Future of Social Protection – High-Level Group makes a strong case for social investment, with technical itches

16 February 2023

As an outcome of the European Pillar of Social Rights Action Plan, the European Commission has created a High-Level Group of Experts to reflect on the mega trends impacting social protection and welfare in the EU in the medium term. After more than one year, the group, composed of academics, presented its final report with recommendations at a launch event in February, in which we took part. The report makes a strong case for more social investment, particularly in education and learning, health and care. Alongside this positive, macro-level approach, a number of issues should be raised, as the report does not take a rights-based approach.

Mandate and approach of the high-level group

The mandate of the high-level group on social protection was to analyse the megatrends influencing social protection in Europe in the medium and long term and to propose recommendations on how to make the welfare state future-proof. The megatrends taken into account by the group are demographic change, inequalities in the labour market and the rise of new forms of employment and digital transition of the economy and the impact of climate change. Taking a life-stage approach, it looks at policy options to adapt the welfare state in early and family life, working lives and the transition into retirement and old age.

Improving welfare state at younger ages

The High-Level Group by and large argues for increased social investment, particularly in early childcare and education, initial education, vocational training and life-long learning, broadening social protection to include all forms of labour and income groups for younger persons and during working lives.

Zoom into the proposals on older age

On the transition into retirement and older age, the report points out that at the current average retirement age of about 65 in the EU, there are an average of almost 20 years of life expectancy to cover by adequate pensions, bearing in mind that many have shorter remaining life expectancy, especially people with long and demanding carers, hazardous jobs.

In its first intervention, the high-level group emphasises the need to adapt labour markets to support social protection in older age, both by direct measures around the end of the career and by indirect, lifetime measures through job opportunities for all, giving rise to social protection entitlements. The report recommends :

reducing early retirement in a nuanced way, by developing more flexible working arrangements, reintegration measures, differential retirement ages and adequate disability pensions.
making it possible to voluntarily work past retirement age, without being forced to do so by inadequate pensions.
developing lifelong learning and education, in particular regarding digital skills.

The report outlines that pension reforms have shifted demographic, political and economic risks on to (future) pensioners themselves, and underlines that the fragmentation of pension systems into complementary pillars and schemes leads to a stronger need for coordination and evaluation. It affirms that public pay-as-you-go schemes remain the most important source of old-age income.

Regarding long-term care, the report outlines the inadequacy of current long-term care systems, relying mostly on informal care provision. Where long-term care care is part of social protection, this is covered by a wide mix of measures (in-kind, in cash, social insurance, care vouchers, payment to carers etc.) and types of provision. The report reminds the projected increase in spending on long-term care, from 1.7 %GDP in 2019 to 2.5 % in 2050 – if care provision is not increased. The high-level group takes note that social protection for care is insufficient, as many have to provide out-of-pocket payments that leave them at risk of poverty and social exclusion. The high-level group also takes note of the flaws exposed by the COVID-19 pandemic in terms of understaffing, underfunding, poor quality, restriction of autonomy, lack of coordination and lack of concern for quality of life.
The group, however, fails to develop concrete recommendation on the many issues outlined.

Looking at health, the high-level group focusses on the value of preventive measures, health promotion and healthy lifestyles. It calls for increasing training and numbers of qualified staff, including for geriatrics, making use of modern technologies to support healthy lifestyles and better coordination of care.

The group made a general call for better social investment with regard to older age. Investment should be channelled into :

preventing inadequate retirement incomes,
promoting active ageing and healthy living,
providing safe homes and living environments
better planning for retirement.

The high-level group warns against overestimated expectations of the impact of financial education and literacy.

Funding the welfare state

The High-Level Group was asked to assess the situation of funding for the welfare state. The numerous measures recommended by the Group require higher levels of funding – be it for increased coverage by pensions, stronger investments into life-long learning or the development of formal care. First and foremost, the Group points out the role of social investment, which generates a dividend for the welfare state: strong life-long learning policies contribute to higher levels of employment and salary, thereby increasing revenue from taxes and social contributions. The development of the care economy yields similar returns in terms of direct employment by the care sector, but also by allowing many informal carers to engage to a higher degree in paid employment.

The High-Level Group points to the longer-term prospects for GDP growth, estimated at 12.5 % in real terms 2019 and 2030 according to the 2021 Ageing Report. A prospect which of course bears major uncertainties, such as the impact of refugee flow and the Russian war against Ukraine.

To allow for the social investment strategy that the High-Level Group recommends, the Group favours shifting the funding for the welfare state to new or increased taxes on capital, for which the tax burden has fallen in the past decades. Reducing maximum caps for taxes and social contributions can further broaden the tax base without reducing the progressiveness of personal tax systems. The High-Level Group notes that corporate taxation has been reduced over the previous decades. Increasing them can also bring additional revenues into social protection systems, in particular for digital platforms and the digital economy. Wealth taxation is also considered favourably by the High-Level Group, while it is more mitigated about specific consumption taxes, such as based on environmental impact: these types of taxes are temporary if they are to achieve their aim of transitioning to a lower-carbon society, and often turn out to be regressive. However, they can temporarily raise revenue for social protection, and if it is directly use to offset the impact of the taxes on the most vulnerable, can have an important social benefit..

Lack of a rights-based approach in the report

The report of the Group emphasises the importance of quality job and strong health and safety policies, alongside education, training and life-long learning to achieve higher employment rates of older workers and allowing for increasing real retirement ages. However, one of the Group’s proposals is to create sheltered jobs for older persons, an idea that is already ill-perceived in the community of persons with disabilities. Sheltered jobs risk reinforcing the stigma that older persons are not employable or productive and therefore have to be ‘put aside’ the first labour market.

In the section on housing, the High-Level Group rightly points out that older persons often live in inadequate housing, particularly when they are challenged with growing care needs. However, the report suggests that older persons, particularly older women living alone, might have to move out of their housing towards residential facilities. The group also suggests that older persons must move into facilities ‘if they cannot be cared for at home’. This shows the lack of consideration of persons’ rights to live independently in the conception of the Group. The problem with this statement is that the absence of available care services creates the need to move out, not the frailty itself.

Another omission of the report is that despite taking into account climate change, the risks of catastrophic events on older persons’ housing as well as their particular vulnerability to heat waves are not mentioned nor addressed.

However, the Group makes a claim for public support to adapt housing to the evolving needs of older persons which is very positive. Furthermore, the Group calls for using the potential of multigenerational co-housing and accessible, low-cost public transportation.

Overall, in the area of long-term care, the High-Level Group mainly focusses on the provision of care in terms of financial accessibility and availability of services. A rights-based approach would require going beyond this and emphasise the right of a person to maintain her independence and autonomy through quality, person-centred care, in the form that the person choses. Residential care should be an option, but only the last option of a person in need for care. Before, the adaptation of the persons’ home, home care, alternatives in the community should be available, accessible and adequate. The high-level group therefore has not clearly developed the rights-based perspective that the European Pillar of Social Rights would imply.