[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 6.3.2007

SEC(2007) 329

COMMISSION STAFF WORKING DOCUMENT

Joint Report on Social Protection and Social Inclusion SUPPORTING DOCUMENT

TABLE OF CONTENTS

1. Scope and Outline of the Report 5

2. Part One: Quantitative Analysis 6

2.1. The Economic and Demographic Context and Developments 6

2.2. The Social Situation in the EU and the Role and Effectiveness of Social Policy 10

2.2.1. Poverty and social exclusion: the income dimension 10

2.2.2. The impact of social protection expenditure in reducing the risk of poverty 15

2.2.3. Joblessness: a cause of income poverty and an aspect of social exclusion 18

2.2.4. Educational barriers to social inclusion: early school leaving 24

2.2.5. Regional cohesion 25

2.2.6. The labour market situation of immigrants 27

2.2.7. The labour market situation of older people 28

2.2.8. The role of pension systems in maintaining living standards 29

2.2.9. The health dimension 34

2.3. The Lisbon Strategy and its Impact on Social Cohesion 37

2.3.1. Employment and its impact on the poverty risk 37

2.3.2. Employment growth and jobless households 39

2.3.3. Working longer and its impact on the adequacy and sustainability ofpension systems 40

2.3.4. The impact of economic outcomes on health 42

3. Part two: Thematic Analysis 43

3.1. Strategies for Social Inclusion 43

3.1.1. Full participation in society requires access to resources, rights and services 44

3.1.2. Promoting active inclusion and fighting poverty 51

3.1.3. Strengthened governance of social inclusion policies 59

3.1.4. Annexes to section on social inclusion 67

3.2. Strategies in Health Care and Long-Term Care 78

3.2.1. Introduction 78

3.2.2. Global challenges in the area of access and policies to address them 79

3.2.2.1. Lack of insurance coverage of the population 80

3.2.2.2. Lack of coverage of certain types of care and high direct costs of care 81

3.2.2.3. Geographical inequity in access to care 83

3.2.2.4. Long waiting times and disparities in waiting times 84

3.2.2.5. Lack of information 85

3.2.3. Global challenges in the area of quality 85

3.2.3.1. Improving effectiveness 85

3.2.3.2. Applying evidence-based medicine 86

3.2.3.3. Developing better integration, choice and coordination of care 87

3.2.3.4. Summary of findings 88

3.2.4. Global challenges in the area of sustainability 89

3.2.4.1. Financial sustainability 89

3.2.4.2. Human resources for health 96

3.2.4.3. Health promotion and disease prevention 99

3.2.5. Long-term care 100

3.2.5.1. Access to adequate long-term care 101

3.2.5.2. Quality of long-term care 102

3.2.5.3. Sustainability of long-term care systems 103

3.2.5.4. Summary of findings 106

3.2.6. Conclusions on health care and long-term care 106

3.2.7. Annex to section on health and long term care: Best Practice Examples inhealth care and long-term care in the 2006 National Reports 109

3.3. Progress in the Field of Pensions since 2006 111

3.3.1. Introduction 111

3.3.2. Recent developments in pension reforms 112

3.3.3. Theoretical replacement rates and the long-term adequacy of pensions 113

3.3.4. Minimum income provision for older people 121

3.3.5. Flexibility of retirement age 124

3.3.6. Next steps within the Open Method of Coordination 125

3.3.7. Annex to section on pensions– Result tables on theoretical replacement rates 126

4. ANNEXES 131

4.1. Annex IA – Overarching Indicators 131

4.2. Annex IB - Data Sources – specific notes 136

4.3. Annex 1C: Statistical tables – Overarching indicators 140

SCOPE AND OUTLINE OF THE REPORT

This supporting document provides the analytical background for the 2007 Joint Report on Social Protection and Social Inclusion [COM(2007) 13 final]. It draws on the material provided by the Member States in their National Reports on Social Protection and Social Inclusion, as well as analysis provided by independent experts, and uses the common indicators agreed for this purpose by the Social Protection Committee and its Indicators Subgroup. Where appropriate, it also draws on studies and research carried out in the framework of the Open Method of Coordination (OMC) on Social Protection and Social Inclusion.

The document is divided into two parts. The first part relates to the common objectives for promoting social cohesion and ensuring effective interplay between the social OMC and the Lisbon and Sustainable Development strategies; it provides an analysis of the social situation across the fields of social inclusion, pensions and health and long-term care. The second part examines the policy strategies presented by the Member States and looks in turn at social inclusion, health and long-term care, and pensions.

Part One of the supporting document begins with an analysis of the economic and demographic context in which measures to combat poverty and exclusion and to ensure the adequacy, quality and sustainability of pensions, health care and long-term care are being implemented. The first chapter describes the more limited economic growth which has characterised in particular the first years of this millennium, while the second highlights the disparities that continue to be a feature of EU societies and in particular the extent of poverty and social exclusion affecting considerable groups of the population. It also looks at the labour market situation of older people and the interplay with the pension system, before looking at the role of pensions more widely in maintaining adequate living standards in retirement. Finally, it examines the health dimension, looking at the indicators of levels of health across the Union and at health care spending, health status and inequalities. The third chapter examines the complex issue of the interrelationship between, on the one hand, efforts to promote inclusion and the reform of social protection systems and, on the other, the Lisbon goals of growth and jobs.

Part Two has three sections. Section 1 assesses Member States' Strategies for Social Inclusion. It explores how Member States set out to address inequalities in access to the resources, rights and services needed for full participation in society, to achieve active social inclusion while fighting poverty and exclusion and to further improve governance of social inclusion policies. Reflecting the priorities set in Member States' Reports, it devotes particular attention to the strong commitment across the EU to tackling child poverty and to promoting active inclusion. Section 2 summarises the national strategies for health care and long-term care to ensure access for all to high quality care in a sustainable manner. This is the first report of its kind, given that the open method of coordination was extended to cover health care and long-term care only from 2006. Section 3 summarises the work carried out in 2006 on pensions. National strategies for pension reforms were reported in 2005 and work on pensions in 2006 within the OMC focused on: replacement rates, minimum income guarantees for older people and flexibility in retirement age.

PART ONE: QUANTITATIVE ANALYSIS

The Economic and Demographic Context and Developments

Between 2001 and 2005, average economic growth in the EU25 was 1.7% per year, but this hides the good performance of countries like Ireland, Greece and Spain (over 3% per year on average) and the new Member States (around 4.6%). The gap between the richest and the poorest countries in Europe continued to narrow during the period. While the average GDP per capita of the five richest countries in Europe remained at 125% of the EU25 average[1], the average GDP per capita of the five poorest moved up from 42% of the EU25 average in 2000 to 51.4% in 2005. For 2006, a projected 2.3% EU25 average growth rate reflects signs of recovery observed in most Member States.

Figure 1: GDP growth over 2001-2005 and 2006 forecast.

[pic]

Source: Eurostat – National Accounts

In 2005, employment growth in the EU25 continued to recover gradually from the low in 2003. Employment growth averaged 0.8% for the year as a whole, slightly up on the previous year’s level of 0.6%. The employment rate in the EU25 increased to 63.8%, mainly driven by the growth in the employment rate for women (from 54.3% in 2001 to 56.3% in 2005) and for older workers (from 37.5% to 42.5%). The share of part-time employment (including involuntary part-time) have risen from 16.3% in 2001 to 18.4% in 2005, as well as the share of fixed-term employment (from 12.9% in 2001 to 14.5% in 2005).

Figure 2: employment rates in the EU; total, women and older workers; 2005 .

[pic]

Source: Eurostat - Labour Force Survey

Unemployment remains a concern for most EU Member States, with 8.8% of the EU25 labour force unemployed in 2005 (against 8.6% in 2001), and long-term unemployment rising from 3.6% to 3.9%. Seven countries (IE, LU, NL, DK, UK, AT and CY) have unemployment rates around or below 5%, while two (SK and PL) have rates above 15%. The unemployment rate for women is higher than for men in most EU countries and on average in the EU it is 2.1 percentage points higher. Youth unemployment remains very high (18.5% in 2005). In most countries, youth unemployment is at least twice as high as the overall rate, and up to 3 times as high in IT and LU. While some Member States have managed to reduce youth unemployment significantly between 2000 and 2005 (the Baltic States, Slovakia and Bulgaria from higher levels), it has increased sharply in LU, HU, PT and BE.

Figure 3: Unemployment and youth unemployment; 2000 and 2005.

[pic]

Source: Eurostat - Labour Force Survey

Average spending on social protection (excluding administrative costs) in the Union in 2004 represented 26.2% of GDP. In general, the relative levels of social protection expenditures are highest in the richest countries as measured by GDP per capita. Social protection expenditures range from 12% to 20% in the Baltic States, IE, MT, SK, CZ, PL and HU to around or even above 30% in DK, SE, DE and FR. In all EU countries, pensions and health care represent the bulk (three quarters) of social protection expenditure, reaching on average 46% and 28% respectively of social protection expenditure. The rest is spent, to varying degrees, on disability, family-related benefits, unemployment, housing and other social exclusion benefits.

Figure 4: social protection benefits, by function, in % of GDP – 2004.

