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Social Spending in the OECD: Concepts, indicators and trends Workshop on Measuring Social Protection Statistics

Social Spending in the OECD:

Concepts, indicators and trends

Workshop on Measuring Social Protection

Statistics Indonesia - Badan Pusat Statistik, Jakarta, 14 - 16 May 2013

Disclaimer: The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.

Willem Adema

Senior Economist, Social Policy Division, OECD

may not necessarily be consistent with ADB official terms. Willem Adema Senior Economist, Social Policy Division,
This presentation covers: 1. Background to the OECD Social Expenditure database (SOCX) 2. Trends in

This presentation covers:

1. Background to the OECD Social Expenditure database (SOCX)

2. Trends in social expenditure

3. Social spending after tax

4. Re-distribution

5. The ageing challenge

(SOCX) 2. Trends in social expenditure 3. Social spending after tax 4. Re-distribution 5. The ageing
The OECD Social Expenditure database (SOCX) • SOCX was developed in the 1990s to monitor

The OECD Social Expenditure database (SOCX)

SOCX was developed in the 1990s to monitor trends in social spending and analyse changes in its composition in line with the SNA

cross-nationally comparable statistics on public and private social spending at the detailed programme level to facilitate reclassification where required.

Data on the effect of fiscal measures is often of a more aggregate nature.

SOCX covers 34 OECD countries with data from 1980: shorter time-series for countries which have joined since the mid-1990s.

Sources: national correspondents and ESTAT for EU countries and other OECD databases: OECD Health data; OECD Database on

Labour Market Programmes; the OECD Education database; and a Questionnaire on fiscal measures via the OECD Centre for Tax

Policy and Administration

What is social expenditure? “…The provision by public and private institutions of benefits to and

What is social expenditure?

“…The provision by public and private institutions of benefits to and contributions targeted at households and individuals during circumstances which adversely affect their welfare, provided that the provisions of the

benefits and financial contributions constitutes neither a direct payment

for a particular good or service nor an individual contract or transfer. …”

Social spending involves redistribution and/or compulsion:

Public : financial flows controlled by General Government (central + local

governments + social security funds)

Private

mandatory: stipulated by legislation (i.e. employer provided sickness

benefits)

voluntary: stipulated by collective agreement (i.e. occupational

pensions funds, private health)

sickness benefits) • voluntary: stipulated by collective agreement (i.e. occupational pensions funds, private health)
Categorisation of benefits with a social purpose Mandatory Public Voluntary Mandatory Private Voluntary

Categorisation of benefits with a social purpose

Mandatory Public Voluntary

Mandatory

Public

Voluntary

Mandatory Public Voluntary Mandatory Private Voluntary Redistribution Means-tested Voluntary participation

Mandatory

Private

Voluntary

Public Voluntary Mandatory Private Voluntary Redistribution Means-tested Voluntary participation
Public Voluntary Mandatory Private Voluntary Redistribution Means-tested Voluntary participation

Redistribution

Means-tested

Voluntary participation

Employer-provided

across households

benefits, social

in public insurance

sickness benefits,

insurance benefits

programmes. Self-

employed ‘opting in’

to obtain insurance

coverage.

benefits accruing from

mandatory contributions,

to, for example, pension

or disability insurance.

to, for example, pension or disability insurance. No redistribution across households Benefits from

No redistribution

across households

Benefits from

government

managed

individual saving

schemes

Non tax-advantaged

actuarially fair pension

benefits

Non tax-advantaged actuarially fair pension benefits Tax-advantaged benefits, e.g., individual retirement
Tax-advantaged benefits, e.g., individual retirement accounts, occupational pensions, employer- provided health
Tax-advantaged benefits, e.g., individual retirement accounts, occupational pensions, employer- provided health

Tax-advantaged benefits,

e.g., individual retirement

accounts, occupational

pensions, employer-

provided health plans

Exclusively private:

Benefits accruing from

insurance plans bought at

market prices given

individual preferences.

The shaded cells reflect benefits that are NOT classified as social.

