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 "market solutions". 

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 solidarity. 

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 security systems: 

 

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 international comparisons. 

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 is weaker. 

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 six principles:- 

(i) Equity must be brought to the centre of health care systems: 

- people want healthy living and working conditions  not "remedial" health care;
- 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; 
 - 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 providers; 
 - 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; 
 - 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 affects quality.

 - demands for health care from individuals are real; greater user-charges have been shown to be in general highly regressive and of limited effectiveness; 
 - all efforts must be directed to reducing provider-induced demand; 
 - the pharmaceutical industry is a prime example where efforts must be targeted.

Conclusion 

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. 
 

- Social policy must extend from beyond expenditure programmes and economic policies must have social objectives (§ 4). 

- 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 (§ 7-10). 

- Broad public debate to establish agreed principles for the equitable and sustainable renewal and reform of social security systems. 

- The OECD must play an active role in preparing comparable social indicators and the dissemination of policy experience (§ 6). 

- 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).