Statistics Explained

Archive:Social protection statistics - financing

Data extracted in January 2016. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: March 2017.

This article presents statistics on social protection receipts in the European Union. Social protection receipts are transactions whose purpose is to finance the provision of social protection benefits. The data are collected through the European system of integrated social protection statistics (ESSPROS).

Main statistical findings

Data on social protection are collected with reference to each social protection scheme, the statistical unit of ESSPROS. For each scheme, data are collected for both sides of the balance sheet: the receipts, that are the financing of the scheme, and the expenditures, that are the costs incurred by the scheme for the provision of social benefits (directly by the scheme or via transfers to other schemes) plus its administration costs. At national level, transfers to and from other schemes are held to balance out and the social protection system can be analysed from a double perspective: its financing, that is which kind of contributions are paid and from which institutional sector they are generated, and its total cost, that is the provision of benefits in cash or kind by risk/need covered, plus the global administration costs and other residual expenses. In other terms, the expenditure side allows a detailed analysis of the benefits provided by the social protection system (by category of beneficiaries and by type of intervention), while the receipt side gives an insight on how these benefits are financed, that is by whom and which economic transactions are involved. This article will focus on the social protection receipts.

Social protection receipts in the European Union

Figure 1: Social protection receipts and expenditure, 2013
(% GDP)
Source: Eurostat (spr_rec_sumt) (spr_exp_sum)

In the long term, social protection receipts are expected to balance with social protection expenditure, but this is not necessarily the case in the short or medium term. Indeed in the EU-28, receipts exceeded expenditure each year from 2008 to 2013. In 2013 (the latest year for which data are available), the difference was 2.3 %; while receipts represented 29.6 % of GDP, expenditure represented 28.9 % (see Figure 1)[1]. At national level, receipts exceeded expenditure in 20 Member States (Figure 1). Absolute differences are no larger than 8 % of expenditure in any country except four – Bulgaria (9.0 %), the Netherlands (9.1 %), Luxembourg (9.6 %) and Ireland (-9.9 %). Among non-Member States, receipts exceeded expenditure in all cases with differences in excess of 8 % in Turkey (11.2 %), Iceland (11.6 %) and Switzerland (15.7 %)[2]

The main reason why expenditure and receipts may not balance is because the relevant amounts are recorded on an accruals basis, i.e. at the time that the events creating the related claims and liabilities occur. Since the events underlying transactions for expenditure and receipts are not necessarily related, the amounts recorded in a given period may not balance. For example, unemployment benefits (expenditure) are paid out in relation to specific periods of unemployment while social contributions (receipts) are generally made in relation to periods of employment. However, for some social protection schemes, expenditure and receipts may balance because contributions from general government are used, on an annual basis, to either finance a scheme in full or plug the gap between expenditure and receipts from other sources.

The balance between receipts and expenditure at scheme level is influenced not only by the mode of financing used but also by the phase of implementation. For example, consider pension schemes funded by contributions. Recently introduced pension schemes are liable to have more receipts than expenditure as they accumulate funds for the disbursement of social benefits in the future. Meanwhile, older pension schemes being phased out are liable to have more expenditure than receipts as pensions are being disbursed to a relatively high number of pensioners while those contributing may be few.

Probably one of the most useful aspects of data on social protection receipts is that it may be used to identify the means by which social protection is financed. There are two ways in which this can be undertaken - to consider the breakdown of receipts by type or by sector of origin.

Note that there is no common financing structure for social protection across Member States or even across social protection schemes within a country. The data presented here at EU and country level may be interpreted as an overview and do not necessarily reflect the financing structure of individual social protection schemes.

Social protection receipts by type

Figure 2: Social protection receipts by type, 2013
(% total receipts)
Source: Eurostat (spr_rec_sumt)
Table 1: Clustering of countries by breakdown of social protection receipts by type of receipt, EU-28, 2013 (1)
Source: Eurostat (spr_rec_sumt)
Figure 3: Social protection receipts by type, EU-28, 2000-2013 (1)
(constant prices, 2000=100)
Source: Eurostat (spr_rec_sumt)

In the EU-28 in 2013 social protection receipts were for the largest part composed of social contributions (55.4 %), which are transfers made with the explicit purpose of securing entitlement to social benefits (Figure 2). These can be broken down into employers’ social contributions, which are paid by employers for the benefit of their employees, former employees and their dependants; and contributions by protected persons, which are payable by individuals and households. These contributed 35.1 % and 20.3 % of receipts respectively. Employers’ social contributions can be further sub-divided into actual and imputed social contributions. The former are payments to insurers to secure entitlement to benefits while the latter are costs incurred by employers as a result of providing eligibility to social benefits without an autonomous insurer or maintaining separate reserves in their balance sheets. Actual contributions accounted for 29.8 % of total receipts and imputed contributions for 5.3 %.

