Opinion of the Economic and Social Committee on the 'Communication from the Commission to the Council and the European Parliament on the future of social protection: a framework for a European debate` (97/C 66/17)

On 8 November 1995, the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the 'Communication from the Commission to the Council and the European Parliament on the future of social protection: a framework for a European debate`.

The Section for Social, Family, Educational and Cultural Affairs, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 15 November 1996. The Rapporteur was Mr Laur and the Co-Rapporteurs were Mr Meriano and Mrs van den Burg.

At its 340th Plenary Session held on 27 and 28 November 1996 (meeting of 28 November 1996), the Economic and Social Committee adopted the following opinion by 67 votes to 41, with 15 abstentions.

The present opinion on the future of social protection takes account of the following two-fold objective:

- on the one hand, it is necessary today to seek to make national rules and practices on social protection more compatible;

- on the other hand, pursuit of this objective must take account of the culture of each Member State, in accordance with the subsidiarity principle. This means that the management of expenditure related to social protection is essentially a matter for the Member States.

1. Introduction

1.1. The European Commission sought to initiate a European debate on the future of social protection with its Communication COM(95) 466 of 31 October 1995. The debate is intended to take the form of a joint analysis by the Community institutions, the European Social Dialogue and Member States, which should lead to 'an appropriate follow-up` by the end of 1996.

1.2. The initiative is based on the underlying objective of social cohesion and solidarity in order to maintain or attain a high level of social protection, a task that is referred to in Article 2 of the Treaty on European Union. Together with the role and interest of the Union in the field of freedom of movement, this fundamental objective led to the convergence strategy, which was formulated in two Recommendations in 1992: 92/441/EEC of 24 June 1992 and 92/442/EEC of 27 July 1992. In these Recommendations the Member States jointly agreed on the need to maintain, adapt and develop their social protection systems and set themselves common objectives.

1.3. The Communication gives specific reasons that are related to recent policy efforts and the new debate on whether by reducing indirect labour costs or through the combined effects of tax and aid schemes, social protection systems can be more employment-friendly and efficient.

1.4. The Communication outlines some of the main features of recent and expected future developments, and focuses on seven specific issues for further analysis and common reflection. The last of these ('reflection on the future of social protection in the longer term`) in particular, may cover several trends and problems that have been examined in other Committee Opinions, such as the change in working patterns and life-cycle/family patterns. As is pointed out in paragraph 2.3 of the Communication, demographic trends cannot be restricted to population ageing; the progressive transformation of family structures is also mentioned here, leading to the need for a shift of focus from the family 'breadwinner`/single wage-earner, to all individual workers, including those in 'new` forms and patterns of work. The fact that such patterns change throughout working life should also be given due attention ().

2. Social protection in Europe

2.1. In its November 1991 Opinion on the Proposal for a Council Recommendation on the convergence of social protection objectives and policies, the Economic and Social Committee started off discussing social protection (and social security) by evoking the principle of social cohesion. The Opinion states:

'Social security should be interpreted as "social cover" based on the principle of social cohesion and extended to any person, legally resident in the Community, when in need and justifiably requiring protection against certain risks (...). Such protection, provided in the event of sickness, accident, maternity, unemployment (...), old age and family problems, guarantees the resources required to maintain an adequate standard of living in order to prevent the social exclusion of those in question (...). Social protection is intended to offset the risks set out above, and has been shaped by various international and Community agreements and Opinions` ().

If we add parental education leave to this list, it encompasses all forms of social protection, representing assurance against risks, and the need for social cohesion.

2.2. Section 1.1 of the Commission communication defines social protection as a range of collective transfer mechanisms designed to protect the inhabitants of a country against social risks.

2.3. Social protection is a fundamental part of the European social model. It inspires confidence, promotes social cohesion and helps create a sense of community among Europeans.

2.4. Across the Community, social protection systems are based on solidarity between individuals. Solidarity finds expression in the welfare state tradition and the 'mutual-benefit` insurance systems.

2.5. One characteristic of social security systems throughout the Community is their tremendous diversity. As a number of studies have shown (), differences emerge in risks covered, access rules, benefits structure, the level and source of the financial resources concerned, the actors involved in the decision-making process and the way the various systems are managed.

2.6. The diversity which exists is undoubtedly a result of differing conditions, each Member State having combined or drawn upon in its own way various elements of the Beveridge and Bismarkian systems.

2.7. Nevertheless, the various systems have much in common as regards objectives, risks covered and guaranteed minimum standards, not only within the purview of the European Community, but also in other international contexts. A number of international arrangements collate the minimum-standards clauses adopted by most EU Member States. The 1952 ILO Convention 102 has been ratified by thirteen Member States (), with the same number having ratified the 1964 Council of Europe European Code of Social Security (). The revised 1990 Council of Europe Social Security Code has been signed by ten Member States ().