[pic]

Source: Eurostat - ESSPROS

In the coming decades, the size and age-structure of Europe’s population will undergo dramatic changes due to low fertility rates, increases in life expectancy and the retirement of the baby-boom generation. Member States have started to address the demographic challenge in a context of tight fiscal constraints. The situation in public finances in the EU has deteriorated in a number of countries since 2000. Debt ratios in 2006 remained above the 60% of GDP threshold in Belgium, Germany, Greece, France, Italy, Austria, Portugal, Cyprus and Malta. Reforms have had a significant impact in BE and EL (where however the debt ratio remains close to 90% or more), and in AT and CY where the debt ratio is expected to fall below the 60% thresholds in the coming two years.[2]

Pensions and health care functions that mostly benefit elderly people are most likely to be affected by the expected ageing of the population. According to Eurostat projections, the age structure of the EU population will change dramatically. By 2050, the EU will have lost 48 million 15 to 64-year-olds and will have gained 58 million people 65 and over. The old-age dependency ratio, that is the number of people aged 65 years and above relative to those between 15 and 64, is projected to double, reaching 51% in 2050. This means that from four working-age people supporting each pensioner in 2004, this ratio will drop to two to one by 2050.

Nevertheless, ageing is a consequence of the positive fact that life expectancy has continued to increase. For the EU-25, from 1995 to 2005 life expectancy at birth has increased from 72.8 to 75.8 years of age for males and from 79.7 to 81.9 for females. Between 1993 and 2003, significant increases in life expectancy at the age of 45 (from 30.5 to 32.5 for males and from 36.3 to 37.8 for females) and at 65 (14.7 to 16.3 for males and from 18.9 to 19.9 for females) indicate that gains in life expectancy are more and more happening in older age. The challenge is now for social protection systems to ensure that people are living and working longer in good health, not only to improve the well-being of citizens but also to help maintain a healthy work-force and to limit increases in expenditure on health and long-term care in old age.

The Social Situation in the EU and the Role and Effectiveness of Social Policy

The first objective of the streamlined Open Method of Co-ordination in the field of social protection and social inclusion is the promotion of social cohesion, equality between men and women and equal opportunities for all through adequate, accessible, financially sustainable, adaptable and efficient social protection systems and social inclusion policies.

There are a number of aspects to social outcomes, including income and living standards, access to good quality health services, educational and work opportunities. This chapter aims to give a snapshot of the social situation in the European Union from this multidimensional perspective, based on the set of indicators agreed at EU level to monitor progress in this area. It will also highlight the role of social protection and employment policies in fighting against poverty and social exclusion.

Poverty and social exclusion: the income dimension

Poverty and social exclusion take complex and multi-dimensional forms and, among these, living on very low incomes probably resonates best with what is commonly referred to as "poverty". Being at risk of poverty is a relative concept: it refers to the capacity of the individual to participate fully in the society in which she or he lives. That is why the income measures of poverty are related to some extent to the overall income distribution nationally and are expressed as a percentage of the median income in any given country.

Income poverty still affects 16% of the EU population…

In 2004, the average at-risk-of-poverty rate in the EU was 16%[3] while national figures ranged from 9% in Sweden and 10% in the Czech Republic to 21% in Lithuania and Poland and 20% in Ireland, Greece, Spain and Portugal. In most countries, the at-risk-of-poverty rate (for the population aged 16 or more) was higher for women, the difference reaching 4 percentage points in Bulgaria and Italy, while at EU level the gender gap was 2 percentage points. Only in Hungary and Poland was the at-risk-of-poverty rate marginally greater for men. However, when looking at the gender dimension, it is important to interpret figures with caution since they assume equal distribution of resources within the household, which might not necessarily be the case.

…and is even higher for children, young people and the elderly.

The young have the highest at-risk-of-poverty rate, at 19% for children aged 0-17, and 18% for the 18-24 age groups. The at-risk-of-poverty rate then decreases with age as individuals progress in the labour market, before it rises again after people retire and cannot rely anymore on income from work. The risk of poverty for children is particularly high in Poland (29%), Lithuania (27%) and Romania (25%). One person households and those with dependent children tend to have the highest poverty risk, with the highest poverty rate affecting single parents with one dependent child (33% in the EU as a whole).

The risk of poverty for people aged 65 and more is particularly high in Ireland (33%) and Cyprus (51%), while it is also significantly high in comparison to the population as a whole in a number of Member States[4]. However, recent measures introduced in some Member States, including minimum income guarantee schemes and increases in the minimum income guarantee, are likely to have decreased the poverty risk in recent years. Older women, without exception, are at greater risk of poverty than older men, who are on the whole no more exposed to the risk of poverty than their younger counterparts. The oldest cohorts (aged 75 and over) tend to be more at risk of poverty than those over 65 and women represent a majority of these older people. Higher poverty risk amongst the oldest people is linked to several factors. Low incomes or interrupted careers, which particularly affect women, coupled with the indexation rules in some countries, generally result in a progressive worsening of retirement incomes as older cohorts grow older.

Comparing the poverty risk in the EU for the youngest and the oldest segments of the population, which are both higher at EU level than the poverty risk of the working age population, approximately half of Member States have a higher child poverty risk and the other half have higher elderly poverty risk. It should, however, be noted that in almost all Member States the poverty risk for children is higher than that for the working age population, while the poverty risk for elderly people varies to a greater extent (but in most Member States it is still significantly above average). Income poverty among children is generally recognised as affecting their development and future opportunities and so the life chances of future generations.

Figure 5: At-risk-of-poverty rate for children, elderly people and the overall population - 2004 – percentages

[pic]

Notes: provisional data for HU and the UK; age brackets 0-15, 16-64 and 65+ for BG, RO and SI.

Source: EU-SILC, Eurostat; national sources for BG and RO. Survey year: 2005; Income year: 2004; except BG and RO (survey and income year 2004), and the UK (survey and income year 2005)

Being poor means having very different living standards in different Member States

At-risk-of-poverty thresholds are country-specific and the economic well-being of individuals at risk of poverty in Member States can therefore be quite different in absolute terms, so that, for example, individuals with similar real incomes may be classified as being at risk of poverty in one Member States but would not be in another. The following graph presents the illustrative values of the at-risk-of-poverty thresholds for a single adult household, expressed in purchasing power standards. Member States with the lowest at-risk-of-poverty threshold include all new Eastern European Member States and Portugal. At the other end of the distribution, the highest at-risk-of-poverty thresholds are those of Luxembourg and Austria, where they are respectively more than seven and four times higher than in Latvia, Lithuania and Bulgaria and more than twelve and eight times higher than in Romania. In euros, this means that the at-risk-of-poverty threshold for a single person household and for a household with two adults and two dependent children ranges from 558 euros and 1172 euros respectively a year in Romania to 17087 euros and 35883 euros respectively in Luxembourg. This means that in Romania single people at risk of poverty live on less than two euros a day, while in Bulgaria Latvia and Lithuania they live on less than four euros a day.

Figure 6: Illustrative value of the at-risk-of-poverty threshold for a single adult household, in PPS, 2004

[pic]

Notes: provisional data for HU.

Source: EU-SILC, Eurostat; national sources for BG and RO. Survey year: 2005; Income year: 2004; except BG and RO (survey and income year 2004). Data for the UK not available.

In Member States where poverty affects a larger share of the population, it also tends to be more severe, but this is not always the case.

Headcount figures on poverty risk do not answer the question "how poor are the poor?". Information on the intensity of poverty can be obtained from the relative median at-risk-of-poverty gap indicator, which measures how far below the threshold the income of people at risk of poverty is. In 2004 the median at-risk-of-poverty gap for the EU was 23%. Member States with low headcount measures of poverty tend to have the lowest intensity of poverty as well. On the other hand, countries with a high at-risk-of-poverty headcount tend to have a relatively higher median at-risk-of-poverty gap as well. This is particularly high in Poland, where it reaches 30% of the at-risk-of-poverty threshold.

Figure 7: At-risk-of-poverty rate and median at-risk-of-poverty gap for the total population - 2004 – percentages

[pic]

Notes: provisional data for HU and the UK.

Source: EU-SILC, Eurostat; national sources for BG and RO. Survey year: 2005; Income year: 2004; except BG and RO (survey and income year 2004), and the UK (survey and income year 2005)

Member States that succeed in achieving low rates of poverty risk are the ones with the most equal income distributions

The figures presented so far, focus on analysis of the lower end of the income distribution. To assess the degree of social cohesion within Member States, one must explicitly consider how the income situation of those at the bottom of the income distribution compares with that of individuals at the top, as measured, for example, by the income quintile ratio . The value for this indicator was 4.9 for the EU in 2004, which means that the ratio of total income received by the 20% of the EU population with the highest income (top quintile) was nearly 5 times that received by the 20% of the EU population with the lowest income (lowest quintile). Member States with the lowest income inequality are also among the countries with the lowest at-risk-of-poverty rate. Member States with the highest disparities between those at the top and those at the bottom of the income distribution are Portugal (with a ratio of more than 8 to 1), followed by Lithuania, Latvia and Poland.

Figure 8: Inequality of income: S80/S20 income quintile share ratio – 2004.

[pic]

Notes: provisional data for HU and the UK.

Source: EU-SILC, Eurostat; national sources for BG and RO. Survey year: 2005; Income year: 2004; except BG and RO (survey and income year 2004), and the UK (survey and income year 2005)

The impact of social protection expenditure in reducing the risk of poverty

Social protection expenditure plays a decisive role in reducing the risk of poverty

A comparison between the standard at-risk-of-poverty rate and the hypothetical situation where social transfers are absent, other things being equal, shows that such transfers have an important redistributive effect that helps to reduce the number of people who are at risk of poverty. In the absence of all social transfers[5], the average poverty risk for EU Member States would be considerably higher than it is in reality, by the order of 10 percentage points (average pre-transfer risk rate of 26% compared with the post-transfer rate of 16%). Figure 9 shows the percentage drop (in absolute terms) of the at-risk-of-poverty rate allowed by social transfers[6].

