labour market impacts of the crisis In spite of the thoroughly pronounced effects of the economic crisis on the Austrian labour market, recovery was comparably quick: since June 2011, Austria has the lowest unemployment rates EU-wide (between 4% and 4.5%). Yet the pre-crisis situation has still not been reached again. At the beginning of the crisis, the rise in recipient numbers of unemployment benefits exceeded that of recipients of unemployment assistance by about 10%. By now, the number of recipients of unemployment benefit already decline again compared to 2008 (-2% in November 2011); however, the increase in recipients of unemployment assistance is at 27%. This illustrates, that it becomes more difficult to find a job for a part of the population. The crisis-related decrease of employed persons only affected full-time employment, the number of part-time employees has been increasing constantly since 2008: the part-time rate of women rose from 43% to 45%, that of men from 7% to 8%. Reduction of poverty and social exclusion In European comparison, Austria was one of the few member states that could successfully reduce poverty and social exclusion. The social target group of the European Strategy Europe 2020 was reduced by between 2008 and 2011; this results in a reduction of poverty and social exclusion by 1.7 percentage points to 16.9%. To reach the nationally defined target for 2018, 110,000 further persons have to be lifted from poverty or social exclusion. The number of recipients of means-tested minimum income scheme benefits (Bedarfsorientierte Mindestsicherung) in Austria has risen by 37% since the beginning of the crisis. This rise is not only due to higher neediness but also to enforced information policy and the removal of access barriers which relates to the introduction of the means-tested minimum income scheme (desired increase of the take-up rate); furthermore, statistical recording has been improved. Since 2009, continuing rises of persons with severe repayment problems (regarding the repayment of loans/liabilities) as well as of the number of these repayment problems have to be noted. 9

12 Summary It may be resumed that because of wage policy and tax measures as well as of social transfers mass purchasing power could be maintained, whereby important conditions for economic recovery could be created. During the crisis, an increase of the number of persons at risk of poverty or social exclusion has not taken place; however, additional indicators show that a growing number of persons within this group is confronted with multiple and exacerbated risk situations. Types of transition to retirement To reach the political target of rising the effective retirement age it is necessary to evaluate the essential factors that currently stand against this strategy. Although numerous measures to reduce early and health-related retirements have been set in recent years, this had only little effect on an increase of the effective retirement age. This is due to labour market conditions and the health status of the respective persons. Majority unemployed or on sick leave prior to invalidity pension About two thirds of men with newly granted pensions receive unemployment or sickness benefits directly before retiring on an invalidity pension. The blue-collar workers proportion is at 70% and, thus, slightly higher than that of white-collar workers. Women who have been granted their first-time invalidity pension in 2011 were even more often unemployed or on sick leave prior to their retirement. Only about 20% of women (ca. 30% of men) were employed directly before they retired. Almost 30% of transitions to old-age pensions are not preceded by employment Although active employment directly before retirement plays a far more significant role in the transition to old-age pension than in that to newly granted invalidity pensions, almost one quarter of male first-time pensioners retire from unemployment, sickness or other workless positions. One third of women are not employed directly before retiring to an old-age pension. Regulations for part-time work for older workers are claimed less among women than among men. Furthermore, a considerable proportion of women were not even registered as employed or unemployed before they retired. Long phases of unemployment before transition to retirement The long period of time between the last active employment and the actual retirement is an indicator of disadvantageous employment opportunities for persons with health limitations and specific groups of elderly persons. Among persons receiving unemployment or sickness benefits before their first-time invalidity pension, the transition period between the last active employment and the retirement was about one and half years. Among recipients of unemployment assistance, the last active employment was terminated about five years before retirement on average. Workless individuals (voluntary insurance, self-insurance, eternal entitlement, i.e. ewige Anwartschaft ) retired more than ten years after their last employment. It has to be noticed that the periods of transition between last employment and retirement on an old-age pension among persons who were unemployed, sick or workless directly before retiring are even longer. At receipt of unemployment or sickness benefits, the periods are between two and three years, at receipt of unemployment assistance or advance on pension payments between four and eight years. In case that the persons were neither employed nor on sickness 10