The second largest component of social protection receipts is general government contributions (40.4 %), which consist of costs incurred by general government in running government-controlled non-contributory social protection schemes and financial support provided by general government to other resident schemes. Lastly, other receipts, which include property income, gifts, proceeds of private lotteries and insurance claims, provide only a small contribution to total receipts (4.2 %).

The structure of receipts used to finance social protection varies between countries and three groups of EU Member States can be identified (see Table 1 and Figure 2). A first group of eight covers those in which government contributions are the largest component of receipts (DK, IE, CY, MT, PT, FI, SE, UK). In six of these countries government contributions account for around half of all receipts (between 47.0 % and 53.0 % in all cases) but they account for more than two-thirds of receipts in Ireland (69.4 %) and more than three-quarters in Denmark (77.7 %).

In the remaining countries social contributions represent the largest component of receipts and these can be sub-divided based on the source of the contributions. In a second group of eleven countries (actual or imputed) employers’ social contributions account for 65 % or more of social contributions (Belgium, Czech Republic, Estonia, Spain, France, Italy, Latvia, Lithuania, Poland, Romania, Slovakia), while in the final group of nine countries employers’ social contributions account for less than 65 % of all social contributions (Bulgaria, Germany, Croatia, Greece, Hungary, Luxembourg, Austria, The Netherlands, Slovenia).

Note that in most countries other receipts tend to be relatively insignificant and for this reason are not used to cluster countries into groups. In fact, they only contribute more than 10% of total receipts in three countries – the Netherlands, Poland and Greece.

Among non-Member States, government contributions are the largest component of receipts in Norway and Iceland while it is social contributions in Serbia, Turkey and Switzerland. In the case of the latter group employers’ social contributions accounted for less than 65 % of social contributions.

Note that the breakdown of social protection receipts by type is likely to be influenced by numerous factors including the forms of social protection benefits provided (i.e. benefits by function, type …etc.) and the distribution of benefits between different categories of social protection schemes (i.e. between government and non-government schemes, contributory and non-contributory…etc.).

Between 2000 and 2013, the value of social protection receipts increased by 28.6% in constant price terms (see Figure 3)[3]. While all types of receipts have increased during this period, the main part of the overall rise has derived from general government contributions, which increased by 46.7% over the period. Consequently the share of government contributions in total receipts has increased from 35.4% in 2000 to 40.4% in 2013, while the relative contribution of other types of receipts has fallen.

Social protection receipts by sector of origin

Figure 4: Receipts by sector of origin, 2013
(% of total receipts)
Source: Eurostat (spr_rec_eur)
Table 2: Clustering of countries by breakdown of social protection receipts by sector of origin, EU-28, 2013 (1) (2)
Source: Eurostat (spr_rec_eur)
Figure 5: Receipts by type and sector of origin, EU-28, 2013 (1)
(% of total receipts by type)
Source: Eurostat (spr_rec_eur)
Figure 6: Receipts by sector of origin, EU-28, 2010-2013 (1)
(constant prices, 2000=100)
Source:Eurostat (spr_rec_sums)

In 2013 social protection receipts in the EU mainly originated from the general government sector (53.2 %) while smaller but still significant shares came from corporations (26.5 %) and from households (19.6 %). Less than 1 % of receipts derive from non-profit institutions serving households (NPISHs) or from the rest of the world (e.g. non-resident units).

At national level, the structure of receipts by sector of origin varies between countries. By focusing on the distribution of receipts between general government and non-government sectors and then between corporations and households three distinct groups of countries can be identified (Table 2 and Figure 4).

A first group of fifteen countries (Bulgaria, Denmark, Ireland, Greece, Spain, Italy, Cyprus, Luxembourg, Malta, Poland, Portugal, Romania, Finland, Sweden and the United Kingdom) comprises those in which the majority of receipts originate from the general government sector (central government, state/local government or social security funds). Among these, receipts from government constitute more than three-quarters of total receipts in the three countries – Denmark (77.7 %), Ireland (75.2 %) and Malta (74.8 %) – where government contributions were a particularly important component in the breakdown by type of receipt.

This large group can also be subdivided based on the relative importance of the different government sectors. In most cases the vast majority of receipts from the government sector derive from central government but in four members of the group (Denmark, Spain, Finland and Sweden) at least a third (and more than 25 % of total receipts) comes from state/local government. Most notably, in Sweden and Spain state/local government contribute the majority of receipts from the government sector (63.5 % and 62.3 % respectively).

