Texte en français
TO THE EMPLOYMENT, LABOUR AND SOCIAL AFFAIRS COMMITTEE
AT MINISTERIAL LEVEL ON SOCIAL POLICY
23-24 June, 1998
The new challenges for welfare
and social security systems in an era of globalisation
1. Welfare states are an achievement. The creation of the social
security systems or more broadly defined welfare states has for many OECD
countries been the major social achievement of the last fifty years. Although
the balance of public and private provision varies between countries, good
public systems have proved a key asset. Public health systems have been
responsible for increasing the length and quality of life, social security
has reduced the worst extremes of poverty and deprivation and public pension
systems in many countries have removed insecurity and poverty in old age.
At the same time these systems have become large employers, who have workers
with strong commitment and belief in the value of their work to society.
2. Yet OECD countries face a social crisis. For many working
families the last years of the 20th century have been dominated by growing
insecurity, rationalisation, competitive pressure and fear of unemployment.
Others - the long-term unemployed, single parent families, and many young
people, have become excluded from mainstream society and are trapped in
a new form of poverty and deprivation. Income inequality in the OECD is
increasing. There is a real danger of social cohesion breaking down. Social
security systems have in many cases moderated the worst impacts. But these
systems are now under attack particularly due to expenditure cuts, rising
health costs, mass unemployment and in some cases a policy obsession with
3. This puts at risk political stability. Set against the background
of globalisation the OECD itself has warned that failure to keep social
progress in line with economic development puts at risk political stability.
This is demonstrated in the growth of political extremism and racism, but
also in the public backlash against the global trade and investment system.
The cause of the social and political malaise is not globalisation as such
but the failure to regulate and manage global markets effectively and develop
appropriate domestic policies.
4. Economic policies must have social objectives. Social policies
have a key role to play in developing the appropriate response. But social
policy is more than social programmes and coherence between different areas
of policy is essential. This is not just a one way process. Social policy
has to take account of economic and employment policy objectives, but economic
policies have to integrate social objectives. For social policies to work
economic policies must be directed at reestablishing and sustaining full
employment. There must also be limits set to the pressures of global competition.
5. OECD countries experiencing wider social change. Beyond the
immediate threat of unemployment and the impact of globalisation, the economies
and the societies of OECD-member countries are experiencing pervasive changes.
Among them are the changing roles of men and women. In most OECD countries
women's participation in the labour force has increased and in many areas
women now form the majority of employees. This is leading to new demands
for social support and child care, as are the appearance of new lifestyles
and patterns of family life such as the growth of single parent families.
Cuts in social security systems have had a disproportionately negative
impact on women, people with disabilities and minority groups. In addition
demographic trends are leading to an increase of the population aged 65
and over in most OECD countries, with radical impacts on social, health
and employment systems.
6. Unions are key stakeholders. Many of the objectives of social
security systems are also pursued by trade unions in collective bargaining
strategies, which can complement and spread social protection. In several
countries unions co-manage social security systems. Unions provide a voice
from many of the underprivileged groups. They also represent those working
in social security systems. The trade union movement is ready to work with
OECD Social Policy Ministers to forge a new consensus in policy.
Social policy is an investment - it makes economic and political
as well as social sense
7. The challenge of financing. The appearance of mass unemployment,
the growth of precarious employment (low paid work, part-time and temporary
employment, self-employment due to subcontracting), and the trend towards
a shorter working life including the decrease of the effective retirement
age have each affected the way in which social security systems are organised,
financed and function. The repercussion of these trends on tax revenues
and on social security contributions as well as on the expenditure on benefits,
public pensions, and health care has been the main driving force behind
the OECD debate on the reform of social security systems. Trade unions
recognise that these changes put new and significant pressures upon the
welfare state, but the centre of the debate must be the effectiveness of
systems in meeting multiple objectives in a period of change.
8. Social expenditure is an investment. The 1992 OECD Social
Ministers' meeting correctly identified social expenditure as an investment.