13 Summary or unemployment benefits before retiring, more than ten years pass between retirement to an old-age pension and the last active employment. Data on type and duration of transition to retirement suggest that improved employment opportunities for older workers and preventive health measures are essential preconditions for an increase of the actual retirement age. 11

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15 11. THE DEVELOPMENT AND STRUCTURE OF SOCIAL EXPENDITURE IN AUSTRIA Contents Hans Steiner Federal Ministry of Labour, Social Affairs and Consumer Protection (BMASK) 11.1 Important features Structure of social expenditure Social expenditure according to functions Cash benefits and benefits in kind Cash benefits according to type of benefit Financing of social benefits Social expenditure according to gender Social benefits depending on employment history Universal social benefits Social expenditure according to age groups Determining factors for the development of social expenditure Scenario Social expenditure compared to other EU states

16 THE DEVELOPMENT AND STRUCTURE OF SOCIAL EXPENDITURE IN AUSTRIA 11. THE DEVELOPMENT AND STRUCTURE OF SOCIAL EXPENDITURE IN AUSTRIA Compared to other EU countries, the effects of the financial and economic crisis on social cohesion and the standard of living of the population have been relatively moderate in Austria. Alongside economic, fiscal and employment policy measures, the structures of the welfare state and social expenditure play a significant role as factors, which stabilise the economy. This article illustrates the most important features of the Austrian welfare state from the perspective of public spending on social protection systems. The data basis is provided by the social expenditure, recorded annually by Statistics Austria on behalf of the Federal Ministry of Labour, Social Affairs and Consumer Protection (BMASK), based on a method 1 which has been harmonised for use throughout the EU. The website of the BMASK contains detailed information and documentation on this issue. 2 The data for 2011 is provisional and based on the figures available in May The final data can thus show slight variations compared to the figures presented here IMPORTANT FEATURES Austria belongs to the well-developed welfare states. In 2011, 29.3% of the annual value added, created by the economy (gross domestic product GDP) was redistributed via public spending on social and health-related services and benefits. This percentage is above the average for the EU (see Section 11.8). In 2009, the social expenditure/gdp ratio in Austria rose sharply compared to 2008 as a result of the financial and economic crisis, as it did in all EU countries. It rose from 28.4% to 30.8%. The most important reasons for this were the marked fall in GDP as a result of the crisis and the disproportionate increase in social expenditure, also due to the crisis. Since 2010, the social expenditure/gdp ratio has fallen again (2010: 30.4%, 2011: 29.3%). The increase of the social expenditure/gdp ratio in times of the crisis facilitates a stabilisation of material living conditions, and was thus one of the reasons why the economy in Austria recovered more quickly than in other EU states. This in turn has made the fall in the social expenditure/gdp ratio since 2010 possible (see Section 11.6). Over half of social expenditure consists of benefits and services for older people (particularly old age and survivor s pensions, long-term care benefits and expenditure on social care facilities), around a quarter is accounted for by health care provision, a tenth by family benefits, 8% by benefits due to invalidity, and 5% by unemployment and labour market benefits and services (see Section 11.2). It is remarkable that in the past decade the rise in expenditure on early retirement pensions and invalidity pensions for persons under 60/65 years could be significantly reduced (see Section ). 1 The description of social expenditure is based on the legal and methodological specifications of ESSPROS (European System of Integration Social Protection Statistics). This lays down that all ESSPROS social expenditure with a redistributive character should be included (i.e. no private expenditure, no saving or life insurance schemes, no private co-payments, no company social benefits without redistributive character). In addition, there are demarcations vis-à-vis other public systems (e.g. vis-à-vis tax redistribution which is not primarily socially induced, public spending on education, subsidies for the construction of housing etc.). 2 > Soziales > Allgemeine Sozialpolitik > Sozialausgaben in Österreich (available in German) 14