545

545 OECD Social Expenditure database SOCX - structure • 1. Old Age • 2. Survivors •

OECD Social Expenditure database SOCX -

structure

1. Old Age

2. Survivors

3. Incapacity-related benefits

4. Health

5. Family

6. Active labour market programmes

7. Unemployment

8. Housing

9. Other social policy areas

5. Family • 6. Active labour market programmes • 7. Unemployment • 8. Housing • 9.
Trends in public social protection Public social spending, in percentage of GDP, 1960-2009 Source :

Trends in public social protection

Public social spending, in percentage of GDP, 1960-2009

Public social spending, in percentage of GDP, 1960-2009 Source : OECD Social Expenditure database (SOCX,

Source: OECD Social Expenditure database (SOCX, www.oecd.org/els/social/expenditure).

Social spending and the crisis Annual growth in real public social spending and real GDP,

Social spending and the crisis

Annual growth in real public social spending and real GDP, Index 2007= 100 (left scale and public social spending as a % GDP (right scale), 2007-2012

public social spending as a % GDP (right scale), 2007-2012 Australia 150 140 130 120 110

Australia

150

140

130

120

110

100

90

80

70

%

2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010
2007-2012 Australia 150 140 130 120 110 100 90 80 70 % 2007 2008 2009 2010

2007 2008

2009

2010

2011

2012

Greece

150

140

130

120

110

100

90

80

70

%

2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008
2010 2011 2012 Greece 150 140 130 120 110 100 90 80 70 % 2007 2008

2007 2008

2009

2010

2011

2012

35

30

25

20

15

10

5

35

30

25

20

15

10

5

France

150

140

130

120

110

100

90

80

70

%
35

30

25

20

15

10

5

150 140 130 120 110 100 90 80 70 % 35 30 25 20 15 10
150 140 130 120 110 100 90 80 70 % 35 30 25 20 15 10
150 140 130 120 110 100 90 80 70 % 35 30 25 20 15 10
150 140 130 120 110 100 90 80 70 % 35 30 25 20 15 10
150 140 130 120 110 100 90 80 70 % 35 30 25 20 15 10
150 140 130 120 110 100 90 80 70 % 35 30 25 20 15 10
150 140 130 120 110 100 90 80 70 % 35 30 25 20 15 10
150 140 130 120 110 100 90 80 70 % 35 30 25 20 15 10
150 140 130 120 110 100 90 80 70 % 35 30 25 20 15 10
150 140 130 120 110 100 90 80 70 % 35 30 25 20 15 10

2007

2008

2009

2010

2011

2012

United States

150

140

130

120

110

100

90

80

70

%

2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008
2011 2012 United States 150 140 130 120 110 100 90 80 70 % 2007 2008

2007

2008

2009

2010

2011

2012

35

30

25

20

15

10

5

Source: OECD Social Expenditure database (SOCX, www.oecd.org/els/social/expenditure).

Public spending on family benefits and labour market programmes went up during the crisis -1

Public spending on family benefits and labour

market programmes went up during the crisis

-1

and labour market programmes went up during the crisis -1 Public spending on family benefits in

Public spending on family benefits in percentage of GDP, 2007

Increase2007-2009

-0.3
-0.3
3.6 3.7 3.4 0.3 2.5 0.3 2.3 0.3 2.8 1.3 0.2 1.1 0.3 1.2 0.0
3.6 3.7 3.4 0.3 2.5 0.3 2.3 0.3 2.8 1.3 0.2 1.1 0.3 1.2 0.0
3.6
3.7
3.4
0.3
2.5
0.3
2.3
0.3
2.8
1.3
0.2
1.1
0.3
1.2
0.0
0.7
0.3
3.6 3.7 3.4 0.3 2.5 0.3 2.3 0.3 2.8 1.3 0.2 1.1 0.3 1.2 0.0 0.7
3.6 3.7 3.4 0.3 2.5 0.3 2.3 0.3 2.8 1.3 0.2 1.1 0.3 1.2 0.0 0.7
3.6 3.7 3.4 0.3 2.5 0.3 2.3 0.3 2.8 1.3 0.2 1.1 0.3 1.2 0.0 0.7
3.6 3.7 3.4 0.3 2.5 0.3 2.3 0.3 2.8 1.3 0.2 1.1 0.3 1.2 0.0 0.7