The poverty-reducing effect of social transfers is particularly evident in France, the Netherlands, Austria, the Czech Republic, Hungary, Finland, Denmark and Sweden, where all social transfers reduce poverty by 50% or more. Conversely, in Lithuania, Spain, Bulgaria and Greece social transfers only reduce the risk of poverty by 20% or less.

Figure 9: The impact of social transfers (excluding pensions) on the at-risk-of-poverty rate, 2004

% reduction in the total poverty-risk rate allowed by social transfers

[pic]

Notes: provisional data for HU.

Source: EU-SILC, Eurostat; national sources for BG, RO and the UK. Survey year: 2005; Income year: 2004; except BG and RO (survey and income year 2004) and the UK (survey and income year: 2003).

The impact of social cash transfers on the poverty risk rate differs across age groups. Figure 10 illustrates the percentage drop in the poverty risk rate for children aged 0-17 years allowed by social transfers (excluding pensions). In the Nordic countries, the drop in the poverty risk rate for children allowed by social transfers other than pensions was as high as 60% or more; on the other hand, in Bulgaria, Spain and Greece children benefit least from poverty relief allowed by social benefits (the percentage drop was less than 20%).

Figure 10: The impact of social transfers on the at-risk-of-poverty rate for children, 2004

% reduction in the total poverty-risk rate for children (aged 0-17) allowed by social transfers other than pensions

[pic]

Notes: provisional data for HU and the UK; age bracket 0-15 BG, RO, SI and the UK.

Source: EU-SILC, Eurostat; national sources for BG, RO and the UK. Survey year: 2005; Income year: 2004; except BG and RO (survey and income year 2004) and the UK (survey and income year: 2003)

BOX 1: Social assistance and risk of poverty Countries differ substantially in terms of the minimum safety nets they provide to workless households[7], even when comparing them relative to the at-risk-of-poverty threshold that depends on living standards in each country. Only a few countries provide workless households with a minimum income and related (i.e. housing) benefits that are sufficient to lift them close to or above the 60% of median income threshold, and this only with respect to some family types. So, for example, lone parents can receive benefit income at or above the poverty threshold level only in Poland, the United Kingdom, Germany, Denmark and the Netherlands; whereas in all countries but Poland, couples with two children relying on social assistance benefits would have disposable income levels below 60% of the median. In Hungary and Spain, all three family types are likely to receive less than 40% of median income with out-of-work benefits. Some Member States argue that the main purpose of social assistance is to meet basic needs rather than compensate for income differences between low income households and the rest of the population. Furthermore, these basic needs can be met by cash transfers, benefits in kind or a mixture of both. Figure 11: Net income of social assistance recipients – 2003 As a % of the at-risk-of-poverty threshold for three jobless family types, including housing benefits. [pic] Only countries where non-categorical social assistance benefits are in place are considered. Source: Joint EC-OECD project using OECD tax-benefit models, and Eurostat |

Joblessness: a cause of income poverty and an aspect of social exclusion

Social protection can provide relief from poverty but does not in itself help individuals and families durably elude poverty. If they are to be effective in combating poverty and social exclusion, social transfers must be accompanied by adequate health care, education, housing, social services and measures facilitating integration into the labour market for those capable of working. This is why many Member States are increasingly focusing their policies on promoting individual self-sufficiency through an employment-friendly social protection system that fosters participation in the labour market.

Joblessness is not only one of the main causes of poor living standards but is also in itself a central dimension of social exclusion, since a job is a key determinant of people's ability to fully participate in society, build a social network and realise their potential. Among all the different types of joblessness, long-term unemployment is clearly associated with social distress. The term covers people who have been searching for a job, but who have been unable to find one for more than 12 months[8]. Long-term unemployment represents an important loss of income for the individuals concerned, who also tend to lose their skills and the self-esteem necessary to regain a foothold in the labour market.

In 2005, long-term unemployment affected 3.8% of the active population in the EU-27 (3.9% in the EU-25), on average more men (3.9%) than women (3.7%). The differences between Member States are considerable. Long-term unemployment rates are equal or below 1.5% in Ireland, Austria, Sweden, Luxembourg, Cyprus, Denmark and the United Kingdom, where only 1% of the active population is affected, but is equal or more than 5% in Germany, Greece and Bulgaria and 10% in Poland and Slovakia. The gender gap is particularly large in Poland, Italy and Greece where the long-term unemployment rates for women are respectively 2.1, 2.3 and 6.3 percentage points higher than for men. In only seven Member States - the United Kingdom, Sweden, Ireland, Finland, Malta, Latvia and Romania - are long-term unemployment rates higher for men than for women. Long-term unemployment has remained broadly unchanged in the five-year period between 2000 and 2005 for the EU-25 and decreased by 0.3 percentage points in the EU-27. The long-term unemployment rate decreased by more than 2 percentage points in Bulgaria, Spain, Italy, Latvia and Lithuania, while it increased by 1.4 percentage points in Slovakia and 2.8 in Poland.

Figure 12: Long-term unemployment rate by country and gender – 2005.

[pic]

Notes: provisional data for SE.

Source: Eurostat, Labour Force Survey, annual averages, based on 1990 census.

The term "at risk of poverty" refers to those individuals whose household income is below a certain threshold, since economic well-being depends on the sum of all the resources contributed by all members of the household. Therefore, joblessness is even more problematic when it concerns not only one individual, but all the members of the household. Furthermore, the potentially adverse impact of living in a jobless household goes beyond the lack of work income, as it extends to the lack of contact with the labour market.

In the EU25, the percentage of people aged 18-59 and living in households where no one works was 9.8% in 2006. This proportion ranged from below 6% in Cyprus and Portugal, to 13.5% in Poland and 14.3% in Belgium. It is interesting to note that even Member States with relatively high employment rates, such as Finland, Germany and the United Kingdom, also have above-average rates of people living in jobless households, pointing to a greater polarisation between "job-poor" and "job-rich" households in these countries[9].

In the EU, the proportion of women living in jobless households at 10.8% is two percentage points higher than for men, and this gap is equal to 3 percentage points or more in the Czech Republic, Malta, the United Kingdom, Greece and Belgium, where it reaches 4.1 percentage points.

Figure 13: People aged 18-59 living in jobless households by country and gender, 2006.

[pic]

Notes: In CY, the reference population (denominator) excludes students abroad.. Data for SE not available. Provisional data for DK, LU and FI.

Source: Eurostat, Labour Force Survey - Quarter 2 results

Between 2001 and 2005, the proportion of prime-age adults living in jobless households remained essentially unchanged in the EU. Only in the Baltic States and Bulgaria has there been a marked decrease equal to more than 3 percentage points.

Particular concerns are raised when children grow up in a jobless household, as the absence of a working adult could be a factor affecting the educational and future labour market achievement of children. In 2006, the proportion of children living in jobless households was slightly lower than that of prime-age adults (9.5%), but variations across Member States are more marked, ranging from 2.7% in Luxembourg to 16.2% in the UK.

In the past five years, the proportion of children living in jobless households has not changed in the EU, but has decreased by over 3 percentage points in the Baltic States and Bulgaria and increased by the same amount in Austria and Romania.

Figure 14: Children living in jobless households, 2001 and 2006.

[pic]

Notes: data for the EU estimated. In DK, LU, EE, LV, LT, CY, MT and SI, the degree of variation of results over time is partly influenced by a low sample size. In CY, the reference population (denominator) excludes students abroad.

Source: Eurostat, Labour Force Survey - Quarter 2 results; in the first column, 2002 data for DK and LT, 2003 data for FI; data for SE and for PL prior to 2006 not available.

