Social Security in European
Countries That Border the
Mediterranean Sea

Term Paper in the Economics Seminar

by

Alexander Knuppertz

April 29, 2003

Table of Contents

TABLE OF CONTENTS IV

TABLE OF FIGURES V

INDEX OF TABLES VI

TABLE OF ACRONYMS VII

1 INTRODUCTION 8

2 CRITERIONS OF THE VALUATION MODEL 9
2.1 Overview over Demographic Trends 9
2.2 Social Protection Expenditures 11
2.3 Financing of the Welfare Systems 15
2.3.1 The Structure of Sources of Receipts 15
2.3.2 Reform Ideas in France, Italy and Spain 16
2.4 The Fight Against the Poverty With Redistribution 18

3 VALUATION OF THE PRESENTED WELFARE SYSTEMS 20
3.1 The Method of Scoring 20
3.2 Realization of the Scoring 20

4 CONCLUSION 22

BIBLIOGRAPHY 23

ANNEX 25

Table of Figures
Figure 1: Ratio of people aged 65 and over to the working age population p. 9
Figure 2: Rate of population growth until 2050 (estimated) p.10
Figure 3: Employment rate of women and men aged 65-74 in 2000 p.11
Figure 4: Social protection expenditures per inhabitant in PPS p.12
Figure 5: Percentage of beneficiaries of social benefits other than pensions p.12
Figure 6: Structure of social protection expenditures in 2000 p.13
Figure 7: Structure of expenditures for all types of pensions in 1998 p.14
Figure 8: Structure of sources of receipts in 2000 p.15
Figure 9: Inequalities in income distribution before and after redistribution p.18

Index of Tables
Table 1: Distribution of social benefits other than pensions by quintiles of income p.19
Table 2:: Scoring of each criterion and country p.21

Table of Acronyms
cp compare
D Germany
E Spain
F France
GR Greece
I Italy
PPS Purchasing Power Standards

1 Introduction

The question of social security and proposals for solutions are often discussed in Germany. But the welfare system is not only in this country a main topic: There are proposals of reforms in many western industrial countries. In this context it is interesting to know which problems other European states have and how they try to guarantee social security. This report analyzes the social policies in the European countries that border the Mediterranean Sea. In order to limit the text to a size of 15 pages, the work is concentrated on the member states of the European Union situated next to the Mediterranean Sea. Thus 89 percent of human beings in the Mediterranean area of Europe are considered.¹ Another focal point is the old-age insurance in France, Greece, Italy and Spain always in comparision with Germany. This part of social security was chosen because the expenditures for the old-age pension are higher than the other social contributions.

A valuation model will compare the welfare systems of France, Greece, Italy, Spain and Germany in the end. The necessary criterions are presented in the following study. The demographic conditions of the countries, the level of social security, the financing of the welfare systems and the redistribution of social contributions. The fight against the poverty is considered as a central task of welfare systems. That is why redistribution is an important criterion in the valuation model.

2 Criterions of the Valuation Model

In the following only four of many possible criterions are presented. There are more possibilities to describe a welfare system and to evaluate its quality. The valuation model will take in consideration the different importance of each criterion through a different weight.

2.1 Overview over Demographic Trends

Befor the welfare systems are considered, it makes sense to analyze, which demographic trends the countries are afflicted with and which problems could develop in the next future. Figure 1: Ratio of people aged 65 and over to the working age population² The old-age dependency ratio puts elderly people aged 65 and over in proportion to the working age population (15-64 years old). The graph shows that the old-age dependency ratio will rise in all considered countries until 2010. The recent number of elderly people is in the Mediterranean countries higher than in Germany. In the future, the German ratio will rise to 30 percent in 2010. Then only the Italian old-age dependency ratio will be higher than in Germany.

The old-age dependency ratio is influenced by the average life expectancy and the rate of population growth of the countries. Italy has the highest life expectancy of the Mediterranean countries. The average of women and men is 80 years.

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1 cp. table in the annex: population in the European countries that border the Mediterranean Sea

2 cp. Eurostat (2002), p.18