2.8. The Commission Report on Social Protection in Europe () also notes that, on a wider comparative base, European social protection systems stand out from those in other parts of the world, for example the United States and Japan, and bear a number of similar traits. The Commission report gives an exhaustive overall picture.

2.9. There is widespread agreement that the completion of the single market and the conclusion of economic and monetary union (EMU) should not be deleterious to social protection. A number of surveys () have shown that people in Europe are extremely worried about the impact of EMU on social protection, poverty and exclusion.

3. Objectives and instruments of social protection at European level

3.1. Commitment to 'a high level of employment and of social protection` is a key element of the European Union. Article 2 of the Treaty is unequivocal on this point.

3.2. When the Treaty of Rome was being drawn up, an in-depth discussion took place on the need to harmonize social protection in order to avoid social security becoming a factor of distortion and competition among the Member States. Harmonization means standardizing legislation on the systems, the risks covered and the (minimum) level of protection required, and could also necessitate the establishment of Community guarantee or cohesion funds. The move towards harmonization was subsequently abandoned. In its place, the European Community focused on coordinating social security systems. The term 'coordination` means establishing legal, technical and administrative links between social protection systems to ensure a fair level of protection for migrants within the Member States. Moves towards coordination therefore do not alter the basic traits of the various systems. These mechanisms are laid down in Regulations 1408/71 and 541/72. Coordinating very diverse systems is undoubtedly a complex issue, especially since social security systems have been subject to numerous and far-reaching reforms and developments over the past few years.

3.3. Towards the end of the 1980s, a new approach was adopted at Community level via Commission initiatives aimed at convergence in social protection. The 1992 Recommendation defines the goal of the convergence strategy as the setting of common objectives to guide Member States' policies in such a way that different national systems can exist side by side and allowing them to work in harmony together in pursuit of the Community's basic goals (). Nonetheless, this Communication explicitly states () that because of the diversity of the systems and the fact that they are rooted in different national cultures, it is up to the various Member States to decide how to operate these in practice, how they should be financed and how their system of social protection should be organized. The only obligation incumbent on the Member States was to submit evaluation reports and to arrange for regular exchanges of information on their policy development (). The attitude of the Council over the years following the two Recommendations has been restrictive.

3.4. In its Opinion of November 1991, the Economic and Social Committee had already pointed out the contradiction between the principle of setting joint objectives - a proposal it backed - and the absence of practical means for applying it. The Committee stressed the importance of reducing the disparities between the Member States and the need for a 'realistic, and most importantly, dynamic, perspective` ().

3.5. In the field of social protection, the Member States have vigorously defended national sovereignty by invoking the principle of subsidiarity, as enshrined in Article 3b of the Treaty of Maastricht ().

3.6. The principle of subsidiarity is of particular relevance as regards social protection. Under Article 118, the Commission has the task of promoting close cooperation between Member States. To achieve the objectives set out in Article 117, it is of crucial importance to work together with charitable associations and foundations as institutions responsible for social welfare establishments and services.

3.7. Article 3b refers to cases in which the objectives set can 'by reason of the scale of effects of the proposed action` be better achieved by the Community. This raises the question of how to evaluate whether an objective can be achieved sufficiently and what is meant by efficiency, particularly in the issue of how to apply social and economic criteria arising from other provisions in the Treaty in general, and the objectives of social cohesion and solidarity in particular (Article 2 of the Treaty on European Union) ().

3.8. If the subsidiarity test is applied to social protection, two reasons emerge for enhanced cooperation in efforts at convergence in goals and policies within the EU as set out in the 1992 Council Recommendation ():

1) the weaknesses of coordination policy both in respect of the social protection schemes and the tax issues surrounding these schemes, which are due largely to the diversity of the systems which exist within the European Union and which greatly hinder the free movement of workers;

2) the impact of social and tax-related competition among Member States, which tends to lead to the dismantling or 'downward` convergence of social protection.

3.9. The completion of the single market and the conclusion of economic and monetary union (EMU) cannot but have an impact on national policy on social protection, and should not be achieved in such a way as to lower social protection standards and distort the tax system. Trends towards social and tax-related competition among the Member States are increasingly running counter to the principle of solidarity and the goal of promoting a high level of employment and social protection.

3.10. A paradox is emerging in the concept of national sovereignty and subsidiarity in the field of social protection similar to that recently described in the reflection document on taxation in the European Union (): 'The apparent defence of national sovereignty in taxation matters has progressively led to a real loss of tax sovereignty for each Member State to the profit of the markets...`.

