No C 343/14 Official Journal of the European Communities 24. 12. 84 
Similarly, career endorsement for particularly 
mobile researchers may at first sight seem an attrac­
tive proposition but the precise arrangements and 
the practical implications are still very nebulous. 
3.4. The Committee wholeheartedly supports the 
setting-up of a European data bank. Though the 
costs would inevitably be high, such a bank would 
be a major achievement. The Committee recom­
mends that the 'handbook' formula be avoided as 
updating is virtually impossible. Instead efforts 
should be concentrated from the start on a compu-
Done at Brussels, 25 October 1984. 
Introduction 
1. Member States' social security systems are being 
put under increasing financial pressure by the ongo­
ing economic, employment and financial crisis. The 
Commission of the European Communities has set 
out some of its ideas on this subject in a communi­
cation to the Council, which describes the economic terized system enlisting the most advanced informa­
tion technology. 
3.5. CODEST must continue to be a key compo­
nent. Its composition will probably have to be 
reviewed and agreement reached among the Mem­
ber States to ascertain that members are sufficiently 
versatile and in touch with industrial requirements. 
3.6. The Committee agrees with the principle of 
two-yearly assessments but recommends that some 
manifestly long-term operations be given a 'renewal 
guarantee' once they get off the ground. 
The Chairman 
of the Economic and Social Committee 
Gerd MUHR 
background and how the Member States' different 
schemes operate and also reviews (a) these schemes' 
development from the point of view of revenue and 
expenditure and the protection provided and (b) 
their financing. 
2. The Economic and Social Committee has 
decided to produce an own-initiative opinion on this Opinion on the current social security problems in the countries of the EEC 
(84/C 343/05) 
Procedure 
On 27 April 1983 the Economic and Social Committee, acting under the fourth para­
graph of Article 20 of its Rules of Procedure, decided to draw up an opinion on cur­
rent social security problems in the countries of the EEC. 
The Section for Social Questions, which was responsible for preparing the Committee's 
work on the subject, adopted its opinion on 13 September 1984, in the light of the 
report by Mrs Engelen-Kefer. 
At its 220th plenary session (meeting of 25 October 1984), the Economic and Social 
Committee adopted the following opinion by 56 votes to 32, with 11 abstentions (vote 
recorded). 
24. 12. 84 Official Journal of the European Communities No C 343/15 
subject on the basis of national experts' reports, 
which are summarized in the Section's report. 
3. The national experts' reports focused on the 
schemes applicable to wage-earners and were less 
explicit about the cover provided for other socio-
occupational categories. For the sake of consistency, 
the Committee's conclusions refer mainly (though 
not solely) to the wage-earners' schemes. The other 
schemes might be the subject of a later opinion. 
The following conclusions can be drawn from the 
national experts' reports: 
Special features of the various systems of social 
security 
4. The Commission has the following to say in its 
communication on social security problems: 
'Social security is defined here as the field cov­
ered by social insurance including unemploy­
ment, health services and family benefits. There 
are sharp contrasts in the social security 
schemes in force in the Member States of the 
Community... 
All Member States offer protection against the 
risk of sickness, maternity, unemployment, 
invalidity, old age, death, industrial injuries and 
occupational diseases as well as family ben­
efits.' 
About 60 % of all social security expenditure goes 
on retirement pensions and health care, with pen­
sions alone accounting for one-third of the total. 
Cash benefits outstrip benefits in kind and total at 
least 60 % of all expenditure, and often considerably 
more. 
5. There are considerable differences in the way 
social security systems are organized in the Member 
States, with historical factors being responsible for 
the wide variety of different systems. A fundamental 
distinction should be drawn between schemes for 
wage-earners (some of which differentiate between 
workers, employees and civil servants) and schemes 
for the self-employed and the owners of small and 
medium-sized enterprises. There are also a large 
number of special occupational schemes. In some countries the whole or a large part of the 
population is protected against all or at least most 
risks by schemes that are funded by taxes instead of 
by contributions. This is the case in Denmark and 
the United Kingdom. In the Netherlands there are 
both general social insurance schemes (which are 
financed by contributions levied by the national tax 
authorities) and non-contributory welfare schemes, 
which obtain their funds from general taxation. 
Special mention should be made of the national 
health services for all sections of the population in 
the United Kingdom, Italy and Denmark. The 
track-record of the United Kingdom health service 
is particularly impressive, since it is both efficient 
and economical (the United Kingdom being the 
only Member State which has succeeded in keeping 
health spending under control). 
Various countries of Europe have launched ambi­
tious projects for reforming or harmonizing their 
social security systems, but these have never 
succeeded because of popular opposition. As the 
French expert stated: 'It would seem neither practic­
able nor desirable at the present juncture to push for 
far-reaching reform in the shape, for instance, of the 
gradual merger of the various special schemes to 
form a single scheme. As with financing, the key­
note is slow progress.' 
As regards the Commission memorandum on social 
security problems and the general problem of har­
monization of social security systems, Mr Petersen 
had the impression that no Danish politician would 
ever dare to use the word 'harmonization'. In Den­
mark there is absolutely no desire for harmonization 
in any respect, let alone any question of 'levelling 
downwards'. 
6. Social security systems are financed by employ­
ers' and employees' contributions and the taxpayer. 