BOX 2: Social protection and employment: making work pay In line with Integrated Guideline No 19, strengthening incentives and support for labour market participation continues to be the main driver of many welfare and tax reforms in the Member States. The concern is to reduce reliance on social protection and increase self-sufficiency by supporting labour market participation and "making work pay", that is, making work an economically attractive option relative to welfare. However, it should also be noted that non-monetary incentives are just as important as monetary ones, and a generous benefit level and incentives to work do not necessarily contradict each other. Balancing the two goals of increasing labour supply incentives and at the same time alleviating poverty is a challenge for policy-makers, who also have to take account of the budgetary costs that any tax and benefit reform may involve. The unemployment trap Unemployment benefit systems are intended to provide income security during unemployment and to allow a better and more efficient match between workers and jobs as they allow individuals to spend more time on job searching. At the same time, unemployment benefits can reduce the financial incentives to return to work and thus lower job search intensity. The term unemployment trap refers to the situation where net in-work earnings are low relative to out-of-work income of the unemployed and their families. Table 1 Unemployment traps for unemployed persons returning to full-time work at 67% of the APW1, 2004 and changes 2001-2004 [pic]1.Results refer to the situation of a person who has just become unemployed and receives unemployment benefits (following any waiting period) based on previous earnings equal to 67% of APW (full-time work). Social assistance top-ups and housing benefits are assumed to be available in either the in-work or out-of-work situation where applicable. 2. METR: marginal effective tax rate, due to the combination of tax to be paid on the wages and withdrawal of previously received benefits. Source: Joint EC-OECD project using OECD tax-benefit models. Table 1 shows that for an unemployed person previously employed at a wage of 67% of average national earnings (here measured as the average earnings of a full-time manual worker in the manufacturing industry – APW), taking up a new job at the same wage as before the unemployment spell would imply facing a marginal effective tax rate of over 70% in almost all countries and for all four household types shown in the Table. This means that taking up a new job would increase net income by just 30% or less of the increase in gross earnings: this is due to the fact that when people take up a job, they have to pay taxes on their salaries, but also lose the benefits to which they were previously entitled and so the increase in their final disposable income when taking up employment can be rather limited. There are notable exceptions to this pattern, and low METRs are found in countries where in-work benefits are in place (e.g. Ireland, the United Kingdom) or in countries with low net incomes during unemployment (e.g. Italy). Comparing across family types, the Table shows that unemployed people with a non-working spouse and dependent children are faced with the highest METRs in several countries. This is due not only to the withdrawal of unemployment benefits but also to the phasing out of the additional social assistance payments to which this household type may be entitled. Table 1 also shows percentage point changes in METRs faced by unemployed persons between 2001 and 2004: for most countries the figures are negative, which shows that policy efforts to review tax and benefit systems to enhance financial incentives to work are bearing fruit. In most cases, reductions in METRs have been achieved through mechanisms that allow in-work earnings to be topped up, rather than by reducing out-of-work incomes, notably by allowing beneficiaries to retain part of their benefits upon taking up work. In general, reforms of benefit systems aimed at getting beneficiaries into work tend to attach conditions with regard to active job search or participation in active labour market programmes, affecting benefit coverage rather than levels. However, in some countries, benefits have been increased by less than nominal wages, resulting in lower replacement rates and lower METRs. In the Slovak Republic, the "stronger incentives to work stem in large part from the relatively low level of social assistance that is now offered, together with the fact that social assistance is reduced less abruptly if the recipient begins to earn labour income" following the welfare reform that came into force on 1 January 2004.[10] The inactivity trap METRs faced by inactive individuals considering taking up a job and who are not or no longer entitled to unemployment benefits are generally lower than those affecting unemployment-to-work transitions. This is to be expected given that out-of-work income support benefits on which these people can rely are lower than unemployment benefits. Still, in many cases, the entry into a low-paid job would result in an increase in net income of no more than 30-40% of the increase in gross terms. Greece, Italy and, to a lesser extent, Spain, Hungary and Portugal, are notable exceptions: in these countries, the absence or low level of minimum income schemes[11] explains the very low level of METRs. In Ireland, METRs are also low, due to in-work benefits to raise incentives to work for lone parents, whereas the combination of low out-of-work benefits and income supplements for workers explains the low inactivity METRs in the Slovak Republic. Across family types, METRs are generally higher for members of workless households with a dependent spouse and children (i.e. the one-earner couple with two children). METRs are close to or higher than 90% in 10 out of the 19 countries for which data are available: in these cases there is no or little pay-off from taking up employment. This is mainly due to the withdrawal of social assistance benefits, in some cases in combination with the withdrawal of housing benefits. On the other hand, employment, even if low-paid (or, more realistically, a part-time job that pays the hourly APW), appears to bring significant income gains to spouses whose partner is already working, by at least 40% of the additional gross income. The case of the two-earner couple with children can be seen to illustrate the case of potential second earners, normally women, who have to choose between staying at home and looking after their children or working and using child care services. While the availability of quality child care services is essential to ensuring the participation of parents, especially mothers, in the labour market, child care costs can be a major expenditure item for working parents. Low-wage second earners in about half the countries for which estimates are available see more than 70% of their additional earnings consumed by child care fees, taxes and reduced benefits. For lone parents, the payoff from employment can be even lower. The best example is Ireland, where a METR of 54% for lone parents (with two children, but with no childcare costs) shoots up to 131% when childcare costs are included. |

Educational barriers to social inclusion: early school leaving

- The lack of basic competencies and qualifications is a major barrier to inclusion in society. This is even more the case in an increasingly knowledge-based society and economy and a skilled workforce is a key factor in supporting the Lisbon agenda for jobs and growth. This is why improving the adaptability of workers and increasing investment in education and skills are also key priorities of the European Employment Strategy. Those without adequate skills will find it more difficult to enter the labour market and find a quality job, are more likely to spend long periods out of work and if they do work they are more likely to be in low-paid jobs. Better educated people are also more likely to benefit from training opportunities over the course of their life and this is why a solid skill base is necessary for young cohorts.

However, in the EU almost 15% of young people aged 18-24 have at most lower secondary education and are not in further education or training (this group will be referred to as 'early school leavers'). This means that significant additional efforts are needed in order to reach the European benchmark set by Education Ministers of no more than 10% early school leavers by 2010.

This percentage reaches almost 30% in Spain, 39% in Portugal and almost 42% in Malta. On the other hand, countries with the lowest proportion of early school leavers include Poland, the Czech Republic and Slovenia, where the figures are below 6%. In all Member States, the percentage of early school leavers is higher for young men, except in Romania, Bulgaria, Germany, and the Czech Republic where they are broadly similar[12].

Figure 15: Early school leavers (% of the total population aged 18-24 who have at most lower secondary education and are not in further education or training) – 2006.

[pic]

Source: Eurostat, Labour Force Survey – quarter 2 results.

Regional cohesion

All the indicators that have been examined so far are calculated at national level. Yet territorial differences matter not only between but within countries. A clear understanding of the nature and situation of poverty and social exclusion at sub-national level is important for the design and implementation of effective policies to combat them. However, considerations of statistical reliability hinder the breakdown by region of most of the commonly agreed EU indicators.

A proxy measure of social cohesion across regions is represented by the dispersion (coefficient of variation) of employment rates at NUTS2 level. Regional cohesion is lowest in Italy, with a coefficient of variation which is seven times greater than the best performing country. Although regional cohesion tends to be greater in smaller countries, such as the Netherlands, Austria and Portugal, as might be expected, the correlation between regional cohesion and country size is not a perfect one; some of the bigger Member States, such as the UK and Germany, perform relatively better than some smaller countries. Within the regional spread, differences between men and women are particularly marked in southern countries, including Greece, Spain and Italy, where it is 17 percentage points.

Since 1999, regional cohesion has increased slightly in the EU as a whole, with consistent and more substantial progress in Spain, and to a lesser extent in the UK, Sweden, Italy and Finland. On the other hand, dispersion of regional employment rates increased in Austria and Slovakia.

Figure 16: Dispersion of regional employment rates – 2005.

[pic]

Notes : the dispersion of regional employment rates is measured by the Coefficient of variation of employment rates (of the age group 15-64) across regions (NUTS 2 level) within countries. Data for DK, IE, EE, CY, LV, LT, LU, MT and SL not applicable. EU average includes all countries.

Source : Eurostat - Labour Force Survey, Annual averages.

The labour market situation of immigrants

Concerning the employment situation of foreign born residents, the employment gap is positive in almost all old Member States, except Luxembourg, Greece, Spain, Portugal and Ireland, and in Slovakia, Bulgaria and Poland. If the foreign born population is divided as to whether they were born in another EU country or outside the EU, in the former case the employment gap with those born in the country is almost zero for the EU as a whole, but it reaches almost 7 percentage points in the latter. The employment gap depends on a number of factors, including the composition and size[13] of the migrant population in terms of age structure, skill level and household composition. Member States also differ in relation to developments in migration flows over time and in legal requirements for entry into the country – in particular whether a job is a pre-condition.

Figure 17: Employment gap of foreign born residents, in percentage points

(Employment rate of born in country – employment rate of born abroad in the EU or outside the EU), 2005.

[pic]

Notes: In case "born in another EU25 country" is not reliable due to small sample size, the cell "Born outside the EU25" refers to "Born outside the country". Country of birth is not available for BG, DE and RO. Nationality is used instead. Data for BG and MT should be interpreted with caution due to small sample size. Data for IT and RO not available or not reliable due to small sample size.

Source: Eurostat, LFS annual averages.

The labour market situation of older people

The Stockholm European Council has set a target of 50% by 2010 for employment rates of people aged 55-64 and, despite recent improvements, the EU has a significant way to go to reach this goal, as currently the employment rate is around 42.5% in 2005. A second target related to older workers was set by the Barcelona European Council in spring 2002. It focuses on the average labour market withdrawal age which is to rise by five years by 2010. The average labour market exit age is currently (2005) estimated at 60.9 years[14]. In the long run, the adequacy and sustainability of pension systems will probably require an improvement in labour market participation of older workers even beyond these targets.

As highlighted in the 2006 synthesis report on adequate and sustainable pensions, Member States have generally increased the accrual of pension rights if people work longer and this should act as an incentive to work longer (see box 2), thus contributing to compensating for the projected decrease of replacement rates. Furthermore, some Member States have changed the eligibility rules for retirement.

BOX 3 – Strengthened incentives to work longer In most Member States, recent reforms have increased incentives to work longer, notably by strengthening the link between contributions and benefits. Working longer is generally encouraged by providing pension supplements, while leaving earlier is discouraged by actuarial reductions, but also by the introduction of more restrictive eligibility rules to early retirement schemes and also possibly by a review of access to disability and incapacity schemes. In defined-benefit schemes, the link can be strengthened by requiring a longer contribution period for a full pension, while applying actuarial reductions for early pensions and increases in pension rights for deferred retirement. This is the case for most Member States, such as recently BE, AT, FR, and FI, while the link was already strengthened under earlier reforms in a number of Member States. Nevertheless, in a number of Member States, the question remains whether the strength of incentives is now appropriate. Some Member States have introduced major reform packages that have substantially amended their statutory schemes (DE, DK, FR, AT, FI, IT). Notional defined contribution schemes (such as in SE and PL) also build on a strong link between contributions and benefits, which by their nature ensure better rewards for longer working. Furthermore, since the end of the 1990s, the Swedish introduced the premium pension, and a number of Member States have also introduced statutory funded pension schemes (for example PL, HU, EE, and LV), while Lithuania did so in 2004 and Slovakia in 2005. |

Employment rates of older workers have increased in recent years, reversing a long decline. The employment rate of older workers increased from 36% in 1995 to 44% in 2005 for the EU-15, while that for the EU-25 increased from 36.6% in 2000 to 43% in 2005. These figures mask significant disparities between Member States (see figure 18 below). It should also be noted that this increase is partly due to a demographic effect (the composition of the age bracket 55-64 currently changes towards more people aged 55-59, who have a higher employment rate), as well as the trend towards an increase in women's employment and of an increase in part-time work.

