Transformation of the Public Sector

Changes in the Social Policy

Katarina PoluncovaKatarina Poluncova

katarinakatarina@econ.muni.cz@econ.muni.cz

Department of Public EconomyDepartment of Public Economy

Social Policy components

social security policysocial security policy healthcare policyhealthcare policy education policyeducation policy housing policyhousing policy family policyfamily policy employment policy employment policy

The objectives of Social Policy

I. “care objectives”I. “care objectives”a)a) dimension of risksdimension of risks

1.1. poverty reliefpoverty relief2.2. insuranceinsurance3.3. income smoothingincome smoothing

b)b) dimension of equalitydimension of equality1.1. vertical equityvertical equity2.2. horizontal equityhorizontal equity

c)c) social integration dimensionsocial integration dimension1.1. dignitydignity2.2. social solidaritysocial solidarity

II. “instrumental” objectivesII. “instrumental” objectivesa)a) administrative feasibilityadministrative feasibility

1.1. intelligibilityintelligibility2.2. absence of abuse and fraudabsence of abuse and fraud

b)b) efficiency dimensionefficiency dimension1.1. macro efficiencymacro efficiency2.2. micro efficiencymicro efficiency3.3. incentivesincentives

The Development of the Social Policy in the Czech RepublicWe should take into account following factors:We should take into account following factors: the political environmentthe political environment the economic environmentthe economic environment the social environmentthe social environment cultural factorscultural factors diffusion of cultural and institutional patterns from diffusion of cultural and institutional patterns from

abroadabroad influence of strong, politically active personalities influence of strong, politically active personalities

inside and outside the systeminside and outside the system

Communistic Period- till 1989 social policy centralized and bureaucratized social policy centralized and bureaucratized

ineffective economyineffective economy full compulsory employmentfull compulsory employment state paternalism citizens became the passive state paternalism citizens became the passive

recipients of social servicesrecipients of social services publicly providing services free of chargepublicly providing services free of charge existence of “extra services” for the privileged populationexistence of “extra services” for the privileged population many subsidies prices of energies and goodsmany subsidies prices of energies and goods social security schemes financed from the state budget- social security schemes financed from the state budget-

various types of payments made this system unclear and various types of payments made this system unclear and economically inefficient.economically inefficient.

Transformation period- 3 parts:1.1. Emergency period- December 1989-1992Emergency period- December 1989-1992

replacing state paternalismreplacing state paternalism objective- protect population against all risks- development objective- protect population against all risks- development

of the social safety netof the social safety net active labour market policyactive labour market policy implementation of social benefitsimplementation of social benefits new institutions and institutesnew institutions and institutes

2.2. Institutional building 1992-1997Institutional building 1992-1997 neo-liberal approachneo-liberal approach pension supplementary insurance actpension supplementary insurance act state social support act- implemetation of income-tested state social support act- implemetation of income-tested

benefitsbenefits

3.3. Adjustment within existing institutions 1998- presentAdjustment within existing institutions 1998- present social democratic government- “making work pay”social democratic government- “making work pay”

Social security policyBuild on 3 tiers:Build on 3 tiers:1.1. social insurance systemsocial insurance system

1.1. pension systempension system2.2. sickness systemsickness system3.3. state employment policy systemstate employment policy system

2.2. state social support systemstate social support system1.1. income tested benefitsincome tested benefits2.2. benefits provided without regard to incomebenefits provided without regard to income

3.3. social assistance system- for people who find themselves in:social assistance system- for people who find themselves in:1.1. material needmaterial need2.2. social needsocial need

Contributions to the social insurance scheme

contributions of social insurance

system

employee (% of wages)

employers (% of total wage-bill)

self-employed (% of insurance

basis) pensions scheme 6,5 21,5 28 sickness scheme 1,1 3,3 4,4 employment policy 0,4 1,2 1,6 health insurance 4,5 9 13,5 Total 12,5 35 47,5

Pension system in the CR

2 tiers:2 tiers:1.1. basic obligatory system of pension insurancebasic obligatory system of pension insurance

system is uniform, based on social solidarity with relatively system is uniform, based on social solidarity with relatively high redistribution of income, current financing- PAYGhigh redistribution of income, current financing- PAYG

allowances replacing income in case of old age, allowances replacing income in case of old age, disablement and deathdisablement and death

state guarantees the systemstate guarantees the system retirement age since 31retirement age since 31stst of December 2012 will be 63 for of December 2012 will be 63 for

men and 59-63 for womenmen and 59-63 for women

2.2. voluntary additional pension insurance with a state voluntary additional pension insurance with a state contributioncontribution