The percentage shares of each type of revenue vary 
considerably. In most Member States the bulk of 
receipts comes from contributions, with employers 
contributing between 23 and 55 % of the total and 
No C 343/16 Official Journal of the European Communities 24. 12. 84 
between 12 and 35 % coming from the insured per­
sons. In Denmark, which is a well-known exception 
to these rules, a disproportionately large share of the 
funds comes from taxes. In the United Kingdom the 
ratio between contributions and tax revenue is more 
or less 50-50. The French system is the least depend­
ent on taxation. 
In Italy, social security contributions are earnings-
related, though there is a ceiling on pensions. State 
intervention accounts for approximately 25 % of 
funds comes from taxes. In the United Kingdom the 
pays a substantial part of employers' contributions. 
63 % of the costs of the Health Service are met by 
social security contributions, and the rest is paid by 
the State; Italians also pay part of the cost of certain 
prescribed medicines, laboratory analyses, X-rays 
and medical consultations. 
7. The roles played by the social partners within 
the system of social security are far from being the 
same everywhere. The legislation dealing with this 
matter is also very complicated. 
In Italy, the INP (National Institute of Social Wel­
fare) is presided over by a worker's representative 
appointed by the unions. 
In a large number of countries the social partners 
have a very important part to play, within the frame­
work of the law, in the day-to-day running of social 
security and its various component parts. In some 
countries they may take initiatives on their own, 
while in others they are even responsible for the 
implementation of certain measures (e.g. the pay­
ment of unemployment benefits in Belgium and the 
trade unions' involvement in unemployment funds 
in Denmark). 
(a) In France the social partners have decision­
making powers both with regard to the manage­
ment of the social insurance fund and as regards 
non-statutory social and health measures. Deci­
sions about the levels of contributions and ben­
efits lie solely in the hands of the State though 
the social partners are consulted beforehand. 
(b) Steps have also been taken in Greece to give 
interested parties a say and increase their parti­
cipation. For example, workers, employers, pen­
sioners and the staff of the social security insti­tutions are represented on the administrative 
boards of the social security schemes. 
(c) Unique in Western Europe is the autonomous 
status of the Federal Republic's Federal Labour 
Office (Bundesanstalt fur Arbeit) as the auth­
ority responsible for unemployment insurance 
and labour market policy with its tripartite self-
governing structure at national, regional and 
local level. 
(d) In Belgium the social security bodies are man­
aged jointly by delegates from the representative 
workers' and employers' organizations. 
(e) In the Netherlands employers and employees 
jointly administer the employed persons' insur­
ance schemes (werknemersverzekeringen) and a 
considerable number of general social insurance 
schemes (volksverzekeringen). 
Social security is mainly the responsibility of the 
government authorities in some countries, e.g. 
United Kingdom, Ireland and — apart from unem­
ployment benefits and occupational pension 
schemes — Denmark. In these countries the direct 
say which the social partners have is only minimal, 
though this does not mean that they have no influ­
ence on policies. Far from it! In Denmark, for 
example, the social partners are invariably consulted 
before decisions are taken. 
Generally speaking, the social partners' involvement 
in social security schemes — whether it be in their 
management or in the framing of policies — has 
proved to be highly beneficial. 
Reasons for social security schemes' financial 
difficulties 
8. The purpose of this opinion, according to its 
terms of reference, is to discuss the financial prob­
lems facing social security systems in the context of 
the present economic and employment crisis. The 
following quotations from the Commission's com­
munications are particularly relevant in this connec­
tion: 
'The upward trend in social expenditure should 
be seen in a new economic and social context 
characterized by low economic growth, large 
budget deficits, extensive unemployment and, 
in certain countries, a high rate of inflation ... 
It is the economic crisis, however, which is as 
much if not principally responsible for the pres­
ent difficulties, rather than problems inherent in 
24. 12. 84 Official Journal of the European Communities No C 343/17 
the systems. The slow-down in economic activ­
ity and the resultant rise in unemployment con­
stitute the main immediate reason for the diffi­
culties which the social security schemes are 
now experiencing.' 
The report on France also states: 
'However, the social security system's real 
Achilles heel is its vulnerability in times of high 
unemployment. In a country where 70% of 
social security revenue is directly linked with 
employment, (it is clear that) when employment 
is sick, social security suffers too.' 
The United Kingdom report explains that the finan­
cial imbalance is almost entirely due to the problem 
of unemployment 'impacting through the lower 
yield of national insurance contributions and taxes 
as well as on the cost of benefits. If you add these 
two together (loss of tax and of social security 
income plus the cost of benefits paid) it can be cal­
culated that, if we had higher levels of employment, 
which we were used to in the 1960's, the extra gain 
to the exchequer of having full employment would 
enable, without any increase in contribution, a 
whole second National Health Service to be funded. 
This shows the magnitude of the cost of unemploy­
ment!' 
The report on the Federal Republic of Germany, 
too, emphasizes very clearly that the main problem 
of financial imbalance is due not to the systems 
themselves but to the persistently high and ever 
increasing mass unemployment. Thus, the mass 
unemployment in the Federal Republic in 1984 
alone will cost DM 55 000 million in unemployment 
benefits and other forms of assistance plus all the 
taxes and social security contributions not paid. 