3.11. Recognition of this paradox and assessment of the real trends which exist in the field of social protection and which have an - albeit indirect - impact on the single market and EMU policy should lead to a more active convergence strategy in the sense set out in Article 3b of the Treaty. Article 2 of the agreement on social policy already provides for qualified majority voting on social issues of relevance to 'the integration of persons excluded from the labour market`.

3.12. The Economic and Social Committee's response to the problems raised by the Commission should be, as in 1992, that there are real arguments in favour of the development of a more dynamic European Union strategy for promoting convergence in social protection, obviously with due respect for national cultures and practices. This convergence should be based on the basic goals already contained in the Treaty and in the welfare-state traditions of the Member States, and should be confirmed by the international norms these countries have accepted. They should shore up and enhance social cohesion and prevent regressive policies from dragging everything down to the lowest common denominator.

4. What future for social protection in Europe?

4.1. In order to maintain the legitimacy of such a debate within a European organ, the present paper covers the issues listed in 3.4 of the Commission document in general terms.

4.2. Social protection will therefore be discussed with reference to its impact on employment, its financing, the effect of population ageing, its adaptation to the single market, health-care systems and measures to combat exclusion.

4.3. A - Adapting social protection to the employment situation

4.3.1. Employment is at the heart of the debate on social protection and any development in the latter must help in the pursuit of employment-enhancement.

4.3.2. Indeed, the Commission recognizes that the impact of population ageing could be offset by a rise in employment levels which would make it easier to fund social protection.

4.3.3. As life expectancy rises, benefits are paid out for longer periods without this relative increase being offset by a corresponding rise in contributions, since, in some Member States at least, pensioners pay no contributions. On the other hand, a drop in unemployment would increase the workforce and compensate for the growing numbers of non-contributing pensioners in receipt of benefits.

4.3.4. Other elements, however, must be taken into consideration.

4.3.5. On the one hand, the very high levels of indirect charges at the moment could discourage the investments needed to create new jobs. It would be useful here to have a study on the relationship between indirect costs and job-creation, between the level of contributions and overall manpower costs and between manpower costs and manpower requirements. This would allow a better overview of the direction to take in promoting employment. Moreover, it would be wise to evaluate the effect on employment of a targeted reduction in social contributions. This was reiterated by the Council and the Commission in a joint report on employment adopted by the Madrid European Council. It would also be wise to assess the impact of other sources of funding.

4.3.6. However, unemployment benefit is also an essential element of our economy, since it allows the unemployed to continue to act as consumers and helps keep them in a fit state of mind to seek work.

4.3.7. To promote adapting social protection to the employment situation, a number of elements could come into play.

4.3.7.1. Reducing the burden of social costs on low wages

4.3.7.1.1. As Jacques Delors pointed out in his White Paper, the worst effects of the international competition for employment currently experienced by Europe are felt by low-skilled labour. In the current labour market situation, it should be possible to take action on behalf of this section of the workforce with the aim of lowering non-wage labour costs by reducing social security contributions. In the long term, the top priority must be to stimulate low-skilled workers to upskill.

4.3.7.1.2. The Member States could introduce a system of partial exemption, under which wages would only be subject to social security contributions for the portion above a certain level. The system would thus cover all wages but only those above the threshold would be subject to these contributions (on a pro-rata basis).

4.3.7.1.3. Under this system, employers would enjoy partial exemption on all wages and salaries regardless of their level. This is contrary to the White Paper, which only recommends exemption for low salaries.

4.3.7.2. Backing developments in working practices

4.3.7.2.1. Developments on the labour market, with more and more women in employment, have changed working practices. Practices have emerged such as flexible working, atypical types of work (temporary employment, part-time working etc.) and access to benefits such as parental leave.

4.3.7.2.2. Individual working patterns are becoming more and more disparate, interdependent with other activities and personal responsibilities and changing throughout a lifetime. Social security and pension schemes should be adapted to fit into these new working patterns, and to give adequate protection. Useful measures are mentioned in the ILO Convention and Recommendation of 1994 on part-time work. The Convention requires that statutory social security schemes based on occupational activity be adapted so that part-time workers can enjoy pro-rata conditions equivalent to those of comparable full-time workers.

Thresholds below which part-time workers may be excluded from social security schemes must be reviewed periodically and progressively reduced. As regards temporary work and different types of (atypical) contracts with fluctuating working hours, discussions are still at a very initial stage. An important element here (besides equal access) seems to be that longer reference periods and/or more individually adapted working hours are necessary to ensure better social security protection.

4.3.7.2.3. These new developments must be taken into account in the organization of social protection. Thus, work models such as part-time work and parental leave should be encouraged, insofar as these, to a certain extent, also help create jobs.