17 THE DEVELOPMENT AND STRUCTURE OF SOCIAL EXPENDITURE IN AUSTRIA Approximately 70% of social benefits are provided in the form of cash benefits, and 30% as care services and other benefits in kind (see Section ). More than half of cash benefits (57%) are benefits provided according to social insurance law, 17% are civil servants pensions, 13% are universal benefits (above all child care benefit, family allowance and long-term care benefit) and less than 5% are means-tested benefits such as the equalisation supplement from pension insurance or the means-tested minimum income scheme (see Section ). If all social systems are considered, more than a third of their financing takes place via employers contributions and allocations from the budgets of the regional administrative authorities, and more than a quarter originates from the contributions of the insured (see Section 11.3). Compared to other EU countries, in Austria the insured persons contribute a higher proportion to the financing of the social system and state expenditure accounts for a lower proportion (see Section 11.8). Around half of social expenditure is accounted for by women, and half by men. Due to their more disadvantaged position in the labour market, women receive a markedly lower proportion of the social benefits which are dependent on work history, whereas they receive a higher proportion of health and care benefits and services, largely due to their longer life expectancy (see Section 11.4). The decisive factors for the development of the social expenditure/gdp ratio are demographic and economic trends as well as reforms, which either reduce or improve benefits and services. The social expenditure/gdp ratio fluctuated between 28.3% and 29.4% from 1995 to In periods of high economic growth, it was usually below 29% and in phases of low growth, it was above this value. Real annual growth of social expenditure has, however, declined noticeably since the 1990s (with the exception of the crisis year 2009). The rise in age-related additional costs has been compensated for by cost-containing consolidation measures. In this way, the social expenditure/gdp ratio has been kept constant over the long term in spite of the ageing of society (see Section 11.6). Development of social expenditure and the social expenditure/gdp ratio Year Social expenditure in EUR billions GDP in EUR billions Social expenditure/ GDP ratio Real 1) annual change of social expenditure in per cent % % 3.9 2) % 1.8 3) % 1.6 4) % 2.1 5) % % ) % -1.9 Source: Statistics Austria/ BMASK: ESSPROS database on social expenditure; own calculations 1) price-adjusted with the index-linked consumer price index ) average annual rate of real increase from ) average annual rate of real increase from ) average annual rate of real increase from ) average annual rate of real increase from ) based on provisional figures; as at May

18 THE DEVELOPMENT AND STRUCTURE OF SOCIAL EXPENDITURE IN AUSTRIA An older person accounts for six times the amount of social benefits compared to a person under 60/65 (see Section 11.5). Due to the long-term effect of the consolidation measures introduced since the mid-1990s, we can expect in the medium term that this rise in the social expenditure/gdp ratio until 2030 will be moderate at most, in spite of the ageing of society and the crisis year of 2009 (see Section 11.7) STRUCTURE OF SOCIAL EXPENDITURE SOCIAL EXPENDITURE ACCORDING TO FUNCTIONS Social benefits and services are initially differentiated according to general social risks. This description is based on the functions listed in the ESSPROS system (old age, surviving dependants, health etc.): Functions according to ESSPROS Old age Surviving dependants Health Invalidity Families/children Unemployment Other Definition all social cash benefits and benefits in kind (except health and survivors pensions) for people over statutory retirement age 1) survivors pensions from the various social systems for all age groups (also for persons over statutory retirement age) public health expenditure for all age groups invalidity-related social benefits and services for persons of working age (the equivalent benefits for those over the statutory retirement age appear in the function age ) social cash benefits and benefits in kind for children and young people (without educationrelated services) and family benefits for parents the benefits and services related to actual or impending unemployment (not only the benefits and services of the unemployment insurance scheme) part of the spending, which serves to combat social exclusion, such as socially-induced housing benefits and social assistance for people still living independently, i.e. not in homes or institutions, and the means-tested minimum income scheme (However, the majority of means-tested benefits such as the equalisation supplement in pension insurance or unemployment assistance appear in other functions.) 1) Statutory retirement age for normal old-age pensions is 60 for women and 65 for men. However, lower age limits occur in the case of early retirement pensions; these benefits are nevertheless classified as old-age benefits. In the descriptions, which follow, however, the age limits of 60/65 are mostly referred to as the statutory retirement age. Almost half of social expenditure (50%) is accounted for by the functions old age and surviving dependants and a quarter (25%) is accounted for by health care. Family benefits account for 10%, invalidity-related benefits and services for 8%, and labour market-related benefits and services for 5% of social expenditure. Social expenditure for older people increased most strongly (in percentage terms) between 1995 and 2011, primarily for demographic reasons. The increases in expenditure on health care roughly correspond to the average general increases in spending. Spending on benefits for surviving dependants and spending on invalidity benefits exhibit the lowest increases. The rises in expenditure on unemployment and on families were also below average. Since 1995, the proportion of total expenditure accounted for by older people (the elderly and surviving dependants) has increased by four percentage points, whereas that on persons under the statutory retirement ages of 60/65 has fallen correspondingly. This shift of focus in social expenditure between the age groups is largely 16