9. According to the Commission, other factors res­
ponsible for the social security systems' financial 
difficulties over the past decade (some of which are 
inherent in the systems) include: 
— the improvement of protection. The Commis­
sion states in this respect that 'the protection 
offered by social security is highly developed, 
even if certain sectors of the population do not 
enjoy very satisfactory cover, especially in those 
Member States where benefits are relatively low. 
This extension has by and large been a matter of 
political consensus. Improvements have varied 
from country to country: social security has 
been extended to categories of persons not pre­viously covered; new benefits have been intro­
duced; the level of benefits has been improved; 
conditions for the award of benefits have been 
eased; and there has been a tendency for ben­
efits to increase in proportion to income in 
order to maintain a previous standard of living, 
rather than simply to provide a minimum 
income', 
— the ageing of the population in most Com­
munity countries, 
— the rapid growth in health spending in almost 
all countries of the Community (with the excep­
tion of the United Kingdom, especially in 
recent years). 
Further factors are: 
— the rise in the number of people claiming disa­
bility pensions, especially in the Federal 
Republic of Germany and the Netherlands, 
partly as a result of the persistently high and 
ever increasing mass unemployment, 
— the inclusion in retirement pension schemes of 
new groups of employed persons, 
— improvements in social security benefits for the 
lower income brackets — a point stressed in the 
Greek and Dutch reports, 
— the considerable extraneous costs with which 
the various systems of social security have been 
burdened in recent years and decades without 
provision having been made for extra revenue, 
— the increasing attempts being made to avoid the 
payment of taxes and social security contri­
butions by employing people illegally or for 
only a small number of hours. 
Inadequately protected persons and sections of the 
population 
10. In some countries of the Community there are 
groups of people who are either inadequately cov­
ered or not covered at all by social security schemes. 
At a time when long-term unemployment is rising 
steeply the jobless and their families are the main 
sufferers. 
In the Federal Republic of Germany, for example, 
only about 40 % of the unemployment total still 
draw unemployment pay and more than 30 % of 
those out of work do not qualify for any assistance 
at all. Moreover, following the various cuts in recent 
years unemployment benefits are now so low in 
No C 343/18 Official Journal of the European Communities 24. 12. 84 
many cases that they fall below the level of social 
assistance. As a result of the long-lasting and ever-
increasing mass unemployment and the cutbacks in 
social security benefits, some forms of poverty are 
on the increase in the Community, for increasingly 
large sections of the population are being forced to 
survive on less than the living wage. 
In addition, social security does not provide ade­
quate cover for young people with no work experi­
ence, married women who are not entitled to ben­
efits of their own, domestic staff, old-age pensioners 
on small pensions, elderly single women and fami­
lies with several dependent children. 
11. It is important to point out that in some of the 
less developed countries of the Community the 
overall level of benefits is nowhere near enough to 
provide adequate protection. 
The following extract from the Greek report is indi­
cative : 
'We feel that the level of social insurance in 
Greece is not satisfactory and is far removed 
from the level of coverage in the rest of the 
EEC. In the last two years major attempts have 
been made to cover the population, and mea­
sures have been taken to make a real increase in 
the quality of benefits. As examples, we could 
refer to: 
— the pension for the elderly who have not 
paid adequate total contributions, 
— the extension of the Social Insurance Insti­
tution to the whole of Greece, 
— reduced requirements for pensions for those 
who work in areas not covered by the Social 
Insurance Institution, 
— the generalization of supplementary insur­
ance for all workers through the Salaried 
Workers' Supplementary Insurance Fund, 
— the extension of survivors' insurance, phar­
maceutical and medical care for farm work­
ers, increased unemployment benefit, etc' 12. The problem of failure to claim is also touched 
on. This is a problem which has been referred to in 
other studies, such as the reports drawn up under 
the EEC programme for combating poverty. One 
striking example is the poor use made of social 
assistance in the Federal Republic. According to a 
recent representative survey not even 50 % of eligi­
ble households draw social assistance. The main 
reasons for this are the lack of detailed information 
about how the assistance is granted, social inhibi­
tions and bureaucracy. The same phenomenon has 
been observed in the UK. 
13. A good deal more should be done to provide 
the public at large with information and advice so 
that better use is made of social security benefits. 
14. A number of the national reports agree on the 
fact that apart from adhering to the principle that 
benefits should be commensurate with contributions 
(the so-called 'principle of equivalence'), social 
security schemes should also incorporate some ele­
ments of solidarity. 
One example of this is that most schemes are com­
pulsory, with larger and smaller risks being balanced 
against each other. Another example is the fact that 
despite different earnings-related contributions the 
same benefits are obtainable for specific risks, albeit 
with variations according to the claimant's family 
situation. This solidarity is displayed best of all in 
the various types of general insurance which cover 
the whole of the population. 
Varying the level of the benefit in accordance with 
the needs of the beneficiary is a further departure 
from the principle of equivalence. 
Possible preventive and rehabilitation measures 
15. The Committee attaches special importance to 
the preventive aspects of social policy since calcula­
ble and incalculable risks which cause human suf­
fering may thus be avoided and social costs may be 
saved, too. Therefore, it has also considered the 
openings available for including preventive mea­
sures in social security schemes and the problems 
these measures pose. 