0.4

-0.3 3.6 3.7 3.4 0.3 2.5 0.3 2.3 0.3 2.8 1.3 0.2 1.1 0.3 1.2 0.0
-0.3 3.6 3.7 3.4 0.3 2.5 0.3 2.3 0.3 2.8 1.3 0.2 1.1 0.3 1.2 0.0
-0.3 3.6 3.7 3.4 0.3 2.5 0.3 2.3 0.3 2.8 1.3 0.2 1.1 0.3 1.2 0.0

0.6

0.3

0.6 0.3

0

1

2

3

4

United Kingdom

France

Sweden

Germany

Australia

OECD

Netherlands 1

Japan

Greece

United States 2

Korea

Public spending on labour market programmes in percentage of GDP, 2007OECD Netherlands 1 Japan Greece United States 2 Korea Increase2007-2009 0.5 0.3 2.3 0.2 0.1 2.1

Increase2007-2009on labour market programmes in percentage of GDP, 2007 0.5 0.3 2.3 0.2 0.1 2.1 0.6

0.5 0.3 2.3 0.2 0.1 2.1 0.6 0.7 0.2 1.2 0.5 2.2 0.4 0.5 0.7
0.5
0.3
2.3
0.2
0.1
2.1
0.6
0.7
0.2
1.2
0.5
2.2
0.4
0.5
0.7
0.6
0.3
0.4
0.7
0.4
0.6
0
1
2

3

4

1.Due to reform in 2007/8, public spending on home-help services decreased in the Netherlands. 2. Available indicators underestimate the extent of public spending on childcare for Federal countries (e.g. the United States), as relevant spending by local governments is not fully reported to Federal authorities.

Source: OECD Social Expenditure database (SOCX, www.oecd.org/els/social/expenditure).

Health and Pension spending are key social policy areas in the OECD Public social expenditure

Health and Pension spending are key social

policy areas in the OECD

Public social expenditure by broad social policy area, % GDP, in 2009

expenditure by broad social policy area, % GDP, in 2009 Source : OECD Social Expenditure database
expenditure by broad social policy area, % GDP, in 2009 Source : OECD Social Expenditure database

Source: OECD Social Expenditure database (SOCX, www.oecd.org/els/social/expenditure).

Private social protection Composition of private social expenditure by category, % GDP, 2009 Source :

Private social protection

Composition of private social expenditure by category, % GDP, 2009

of private social expenditure by category, % GDP, 2009 Source : OECD Social Expenditure database (SOCX,

Source: OECD Social Expenditure database (SOCX, www.oecd.org/els/social/expenditure).

Tax systems and social spending – Gross and net social expenditure Gross social expenditure –

Tax systems and social spending

Gross and net social expenditure

Gross social expenditure

Direct taxes and social contributions

Indirect taxes on consumption (VAT)

+ Tax break for social purposes (TBSP)

= Net social expenditure

contributions – Indirect taxes on consumption (VAT) + Tax break for social purposes (TBSP) = Net
Taxing benefits and associated consumption Direct and indirect taxes paid by recipients of public/private benefits,

Taxing benefits and associated consumption

Direct and indirect taxes paid by recipients of public/private benefits, % GDP, in 2009

A. Direct taxes paid by recipients of benefits

GDP, in 2009 A. Direct taxes paid by recipients of benefits B. Indirect taxes paid by

B. Indirect taxes paid by recipients of benefits

of benefits B. Indirect taxes paid by recipients of benefits Source : OECD Social Expenditure database

Source: OECD Social Expenditure database (SOCX, www.oecd.org/els/social/expenditure).

paid by recipients of benefits Source : OECD Social Expenditure database (SOCX, www.oecd.org/els/social/expenditure ).
Tax breaks with a social purpose Revenue foregone of Tax breaks with a social purpose

Tax breaks with a social purpose

Revenue foregone of Tax breaks with a social purpose (excluding TBSPs to pensions), % GDP, 2009

a social purpose (excluding TBSPs to pensions), % GDP, 2009 Source : OECD Social Expenditure database

Source: OECD Social Expenditure database (SOCX, www.oecd.org/els/social/expenditure).

Similarity in spending totals In many OECD countries net total social spending is around 20-25%

Similarity in spending totals

In many OECD countries net total social spending is around 20-25% of GDP

Gross to net social expenditure, % GDP, 2009

20-25% of GDP Gross to net social expenditure, % GDP, 2009 Source : OECD Social Expenditure

Source: OECD Social Expenditure database (SOCX, www.oecd.org/els/social/expenditure).