4.3.7.2.4. Taking advantage of these forms of employment should not be discouraged by the unsuitability of social protection. Flexibility must be introduced into social security systems to take account of people's occupational development. At the same time, steps should be taken to ensure that people with inflexible or atypical forms of work do not receive a low level of social protection or even lose it altogether.

4.3.7.3. Promoting the European labour market

4.3.7.3.1. Achievement of a truly European labour market and the free movement of workers are fundamental objectives of the Union and also contribute to the tackling of the unemployment problem.

4.3.7.3.2. In order to ensure this freedom, Article 51 gives the Community the competence to coordinate the social security of migrant workers, with a view to eliminating possible sources of discrimination between national and 'migrant` workers. The coordination mechanism should therefore cover the entire social security status of workers.

4.3.7.3.3. Complementary social protection schemes are increasingly important as an essential element of the social protection of workers. Coordination mechanisms should be adapted to cover complementary social protection rights to ensure their portability across the Union.

4.3.7.4. Promoting developments in on-going training

4.3.7.4.1. In future, periods of training will be spread over an individual's entire working life. To ensure that social protection is employment friendly, social protection schemes must give priority to support for training, including that financed by businesses; social protection should be made compatible with new forms of training, since training promotes jobs; in the same way, social protection should also help the employment situation. Tax and other incentives must be developed so that people, even at their own expense, are willing to improve their skills, risk taking new jobs and are also willing to move.

The possibility of introducing a 'competence account`, which is being discussed in a number of Member States, should be explored.

4.3.7.4.2. On-going training would therefore be an easier option if training periods were systematically considered as normal work periods giving the right to full social cover.

4.3.7.4.3. Member States must also introduce measures to ensure that training on offer corresponds to actual workforce demand and that the training undertaken is of real use and is not only aimed at gaining a further qualification with no real prospects. Occupational training should be adapted to economic or business requirements and should even pave the way for social or professional advancement, with social protection helping it to do that.

4.3.7.4.4. At the same time, distortions in the age pyramid are becoming generally apparent. These are due both to the raising of the school-leaving age and longer training periods and a rise in the average age of the population. School must not become merely a social shock absorber for young people. It could also provide a framework in which young people benefited from the experience and skills of older people. Such an arrangement would also undoubtedly benefit older people by helping them to remain active for longer.

4.3.7.5. Transforming passive expenditure on unemployment into active expenditure

4.3.7.5.1. Possible action here could involve promoting the productive deployment of unemployed persons enjoying social security cover for the performance of work for which there is still insufficient funding. The objective must be the creation of real jobs.

4.3.7.5.2. However, other employment sectors should also be promoted which, despite certain reservations, are not designed for the unemployed since they are outside the market sector. These include service providers (domiciliary carers, home-helps etc.) where demand is often not met because of staffing difficulties. Need often lags far behind reality. The Member States should therefore promote the establishment of private companies, associations or even public services to develop activities of this kind and help ensure they are not considered as a mere transition to a 'real job` but as normal employment in their own right. The EU should contribute actively towards this by allowing greater Member State support than before for those sectors in which market social services are produced, if this serves to get the unemployed into work.

4.3.7.5.3. Similarly, social protection systems could contribute to the financing of training through structures involving more direct participation by the social partners and by the establishment of a closer link between unemployment benefit and the qualifications of the unemployed.

4.3.7.5.4. Lastly, consideration must be given to other employment-promotion measures, such as the offsetting of retirement by the employment of young people or measures to return the long-term unemployed to work.

4.3.7.5.5. However, measures of this kind should be accompanied by a firm commitment on employers that they will respect their contractual obligation to take on new staff, as agreed between the social partners.

4.3.7.5.6. Still with the aim of transforming a passive response to unemployment into an active policy on employment, the Committee believes it necessary to restructure social security systems and to take a much more differentiated and flexible approach to working time, with a view to giving young couples starting a family greater access to the labour market. This could be matched by enhancing parental leave and improving childminding and child care facilities.

4.3.7.5.7. By proceeding in this way, the Member States would help transform passive expenses into active expenses. Unemployment insurance should not be merely a social benefit but must be a component of an active employment policy.

5. B - How is social protection to be financed?

5.1. Employment and the financing of social protection are closely linked issues, since, as Jacques Delors notes in his white paper, if social protection costs bear too heavily on employment, investment decisions which could lead to job creation tend to be deferred.

5.2. Thus, action to promote employment frequently has an impact on the financing of social protection and vice versa.

5.3. The introduction of employment-friendly policies and the guarantee of a financial balance in social protection presupposes the adoption of new arrangements for the financing of social protection which do not adversely affect labour costs or, as a result, employment.

5.4. There are several possible approaches.

5.4.1. It should not be forgotten that the future of social protection is also linked to the current debate and to the measures already taken in the majority of Member States concerning efforts to balance the social spending budget. Social welfare schemes covering the whole population should be financed more by taxes and less by contributions, so that all taxable incomes are tapped.