24. 12. 84 Official Journal of the European Communities No C 343/19 
Denmark provides a good example of a country 
with a social policy which is focused on preventive 
measures. According to the report on Denmark the 
aim is 'to limit the occurrence of major social 
adjustment problems or loss of earnings and to 
make an active contribution to the solution of such 
problems where they do arise'. 
The Danish system of social security is therefore 
based on the following principles: 
— preventive principle: early and effective action to 
be taken to limit the cases requiring permanent 
or long-term assistance, 
— loss of earnings principle: loss of earnings (due to 
unemployment, illness, occupational accidents, 
etc.) may generate social problems: hence gen­
erous financial compensation to limit such 
cases, 
— needs/rehabilitation principle: what counts is the 
actual need. This is determined by assessing all 
facets of the recipient's life (personal, family, 
work and other circumstances). Where harm has 
been sustained, transitional support and ser­
vices are provided in order to restore fitness for 
employment; long-term assistance is to be 
avoided as far as possible, i.e. restricted to 
'hopeless' cases. 
Guidance and counselling are therefore key ingre­
dients of the Danish system. 
16. Furthermore, provision has been made for the 
following measures in Denmark in keeping with the 
priorities that have been established: 
— general prevention of social problems (e.g. mea­
sures aimed at children and young people, pre­
ventive medicine, accident/disease prevention 
at the place of work), 
— social protection as such (e.g. detection of needs 
via health workers, district nurses, home helps, 
schools, general practitioners, etc.; guidance 
and counselling), 
— prevention of social problems among 'high risk' 
groups, 
— treatment of social problems and measures to 
ensure they do not lead to other problems, 
— if preventive measures fail, long-term benefits 
are provided under the pensions legislation. 17. A more comprehensive policy of prevention is 
included in the Netherlands' social security system, 
e.g. the provision under the compulsory sickness 
insurance scheme of (i) vaccination programmes, (ii) 
day-care treatment in mental health institutions and 
(iii) specialist day-care treatment in the polyclinics 
attached to hospitals; industrial health care; disease 
prevention within the framework of general health 
care; and the policy of restricting the number of per­
sons needing to use the social services. It is consid­
ered an important task for industry to do everything 
necessary within the framework of occupational 
health care, as provided for in the Law on Working 
Conditions (Arbeidsomstandighedenwet), to ensure 
that employees are not declared incapacitated and 
are not dismissed from their jobs. 
It is interesting to note that in some countries of the 
Community (e.g. the Federal Republic of Germany, 
the United Kingdom, France and Belgium) firms are 
obliged by law to employ a certain percentage of 
disabled persons. 
18. Occupational and medical rehabilitation is 
also playing an increasingly important role in the 
work of the German Federal Labour Office and in 
the country's sickness, retirement pension and acci­
dent insurance schemes. 
In Ireland the emphasis is on a policy aimed at 
keeping people in work. A whole series of job place­
ment, rehabilitation and retraining measures have 
been taken. Policy in Greece is focused primarily on 
preventive medicine. This is also the case in Luxem­
bourg, Belgium and Italy, where the main emphasis 
is on the reduction of industrial accidents. 
All in all, such policies may be said to have been a 
success, both from a financial point of view (as the 
Belgian report shows) and in reducing risks. 
Structural problems associated with the funding of 
social security 
19. It can be seen from the national reports that 
there are no miracle cures and that far-reaching 
financial reforms would offer no guarantee of suc­
cess besides being difficult to justify in political 
terms. However, minor adjustments might be possi­
ble in some cases. Some thought could be given, in 
No C 343/20 Official Journal of the European Communities 24. 12. 84 
the light of the Member States' varying situations, to 
either raising contributions slightly, increasing the 
ceilings on the contributions to various schemes or 
introducing small additional parafiscal levies. In 
some countries the governments have also made 
cuts in some benefits and have thus reduced the 
protection enjoyed by insured persons without 
demanding similar adjustments in all cases from 
those chiefly responsible for the steep rise in some 
spending (e.g. medical consultants, other members 
of the medical profession, the drug industry, the 
manufacturers and users of medical apparatus and 
instruments and administrative costs). 
20. Various reports (France, Netherlands, Ireland, 
Belgium, Italy, etc.) refer to the problem of social 
security contributions being earnings-related. This 
naturally puts labour-intensive firms at a disadvan­
tage and might therefore have an adverse effect on 
employment. Capital-intensive firms contribute pro­
portionally less towards social security. It should 
also be borne in mind that technological change and 
rationalization causes unemployment and reduces 
the costs of the firms involved. In addition, more 
strenuous work may put a new or extra strain on 
some workers' health and give rise to social costs. 
However, it should not be forgotten that technologi­
cal change may also make the work process easier. 
Further social costs are caused by the fact that tech­
nological change not only creates high-quality jobs 
but also destroys the need for some skills. 
21. The associated problems are summarized in 
the report on France, which lists the results of var­
ious studies on the effects of a possible broader 
basis of assessment for social security contributions 
(i.e. the value added by firms instead of their pay­
rolls): 
'— the current system advantages capital and 
penalizes employment besides discouraging 
recruitment. The present contribution-based 
structure also results in a drop in revenue 
during a recession as persons out of work 
pay only a symbolic contribution, alize capital-intensive (usually the most 
productive) firms and could instigate a 
levelling-down process which would do 
very little to promote employment. 