Figure 18 – Employment rates of older workers in 2005 and evolution since 2000

[pic]

Source: Labour Force Survey, annual averages.

In spite of these recent improvements, in a number of Member States, the employment rate of older workers lies below or around 30% (Belgium, Italy, Luxemburg, Malta, Austria, Poland, Slovenia and Slovakia), or between 30% and 45% (Bulgaria, Hungary, the Czech Republic, Greece, Spain, France and Romania), while it lies between 45% and 55% in some others (Germany, Latvia, Lithuania, the Netherlands, Ireland, Cyprus, Portugal and Finland), and exceeds 55% in only a few (Estonia, Denmark, Sweden and the United Kingdom). It is worth noting that progress is slower in Member States where the employment rates of older people are already lower, which indicates a need for enhanced efforts.

The role of pension systems in maintaining living standards

Pension systems not only aim to ensure that older people do not have to live in poverty (see section 2.1), but more generally facilitate the maintenance to a reasonable degree of the living standard achieved during their working lives. Public pensions are essential in this respect and they will generally continue to be the main source of pensions for retired people in the future.

Older people report living standards that are relatively close to that of the general population, mostly ranging between 75% and 90% of that of the 0-64 population (see figure 19). In some Member States, the level is significantly below 75% (Ireland and Cyprus), reflecting relatively low pension entitlements as well as fast economic growth which mainly benefits people of active age, while in a number of Member States, the relative income of older people is close to 75% (Belgium, Denmark, Estonia, Spain, Portugal, Finland, Sweden and United Kingdom). By contrast, a number of Member States report levels higher than 90% (France, Germany, Luxembourg, Austria, Hungary and Poland).

Figure 19 – Indicators on current adequacy of pensions

[pic]

N ote: Relative income of 65+: relative median equivalised disposable income of people aged 65 and more compared to those aged 0-64. Aggregate replacement rate: median individual pension income of retirees aged 65-74 in relation to median earnings of employed persons aged 50-59 excluding social benefits other than pensions, based on gross income, except for some Member States (EL, ES, IT, LV, PT), for which it was calculated with net income as only net income were available for the first wave of EU-SILC. This indicator is thus not (yet) completely comparable across countries. It should also be noted that these calculations are by nature different from those of theoretical replacement rates (which are presented in part II of the Supporting document in section on pensions) and that for a great majority of Member States, the respective levels are different (see for instance ISG report on replacement rates 2006).

Source: Eurostat, data (income year 2004).

Pension entitlements generally provide around 70 % of this retirement income (in particular statutory pension schemes and widely developed private ones, such as those based on binding collective agreements). Pension schemes currently manage on the whole to ensure adequate income in most Member States (see figure 19). However, in certain cases, current average pension levels turn out to be low compared to current earnings, reflecting low coverage or low income replacement from statutory schemes as well as maturing pension systems, incomplete careers and / or under-declaration of earnings.

Future adequacy and sustainability of pensions

As highlighted by the recent AWG expenditure projections , not all Member States are in the same situation as regards forecast pension expenditure and thus sustainability of public pensions. These projections have also shown that some of the pension reforms already put in place are likely to contain/slowdown the projected increase in the level of expenditure.

Between 2004 and 2050, public spending on all age-related provision (pensions, health care and long-term care, education and unemployment benefits) is projected to rise in most Member States, on the basis of current policies, although the degree varies greatly between countries (some Member States have introduced reforms since 2004 that will also affect future spending). The budgetary impact of ageing in most Member States starts becoming apparent as of 2010. However, the largest increases in spending are projected to take place between 2020 and 2040. For the euro area and the EU-15 as a whole, public spending is projected to increase by about 4 percentage points between 2004 and 2050 (including the funded tier of statutory pensions and occupational pension, the increase is about 4.5 percentage points). For the EU-10, the increase in overall age-related spending is projected to rise by about 2.9 percentage points (when including the funded tier of statutory pensions and occupational pension).

For EU-15 Member States, public pension spending is projected to increase in all countries, except Austria, on account of its reforms since 2000. Very small increases in spending on pensions are projected in Italy and Sweden due to their notional contribution-defined schemes where pension benefits are based on effective working-life contributions. Relatively moderate increases (between 1.5 and 3.5 percentage points of GDP) are projected in most other EU countries, with the largest increases projected for Ireland (6.4 p.p.), Spain (7.1 p.p.), Luxembourg (7.4 p.p.) and Portugal (9.7 p.p.).

Reforms introduced in several EU-15 countries, since the last age-related expenditure projection exercise of 2001, appear to have curtailed the projected increase in public spending on pensions significantly in half of all EU15 Member States. Also the projections assume an increase in the general employment rate of about 8 p.p. and of nearly 20 p.p. in the employment rate of older workers. The inclusion of the EU-10 Member States increases the variation in the results. Between 2004 and 2050, public pension expenditure is projected to remain nearly stable (increasing by 0.3 p.p. of GDP), while including the funded tier of statutory pensions, there is a projected increase (of 1.7 p.p.). However, the overall trends (including the funded tier of statutory pensions) differ greatly between countries, ranging from a decrease of 4.6 p.p. of GDP in Poland and to an increase of 8.3 p.p. in Slovenia, 9.9 p.p. in Hungary and 12.9 p.p. in Cyprus. The challenges faced by Cyprus, Slovenia, Hungary and the Czech Republic are among the biggest in the EU.

As reflected above, pension schemes generally manage to ensure adequate retirement income in most Member States at present, in particular statutory schemes and those private schemes that are spread widely in terms of coverage. Future adequacy and, in particular, future levels of pensions in relation to earnings (income replacement levels) will depend notably on the pace of accrual of pension entitlements (which is linked to developments in the labour market), the maturation of pension schemes, the indexation of benefits and the effect of reforms introduced.

The effects of reforms are partly reflected in the evolution of the benefit ratio (average pension in relation to the average wage) projected by the AWG . However, it is not clear how or to what extent this will affect future adequacy. Another useful indicator for future adequacy is theoretical replacement rates, notably as they allow us to see how changes in pension rules can affect pension entitlements and to disentangle the various contributions to future changes. They are calculated for a hypothetical worker (in the base case, retiring at 65 after 40 years of a career average wage) and take into account enacted reforms of pension systems. As underlined in the 2006 Indicators Sub-Group report on replacement rates, it is essential to consider theoretical replacement rates with the associated information on representativeness and assumptions used and to consider the links between theoretical replacement rates and other indicators, and in particular the evolution of pension expenditure.

Reforms of statutory schemes will for most Member States lead to a decrease of replacement rates at given retirement ages (at 65 in the case considered). This also reflects the need to adapt pension systems to the trend towards an increase in life expectancy at 60 or 65, for all types of pension provision (be they financed on a pay-as-you-go mechanism or through funded defined-contribution or defined-benefit schemes). Indeed, against a backdrop of rising longevity, unchanged levels of replacement rates at a given age inevitably mean greater pressure on pension expenditures for all types of pension provision.

Trends in theoretical replacement rates for the base case suggest that, for most Member States, overall replacement rates are set to decline over the coming decades.[15] Net theoretical replacement rates are projected to decline in 12 Member States.[16] Given that second pillar pensions generally do not provide full coverage of the population, it is significant that the decline in gross replacement rates of first pillar statutory schemes is even more marked: gross theoretical replacement rates for first pillar are projected to decline in 14 Member States (the situation does not change significantly in 8 other Member States).[17]

BOX 4: Promoting adequate and sustainable pensions The 2006 Synthesis Report on Pensions and the 2003 Joint Report on Pensions underlined the interdependency between the financial sustainability and adequacy of pensions in ageing societies and the need for comprehensive reforms to secure adequate, accessible and financially sustainable pension systems. To monitor these developments the SPC and ISG agreed to use theoretical replacements rate trends as a context indicator for the overarching list of indicators, by also taking into account the projections for the sustainability of pension systems developed in the AWG, which are indeed mutually dependent. Replacement rates show the level of pensions as a percentage of previous individual earnings at the moment of take-up of pensions. Public pension schemes and (where appropriate) private pension arrangements are included, as are the impact of taxes, social contributions, and non-pension benefits that are generally available to pensioners. Current replacement ratios describe the situation of people who retire today while prospective replacement ratios describe the projected pension income of people retiring in the future. They should allow the adequacy of pensions to be assessed, taking into account changes that have been decided in many countries as a result of recent reforms. The base case describes the situation for a typical case including different types of schemes chosen depending on the national framework, while in practice situations are by nature diverse. The evolution of the overall (net) replacement rate indeed reflects different contributions, that of statutory schemes (pay-as-you-go and possibly including a funded tier) and, in some Member States, that of private pension schemes. In those Member States, the latter contribution will benefit only those who are actually covered by such schemes, so a significant share of pensioners will depend solely on the contribution provided by statutory schemes (for more information see the 2006 Report on replacement rates[18]). The tendency towards a decline in prospective replacement rates at a given age is a result of various adjustments. In earnings-related pensions, the contribution period taken into account in calculating pensions, and the pace of revaluation of past wages (no revaluation, revaluation against prices, against wages, or a mix), the pace of indexation of current pensions, and the statutory retirement age are generally the target of adjustments during reforms. Pension levels can also be lowered by adjusting the formula used to calculate benefits, notably by introducing mechanisms to take into account future demographic trends. Two major policies have been developed by Member States to cater for this projected decline in replacement rates at a given age: on the one hand strengthening incentives to work longer and, on the other, the development of private pensions. A number of Member States (such as Belgium and Denmark) have embarked on a strategy of reducing public debt, which can provide leeway for adequate and sustainable pensions in the light of the ageing society. Longer working lives - and in some Member States higher retirement savings - are a key means to compensate for this projected development in theoretical replacement rates at a given age. Moreover, in a number of Member States, the development of privately managed pension provision is projected to account for a rising proportion of future replacement rates, whether through the funded tier of the statutory scheme (PL, EE, LV, LT, HU, SK, and SE), occupational pensions (such as BE and DK) or other private pensions (DE and, IT) that complement public pensions, while in some Member States (IE, NL and UK), this would remain roughly constant assuming that contribution rates are sustained. In these countries achieving good coverage rates and adequate contribution levels in order to reach expected benefit levels are particularly important goals for policy-makers. |