The welfare state allows the market system to function.The whole of society
and not just those receiving benefits enjoy the benefits of the welfare
state including social cohesion, security and political stability. The
individualization of forms of work and lifestyles, as well as the flexibilization
of working-time systems, do not remove the need for social security systems,
rather they require the development of increased and new forms of social
9. It supports economic as well as social development. Although
differing in shape and structure, social expenditure represents between
one quarter and one third of national income in OECD countries. In return
it is an indispensable prerequisite for the functioning of the economy.
It supports the development social infrastructure, of human capital and
hence contributes to the existence of a skilled workforce. Moreover, social
security systems promote balanced consumption and have a stabilizing effect
on consumer demand as "automatic stabilisers" diminish cyclical fluctuations
of the economy.
10. It fulfils social and political functions. By contributing
towards social justice as well as by limiting social risk and exclusion,
the institutions of the welfare state contribute to social cohesion and
solidarity. Without social cohesion modern economies and societies cannot
survive. The same holds true for the framework of the democratic function
of the welfare state. It is this function which makes an important contribution
to the balance of divergent social interests and to political stability.
It must be underlined that it creates the conditions which allow both men
and women to participate as citizens in public debates and in the process
of political decision-making.
The Principles for modernising and safeguarding social security systems
11. Change must be guided by five principles. A full public debate is
necessary to reach consensus on the principles guiding reform of social
(i) The attainment of social justice and the combatting of poverty
and social exclusion.This is even more important in this period of rapid
change and globalisation with more diverse market outcomes. Social and
unemployment benefits must guarantee the dignity of everyday life for all
(ii) Individual responsibility. It is not the task of the welfare
state to take over the responsibility of individuals to earn their living.
It is, however, the duty of the public authorities through social security
systems/programmes and active labour market policies to enable individuals
to live a life free of the fear of poverty and deprivation.
(iii) Coherence between policies. The restoration of full employment
must be the central priority, both to ensure social progress and to allow
an efficient and stable welfare state to work.
(iv) Social policy must be tailored to specific needs of people.
Social security systems must be adjusted to changing forms of work and
lifestyles, particularly the increase in part-time work and the increasing
interspersing of periods of paid employment and periods of further learning
or fulfilling family responsibilities.
(v) Promotion of equal opportunities, participation and responsibility.
Periods of economic and social upheaval call for social responsibility
and democratic participation. The rights and responsibilities of all citizens
must complement each other.
The OECD has potentially key role to play
12. The need for indicators.The OECD role in the debate on social
policy must be to put the issues of social justice, efficiency and effectiveness
on the agenda and to consider the interrelations between social policy
and economic development. This must be on the basis of preparation of comparable
social indicators and the dissemination of policy experience. Therefore
TUAC firmly supports the proposal to strengthen the OECD's monitoring and
evaluation of social policy measures and to develop better methods for
13. The limits to markets. Since the mid 1980's the OECD as an
Institution and many OECD governments have been promoting market-led liberalisation
and deregulation in almost all fields of policy.The period of a naive belief
in market outcomes in all areas is now over. Trade unions are aware that
social responsibility of the state does not necessarily mean state provision.
Trade unions also agree with proposals in favour of an enabling state.
But they strongly oppose approaches to social policy which are guided by
ideological or self serving thinking that "private is better". Despite
the need to change the role of the state in the field of social policy,
markets alone cannot and should not play the major agenda setting role
in the provision of social services. Neither health care provision nor
the provision against the need of old age can be left to the market and
its rules and values. Market outcomes are strongly influenced by existing
inequalities of economic and political power. Moreover the example of health
expenditure in the United States shows graphically that private provision
does not necessarily lead to increased efficiency and lower costs than
public health systems.