On suggestions that the system should be tax-
funded, it has been pointed out that the prac­
tical details would be very complicated: 
— the choice of VAT would be likely to push 
up consumer prices and hence inflation, 
— a higher rate of progressive income tax or a 
special levy based on total income would 
meet with considerable disfavour among the 
niiddle- and high-income groups and could 
discourage savings. 
In addition, a tax-funded social security scheme 
could cause problems as regards joint adminis­
tration of funds.' 
22. The report on France points out that one possi­
ble solution might be 'to build up reserves during 
periods of prosperity as a buffer against hard times'. 
23. As regards the possibilities for extending the 
sources of revenue it should be noted that civil ser­
vants in both France and Belgium contribute 
towards the unemployment insurance funds ('soli­
darity contributions'). 
24. Another point worthy of note is made in the 
United Kingdom report which states that 'the limits 
to social spending, within the present range of 
experience, are psychological rather than economic'. 
25. A number of the national reports also refer to 
the need to limit the rise in health costs. Above all, it 
is necessary (a) to curb the profligate growth in med­
ical and paramedical services (in particular, tech­
nical examinations and laboratory tests) and the 
over-use of drugs, (b) to reduce hospital costs and 
(c) to keep a closer eye on hospital building pro­
grammes. 
— to make a firm's value added the basis for 
calculation instead of its payroll would pen-A more ambitious policy with regard to prevention 
might also help in the medium term to curb, or even 
24. 12. 84 Official Journal of the European Communities No C 343/21 
reduce, social spending (cf. what has happened in 
Luxembourg). The schemes already launched in 
some Member States for making patients themselves 
foot small bills for sickness costs may, however, 
have exactly the opposite effect to a policy of pre­
vention. 
Trend towards the privatization of social security 
26. Various Member State reports explain that 
because social security systems have been plunged 
into the red by the persistently high and ever rising 
mass unemployment and other factors mentioned 
above, there has been a noticeable trend towards the 
privatization of some parts of the systems, in parti­
cular the sickness insurance and retirement pension 
schemes. 
The Committee notes, however, that there can be no 
solidarity between the various categories of insured 
persons without compulsory schemes for the main 
risks. 
27. It is certainly right to say, as they do in the 
Dutch report, that 'it is necessary to seek the proper 
balance between provision by the government and 
the own responsibility of the individual and social 
groupings'. This cannot mean, however, that more 
and more social security schemes should be priva­
tized and that in the final analysis social security 
should be concentrated on the particularly needy. 
This would be in conflict with a basic purpose of 
social security, which is to provide coverage against 
the risks of daily life and if possible prevent them 
from materializing. 
It would be a step backwards from the modern sys­
tems of social security which have been built up in 
many years of hard work in the countries of the 
EEC or are gradually being pieced together in the 
less developed new Member States, and would be 
diametrically opposed to the idea that preventive 
social security does not exist solely for cases of 
hardship, but should also reduce social costs and 
must, according to various Member State reports, be 
urgently expanded. The Danish expert also forecasts 
big problems in Denmark in the long term because 
of the emergence of a supplementary private pen­
sions system. 28. The United Kingdom report also makes an 
interesting point when it states that a national health 
service does not necessarily lead to a substantial 
field for private insurance (as claimed in many cir­
cles) if it is reasonably adequately financed, as in 
the case of the local authority health services in 
Denmark. 
'More effort and incentives to reduce waiting 
lists for cold surgery plus more opportunities for 
amenities in the National Health Service could 
help to counter this development. The develop­
ment of social insurance in the United King­
dom with costly benefits mainly on a flat-rate 
basis has given us less relative poverty than 
most other Member States ...' 
It is also important to note that a high quality and 
level of benefits (e.g. in the field of sickness insur­
ance) considerably impedes the development of pri­
vate schemes. 
Stabilizing role of the social budget for the economic 
and employment situation 
29. Also of interest is the following point made by 
the Commission in its communication on social 
security problems: 
'Social protection is not to be considered as a 
burden on the economy. Social protection is a 
precondition for maintaining a high level of 
skills, efficiency and motivation in the econo­
mic life of Europe. Furthermore, the amounts 
levied do not drop out of the economic circuit; 
they are reintroduced in the form of benefits 
which play an important role in maintaining 
economic activity and thus preventing an even 
greater decline, especially in certain regions. 
Furthermore, the social systems are themselves 
major employers. The health service in parti­
cular employs a large workforce, providing 
direct employment for doctors, chemists, den­
tists, etc., and sustaining various industries 
(pharmaceuticals, chemicals, electronics). 
Labour costs are higher in the Community than 
in most other countries in the world. These dis­
parities are due not only to differences in wages, 
but also to differences in the level of social pro­
tection, which are financed by taxes and social 
No C 343/22 Official Journal of the European Communities 24. 12. 84 
security contributions falling in part on the 
employer. High labour costs may have a critical 
effect on the competitiveness of undertakings, 
especially in certain sectors vulnerable to the 
competition of third world countries, such as 
textiles, clothing, footwear and shipbuilding. 
The potential damaging effect on employment 
is self-evident.' 