The health dimension

It was previously mentioned that an ageing population could pose a financial burden on health and long-term care systems. In this context, it is important to know how long people can expect to live in good health or without disability, i.e. whether ageing is accompanied by extended ill-health/disability or, rather, by its compression i.e. people are living longer but are spending less time in ill-health/ disability. The two alternatives have different implications in terms of future care costs.[19] We therefore need to look at healthy life years (also called healthy life expectancy or disability-free life expectancy): [20] the number of remaining years that a person of a certain age is still likely to live without disability. The measure distinguishes between years of life free of any limitation of activity and years experienced with at least one limitation. The emphasis is not exclusively on the length of life, as is the case for life expectancy, but also on the quality of life. The indicator was developed to reflect the fact that not all years of a person's life are typically lived in perfect health. Chronic disease, frailty, and disability tend to become more prevalent at older ages, so that a population with a higher life expectancy may not be healthier. However, if healthy life years increase more rapidly than life expectancy then, not only are people living longer, they are also living a greater portion of their lives free of disability. Analysing this indicator together with life expectancy can help countries understand whether more effort is needed to promote health and prevent ill-health.

The figures[21] suggest that for the EU-15 the general increase in life expectancy has also meant a general increase in healthy life years. For the EU15 the number of healthy life years for males and females has increased respectively from 63.2 in 1999 to 64.5 years in 2003 and from 63.9 in 1999 to 66 years in 2003. Healthy life years at birth in the EU-15 are, on average, 12 years shorter than overall life expectancy for men and 17 years shorter for women. Healthy life expectancy is higher for women than for men in all countries with the exception of Denmark, the Netherlands, Finland the United Kingdom. While men have seen an increase in their healthy life years in all countries, some countries (Greece, Ireland, The Netherlands, Finland and the United Kingdom) show a small reduction or only a very small improvement in female healthy life expectancy over the decade. In 2003, for all Member States with available data, men in the EU-15 can expect to live 84.9% of their life without disability. Women can expect to live 81.3% of their lives free of disability. Hence, though women live longer and more (absolute number of) years free of disability they also spend a higher proportion of their lives in disability (potentially at an older age). Looking at healthy life years at 65, a trend cannot be identified and the following remarks must be treated with caution. Overall, healthy life expectancy at 65 is greater for women than it is for men except in Germany and Portugal. The increase in healthy life expectancy at 65 is clearer for men than for women in all countries (from 9.4 in 2001 to 9.5 in 2003) except in Denmark, Greece and Sweden where a small reduction is noted. The healthy life expectancy of women at 65 shows no overall increase though Spain, France, Italy and Austria show an increase.

Population ageing has led to the belief that older people are an economic burden to society. This is not necessarily the case if an increase in life expectancy goes along with an increase in the number of years in good health. Older but healthy people can be an important resource to their families, communities and economies through formal employment and informal activities such as care for dependent relatives, friends and children and volunteer work. Moreover, as a 2005 European Commission report, The contribution of health to the economy in the European Union , highlights, together with the report by the Commission on Macroeconomics and Health (2001) and a vast academic literature in the area, a healthy population at all ages is positively associated with better cognitive functions and thus better education attainment in early years, better earnings and wages, higher labour market participation and a higher amount of hours worked in adult age, whilst ill-health is associated with early retirement. Health is also shown to be positively associated with economic growth (GDP) and social welfare.

Consequently, ensuring that people make positive/active contributions to society and enjoy a high quality of life throughout their life and well into their late years requires a high level of health that can be attained through a concerted set of policies such as adequate health care and health promotion and ill-health prevention, education and social protection and general supportive social and environmental conditions.

BOX 5: Health care spending, health status and health inequalities The health status of the EU population has improved considerably in recent decades. Life expectancy at birth increased by more than 30 years in the 20th century and infant mortality fell remarkably and is among the lowest in the world (Social Situation Report 2003; WHO European Health Report 2005). Healthy years of life have also increased and avoidable mortality has declined. Two broad developments are typically associated with a secular increase in life expectancy: improvements in overall living conditions and medical advances and more widely available medical care (i.e. a rising share of resources devoted to health and a more equitable distribution). Measuring the effect of health care on health has received considerable attention in the past.[22] McKeown (1979), in a first influential study, suggests that better nutrition, hygiene and the use of immunisation and therapeutic interventions (emphasising the importance of preventive and primary care) explain the decline in death rates. A study in the Netherlands estimated that the contribution of health care to the mortality decline between 1850 and 1970 ranged from 4.7% to 18 %.[23] A pool of studies[24] shows that health care expenditure is associated with growth in life expectancy and disability-adjusted life expectancy and a decline in infant, child and maternal mortality. Other studies[25] confirm that healthcare interventions (i.e. treatment and preventive activities) have had a substantial effect on the decline in ‘avoidable’ mortality especially over the past 30 years. Moreover, the quality of a country's primary care system is negatively associated with all-cause mortality and premature mortality and cause-specific premature mortality in 18 wealthy OECD countries over three decades (WHO Health Evidence Network, 2006; Macinko et al. 2003). In Europe the SHARE study (2005) demonstrates that a 1% increase in health care expenditure is associated with a 4.2% increase in the proportion of very healthy respondents in SHARE countries. Nixon and Ulmann (2006) find that increases in health care expenditure are strongly associated with declines in infant mortality and increases in life expectancy in the EU, as in the studies they review. Despite economic growth and increases in health care expenditure and population coverage, substantial inequalities in life expectancy, healthy life expectancy, mortality, avoidable mortality and specific mortality causes, self-perceived health and disability, and mental health continue to exist across population groups in all European countries and may have widened during the last decades of the 20th century.[26] People with less education, lower occupational class and lower income tend to die younger and have a higher prevalence of disease[27]. Differences in access to care and care utilisation (e.g. Van Doorslaer and Masseria, 2004) may explain part of the observed inequalities. Higher socio-economic groups may have taken up more effective health care interventions and may have higher survival rates because of better access, quality and compliance to treatments. Indeed, as highlighted in the 2007 Joint Report on Social Protection and Social Inclusion there are important barriers to access such as service availability and distribution, waiting times, financial costs of care, information. Inequalities are also strongly associated to health-related behaviour (smoking and alcohol intake, nutrition, physical exercise), the environment (safe water, air and food, working conditions, adequate housing), economic and social conditions (income, education), gender and cultural values. Recent research also stresses the link between promoting active participation in employment and society (e.g. volunteer work) and health (e.g. SHARE, 2005; WHO European Health Report 2002). Hence, improving health status and reducing health inequalities requires a multi-sector approach, including equal access to timely and effective health care interventions (treatment and preventive care), pensions schemes that ensure an adequate income, policies that reduce social inequalities, poverty and social exclusion, a generally supportive social environment providing education opportunities and opportunities to participate in paid and unpaid volunteer work throughout life and adequate health promotion. |

The Lisbon Strategy and its Impact on Social Cohesion

The second overarching objective of the OMC for social protection and social inclusion is to promote effective, mutual interaction between the Lisbon objectives of greater economic growth, more and better jobs and greater social cohesion, and the EU's Sustainable Development Strategy. While it is certainly too early to draw any firm conclusions about the effectiveness of this interaction in the Member States since the adoption of the revised objectives, the following chapter looks at the impact of employment growth on social inclusion and health and how far it benefits all households. Then it examines the impact of increased working lives on the adequacy and sustainability of pension systems. This is of course only a partial analysis of the interactions between the different objectives.

Employment and its impact on the poverty risk

A job is the best safeguard against poverty and social exclusion…

Employment policies have a key role to play in promoting adequate living standards and greater social cohesion. In the EU as a whole, the risk of poverty is nearly 2.5 times greater for those who are not in work than for those who are.

…but a job does not guarantee a life free from poverty

However, the at-risk-of-poverty rate is still relatively high even for those in work. In the EU25 it stands at 8%, ranging from 3% in the Czech Republic and 4% in Belgium and Finland to 13% in Greece and 14% in Poland and Portugal. Furthermore, the proportion of those working within the income-poor population aged 16 or more is a significant 28%. Therefore, in order to achieve the objective stated by the Barcelona European Council of significantly reducing the number of people at risk of poverty and social exclusion by 2010, the problem of in-work poverty has to be addressed.

Figure 20: At-risk-of-poverty rate by labour force status – individuals aged 18 and over - 2004.

[pic]

Notes: provisional data for HU. Data for RO, SI and UK not available.