The ten countries in which receipts from corporations and households make up the majority of receipts can be split into two further groups based on the relative size of these sources. Firstly, a group of six countries (Belgium, Czech Republic, Estonia, Latvia, Lithuania, and Slovakia) covers those in which corporations are the largest non-government contributor. In all of these countries corporations are the source of at least 30 % of total receipts. Spain, which is a member of the first group of countries in which the government sector is the largest contributor, is the only other country where corporations contribute more than 30 % of total receipts.

In the final group of four countries (Germany, Croatia, Hungary and Slovenia), households contribute the largest part of receipts from non-government sources. In these countries at least a quarter of total receipts derive from households.

Among non-Member States, the general government is the largest contributor in Iceland and Norway while other sectors contribute more in Switzerland, Serbia and Turkey. In the first the largest non-government contribution comes from corporations while in the latter two it comes from households.

The breakdowns of receipts by type and by sector show some similarities. This is primarily because certain types of receipts tend to derive from certain sectors. Indeed, social contributions by protected persons can only originate from households and general government contributions can only originate from general government. Other types of receipts may originate from any sector.

Notably, comparing the breakdown of receipts by type and by sector of origin shows that the proportion of receipts derived from the general government sector exceeds the proportion of receipts classified as general government contributions by just over ten percentage points at EU level. This can be explained by the fact that the general government is an employer, which also pays social contributions on behalf of its employees. Indeed, receipts broken down by both type and sector of origin (Figure 5) show that just over a sixth of social contributions (16.4 %) and just under a third of other receipts (30.2 %) originate from the government sector (central, state/local or social security funds).

From 2000 to 2013 the value of social protection receipts increased by 26.5% when measured in constant price terms (Figure 6)[3] . Receipts from all the major contributing sectors (i.e. general government, corporations and households) increased but the main contributor to the overall rise was receipts from the general government sector, which increased by 42.4 % over the period (Figure 6). This is lower than the rise in government contributions (46.7 %, see Figure 3 above) suggesting that social contributions and other receipts originating from government did not increase as much as government contributions.

Data sources and availability

All data presented in this article are from the European system of integrated social protection statistics (ESSPROS), specifically the core system. These data are collected from national statistical institutes and/or ministries of social affairs in each country and are generally compiled from administrative sources.

Regulation (EC) No 458/2007 of the European Parliament and of the Council provides the legal basis for the collection of this data and a series of Commission Regulations provide further specifications for the implementation of this Regulation.

Context

The Europe 2020 strategy for smart, sustainable and inclusive growth sets targets to lift at least 20 million people out of the risk of poverty and social exclusion and to increase employment of the population aged 20–64 to 75 %.

The organisation and financing of social protection systems is the responsibility of each of the EU Member States. Nevertheless, the European Commission provides to support to help reach these targets through flagship initiatives of the Europe 2020 strategy, including the Platform against Poverty and Social Exclusion and the Agenda for New Skills and Jobs. Furthermore the European Commission provides guidance to EU Member States to modernise their welfare systems through the Social Investment Package.

See also

Further Eurostat information

Publications

Main tables

Database

Social protection expenditure (spr_expend)
Social protection receipts (spr_receipts)
Pensions beneficiaries (spr_pension)
Net social protection benefits (spr_net_ben)

Dedicated section

Methodology / Metadata

Source data for tables and figures (MS Excel)

Other information

  • Regulation (EC) No 1322/2007 of 12 November 2007 implementing Regulation (EC) No 458/2007 of the European Parliament and of the Council on the European system of integrated social protection statistics (ESSPROS) as regards the appropriate formats for transmission, results to be transmitted and criteria for measuring quality for the ESSPROS core system and the module on pension beneficiaries.
  • Regulation (EC) No 10/2008 of 8 January 2008 implementing Regulation (EC) No 458/2007 of the European Parliament and of the Council on the European system of integrated social protection statistics (ESSPROS) as regards the definitions, detailed classifications and updating of the rules for dissemination for the ESSPROS core system and the module on pension beneficiaries.

External links


Notes

  1. ↑ All EU-28 figures for 2013 presented in this article are estimated. 2013 data for DK, IE, EL and PL are not available so data for 2012 is used in the calculation of the figures for 2013.
  2. ↑ In Switzerland some withdrawn capital from a specific scheme are not included among the scheme expenditures. This has an effect on the total balance.
  3. ↑ Note that the change in the value of social protection receipts between 2000 and 2013 in constant price terms presented in Figure 3 (28.6%) is higher than that presented in Figure 6 (26.7 %). This difference is due to the fact that the data for Figure 6 exclude FR, NL and AT which are taken into account in the data for Figure 3.
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