5.4.1.1. This is the opinion developed in the policy paper drawn up for the informal meeting of ECOFIN ministers on taxation in the European Union on 20 March 1996. The cost of social protection may, to follow this thesis, be reduced by augmenting tax-based or quasi-tax-based resources. Calls for more action on tax must however be accompanied by enhanced coordination among the Member States on tax-related matters. In any extension of the tax-financed social security system, mechanisms should be set up to ensure that benefit provision is not geared solely to financial ministers' short-term headroom.

5.4.1.2. Moreover, moves along these lines should be matched by a revised definition on the part of the Member States of what comes under the heading of national solidarity, occupational solidarity or personal effort. These three concepts form the three pillars of social protection. Thus, for example, national solidarity may be considered as seeking to guarantee universal protection irrespective of whether a person pursues an occupation. It may be financed from tax. Occupational solidarity, on the other hand, depends on the pursuit of an occupation and is designed to cover periods of unemployment. It may be financed by wage deductions or employer contributions.

5.4.1.3. In this way, the system of solidarity is preserved, while Member States can move towards a system granting universal participation in the financing of social protection, with each individual and company contributing on a pro rata basis.

5.4.1.4. The financial base would be expanded to all income, not only from work, but also from capital, company added value, energy etc.

5.4.1.5. As for added value, this is on the increase as, for example, the mechanization of work lowers staffing levels. This means some companies are paying little in the way of salary-deductible contributions to social protection, despite sometimes creating considerable wealth.

5.4.1.6. In the same way, social protection charges, in Member States where this is possible, would be spread more widely across the population to include pensioners, the unemployed etc., whose contributions would be adapted to their means.

5.4.1.7. Whatever happens, whether overall funding is tax- or contribution-based, it must be integrated into an operational system which does not undermine the way the Member States have elected to run their schemes, and particularly not solidarity-based joint and mutual social protection schemes.

5.4.2. What financial benefits should accrue from solidarity?

5.4.2.1. Moves have already been made at Community level. For example, the proposal for a Council Recommendation on the convergence of social protection objectives and policies states that protection should guarantee sufficient resources to maintain 'an adequate standard of living`.

5.4.2.2. For this reason, the tax take should be channeled in particular to benefits for which the whole population is potentially eligible, with priority being given to those groups in the population which are particularly threatened by social exclusion.

5.4.3. How can financing through occupational solidarity be arranged?

5.4.3.1. Of the potential financing arrangements, capitalization does not appear to be appropriate to social protection where this is universal or designed to provide minimum cover. Whilst any additional financial charge to fund social protection reduces the net wages of the active population and can cause increasingly serious political tension, capitalization systems are extremely sensitive to demographic and economic changes.

5.4.3.2. At present, demographic trends are responsible for imbalances which, because of their problematic consequences, are particularly dangerous for the pursuit of social protection objectives.

5.4.4. Promoting family policy

5.4.4.1. It seems advisable to note the growing importance of family allowances. Action in this area should be seen as a long-term investment. Indeed, family assistance could bring the structure of the social protection system back into balance. To this extent, it could even be regarded as an asset of the system.

5.4.4.2. In the same way, to reestablish balance in the European age pyramid, it would be advisable to take account of what has now become permanent migration in Europe, so long, of course, as the immigration is legal.

6. C - What adjustments should be made in the face of an ageing population?

6.1. For some years now the European population has been ageing as a result of two phenomena, namely a lower birth rate and a higher proportion of old people in the population owing to greater longevity.

6.2. Thus, whilst the under-twenties accounted for 31,8 % of Europe's population in 1960, 30,1 % in 1980 and 24,2 % in 1995, the corresponding figures for the over-sixties were 15,4 %, 17,9 % and 20,4 %.

6.3. This ageing process will be further accelerated by the recent fall in the birth rate in Italy, Greece, Portugal and Ireland, all countries where it has traditionally been high.

6.4. Consequently, the proportion of economically active persons in the total population is declining and, in the relatively long term, this will create new problems for the funding of pensions and threaten the balance of social protection budgets; it also suggests a need for action to counter the risks of dependence among old people.

6.4.1. The problem of pensions in the context of an ageing population

6.4.1.1. The Member States are already reforming their pension schemes in response to this situation.

6.4.1.2. The Member States should define a joint basic policy so that those who make pension contributions today can be sure of enjoying the benefit of them tomorrow.

6.4.1.3. Retirement age is not uniform throughout Europe. Except in France and Italy (60) and Denmark (67), people retire at 65. Women stop work earlier in some countries (Italy, Portugal, Austria, UK, Greece and Belgium).