Source: Eurostat, EU-SILC (survey year 2005, income year 2004). National data source for BG (survey and income year 2004

In-work poverty is linked to low pay, low skills, precarious and often part-time employment.[28] Quality employment is essential to lift individuals out of poverty and "in order to promote [it] it is necessary to develop employability, in particular through policies to promote the acquisition of skills and life-long learning".[29] It is also necessary to put in place sound macroeconomic policies to facilitate employment creation and a stable economic climate conducive to higher investment in human capital on the part of employers.

The poverty risk increases when joblessness is combined with the presence of dependent children

But poverty risks are associated not only with the employment situation of individuals but also with the household type in which they live and with the economic status of those with whom they share the household. The incidence of poverty risk is broadly similar for households with or without children when all working age members of the household are in full-time work. However, the combination of care responsibilities and exclusion from the labour market for all household members[30] produces the highest risk of poverty, where as many as 64% of those living in jobless households[31] with dependent children are at risk of poverty in the EU-25. This percentage rises to just over 70% in Belgium and France, to 78% in Belgium and the Czech Republic and 81% in Estonia and over 80% in the Baltic States. Low levels of labour market attachment can also be insufficient to safeguard individuals from poverty, especially in the case of households with dependent children. Households with a work intensity of less than 0.5 and dependent children have a particularly high incidence of poverty risk in Luxembourg (54%), Estonia (56%) and Lithuania (64%).

Employment growth and jobless households

Apart from the issue of in-work poverty, it is important to consider whether employment growth benefits all households, in particular those with the least attachment to the labour market. For example, is employment growth matched by a decrease in the proportion of jobless households, or is it concentrated on those households that already have a strong labour market attachment? In general, between 2001 and 2005, the proportion of jobless households remained roughly stable. Only the Baltic States, Bulgaria and to a lesser extent Italy and Spain, experienced a relatively sharp increase in the employment rate coupled with the largest decrease in the proportion of jobless households. Greece experienced a high rate of employment growth, equal to 3.8 percentage points, but a decrease in the proportion of jobless households of only 0.7 p.p. Seven Member States (Belgium, France, Cyprus, Luxembourg, Hungary, Austria and Finland) experienced a weak increase in the employment rate that did not translate into a decrease in the proportion of jobless households. In four countries - Denmark, Germany, the Netherlands and Portugal - the employment rate went down and at the same time the proportion of jobless households increased (in Portugal the percentage point change in employment was – 1.5 and that in jobless households + 1.5).

Figure 21: percentage point change in the proportion of individuals aged 18-59 living in jobless households and the employment rate of people aged 15-64, 2001 to 2005.

[pic]

Source: Eurostat, Labour Force Survey - Quarter 2 results for jobless figures and annual averages for employment rates. 2002 jobless figures for DK, LV, LT and RO and 2003 figures for FI and HU. 2004 employment rates for DE and ES and 2002 figures (starting year) for RO.

Working longer and its impact on the adequacy and sustainability of pension systems

A significant factor in meeting the pension challenge and more generally meeting the challenge of an ageing society is to ensure that people work longer and that average effective retirement ages continue to increase. Extending working lives can strongly contribute to both the adequacy and the financial sustainability of pension systems. An extra 2 years of active life would translate into a corresponding increase in the theoretical replacement rate ranging from 5 to 10 percentage points depending on the Member States.[32] More in-depth analysis is nevertheless needed, in particular of the extent to which these increases in replacement rates associated with extending active life will change in the future.

While pension reforms can greatly contribute to increasing the employment rates of older workers, by strengthening incentives to work longer, it is essential to note that to deliver the expected outcomes, pension reforms need to be accompanied by positive developments in the labour market. People must be able to find adequate employment to be able to work longer, and this underlines the link with the question of employment and growth.

Importantly, early retirement is no longer seen as a way to make room for young people or reduce unemployment. Continued vocational training offers a tremendous opportunity for older workers to acquire new skills and to update qualifications throughout their professional lives. Furthermore, it is essential for Member States to provide suitable access for older workers to appropriate employment. Progress in this area is set out in detail in the 2007 Annual Progress Report on Growth and Jobs. The report provides evidence that comprehensive ageing strategies can achieve good results, though few Member States address ageing as an integral part of the lifecycle approach to work.

The potential increase in employment rates among older people is significant. The pace of the decline in employment rates at age 55 and 60 varies greatly among Member States (see figure 22 below).[33] While, on average, the employment rate of those aged 55-59 is 17 p.p. lower than that of those aged 50-54, the decrease varies from about 5 p.p. (Denmark and Sweden) to 25 p.p. or more (Belgium, Italy, Luxemburg, Slovenia, Austria, Poland and the Slovak Republic). A particular objective for all Member States is to reduce the extent of inactivity before retirement; for many Member States the main focus will be on the 55-59 age group, for whom the employment rate is already falling considerably (see figure 22), whilesome will also target earlier ages.

Figure 22: Pace of decline of the employment rate of older workers by age bracket, in percentage points (2006)

[pic]

Source: Labour Force Survey, 2006 second quarter.Note: In some Member States the decline in employment rates with age can also be significant before 55.

If all Member States recorded a decline in the employment rate between the 50-54 and 55-59 age groups comparable with the levels of those Member States with the best records (about 5 p.p.), employment rates among people aged 55-59 would increase by about 10 p.p. If this could be maintained for the 55-59 to 60-64 cohorts, employment rates among the 55-64 age group would increase by about 10 p.p., going beyond the 50% objective. This shows that achieving an increase in the employment rate of older workers to meet agreed targets can be attained, on the whole, by reducing early exits from the labour market. However, this should be seen as the first step. Improving employment rates for those aged 60-64 will also be necessary in order to contribute to future adequacy and sustainability.

The impact of economic outcomes on health

Currently, the health and social sector employs a significant and growing proportion of the active population in the EU-15 many of whom are highly skilled: in 2003, the sector represented 10% of total EU employment, up from 9% in 1995. In some countries this proportion is even higher (11% in DE and 15% in the NL in 2003, up from 9% and 14% in 1995). An ageing population and important changes in society (e.g. smaller families, families living further apart) will potentially lead to further requirements in terms of care personnel and thus translate into more employment opportunities. As has been stated, health care and health policy (promotion, prevention and curative care) can make a positive contribution to employment and growth by ensuring that a working population is and remains healthy and highly productive over a lifetime.

It can also be shown that economic outcomes also matter for health, as highlighted by extensive academic literature in the area, the 2005 European Commission report The Contribution of health to the economy in the European Union and the 2001 WHO report by the Commission on Macroeconomics and Health. Sustained economic growth is typically associated with better living conditions (e.g. housing, sanitation, hygiene, nutrition) and fewer living and occupational hazards. The positive impact of economic growth on health is particularly strong if growth is channelled into raising the incomes of the poor and increasing public expenditure, notably health care expenditure, social security and education. Thus, though GDP growth impacts positively on health, much depends on how the additional wealth is distributed and utilised.

Poverty also has a negative impact on health: living in poverty is associated with lower life expectancy, higher mortality (including infant mortality) and morbidity. Poverty is related to poor diet, sanitation and housing, higher prevalence of smoking, alcohol and drug use, greater violence and lack of access to care. Unemployment is a major cause of poverty and thus ill-health. Therefore, increasing employment and tackling poverty can improve the general health of the population.

More recently, employment and activity, notably in older ages, are also shown to contribute positively to health status. However, the quality of employment (e.g. jobs compatible with skills and expectations, matching reward and effort, control of work, exposure to risk and unsafe working conditions, job security, job turnover, flexibility, and social dialogue, amongst other things) is an important determinant of good health and well-being (e.g. SHARE, 2005; "Health and Quality in Work", 2005; WHO European Health Report 2002). Adapting work practices and working conditions – e.g. ending discrimination, creating barrier-free workplaces and promoting flexibility for employees – will help workers maintain their health.

PART TWO: THEMATIC ANALYSIS

Strategies for Social Inclusion

In September/October 2006, Member States adopted renewed National Action Plans for Social Inclusion under the new streamlined OMC as one chapter of the National Report on Strategies for Social Protection and Social Inclusion. They presented the key priorities in Member States efforts to promote greater social inclusion and make a decisive impact on the eradication of poverty and social exclusion. Member States have responded to the guidelines that they agreed, together with the European Commission, by selecting three or four key priorities that they consider to have particularly strong potential to make a real difference, rather than covering the full spectrum of relevant issues. The reports are thus more strategic than in previous years, and this assessment, which sets out to reflect Member States' choices, is therefore not exhaustive in its treatment of each specific theme. Nonetheless, Member States continue to recognise the multidimensional nature of poverty and exclusion, by tackling their priority issues from many angles.

This more focused and strategic approach, and the strengthened emphasis on policy implementation, will contribute to making further progress on the achievement of the three Common Objectives[34] relating to social inclusion which were adopted by the European Council in March 2006:

(d) access for all to the resources, rights and services needed for participation in society, preventing and addressing exclusion, and fighting all forms of discrimination leading to exclusion;

(e) the active social inclusion of all, both by promoting participation in the labour market and by fighting poverty and exclusion;

(f) that social inclusion policies are well-coordinated and involve all levels of government and relevant actors, including people experiencing poverty, that they are efficient and effective and mainstreamed into all relevant public policies, including economic, budgetary, education and training policies and structural fund (notably ESF) programmes.

As highlighted in the Joint Report some issues emerge clearly as the major priorities for Member States' efforts:

They have responded strongly to the Spring 2006 European Council challenge to reduce child poverty, with clear commitments to breaking the cycle of deprivation. Measure include facilitating parents' labour market participation, improving access to quality education and adequate housing and protecting children’s rights.

Further, active inclusion emerges as a powerful means of promoting the social and labour market integration of the most disadvantaged. Increased conditionality in accessing benefits tends to be a major component, but this must not push those unable to work further into social exclusion.