Of course, as the Commission notes, when the pres­
sure of taxation and social security reaches a certain 
level (as a percentage of GNP), it meets with the 
resistance of taxpayers and social security contribu­
tions; the Commission points out quite rightly in 
this context that taxpayers and social security con­
tributors are keenly aware of their outgoings without 
always being conscious of the public services and 
benefits they receive. 
30. These ideas of the Commission are also to be 
found in various reports. Thus, the view is often 
expressed that social security spending has risen 
considerably because of the ever-mounting mass 
unemployment and the ageing of the population. In 
consequence, the competitiveness of industry in the 
Member States might be in jeopardy. However, as 
the French report states, such a conclusion would be 
hasty 'as this expenditure was very seldom without 
benefit to the economy'. 
The health sector is quoted as an example: 
'The contributions intended to finance the 
health sector promote employment. In France 
this sector provides jobs for over 1 million peo­
ple, and can therefore hardly be said to be econ­
omically sterile.' 
31. It is stated in the Dutch report that the cuts in 
social security benefits have led to great social 
unrest: 
'The Netherlands' trade unions not only 
opposed these drastic cuts but also put forward 
alternative proposals designed to maintain the 
purchasing power of public service employees 
and those dependent on social security ben­
efits.' 
31. In the Federal Republic of Germany, too, the 
trade unions have made it clear time and again that 
the cuts in social security benefits that have been 
taking place for years represent a socially intolerable unilateral shift in the cost of the economic and 
employment crisis at the expense of the weakest 
social groups; furthermore, they fuel social conflict 
and result in a considerable loss in purchasing 
power, which makes no sense in the context of 
employment policy. 
Conclusions 
33. The national reports demonstrate clearly that 
the economic recession and the resulting unemploy­
ment are a major contributory factor to the financial 
imbalances of social security schemes. However, 
there are also structural reasons for these financial 
difficulties. These include the ageing of the popula­
tion, rising health costs and the extension of ben­
efits to new sectors of the workforce without any 
provision for adequate contributions. Economic and 
social policy in the Member States must therefore 
given priority to securing the foundations of social 
security schemes via an effective policy for promot­
ing economic growth and employment. Socially-
desirable economic growth will make it easier to 
find the money needed to finance social security. 
There is a clear link in the Member States between 
the level of social security cover and economic per­
formance, i.e. the social security cover provided for 
workers and their families is correlated with econo­
mic performance and development in the sense that 
high-quality economic growth is sustained by a 
good level of social security cover. It is therefore 
vital to provide an appropriate level of social secur­
ity cover in the Member States in the future. 
34. In addition, the public budgets and the bud­
gets of the social security institutions play a substan­
tial role in stabilizing the economy and securing 
employment. Social security benefits are channelled 
back into the economic cycle in the form of pur­
chasing power and thus play a key role in support­
ing economic activity. There is no overlooking the 
fact, however, that the rising social security costs 
caused by sustained, mounting unemployment and 
the other factors listed above impose financial bur­
dens on contributors, tax-payers and State budgets. 
Therefore it is a question of striking a balance 
between (a) maintaining purchasing power and (b) 
securing the funds necessary for an economic revi­
val. 
24. 12. 84 Official Journal of the European Communities No C 343/23 
35. Social security benefits also have a significant 
productive and investment-related aspect. They 
represent investment in the health and skills of the 
labour force and they are just as important for 
economic development as capital investment. For 
example, health care employs a large number of 
people and also creates job openings in various sec­
tors of industry (in particular the pharmaceutical, 
the chemical and the electronics industries). 
36. Social security systems must not be confined to 
protecting workers and their families in periods of 
economic prosperity. One of their main tasks is to 
provide adequate protection when times are hard. It 
is precisely at such times that the principle of soli­
darity must be maintained and reinforced by mak­
ing insurance compulsory for everybody. 
37. However, allowance must be made for the fact 
that social security schemes also have to tailor their 
revenue and expenditure to the deterioration in the 
economic situation. When GDP growth rates are 
falling, social security benefits cannot continue to 
expand as fast as they did during boom periods. It is 
important in this connection to strike a better bal­
ance between contributions and benefits. Improving 
the structure of social security schemes would also 
help to strengthen them financially. In particular, it 
is necessary to make costs more transparent, 
improve the provision of information, put an end to 
unrelated benefits or find the money to finance 
them, increase individual responsibility and prevent 
misguided incentives and policies. The necessary 
adjustment of social security benefits to the deterior­
ation in economic and financial conditions in the 
Member States must be implemented fairly. The 
burden must not fall mainly or solely on the socially 
most vulnerable sectors of the population. The 
higher income groups must also bear their share. 