The need for an integrated policy approach to restore full employment
14. Low Pay is not a solution. It is essential that government
action must be coordinated on national as well as on international level,
and that the goal of this action must be the restoration of full employment
on the basis of quality jobs which generate decent incomes. TUAC welcomed
the conclusions of the 1997 OECD Labour Ministers meeting, which pointed
out that low pay can no longer be regarded as the solution to unemployment,
but is part of the same problem. Combating low pay requires a combined
policy response of :- minimum wages to set a market "floor"; related in-work
benefits and income tax systems which avoid both poverty traps and unemployment
traps. As OECD work has shown, reconciling what are at times conflicting
objectives may often have resource costs in terms of public expenditure.
15. The link of unemployment benefits to employment. The linking
of eligibility of unemployment benefit to the acceptance of job or training
offers has been a long standing feature of many systems of active labour
market policies. For this to succeed in reintegrating the long term unemployed
into the labour market and not be simply a way of reducing expenditure
or even worse penalising the victims of unemployment there has to be determined
efforts by governments and the social partners to run tight labour markets,
in which sufficient flows of appropriate job and training opportunities
are available. Groups at risk have to be given additional opportunities
and not simply pushed further into poverty.
16. The linking of retirement and employment strategies. OECD
proposals to counteract the trend to lower effective retirement ages appear
based on the assumption that strong incentives to earlier retirement exist
and that the decisions in favour of earlier retirement reflect a growing
desire for leisure. It considers decisions in favour of earlier retirement
as mainly voluntary, but strongly influenced by the generosity of pension
schemes. Overlooked is the fact, that individual decisions for earlier
retirement go along with the decision to accept a reduction of accrued
pensions. Furthermore, the trend towards earlier retirement reflects also
a fundamental change of employment strategies of companies (downsizing,
increase in work-loads, a higher preference for younger workers). Moreover,
a decision to take earlier retirement is by no means a decision to enjoy
the opportunities of leisure. Instead, the decision is rather a measure
to combat unemployment. The social acceptability of being a retiree and
receiving a reduced pension is far greater than that of being unemployed
and receiving unemployment benefits. The most important step to reversing
the trend to earlier effective retirement ages must be to remove the pressures
coming for early retirement by running more employment orientated economic
policies. In times of low unemployment the trend towards earlier retirement
17. Family friendly labour markets - but not at the expenses of families.
Labour markets need to be made more "family friendly". The provision of
an adequate child care can no longer be seen as a private matter. With
regard to the promotion of equal opportunities and to the increase of female
employment governments and employers must contribute to the reconciliation
of family and working life. Collective bargaining agreements concerning
a shorter working time, flexible working time systems, part-time and Fixed-Term
Contracts are giving clear priority to this. But the establishment of family
friendly labour markets cannot only be the responsibility of trade unions.
Trade unions are ready to work with employers and governments to contribute
to the provision of a sufficient infrastructure as well as to the extension
of options for employees.
The Response to Ageing Societies.
18. Retirement: individual choice rather than economic compulsion.
Trade unions support developing a smooth path for a flexible transition
from work to retirement. The trend to early retirement is often a "second
best" response to unemployment and company restructuring. In addition to
reducing unemployment trade unions are prepared to play a major role in
joint efforts to reharness the extensive experience of older workers and
reduce discrimination against them. Work organisation and workplace design
must take account of the needs of older workers. This requires not only
that possibilities for retraining and "lifelong learning" also are made
available to older workers but also that the extension of working life
is a voluntary decision by employees. This includes also the right of refusal
of compulsory retirement. OECD Member governments must reflect this in
their own public sector employment practices.
19. The central role of public schemes in multi-tiered pension systems.
The OECD work on ageing societies cannot be taken as a blueprint for the
replacement of public pension schemes by private schemes or capitalised
schemes. This is not the response to the increasing costs of pension systems
due to ageing of societies. Actuarial pressures will simply be transferred
from the state to financial markets with associated risks as seen in the
Asian financial crisis. Some OECD countries have already undertaken far
reaching steps to stabilize national pension schemes. These efforts to
avoid increasing contributions to pension schemes and funds combine, dependent
on national frameworks and circumstances, a broad variety of practical
reform measures. They include efforts to broaden the basis of pension contributions
and the shift to two or more tiers or elements (multiple pillars) of systems,
and the reversal of the trend towards less time in work and more time in
retirement. The debate as well as the practical measures indicate that
there is no single best solution. Indeed those countries that have reduced
public costs in many cases have continuing problems of inequality and old
age poverty. Both, the growing importance of multiple pillar-systems and
the great diversity of changed or new arrangements indicate that the often
advocated rapid paradigm-shift towards (mandatory) advance-funding systems
instead of pay-as-you-go-systems represents a false debate. Strong public
systems are more effective in providing wide coverage and portability of
pensions, they have lower administrative costs and are more equitable.