Thirdly, considerable attention is given to further reinforcing governance of social inclusion policies.

Full participation in society requires access to resources, rights and services

Tackling child poverty

Some groups of people are more likely than others to have difficulties accessing resources, rights and services necessary for their full participation in society. So children face a higher risk of poverty than the average citizen in almost every Member States. In some, nearly every third child is at risk. Living in a lone-parent and/or jobless household or in a family with many children further compounds the risk. This is a clear threat to social cohesion and to sustainable development. Children growing up in poverty are less likely than their better-off peers to do well in school, enjoy good health, stay out of dealings with the criminal justice system, and – as young adults – to find a foothold in the labour market and in society more broadly. Member States recognise these facts; the vast majority have set as a key priority the need to develop a strategic, integrated and long-term approach to preventing and addressing poverty and social exclusion among children. Education tends to play a key role in this.

Member States approach the issue in different ways, but often with a mix of policies addressing the manifold dimensions of the problem[35] – increasing the family's income, improving access to services, including decent housing, or protecting the rights of children and their families. While the overall approach is universal, complementary measures targeting the most disadvantaged children and families are often part of the strategy. Two aspects stand out: ensuring equal opportunities with respect to education, including early intervention, and promoting parents' participation in the labour market.

Many Member States plan increased or more targeted financial support, but tend to see the main route out of poverty and exclusion in eliminating any obstacles to parents' , especially mothers' , labour market participation . Measures to facilitate reconciliation of work and family life are often highlighted, including but often going beyond improved access to quality child care (e.g. DE). However, broader gender equality issues, such as the need to promote a more equal sharing of domestic work and of care responsibilities, receive attention only in a few reports (AT, EL, HU, IE, LT, IT and PT), as does the potential role of ICT to facilitate reconciliation. IE is setting out to improve access to quality learning opportunities for those in low-skilled employment; MT is introducing new legislation on children and setting welfare standards and AT to provide job opportunities to women returning to the labour market. Some Member States address the issue of housing in relation to improved labour market access of adults in marginalised families (IE, HU, LV, LT, MT).

Since 1997, the UK has been tackling child poverty as a priority; the proportion of children living in low-income households has fallen from being among the highest in Europe with 27% in 1997/98 to 22% in 2004/05. Eliminating child poverty thus remains a challenge and is addressed via a combination of measures to ensure financial security of parents and break cycles of deprivation, with particular emphasis on early learning opportunities, childcare services and support for children's transition to adulthood.

HU envisages a comprehensive policy mix to tackle child poverty and is making full use of the Community funds available in its efforts. Measures include the promotion of parents' participation in the labour market and improvement of childcare services, and of equality of opportunities for all pupils/students, strengthening of the family benefit system, strong child welfare and child protection services, in particular for children with special needs, and better access to health care and other services relevant for the well-being of children.

NL promotes participation by children, with interventions aiming to support families facing difficulties/problems, and measures to increase opportunities for children and young people from deprived families to participate in social life. Through combined state/municipal intervention, a customised approach is taken with a strong emphasis on results.

CY's Educational Priority Zones , implemented by the Ministry of Education and Culture in three school areas, is a measure aimed at combating school failure and illiteracy and achieving equality of opportunity in education. The criteria for creating an Educational Priority Zone include a high degree of school failure and dropouts, of functional illiteracy and of foreign or foreign-language speaking pupils. Specific actions include reducing the number of children per classroom; employing teachers speaking the mother tongue of foreign-language speaking pupils, and keeping schools in EPZs open all day, with extra-curricular activities offered. The pilot recorded a reduction in dropouts, absenteeism and failures.

In IT a mix of actions has been defined to promote rights of children and families, with specific attention to the reform of family support allowances, to increase of supply of childcare services, and to enhance measures aimed at reconciliating work and family life and increasing participation of women to the labour market.

In line with Member States' priority-setting, child poverty will receive particular attention in implementing the OMC in 2007. A Peer Review will be dedicated to the issue with the purpose of promoting mutual learning between the Member States. Furthermore, Member States and the Commission are committed to developing an indicator that better captures the notion of children's well-being, thereby allowing measures to be designed and progress to be monitored more efficiently.

Striving to make education systems conducive to social inclusion

The reports present measures on how education systems may foster inclusion rather than perpetuating exclusion: a new Education Act based on this principle (ES); considerations on social selectivity in education (DE); emphasis on the link between low socio-economic background and school failure (LU); linking education with employability and reducing illiteracy and school drop-outs (MT); and education and training policy aimed at fostering social equity (FI). Some Member States (BE, ES) set out to provide parents with the skills necessary to assume their role fully.

Adequate investment in pre-primary education is of particular importance for disadvantaged children and for those with a different mother tongue from the majority. Many reports focus on this issue, with a number of Member States (AT, DE, ES, HU, IE, LT, PT, LV, BE, SE) planning to develop capacity, and some specifically targeting the needs of children from areas of acute economic and social disadvantage (IE, CY for immigrant children, IT, CZ, LT, PL, RO for Roma, UK).

Variations in quality of education may translate into structural disadvantage for people from underprivileged areas. To tackle this, Member States support schools in disadvantaged areas and communities in order to achieve greater equality in terms of educational participation (IE); set out to improve quality, especially in relation to areas with a large Roma community (HU); or work on the principle of positive discrimination, based on the provision of different levels of funding to regions or to specific urban areas to compensate for inequalities (CZ, CY, FR and others).

Breaking the link between social origins and educational outcomes is crucial in order to prevent deprived children from becoming disadvantaged young people. The key is to tackle early school leaving , which increases the risk of exclusion from the labour market, of job insecurity and of low quality employment. On average, 15% of students leave school early, but in some countries more than a third of young people are affected. Member States have set a benchmark for reducing early school leaving in the framework of the Education and Training 2010 work programme, and almost all reports focus on the issue. Significant additional efforts are needed in order to reach this benchmark – no more than 10% early school leavers by 2010.[36]

A mixture of preventative and compensatory measures are envisaged: redesigning educational policies with a gender focus, as boys tend to leave school earlier than girls (IE); investing in second-chance schools (DE); action to prevent early school leaving and truancy among impoverished children (RO); ambitious targets for reducing school failure coupled with a set of preventive measures, such as establishing full-time school (longer school hours) (PT); a plan for reinforcement, guidance and support, and pedagogical improvements with particular focus on diversity (ES); introducing non-formal and informal learning as a preventative measure (MT); raising the school-leaving age (NL); grants and logistical support for disadvantaged pupils (PL, LT, HU); extension to upper secondary level of rights to student welfare and guidance (FI); and cooperation with NGOs in addressing early school leaving (CY). Developing these measures into comprehensive strategies will help Member States achieve significant results in tackling early school leaving.

In FR the programme for educational success ( Réussite educative ) is targeted at children experiencing hardship and/or living in deprived areas. The aim is to reinforce the capacity of the educational system and institutional partners to follow up personally 200,000 children over time from age 2 to 16. These actions will mobilise multi-disciplinary teams (teachers, social workers, psychologists, health workers, etc.). A strong monitoring system is in place and results are expected from 2007 on.

RO 's Gata, Dispus si Capabil project involves the NGO Associatia Ovidiu Rom working in partnership with local government in three neighbourhoods to increase school attendance and performance among Roma children, and to help Roma mothers find jobs. Since 2001, 400 children have been helped to enrol in school, stay on longer at school or improve their school results, and 100 women have obtained and kept jobs.

In general, better system flexibility improves access to education and limits social exclusion by maximising the value of learning. So FR is promoting the validation of prior learning, with an ambitious target of 60,000 cases in 2006; DE is putting initiatives in place to improve mobility between education and training systems; and CZ refers to the adoption of a new Law on Recognition of the Results of Further Education and the creation of a National Qualifications Framework. The issue of equal opportunity of access to higher education, however, is addressed only by a small number of Member States (UK, CZ, SK, LT).

Ensuring access to lifelong learning

The importance of adult participation in lifelong learning is recognised in many reports. The focus is mainly on the acquisition of basic skills. A number of measures are planned to reconcile family responsibilities and participation in LLL activities (e.g. in DE: special aid programmes and adequate infrastructure). In IE, the Back to Education Allowance will facilitate access to education for disadvantaged groups and disadvantaged communities. In PT, an ambitious training and certification measure is also planned for adults with poor qualifications. EL is implementing legislation aimed at increasing participation in adult education, and is focusing on second-chance schools. MT is setting up lifelong learning community centres that encourage literacy and skills development.

Some recognition is given to the fact that, as Europe continues to move towards a "knowledge-based society", accessibility and usability of ICT products and services, coupled with the necessary digital skills are paramount to people's social and economic participation.

The significant contribution that guidance and counselling can make to social inclusion is often highlighted. Several reports state that the national guidance system should be reinforced. IT, in particular, refers to setting up a comprehensive, lifelong guidance system.

Ensuring access to services and upgrading their quality

Overall, Member States recognise the general need for access to quality services to allow participation in society, and to prevent and address exclusion. Many address access to different kinds of services separately (education, as outlined above, training, housing, health care, transport, ICT, financial services, etc.). But some (BG, FI, IE, IT, SK, UK) have highlighted as a cross-cutting priority the general improvement of access to essential services. RO is taking measures to address the problem that many Roma people do not possess identity cards, hampering their access to services. As to the social services system, some Member States (CZ, FI, DE, HU, IE, LT, PL, RO, SK, UK) give priority to better balancing income transfers and services, institutional care and community or home care, and to improved availability, quality, client orientation, and versatility.

EE 's Community Services in a Village was initiated by the Estonian Village Movement Kondukant and