Major Gaps and inadequacies in social protection systems across EU

Oct 14 2024 By Admin Economy 0 Comments

A new report by Eurofound clearly show the gaps and inadequacies in the social protection systems across the European Union, revealing that two-thirds of unemployed individuals are left without financial assistance despite available benefits.

Key Findings on Unemployment and Minimum Income Support

The report, Social Protection 2.0: Unemployment and Minimum Income Benefits, emphasizes the critical role of social benefits in reducing poverty. Across the EU, social transfers have reduced the poverty rate from 31% to 15.5% among people aged 16-64. However, while social protection measures have had a notable impact on reducing poverty, many vulnerable individuals still fall through the cracks.

In some Member States, up to 90% of unemployed people receive no assistance at all, with particularly high non-coverage rates in countries like Bulgaria, Malta, and Poland. In contrast, Belgium, Finland, and Germany provide more extensive coverage, leaving fewer than half of their unemployed populations unsupported.

The report suggests that this disparity stems from strict eligibility criteria, inadequate contribution histories, and barriers in navigating complex benefit systems. In countries like Denmark, individuals must have earned at least DKK 263,232 (€35,286) over the past three years to qualify for unemployment benefits. Other countries impose similarly stringent thresholds, leaving part-time and gig economy workers excluded from the safety net.

Benefits Still Fall Short for Many

Even when benefits are granted, many recipients struggle to make ends meet. Unemployment benefits in many EU countries cover between 50% and 90% of prior earnings, with the amount often decreasing over time. Inflation adjustments are either slow or insufficient, further eroding the real value of the support provided. In more than half of the Member States, these benefits are capped at below 60% of the national average wage.

For low-income households, minimum income benefits—designed to ensure a baseline standard of living—are often inaccessible to many who need them. The report states that in most EU countries, less than 80% of those entitled to minimum income benefits actually receive them. Administrative barriers, lack of awareness, and social stigma play significant roles in this underutilization.

The Digital Divide Worsens Inequality

One of the most pressing challenges identified in the report is the move toward digital applications for benefits, which risks excluding vulnerable groups. While online applications can streamline the process, they also present barriers for older individuals, people with disabilities, and those living in rural areas with limited internet access.

In some Member States, portions of the application process are exclusively online, leaving digitally excluded individuals at a disadvantage. This digital divide exacerbates inequalities, prompting the report to call for innovative solutions to engage applicants and make services more accessible to all.

Economic Activation: Barriers to Re-Entering the Workforce

The report also examines the effectiveness of economic activation policies aimed at encouraging benefit recipients to re-enter the workforce. While financial incentives and training programs are in place, sanctions for non-compliance with activity requirements, such as attending training sessions, affect 1-6% of recipients annually.

Rigid unemployment benefit structures further complicate matters. In many countries, individuals lose their entire unemployment benefit if they take up work, creating a disincentive to re-enter the labor market. The report recommends reforms to allow individuals to retain a portion of their benefits during subsequent periods of unemployment, encouraging a smoother transition back to employment.

Social Protection for an Aging Population and Evolving Labor Markets

With an aging population and a rapidly evolving labor market driven by the digital and green transitions, the report stresses the need for adaptive social protection systems. Currently, EU Member States spend an average of 24.5% of their GDP on social protection measures, but disparities in spending across countries have widened since the pandemic.

Non-standard forms of employment, such as gig work, are on the rise, making it difficult for many workers to qualify for traditional social protection schemes. The report underscores the importance of strengthening social protections to ensure these evolving labor market conditions do not leave vulnerable workers behind.

Policy Recommendations

To address these issues, Eurofound’s report proposes several key reforms:

• Automatic Indexation of Benefits: To prevent the erosion of benefit adequacy, minimum income schemes should be automatically indexed to inflation, especially during periods of rapid price increases.
• Simplification of Benefit Systems: Complex benefit systems increase rejection rates and reduce benefit take-up. The report calls for simpler, more transparent entitlement criteria to make benefits more accessible.
• Flexibility in Unemployment Benefits: Allowing benefit recipients to retain a portion of their unemployment benefits during subsequent periods of unemployment would reduce disincentives for re-entering the labor market.
• Inclusive Digitalization: While online applications can increase efficiency, Member States must ensure that these services remain accessible to those without digital access, ensuring no one is left behind.

A Call for Action

The findings in Eurofound’s Social Protection 2.0 report show the urgent need for reforms in EU social protection systems to close gaps in coverage and ensure that benefits are both adequate and accessible. As Europe faces ongoing economic challenges and labor market transitions, ensuring robust and inclusive social protections will be crucial for reducing poverty and fostering long-term economic stability.