Health care: containment of cost is not enough
20. Health is key to raising the quality of life. The development
of health care systems, along with advances in medical technology, have
made major contributions to increasing life expectancy. With ageing populations
a central priority must be raising the quality of life in later years and
spreading equitably access to good quality health care.
21. Six principles of reform. Reform must be based on the following
(i) Equity must be brought to the centre of health care systems:
- people's incomes must be protected against large and unpredictable
commitments of health care expenditures;
- those on poverty incomes have worse health than the rest of
society, though the root causes lie in unemployment, poor housing, food,
and working conditions; health care must be allocated so as to reduce inequalities
(ii) Health systems must be embodied in health policies:
- people want healthy living and working conditions not
"remedial" health care;
(iii) Effectiveness of health systems is more important than narrow "market"
- the root causes of ill health must be tackled through wider social
policies and a shift to preventive medicine;
- occupational health and safety at the work place provides a key focus
for health improvement, but policies must go beyond this and deal with
the whole issue of work organisation..
- market reforms have often shifted costs, not reduced
them, to other parts of the public sector or back on to individuals;
(iv) Health workers must be at the centre of consultations on health reforms:
- the "public service" or "social" ethic in health service provision
is being lost;
- in many cases experiments with competition are simply raising
administrative costs and creating confusion for patients and the service
- co-operation and the sharing of information are at risk from
competition and a business mentality;
- health reforms should concentrate on improving management performance
and the delivery of health services.
- staff cuts and increased work pressure are in many
cases leading to a significant loss of morale in health service professions
and auxiliary services;
(v) Make supply meet demand:
- in some cases "contracting out" of services is forcing workers
to bid for their jobs back at lower levels of pay and benefits; this also
- demands for health care from individuals are real;
greater user-charges have been shown to be in general highly regressive
and of limited effectiveness;
(vi) The ultimate responsibility for financing health care and ensuring
its effective provision must be maintained and developed by the public
- all efforts must be directed to reducing provider-induced demand;
- the pharmaceutical industry is a prime example where efforts
must be targeted.
22. Trade unions support the modernisation of the welfare state to safeguard
its future. The trade union movement recognises the need to play a pro-active
role in efforts to modernise the welfare state by increasing its efficiency
and its cost-effectiveness. Social and welfare concerns must be integrated
more effectively into wider economic and fiscal policy, labour market and
educational policy, as well as family policy. Social policy is no longer
just a question of expenditure programmes. A full and promising response
to the challenge of ageing societies must be based on the full involvement
of the social partners.
Key Points for
a New Policy Consensus
- Social policy must extend from beyond expenditure
programmes and economic policies must have social objectives (§
- Social policy does not just involve costs it
yields economic, political as well as social benefits. Governments must
therefore commit the necessary funding for social policy as an investment
in political stability and a condition for economic efficiency (§
- Broad public debate to establish agreed principles
for the equitable and sustainable renewal and reform of social security
- The OECD must play an active role in preparing
comparable social indicators and the dissemination of policy experience
- The successful fight against unemployment is
critical to restoring social cohesion and allowing social policies to function
effectively (§ 14-17).
- Obsession with the costs of public pension system
is not a satisfactory starting point to meeting the challenges of an ageing
society. There must be a balanced approach to creating multi-tiered pension
systems of which a substantial element must be public provision and action
to integrate and favour the employment of older workers (§ 18-19).
- There must be an equitable reform and strengthening
of health care systems (§ 20-21).