Account must be taken of the fact that social secur­
ity benefits represent purchasing power which is 
vital to the economic upturn and improvement of 
the employment situation. This must not mean, as is 
clearly intended by the austerity policy pursued in 
many Member States, that the burden of the 
undoubtedly necessary economic and social adjust­
ments to the economic, employment and financial 
crisis should fall on the shoulders of social security 
recipients while some of the higher income groups emerge unscathed. This would not only heighten 
social conflict with all the adverse repercussions for 
those concerned and for economic development. It 
would also depress the purchasing power of the low­
est income groups which is vital to economic 
development. In addition, there is a pressing need 
to cut costs in some areas of social security. This 
applies in particular to the earnings of some doctors 
and other members of the medical profession, the 
profits of some pharmaceutical laboratories and 
hospital costs. These cuts could be achieved by 
improved planning of hospital infrastructures, the 
introduction of sophisticated equipment (scanners) 
and tigher control of technical services, laboratory 
tests, clinical biology, etc. A preventive health care 
and health education policy would be particularly 
suitable for cutting costs in the health service. It is 
the governments' responsibility to ensure that every 
citizen in every country has access to efficient health 
care services. Better working conditions and ade­
quate industrial medicine facilities can also prevent 
damage to health at the work place and thus play a 
considerable role in reducing costs. In addition 
effective action to combat unemployment, and 
long-term unemployment in particular, can also 
contribute to cutting the costs of the health service. 
There is a direct correlation between the duration of 
unemployment and the incidence of serious illness, 
particularly in the ranks of the long-term unem­
ployed. This of course pushes up the costs of the 
public health schemes. 
38. Socio-economic developments — especially 
the rise in unemployment — plus the burden of 
social spending prompt the question of whether, 
given the prospect of the Community's further inte­
gration, the responsibilities for funding the various 
risks covered by social security should perhaps be 
redefined on a more uniform basis throughout the 
Ten. 
For example, thought could be give to whether the 
cost of unemployment insurance and, in particular, 
family benefits could not be borne by the entire 
community; whether industrial accidents insurance 
should not be funded mainly by employers; and 
whether sickness insurance — like pensions — 
No C 343/24 Official Journal of the European Communities 24. 12. 84 
should not be funded jointly by employers, workers 
and the State. 
Allowance should be made in this connection for 
the progressive, linear or degressive nature of social 
security contributions, according to whether one or 
the other type of financing is selected and whether 
or not there are any ceilings on contributions. 
At all events, the joint management of social secur­
ity must be maintained wherever it exists. 
39. Arrangements for funding social security sys­
tems tend to penalize the labour-intensive sectors of 
the economy because contributions are largely 
linked to wages and salaries. Thought must there­
fore be given to devising alternative assessment 
bases for employers' contributions under which con­
tributions would be based on the added value 
created by the undertaking as well as on wages, 
especially as technological change and rationaliza­
tion generate unemployment and in consequence 
are likely to increase the cost thereof. 
Consideration should also be given to the following 
corrective measures: the raising of contributions 
(bearing in mind that the burden of taxation and 
social security payments cannot exceed certain lim­
its), the raising of contribution ceilings, the inclu­
sion of all economically active persons in the contri­
bution system and the improvement of State con­
tributions, in particular in connection with benefit 
risks which are becoming increasingly difficult to 
insure against, for example unemployment. 
40. In times of economic hardship and high, rising 
unemployment, it is crucial to mobilize public 
awareness to the need for greater solidarity. Action 
must be taken to counteract attempts to blame real 
or alleged abuses by social security recipients for the 
financial imbalances of social security schemes. 
Although such abuses undoubtedly occur — espe­
cially in the field of sickness insurance — and must 
be counteracted and prevented most decisively, it 
would be dangerous and irresponsible to see this as 
a solution to the financial problems. Such action 
would hamper attempts to identify and combat the 
real causes of the crisis. Privatization can under no circumstances be seen as a solution to the financial 
problems facing social security. 
It is particularly important for the entire population 
to show more solidarity with the long-term unem­
ployed in particular. Attempts to put State budgets 
and social security systems on an even keel cannot 
succeed without an effective employment policy, 
including a fairer share-out of the scarce jobs avail­
able among job-seekers by means of work-sharing, 
with due account being taken of the different condi­
tions in the different fields covered by collective 
agreements. 
41. The principle of solidarity within social secur­
ity schemes also means that discrimination against 
women and immigrant workers must be abolished. 
Steps must be taken to counteract attempts to make 
these disadvantaged groups shoulder the burden of 
the necessary cost of adjusting to the deterioration 
in economic circumstances. In this context, the EEC 
Directive on the implementation of the principle of 
equal treatment for men and women in social secur­
ity must be incorporated into national legislation. 
The Commission must therefore be urged to keep a 
close watch on the alignment of legislation and 
especially national practices and, if necessary, to 
initiate proceedings for non-observance. 
Various Member States have introduced legislation 
requiring undertakings to employ a certain quota of 
handicapped persons. The Committee therefore pro­
poses the extension of this rule to all Member 
States, via either legislation or collective agree­
ments, bearing in mind the views expressed by han­
dicapped persons' national organizations. 
42. One of the Community's long-term objectives 
must be to align social security systems, particularly 
as regards funding. This means that the less devel­
oped and more recent systems in some Member 
States must as far as possible be upgraded and put 
on an equal footing with the systems in the more 
advanced Member States at the earliest opportunity. 
In countries where there are plans to harmonize the 
different pension schemes and/or to merge pension 
24. 12. 84 Official Journal of the European Communities No C 343/25 
— the scope for and the impact of a change in con­
tribution arrangements on the financial situa­
tion of social security schemes, 
— the social costs of unemployment, 
— the redistributive effect of social security, 
— the situation, with regard to social security, of 
young first-time job-seekers, 
— the situation, with regard to social security, of 
the long-term unemployed, 
— the black economy and its importance for the 
funding of social security. 