6.4.1.4. In exchanges of experience, Member States could define an optimum retirement age which ensures maximum reconciliation of all the elements involved and which can be adjusted in line with the determining factors. Member States' legislation could be aligned more closely on this basis.

6.4.1.5. Furthermore, in order to offset the loss of economically active persons from the working population, there is a temptation to delay retirement age. Such an arrangement makes it possible to extend the period over which contributions are paid whilst reducing the duration of pension payments. It also enables undertakings to take advantage of the valuable experience of older people for longer.

6.4.1.6. This approach is, however, rarely adopted since it increases numbers on the labour market and thus reduces vacancies for young people, among whom unemployment levels are becoming increasingly alarming.

6.4.1.7. Gradual retirement might provide an intermediate or alternative solution. Individuals would progressively reduce their working hours (increasingly part-time activity) whilst simultaneously extending their working life (a gradual shift in retirement age). However, this arrangement should be adapted to suit the sector concerned. In fact, in a number of sectors plagued by serious structural problems, applying this arrangement might be expected to put greater strain on unemployment benefits.

6.4.1.8. This arrangement, which is not unlike the system whereby older workers undertake to 'initiate` younger staff, would also have the considerable social advantage of helping older people to leave active life over a period whilst allowing young people gradually to enter working life via such arrangements as apprenticeships and work/training schemes. The arrangement should, however, be set within a strong framework, and be in keeping with collective agreements, involving commitments from the different parties involved.

6.4.1.9. In this context, it is important to stress that, in many sectors, the real retirement age is much lower than that set officially. This is largely due to people in particularly difficult lines of work taking retirement early. It is essential to reform and improve unfavourable working conditions in order to reduce the costs of insurance systems and enhance the quality of life of the people concerned. A useful approach here would be to work out targeted information exchange arrangements within the EU.

6.4.2. The risk of dependence, given an ageing population

6.4.2.1. Throughout the European Union, the risk of dependence resulting from an ageing population is compounded by a second factor. The family unit has shrunk over the last few decades, so that there is no longer a place for old people among their children.

6.4.2.2. They are, it appears, society's responsibility and society should step in and help to create solidarity between the generations. For example, there could be a levy on all employed persons to finance support structures, assistance plans and the like for old people as a means of reducing dependence. A contribution of this kind should in any case be universal since the issue concerns us all.

7. D - How should social protection be adapted to the single market?

7.1. One of the basic objectives underpinning the construction of Europe is the free movement of persons and goods and the freedom to provide services within the single market.

7.2. Exercise of these rights is at present part of everyday economic and personal life within the Community.

7.2.1. Social protection and the free movement of people

7.2.1.1. Two observations can be made with regard to the free movement of individuals:

- there is increasing intra-European migration. A growing number of Europe's citizens are making use of this option for a wide variety of reasons: study, training, the search for work, retirement, etc.;

- at the same time, the content and cost of social services varies greatly from one Member State to the next.

7.2.1.2. Under these circumstances, individuals exercising their right of free movement have different social security cover depending on their destination. This is an obstacle to their true freedom of movement and might lead them to choose their destination in the light of the quality and cost of the social security benefits available. This could give rise to developments such as benefit tourism. Benefit tourism is most often justified by the fact that medical services differ in effectiveness from one Member State to another.

7.2.1.3. Since this is a European problem, it seems logical to seek a European solution.

7.2.1.4. Moreover, since the majority of Member States have started to reform their social protection systems, coordination becomes imperative so that the reforms in question are applicable in a European context.

7.2.1.5. These reforms should focus on the same objectives, since the Member States are facing similar problems. The aim must therefore be to ensure a degree of convergence of:

- the type and level of benefits provided: any EU citizen should be entitled to minimum benefits as determined by each Member State.

Convergence of minimum income provisions which exist for all EU residents could be drawn up according to the relevant criteria of the ILO Conventions on social security; conditions of access to benefits for partners/families should reflect modern working and living patterns so as not to cause disincentives to participation in the labour market;

- the conditions of eligibility for these benefits: the Member States should consult together to determine whether these conditions should be linked to place of residence, occupation, the individual's resources.

7.2.2. Social protection in Europe and freedom to provide services

7.2.2.1. Freedom to provide services, a facility promoted and recognized in the Union process, is not without impact on the future of social protection. The main problem is how to allocate roles between the various agencies which operate social protection schemes once they are free to engage in intra-Community competition.

7.2.2.2. However, one must remember that the idea of competition within the sphere of social protection is different from that in other areas. The rules are not the same as for other more purely commercial areas.

7.2.2.3. A whole range of agencies provide sickness, old-age, unemployment, invalidity, etc. benefits. These agencies may be public or private, obligatory or voluntary.