The redistributive nature of tax and (cash) transfer systems varies across the OECD Gross public

The redistributive nature of tax and (cash)

transfer systems varies across the OECD

Gross public transfers

paid to househlods

Direct taxes and asocial security

contributions

Redistributive effect

A. Average

ratio of

househlod

disposable

B. Share of

C. Transfers

D. Average

E. Share of

F. Taxes from

Gini

public

to lowest

ratio of

taxes paid by

lowest quintile

coefficient at

transfers paid

quintile

househlod

lowest quintile

(D*E/100)

disposable

to lowest

(A*B/100)

disposable

income

Percentage difference through

transfers and taxes between

Gini at market income and

disposable income

Around 2010s

Around 2000s

5.1

Australia

12.0

France

30.1

42.7

17.1

22.0

11.2

13.9

24.3

Germany

26.7

Greece

32.2

Japan

23.6

Korea

5.0

Netherlands

19.4

Sweden

27.3

United Kingdom

19.4

United States

12.6

23.6 Korea 5.0 Netherlands 19.4 Sweden 27.3 United Kingdom 19.4 United States 12.6
23.6 Korea 5.0 Netherlands 19.4 Sweden 27.3 United Kingdom 19.4 United States 12.6

29.4

27.0

25.3

21.9

5.1

5.9

3.6

3.3

1.2

5.7

7.4

4.9

2.8

18.1

0.4

0.1

0.334

29%

33%

15.1

2.3

0.4

0.303

40%

41%

35.8

2.6

0.9

0.286

42%

44%

31.0

5.6

1.7

0.337

35%

22.4

5.1

1.1

0.336

31%

22%

8.9

5.6

0.5

0.310

9%

45.5

5.6

2.5

0.288

32%

31%

32.2

5.4

1.7

0.269

39%

46%

25.6

2.5

0.6

0.341

35%

31%

24.8

1.3

0.3

0.380

24%

25%

OECD-31

23.6

21.7

4.7

26.8

4.3

1.2

0.306

35%

OECD-18

 

35%

33%

Source: Calculations from OECD Income Distribution Database (www.oecd.org/social/income- distribution-database.htm).

Source : Calculations from OECD Income Distribution Database ( www.oecd.org/social/income- distribution-database.htm) .
Populations are ageing and the old-age support ratio will halve in the OECD Source :

Populations are ageing and the old-age

support ratio will halve in the OECD

ageing and the old-age support ratio will halve in the OECD Source : OECD (2011), Pensions

Source: OECD (2011), Pensions at a Glance, OECD Publishing, Paris

(www.oecd.org/els/social/pensions/PAG); United Nations, World Population Prospects - 2008 Revision.

Projections of public expenditure on pensions, 2010-2050 As a % of GDP 13.6 14.6 10.8

Projections of public expenditure on

pensions, 2010-2050

As a % of GDP

13.6 14.6 10.8 8.4 6.8 7.7 0.9 2010 3.6 Difference 2010-2050 0 2 4 6
13.6
14.6
10.8
8.4
6.8
7.7
0.9
2010
3.6
Difference 2010-2050
0
2
4
6
8
10
12
14
16

Greece

France

Germany

OECD-28

Netherlands

Sweden

United Kingdom

Korea

Australia

United States

Sweden United Kingdom Korea Australia United States Source: OECD (2012), OECD Pensions Outlook 2012 , OECD

Source: OECD (2012), OECD Pensions Outlook 2012, OECD Publishing, www.oecd.org/daf/pensions/outlook.

Thank you and further information – The OECD SOCX database is accessible via www.oecd.org/els/social/expenditure –

Thank you and further information

The OECD SOCX database is accessible via www.oecd.org/els/social/expenditure

OECD Social, Employment and Migration Working Papers, No. 124:

“Is the European Welfare State Really More Expensive? Indicators

on Social Spending, 1980-2012; and a Manual to the OECD Social Expenditure Database (SOCX)”. http://www.oecd.org/els/listofsocialemploymentandmigrationwor kingpapers.htm

To come the OECD SOCR Recipiency database