19 THE DEVELOPMENT AND STRUCTURE OF SOCIAL EXPENDITURE IN AUSTRIA due to demographic reasons. This means that until now, the social system has reacted flexibly to the ageing of society. Demographically-related above average increases for older people are balanced by below-average increases in other functions. In spite of the crisis in 2009, the social expenditure/gdp ratio for 2011 is only just above the level of Social benefits and services according to functions ) changes 2) from Nominal in EUR billions in per cent Old age % Surviving dependants % Health % Families/children % Invalidity % Unemployment % Other 3) % Total 4) % Source: Statistics Austria/ BMASK: ESSPROS database on social expenditure 1) povisional ESSPROS data, as at ) The changes were not calculated with rounded figures. 3) A part of social assistance and minimum income benefits, housing benefits and student grants, among others. 4) The total sum is lower than social expenditure, because certain types of spending (including administration) are not given here. Old age More than half (55%) of the benefits and services in this function are regular old-age pensions from statutory pension insurance (including invalidity pensions for over 60/65 year-olds), while 22% are civil servants pensions for those over 60, and 8% are early retirement pensions. Occupational pension schemes and long-term care benefits account for 5% each. The expenditure of the federal provinces and local authorities on mobile and inpatient services for older people accounts for just under 4% of the total expenditure in the function old age. Between 1995 and 2011, the expenditure by the federal provinces and local authorities on mobile and inpatient services for elderly people and the expenditure on occupational pensions increased most strongly. In 2011, occupational pensions accounted for around 6% of all pension payments (without surviving dependants pensions) for those over 60/65. The expenditure on normal old-age pensions (including invalidity pensions for those over 60/65) rose disproportionately, primarily due to demographic changes. The number of those aged over 65 rose by 24% from to around 1.5m. By contrast, the moderate annual statutory pension increases have a cost-containing effect. The spending on civil servants pensions rose more slowly than total expenditure on the function old age between 1995 and 2011, but slightly more strongly than overall social expenditure. Whereas the number of early retirement pensions increased sharply from , from this rise was stopped by pension reforms. After adjustment for inflation, less was spent on early retirement pensions in 2008 than in the year Since 2008, a stronger growth has been noticeable again, which, however, will decrease markedly in the coming years, primarily due to the reforms of corridor pensions and pensions for persons with long contribution periods. 17

