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"Social security systems and demographic developments in agriculture in the CEE candidate countries"

This report by the Network of Independent Experts in the CEE Candidate Countries and the Institute for Agricultural Development in Central and Eastern Europe (IAMO) provides an overview of the agricultural social security systems and their impact on agrarian structural change.

Social security arrangements for those working in agriculture in the CCs are generally integrated into the overall social security system, but the treatment of farmers is often covered by special rules. In those countries with large numbers of individual farmers, social security contributions of farmers are assessed either as a fixed amount or on the basis of a notional income assessment. In practice, large numbers of farmers appear not to be covered by adequate social security arrangements.

While agricultural incomes are lower than average incomes, the pension benefits tend to be only roughly linked to incomes if at all. Nevertheless, the subsidisation of pension arrangements cannot be interpreted as an intended transfer to agriculture although it is very likely that this is its de facto consequence. Reforms are under way in many countries with a view to stabilising the finances of the social security system and reducing the size of the state budget contribution.

The view of most consultants that the social security arrangements in the candidate countries have no impact on demographic developments or structural change in the agricultural sectors in those countries may be an unduly pessimistic assessment. For example, for countries where age distribution data was available, the proportion of those working in agriculture over 64 years of age is noticeably lower than in EU-15 countries. One explanation for this could be the inclusion of agricultural workers in social security schemes, which traditionally have offered retirement benefits at a relatively low retirement age. However, this might also be explained by the differences in agricultural structures between the candidate countries and the EU-15, particularly by the much smaller proportion of self-employed family farmers.

Structural unemployment in agriculture is one of the major political challenges in the candidate countries and the possible contribution of social security arrangements in general in reducing this problem should not be overlooked. The extent to which income from farming is taken into account in assessing contribution rates for social security benefits of employees in the non-farm sector such as unemployment, health insurance and pensions could be seen to have either an incentive or disincentive effect on taking up off-farm employment. Given the relatively low educational levels of those in the farm sector, a link between income support policies and training and capacity-building might be pursued. In some countries, the age structure of farmers is such that encouraging them into off-farm employment is simply not realistic. Encouragement to farmers to take up early retirement through incentives in the social security system might be an alternative, provided it led to an accelerated restructuring of the sector.

Date of publication: 01/08/2003

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