7.2.2.4. One option open to Member States would, it seems, be to determine the spheres of responsibility of these bodies.

7.2.2.5. The responsibilities of these agencies should be looked at on two levels: firstly as to the geographical range of the agencies and secondly as to the fields in which they operate and the benefits they provide.

7.2.3. Social protection in Europe and the free movement of goods

7.2.3.1. This third principle has an impact on European competitiveness and thus on labour costs.

7.2.3.2. Labour today accounts for a growing share of the costs of many goods. Of course, this figure varies, depending on the social policy adopted by a particular country. This brings us back to the issue of financing mentioned above.

7.2.3.3. Whatever happens, it is essential that Europe preserve its international competitiveness; as a result, it must retain competitive labour costs. The Member States should therefore seek financing methods which are as neutral as possible with respect to labour costs, and which allow a high level of social protection to be maintained.

7.2.3.4. A large number of reforms have already been undertaken in this direction. An attempt should be made to coordinate these reforms. Here, it would be possible to adopt a common approach to benefits, and how they are financed, by distinguishing between schemes based on national solidarity, occupational solidarity and individual effort. This common approach should take account of alternative sources of finance.

8. E - Health services in Europe

8.1. Even though their national health schemes are fairly and in some cases very different, all the Member States are currently worried about the increase in health costs. Moreover, the lessons learned from each country's reforms could certainly benefit all the others. Similarly, measures taken by one country will be more or less effective depending on whether they have been agreed upon with the other Member States or not.

8.2. Could not health services be the first area for application of the agreed convergence principles?

8.3. It would therefore be helpful to organize a system for the exchange of information and opinions on this topic between the parties concerned in the Member States.

8.4. As regards increased health expenditure, for example, a large number of reforms have already been initiated. The parties concerned may adopt different arrangements for controlling health expenditure: overall budgets, medical-service or accountancy management, agreements with health professionals, etc. Their European partners could provide valuable guidance on the procedures to be adopted and the results to be expected. This is true of a number of areas, such as the management of health care establishments, pharmacy and preventive medicine.

8.5. By adopting the 1992 Recommendation on the convergence of social protection objectives and policies, the EU Member States have endorsed the objective of ensuring that all persons legally resident in a Member State have access to necessary health care, as well as the maintenance and development of a high-quality health-care system. The concern over containing health care costs must be tempered by concern to ensure equitable access to high-quality health care for all. Measures to allow selection of risks (cream-skimming) would endanger solidarity and jeopardize the provision of effective care.

8.6. As regards the management of health-care systems which, as has been pointed out, varies considerably throughout Europe, standardization is obviously out of the question, at least in the foreseeable future. On the other hand, efforts could be made to give these different systems common features, in particular with a view to ensuring that all Europe's citizens enjoy equivalent services, particularly in health insurance schemes which wholly or partly replace a state scheme and operate in the internal market.

9. F - Action by the Member States to counter exclusion at the European level

9.1. For some twenty years now there has been a disquieting revival of social exclusion, particularly of young people, in the affluent countries, and thus in Europe. Whilst the precise origin of this impoverishment cannot be identified, the principal causes are known. These are, on the one hand, higher unemployment, particularly long-term unemployment and, on the other, a weakening of social and family ties following the break up of the family unit and an increasingly individualistic personal ethos.

9.2. At the same time, many of Europe's social protection systems are designed in such a way that, in most cases, the loss of employment entails a corresponding loss of social security. The numbers of socially excluded increase with rising unemployment.

9.3. Given this state of affairs, which is causing growing concern in all the Member States, the problem of exclusion should be seen as linked to the issue of social protection. Indeed, some Member States include anti-exclusion measures, such as minimum social provisions, among their social services. Action must be taken at European level against social exclusion through social protection. The Member States should pay much more attention to international social standards. The same applies to the EU.

9.4. Adoption of a common approach by everyone responsible for social welfare in the countries of Europe would be more effective and would have a wider impact ().

9.5. Several lines of action can already be mentioned.

9.5.1. In order to reduce the number of individuals who do not enjoy guaranteed social security and in the interests of universal social protection, it might be possible to provide for a minimum income in all the Member States accompanied by minimum health care, free treatment (not advance payments), social welfare facilities at hospitals, etc. For that matter, the then twelve Member States reached unanimous agreement on minimum income in a recommendation adopted on 24 June 1992.

9.5.2. Integration in the workforce is also a central element in the battle against exclusion and long-term unemployment. An EU programme could be initiated to provide the excluded with work experience in enterprises.

9.5.3. A European poverty and exclusion observatory could be created. This would be backed up by observatories in all Member States and would have the task of precisely identifying the causes of poverty and exclusion in order to maximize the efficiency of the measures taken.