20 THE DEVELOPMENT AND STRUCTURE OF SOCIAL EXPENDITURE IN AUSTRIA Benefits and services related to old age ) changes 2) from Nominal in EUR billions in per cent Normal old-age pensions and invalidity pensions for those over 60/65 from the % statutory pension insurance scheme Early old-age pensions from public pension insurance 3) % Old-age pensions for civil servants 4) % Occupational pensions 5) % Other pension-like benefits 6) % Long-term care benefit 7) for over 60/65s % Outpatient and inpatient long-term care services 8) Total 9) % Source: Statistics Austria/ BMASK: ESSPROS database on social expenditure 1) provisional ESSPROS data, as at ) The changes were not calculated with rounded figures. 3) Early old-age pensions for long contributory periods, corrridor pensions, long insurance records ( Hacklerpension ), and for demanding jobs 4) This includes early old-age pensions due to long contributory periods, corridor pensions, and the so-called Hacklerregelung, pensions for workers in physically strenuous jobs. 5) calculations by Statistics Austria 6) pensions for war victims from the social compensation laws, pensions due to work accidents from work accident insurance, special payments for older workers in strenuous night work 7) Federation and federal provinces 8) As the figures for 1995 were clearly underestimated, no rates of change are given for ) The total amount also includes smaller expenditure items which are not listed. Surviving dependants Although the spending on survivors pensions rose significantly more slowly than total social expenditure between 2005 and 2011 (falling number of recipients predominantly due to changes in legal provisions), survivors pensions still play a major role in Austria. Almost a third of pension expenditure on women is accounted for by survivors pensions. The majority of survivors pensions are within the statutory pension insurance scheme and the civil servants scheme. Benefits for surviving dependants ) changes 2) from Nominal in EUR billions in per cent Survivors pensions public pension insurance % Survivors pensions for civil servants % Survivors pensions from other schemes 3) % Total % Source: Statistics Austria/ BMASK: ESSPROS database on social expenditure 1) provisional ESPROSS data, as at ) The percentage change was not calculated with rounded figures. 3) survivors pensions from the social compensation laws and work accident insurance 18

21 THE DEVELOPMENT AND STRUCTURE OF SOCIAL EXPENDITURE IN AUSTRIA Families and children The spending on families rose by 54% between 1995 and 2011, and thus more slowly than overall social expenditure. The main reason for this is the falling number of young people under 15 (which decreased by 8% since 1995). More than half of family benefits and services are accounted for by family allowance and child tax credit, while the child care and youth welfare facilities of the federal provinces and local authorities account for a quarter, and child care allowance and maternity allowance together account for 20%. Spending on youth welfare and child care facilities rose disproportionately. Nevertheless, spending on these non-monetary benefits as a proportion of total family benefits and services is still low in comparison to other EU states. Between 1995 and 2011, expenditure on child care benefit and advances on alimony payments increased at an above-average rate. Social benefits for families and children ) changes from Nominal in EUR billions in per cent Family allowance % Tax credit for children % Parental leave benefit / child care benefit % maternity allowance % Advance on alimony payments % grants for pupils and students % Child care facilities % Support for children, young people & families: provinces and local authorities % Other family benefits Total % Source: Statistics Austria/ BMASK: ESSPROS database on social expenditure 1) provisional ESPROSS data, as at Invalidity The government has succeeded in noticeably reducing the growth in spending on invalidity benefits for persons of working age. Between 1995 and 2011, invalidity-related expenditure rose markedly slower by 41% than total social expenditure. Considering invalidity pensions for persons under the ages of 60/65 in their totality (i.e. invalidity pensions for those under 60/65, early retirement pensions due to reduced ability to work, and invalidity pensions for civil servants under 60), there has actually been a fall in the real share of these spending items in GDP from 2% to 1.4% since This implies that the widely-held view that there are no effective measures against health-related withdrawals from the labour market contradicts the actual developments. Expenditure on federal and provincial long-term care benefits for those under 60/65 also rose more slowly than total social expenditure. The greatest increases in expenditure were recorded within the framework of the assistance scheme for the disabled by the federal provinces and local authorities. 19

