Social Expenditure across OECD countries: concepts and indicators Presentation: Joint OECD/Korea Regional Centre on Health and Social policy July 2006, Seoul Willem Adema (www.oecd.org/els/social/expenditure)

Presentation outline Background to the OECD Social Expenditure Database (SOCX) What is social expenditure? What is in SOCX? How do OECD countries compare? The impact of the tax system The future of SOCX

Background to SOCX Indicators on aggregate spending data published during 1980s. For 1980 onwards the OECD has detailed social expenditure data at programme level: Analysis of programme development Re-categorisation of items by users Improve data quality Aggregates by broad social policy area, mandatory private social expenditure and (from 2006 onwards) estimates on voluntary private social spending.

Programme data are the building blocks of SOCX

What is social spending? Provision of support (cash, in-kind, fiscal) by public and private institutions to households during circumstances which adversely affect their welfare. Individual and employer payments to soc. sec. funds are ‘financing items’ For broad social policy areas, as old age, survivors, incapacity-related spending, health, family support, unemployment, labour market programmes, housing, other contingencies (e.g. low-income), etc.

What is social spending (continued)? Social spending involves compulsion and/or interpersonal re-distribution: payments for services bought at market prices at individual risk-profiles are not social. No transfers between individuals and households

What is public and private social? In line with the System of National accounts, social spending by General government (different levels of Government and social insurance institutes) is regarded as public social expenditure. Social spending by employers, individuals, and NGOs is (voluntary) private social, and when legally stipulated, it is labelled ‘mandatory private social spending’.

Delineation of public, mandatory and voluntary social expenditure

Overall trends: public social spending in Korea is well below OECD-average

France and Germany focus public social support on senior citizens

Public spending on incapacity-related benefits is high in Sweden and the Netherlands

In France public spending on income support for the unemployed is high…

…as is spending on active labour market policies (also in the Netherlands, Sweden)

Private social spending is important in the US

Governments also use tax systems to claw back spending, provide and stimulate support Taxation of cash payments differs across and within countries and across types of transfers Taxation of benefit consumption varies across countries Tax breaks that mirror cash payments : some programmes include both elements Tax breaks that aim to generate more private social provision.

Income tax paid over benefit income is high in Denmark and Sweden compared to UK and Korea

Indirect tax rates are high in Europe

German and US policy makes extensive use of the tax system to deliver social support

Gross public spending overestimates public social effort in many countries, but not in the US

‘After tax’, total social spending levels are similar in many OECD countries…

…, but redistributive nature of tax/benefit systems differ, e. g …, but redistributive nature of tax/benefit systems differ, e.g. Australian and French systems are effective in reducing child poverty Difference between market and disposable income poverty, percentage points

Concluding remarks Public expenditure data give a good view of the nature of national social protection systems Information on effect of tax systems on social effort is needed to improve quality of international comparisons Next release later in 2006 with 2003 data, including information on ‘after tax’ spending, manual, and country notes on social systems The release could well include data on benefit-recipients The RCHSP is working on data for Asia Pacific region which may be included in future issues of SOCX

Future of SOCX Next release later in 2006 with 2003 data, including information on ‘after tax’ spending, preparation of Manual and country notes on social systems The release could well include data on benefit-recipients The RCHSP is working on data for Asia Pacific region which may be included in future issues of SOCX