9.5.4. As with unemployment, anti-exclusion measures must seek to ensure that exclusion never becomes a preferable option. Action taken must not create a permanent state of assistance but must prompt genuine efforts to enter the labour market.

9.5.5. Charitable associations bring together voluntary workers in every Member State and throughout the European Union; their cooperation should be endorsed and promoted in the battle against social exclusion.

Brussels, 28 November 1996.

The President of the Economic and Social Committee

Tom JENKINS

() See ESC Opinion on Working Time, OJ No C 18, 22. 1. 1996.

() OJ No C 40, 17. 2. 1992, Sections 1.4, 1.5, 1.6.

() Cf, for example, Danny Pieters, Introduction into the social security systems of the European Community Member States, Brussels, 1993, and the first chapter of the European Commission Report on Social Protection in Europe 1995 (COM(95)457final).

() The eight risks covered by ILO Convention 102 are: Part II: medical care; Part III: sickness benefits; Part IV: unemployment benefit; Part V: old age pensions; Part VI: benefits in respect of an accident at work; Part VII: family allowances; Part VIII: maternity benefits; Part IX: invalidity benefits; Part X: survivors' allowances. The EU Member States have ratified this Convention as follows: Germany: Parts II to X; Austria: Parts II, IV, V, VII and VIII; Belgium: Parts II to X; Denmark: Parts II, IV, V, VI and IX; Spain: Parts II to IV and VI; France: Parts II and IV to IX; Greece: Parts II to VI and VII to X; Ireland: Parts III, IV and X; Italy: Parts III to VI; Luxembourg: Parts II to X; Netherlands: Parts II to X; United Kingdom: Parts II to V, VII and X; Sweden: Parts II to IV, and VI to VIII.

() The following thirteen EU Member States have signed the 1964 European Social Security Code: Germany, Belgium, Denmark, Spain, France, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, the United Kingdom and Sweden.

() To date, the following countries have signed the revised Code, which was updated on 17. 7. 1995: Germany, Belgium, Finland, France, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal and Sweden.

() Social Protection in Europe 1995, Commission Report, 31. 10. 1995, Chapter I.

() Eurobaromètre, Spring 1992, on social protection.

() Council Recommendation of 27. 7. 1992 on the convergence of social protection objectives and policies, 6th, 7th and 8th recitals (OJ No L 245, 26. 8. 1992).

() Ibid, 9th recital.

() Ibid. final paragraphs.

() ESC Opinion of November 1991, OJ No C 40, 17. 2. 1992.

() Article 3b: 'The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein. In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objective of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale of effects of the proposed action, be better achieved by the Community. Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty.`

() See, for example, Brian Bercusson's article The Dynamic of European Labour Law after Maastricht, in Industrial Law Journal, vol. 23, No 1, March 1994, p. 14.

() Council Recommendation of 27 July 1992 on the convergence of social protection objectives and policies, OJ No L 245 (92/442/EEC) and Council Recommendation of 24 June 1992 on the common criteria concerning sufficient resources and social assistance in social protection systems.

() Op. cit SEC(96) 487 final of 20. 3. 1996.

() It is worth noting that the Committee is drawing up an Own-initiative Opinion on the costs of poverty and social exclusion in Europe.

APPENDIX to the Opinion of the Economic and Social Committee

The following amendments, which received at least one quarter of the votes cast, were defeated during the debates:

Points 3.8 to 3.11 inclusive

Delete.

Reason

These paragraphs tend to show - albeit in a particularly abstract way - that subsidiarity is perhaps not the best solution in the field of social protection. In so doing, they contradict not only the preceding paragraphs but also the whole spirit of the draft opinion.

It would lighten both the form and content of the text considerably to delete these paragraphs and move straight to point 3.12, which sets out the ESC's position clearly and unambiguously.

Result of the vote

For: 55, against: 71, abstentions: 3.

Point 4.3.7.1.1, second sentence

Amend the end of the sentence to read as follows: 'with the aim of lowering labour costs via public subsidies for wages and non-wage labour costs`.

Reason

The German text of the opinion speaks of lowering wage costs, rather than non-wage labour costs. Reducing wage costs is not, however, a suitable way of reintegrating low-skilled workers into the labour market, and would constitute interference in free collective bargaining. What is needed, rather, is active policy for this group to promote employment and skills.

Result of the vote

For: 35, against: 78, abstentions: 11.

Point 4.3.7.1.2

Delete.

Reason

Social protection systems differ too much from one Member State to another. The different effects should first be looked at more closely.

Result of the vote

For: 57, against: 66, abstentions: 7.

Point 5.4.1.4

Delete.

Reason

This is a matter for national debate.

Result of the vote

For: 51, against: 66, abstentions: 4.