22 THE DEVELOPMENT AND STRUCTURE OF SOCIAL EXPENDITURE IN AUSTRIA Invalidity benefits 1) Invalidity pensions 3) for those under 60/65 from public pension insurance Invalidity pensions 4) for civil servants under 60 Invalidity pensions 5) from other social systems for those under 60/ ) changes from Nominal in EUR billions in per cent % % % Long-term care benefit 6) for under 60s Cash benefits and services 6) from the help for the disabled scheme of the provinces and local authorities Benefits in kind from work accident insurance % Other benefits and services Total % Source: Statistics Austria/ BMASK: ESSPROS database on social expenditure 1) Only invalidity benefits for those under 60/65 years are shown here. 2) provisional ESPROSS data, as at ) until 2009 including early retirement pensions due to reduced ability to work 4) All civil servants pensions for those under 60 are classified as invalidity pensions for civil servants. 5) pensions for those under 60/65 from work accident insurance and social compensation 6) The data for 1995 is not sound. Therefore, no rates of change are given. Unemployment Spending related to unemployment increased more slowly than overall social expenditure between 1995 and 2011, in spite of the crisis in The number of unemployed persons registered with the Public Employment Service (AMS) in 2011 (246,700) was higher than in 1995 (216,000). There was a clear shift from strict income replacement benefit schemes to active and activating labour market policy measures. The proportion of all expenditure in the function unemployment accounted for by these benefits doubled between 1995 and Due to the sharp increase in unemployment in the crisis year 2009, expenditure from unemployment insurance rose considerably compared to This high level was also maintained in Due to the subsequent improvement of the difficult labour market situation, expenditure fell again in It is, however, still clearly above the level before the crisis. 20

23 THE DEVELOPMENT AND STRUCTURE OF SOCIAL EXPENDITURE IN AUSTRIA Unemployment benefits and labour market promotion schemes ) changes from Nominal in EUR billions in per cent Unemployment benefit % Unemployment assistance 2) % Special support and transition benefit % Safeguarding of wages in bankruptcy cases % Active and activating measures of the AMS % Activating measures of the Compensatory Levy Fund 3) % Other benefits and services 4) Total % Source: Statistics Austria/ BMASK: ESSPROS database on social expenditure 1) provisional ESSPROS data, as at ) incl. special unemployment assistance until ) incl. the Billion for the Disabled ( Behindertenmilliarde ) 4) incl. short-time work benefit, bad weather compensation and labour market support schemes of the federal provinces, und until 2005 early retirement pensions due to unemployment CASH BENEFITS AND BENEFITS IN KIND Whereas cash benefits primarily serve to provide income replacement for life after working age, for unemployment or inability to work (old age, invalidity, unemployment etc.) and to cover additional financial requirements (children, need for care), benefits in kind (services) have the task of providing suitable offers for situations where there is a need for care or support (illness, need for nursing care, external child care etc.). In some life situations where protection is needed, it depends on the guiding principles of social policy whether for example support for child care or for people requiring nursing care should be provided by means of cash benefits for the affected persons and households, or by state subsidies for the facilities providing care. Mostly it is a combination of both types of benefits/services, but priorities vary in different EU states. Compared with the Nordic and Benelux states, Austria tends towards direct cash benefits for those affected, although spending on the extension of service offers has increased at an above-average rate. In total, more than 70% of social expenditure in Austria is in the form of cash benefits. When social systems are viewed in a narrower sense (i.e. without health services), cash benefits account for 87%. Almost 70% of cash benefits are benefits related to old age and surviving dependants, 11% are family transfers, 8% are invalidity benefits for persons under the statutory retirement age of 60/65 years, and around 5% each is accounted for by cash benefits in the case of illness (continued pay for sick workers, sickness benefit etc.) and by transfers to the unemployed. Cash benefits from the means-tested minimum income scheme account for less than 1% of total monetary social benefits. In the case of benefits in kind, outpatient and inpatient health care provision predominate with 72%. 21