The tree of life of CR in 1998

The tree of life in 2030- prognosis

Age structure of population in 2001  Age 65+ Age 15-64 Věk 0-14

Italy 18,4 % 67,4 % 14,2 %

Japan 17,6 % 67,9 % 14,5 %

Germany 16,4 % 68,3 % 15,3 %

Austria 15,7 % 67,8 % 16,5 %

Hungary 14,5 % 68,7 % 16,8 %

Czech Rep. 13,8 % 70,1 % 16,1 %

USA 12,6 % 66,2 % 21,2 %

Poland 12,2 % 69,0 % 18,8 %

Slovakia 11,3 % 69,3 % 19,3 %

Ireland 11,2 % 67,2 % 21,5 %

Uganda 1,9 % 49,1 % 49,0 %

The problem of PAYG financed pension system in the CRDependence rate indicatorDependence rate indicator

0

1 000 000

2 000 000

3 000 000

4 000 000

5 000 000

6 000 000

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

number of beneficiaries of insurance number of pensioners level of dependence

Pensions as a proportion of the average gross wage

Supplementary pension insurance scheme

Monthly payment (KMonthly payment (Kčč)) State contribution (KState contribution (Kčč))

100- 199100- 199 50 K50 Kč + 40% from the amount č + 40% from the amount over 100 Kover 100 Kčč

200-299200-299 90 K90 Kčč + 30% from the amount + 30% from the amount over 200 Kover 200 Kčč

300-399300-399 120+ 20% from the amount over 120+ 20% from the amount over 300300

400-499400-499 140 + 10% from the amount over 140 + 10% from the amount over 400400

500 and more500 and more 150 K150 Kčč

Sickness insurance scheme

4 benefits:4 benefits:

1.1. sickness benefitsickness benefit

2.2. family member care benefitfamily member care benefit

3.3. pregnancy and compensation benefitpregnancy and compensation benefit

4.4. cash maternity benefitcash maternity benefit

State social supporta)a) income tested benefits:income tested benefits:

child allowancechild allowance social allowancesocial allowance housing benefithousing benefit transport benefit (canceled since September 2004)transport benefit (canceled since September 2004)

b)b) benefits provided without regard to income (flat-rate benefits provided without regard to income (flat-rate benefits):benefits):

parental allowanceparental allowance maintenance contributionmaintenance contribution benefits for foster-parent carebenefits for foster-parent care birth allowancebirth allowance burial allowanceburial allowance

Social assistance

residual system for the people who fall into residual system for the people who fall into difficult social situation, 2 types:difficult social situation, 2 types: material needmaterial need social needsocial need

state guarantees living standard at the state guarantees living standard at the minimum level- socially accepted poverty minimum level- socially accepted poverty limitlimit

The development of the minimum level in the Czech RepublicPerson, householdPerson, household 19971997 19981998 20002000 20012001 20052005

sum of money needed for subsistence and other basic needssum of money needed for subsistence and other basic needschildren up to 6 years oldchildren up to 6 years old 14801480 15601560 16001600 16901690 17201720

6-10 years old6-10 years old 16401640 17301730 17801780 18901890 19201920

10-15 years old10-15 years old 19401940 20502050 21102110 22302230 22702270

15- 26 years old15- 26 years old 21302130 22502250 23102310 24502450 24902490

other peopleother people 20202020 21302130 21902190 23202320 23602360

sum of money needed for paying costs of householdsum of money needed for paying costs of householdhousehold with 1 personhousehold with 1 person 10201020 13001300 15801580 17801780 19401940

with 2 personswith 2 persons 13301330 17001700 20602060 23202320 25302530

with 3 or 4 personswith 3 or 4 persons 16501650 21102110 25602560 28802880 31403140

with 5 or more personswith 5 or more persons 18601860 23702370 28702870 32303230 35203520

Child allowance calculationAge of childrenAge of children Child allowance since 2005 (monthly in Child allowance since 2005 (monthly in

Kč) in accordance Kč) in accordance to to household incomehousehold incomeup 1,1 SMLup 1,1 SML 1,1 - 1,8 SML1,1 - 1,8 SML 1,8 - 3,0 SML1,8 - 3,0 SML

up to 6 years oldup to 6 years old 551551 482482 237237

6-10 years old6-10 years old 615615 538538 265265

10-15 years old10-15 years old 727727 636636 313313

15-26 years old15-26 years old 797797 698698 343343

0,32% of SML0,32% of SML 0,28% of SML0,28% of SML 0,14% of SML0,14% of SML

Development of minimum wage

Minimum Minimum wagewage

19961996 19981998 19991999 20002000 20012001 20022002 20032003 20042004 20052005

Kč per Kč per hourhour

13,6013,60 14,8014,80 2020 22,3022,30 3030 33,9033,90 36,9036,90 39,6039,60 42,5042,50

Kč per Kč per monthmonth

25002500 26502650 36003600 40004000 50005000 57005700 62006200 67006700 71857185

The unemployment since 1995

                                                                             

Public expenditures in active labour market policy (in thousands Kč)