Full use should naturally be made of research 
material already in existence in the Member States. 
45. Because of the special importance of the social 
partners' involvement in social security schemes and 
the relevant decision-making, the ESC will discuss 
the question of the social partners' involvement in 
the management of social security in another own-
initiative opinion as soon as the opportunity arises. 
The Chairman 
of the Economic and Social Committee 
Gerd MUHR 
APPENDICES 
to the opinion of the Economic and Social Committee 
APPENDIX 1 
Voting 
A roll-call vote was taken on the opinion as a whole. The following members, present or repre­
sented, voted for the opinion: 
Mr Amato, Mr Beretta, Mr Boddy, Mr Bonety, Mr Bornard, Mr Burnel, Mr de Caffarelli, Mr Cav-
azzuti, Mr Curtis, Mr Dassis, Mr De Bruyn, Mr De Grave, Mr d'Elia, Mr Delia Croce, Mr 
Delourme, Mr Drago, Mr Dunet, Mr Emo Capodilista, Mrs Engelen-Kefer, Mr Etty, Mr Flum, 
Mr Glesener, Mrs Gredal, Mr Houthuys, Mr Jaschick, Mr Jenkins, Mr Kirschen, Mr Lauga, Mr 
Margot, Mr Masucci, Mr Meraviglia, Mr Milne, Mr Muller, Mr Nielsen B., Mrs Nielsen M., Mr 
Nielsen P., Mr Nierhaus, Mr Ognibene, Mrs Patterson, Mr Pfeiffer, Mr Plank, Mr Raftopoulos, 
Mr Rainero, Mr Rouzier, Mr Schneider, Mr Schoepges, Mr Schwarz, Sir George Sharp, Mr Sou-
lat, Mr Spijkers, Mrs Strobel, Mr Vanden Broucke, Mr Vercellino, Mrs Weber, Mrs Williams, Mr 
Yverneau. funds, care must be taken to ensure that this does 
not lead to a levelling-down. 
43. It is also necessary to make social security sys­
tems more transparent, to simplify their structures 
and to keep employed persons better informed 
about social transfer payments (social security ben­
efits). 
44. In view of the financial difficulties facing the 
various social security schemes, the Committee calls 
on the Commission to make a more thorough exam­
ination of certain specific areas, including: 
— social security systems for members of the work­
ing population not in paid employment — in 
particular, the self-employed and the owners of 
small and medium-sized firms, 
— the impact of a tight wages policy on social 
security revenue, 
— the impact of shorter working hours and a 
dynamic employment policy on the financial 
situation of social security schemes, 
Done at Brussels, 25 October 1984. 
No C 343/26 Official Journal of the European Communities 24.12.84 
The following members, present or represented, voted against the opinion: 
Mr Bernasconi, Mr Binnenbruck, Mrs Bredima, Mr Broicher, Mr Cammann, Mr Ceyrac, Mr De 
Bievre, Mr De Tavernier, Mr Dracos, Mr Fortuyn, Mr Fuller, Mr Germozzi, Mr Hammond, Mr 
Kenna, Mr Low, Mr Marvier, Mr Masprone, Mr Noordwal, Mr de Normann, Mr Pelletier, Mr 
Poeton, Mr Querleux, Mr Schnieders, Mr Stahlmann, Mr Staratzke, Mr Storie-Pugh, Mr Swift, Mr 
van der Mensbrugghe, Mr van Melckenbeke, Mr Wagner, Mr Wick, Mr de Wit. 
The following members, present or represented, abstained from voting: 
Mr Bagliano, Mr Campbell, Mr Eelsen, Mr Goris, Mr Hovgaard Jakobsen, Mr Law, Mr Paggi, 
Mr Regaldo, Mr Romoli, Mr Strauss, Mr Zinkin. 
APPENDIX 2 
A. Defeated amendment 
The following amendment, tabled in accordance with the Rules of Procedure, was rejected by the 
Committee during plenary session discussions: 
Pages 19 and 20: 
Delete the sentence 'Some thought could be given ... additional parafiscal levies.' starting at the 
bottom of page 19. 
Reasons 
In contrast to some other countries, the Netherlands has a ceiling for the payment of social secur­
ity premiums. No premium is payable above this ceiling. The level of the premium is of course 
geared to this ceiling. In addition wage and income tax scales in the Netherlands have a very 
steep progression. As a result, the total fiscal burden (social security premiums and taxes) is prob­
ably the highest in the Community. The suggestion that one element in the burden, viz. social 
security premiums, be increased is unacceptable. This is moreover at variance with the current 
policy in the Netherlands of reducing the total burden. 
Voting: 
For: 30, Against: 43, Abstentions: 7. 
B. Amendments or changes made to the text during discussion 
The following passage of the Section opinion was amended by the Committee during the page-
by-page discussion: 
Page 5, first paragraph: 
'Similarly, the Danish expert, speaking about the Commission's communication, declared that 
"the Danes do not wish to harmonize at any cost and at all events have no wish to get involved in 
any levelling-down". The Danish reply is a clear "No" to harmonization, for if the Government 
were to put forward such an idea, it would not survive two weeks.'