Recent developments in social protection expenditure In 2016, expenditure on social protection relative to gross domestic product (GDP) was estimated at 28.0 % in the EU-28. Across the EU Member States, this ratio was highest in France (34.3 %), while Finland and Denmark also reported ratios above 30.0 % and Austria (29.8 %) and Germany (29.7 %) just below this level. By contrast, social protection expenditure represented less than 17 % of GDP in Estonia, Malta, Ireland, Lithuania and Latvia, with the lowest share in the EU registered in Romania (14.6 %); Turkey recorded an even lower ratio, at 12.9 %. In Finland, expenditure on social protection relative to GDP was 6.6 percentage points higher in 2016 than it had been in 2008 (at the onset of the global financial and economic crisis). This was the largest increase recorded among any of the EU Member States during this period, ahead of a 3.5 point increase in France and a 3.4 point increase in the Netherlands; Norway (7.4 points) and Switzerland (4.4 points) also recorded relatively large increases. By contrast, Lithuania, Malta, Hungary (note there is a break in series) and Ireland each recorded lower ratios of social protection expenditure to GDP in 2016 when compared with 2008; this was also the case in Serbia.

(% of GDP)

Source: Eurostat Table 1: Expenditure on social protection, 2006-2016(% of GDP)Eurostat (spr_exp_sum)

Social protection expenditure and GDP rates of change Having grown by 5.9 % in 2007 (compared with the year before), EU-28 GDP (in current prices) was almost unchanged in 2008 and then contracted dramatically in 2009, while social protection expenditure continued to increase at a relatively stable pace until 2015. As such, the impact of the global financial and economic crisis was clearly apparent, as the ratio of social protection expenditure to GDP increased by 0.7 percentage points between 2007 and 2008 and by a further 2.7 points between 2008 and 2009 to reach 28.7 % in 2009 (see Table 1); thereafter, this ratio fluctuated within a relatively narrow range, between 28.0 % and 28.9 %. The increase in 2009 of this ratio reflected a 4.3 % increase in social protection expenditure combined with a fall of 5.8 % in the value of GDP. In 2010 and 2011, the ratio of social protection expenditure to GDP fell by 0.1 and 0.3 percentage points, as social protection expenditure increased at a slower pace than GDP (which was recovering from the crisis). In 2012, this pattern was reversed and social protection expenditure also increased at a faster pace than GDP in 2013, only to be offset by slower growth in social protection expenditure the year after. In 2015, there was a 4.4 % increase in the level of EU’s social protection expenditure, which was counteracted by the somewhat faster pace of economic growth (5.4 %). The ratio of social protection expenditure relative to GDP fell by 0.3 points in both 2015 and 2016, to reach 28.0 % in 2016, its lowest value since 2009.

(% of GDP and % change in social protection expenditure and GDP)

Source: Eurostat Figure 1: Social protection expenditure, EU-28, 2006-2016(% of GDP and % change in social protection expenditure and GDP)Eurostat (spr_exp_sum) and (nama_10_gdp)

Per capita expenditure on social protection and expenditure as percentage of GDP When comparing across EU Member States, there is generally a positive relationship between social protection expenditure expressed relative to GDP and social protection expenditure per capita in purchasing power standards (PPS). Across the EU-28, expenditure per capita in 2016 averaged 8 229 PPS. The use of a series in purchasing power parities tends to reduce the disparities in expenditure per capita between EU Member States, with the highest level of expenditure per capita in Luxembourg (14 628 PPS) and the lowest in Romania (2 699 PPS); as such, expenditure per capita in the former was almost six times as high as in the latter (see Figure 2). Note that social protection expenditure per capita is calculated on the basis of the resident population; therefore, its value may be particularly high for Luxembourg (due to its high proportion of cross-border commuters), with some benefits paid to persons living outside the country (primarily expenditure on healthcare, pensions and family benefits). Although the EU Member States with the highest levels of social protection expenditure per capita in 2016 tended to have some of the highest ratios of social protection expenditure relative to GDP there were some exceptions. These included the particular case of Luxembourg (already mentioned above), which had the highest level of expenditure per capita, but a much lower ratio of expenditure relative to GDP (21.3 %), considerably lower than the EU-28 average (28.0 %). By contrast, social protection expenditure relative to GDP was slightly higher than one third (34.3 %) in France, while average expenditure per capita was 10 855 PPS; the former was the highest ratio recorded among the Member States, while the latter was only the fifth highest per capita value, although considerably above the EU-28 average.

(% of GDP and PPS per capita)

Source: Eurostat Figure 2: Social protection expenditure, 2016(% of GDP and PPS per capita)Eurostat (spr_exp_sum)

Comparison of gross and net social protection benefits The specific characteristics of national tax and benefit systems may explain some of the differences in levels of social protection benefits between EU Member States, for example, the taxes and social contributions paid on benefits by beneficiaries and the extent to which social benefits are provided in the form of tax rebates or tax reductions (see Data sources below for more details). In 2016, the gap between gross and net expenditure on social protection benefits in the EU-28 averaged 2.2 % of GDP. There were greater variations in some of the EU Member States, with the largest differences — as a percentage of GDP — often recorded for a number of Member States with some of the highest ratios of gross expenditure on social protection relative to GDP (see Figure 3). This was particularly the case for the Netherlands (a gap of 5.6 percentage points between gross and net expenditure) and Denmark (4.6 points), both of which had ratios for gross expenditure that were above the EU-28 average.

Source: Eurostat Figure 3: Gross and net expenditure on social protection benefits, 2016Eurostat (spr_net_ben) When expenditure on social protection benefits is expressed in relation to GDP, the difference between the highest and lowest spending EU Member States was 17.7 percentage points for gross expenditure (France 32.1 % and Romania 14.4 %) compared with 16.0 points for net expenditure (France 30.2 % and Romania 14.2 %). The ranking of the Member States was generally quite similar when considering gross and net expenditure, although there were some differences: for example, the Netherlands had the ninth highest level of gross expenditure relative to GDP but was ranked in 13th place for net expenditure, whereas Belgium had the eighth highest level of gross expenditure but was ranked in fourth place in net terms.

(% of GDP)

Source: Eurostat Figure 4: Gross and net expenditure on social protection benefits, 2016(% of GDP)Eurostat (spr_net_ben)

Analysis of the structure of social protection expenditure Social protection benefits made up 96.3 % of the EU-28’s social protection expenditure in 2016; the remaining share covered administration costs and other expenditure (see Figure 5). Old age and sickness/healthcare benefits together accounted for 67.0 % of total social protection expenditure while benefits related to family/children, disability, survivors and unemployment ranged between 8.4 % and 4.5 %; social exclusion benefits not elsewhere classified and housing accounted for the remaining 2.1 % and 1.9 % respectively.

(% of total expenditure)

Source: Eurostat Figure 5: Structure of social protection expenditure, EU-28, 2016(% of total expenditure)Eurostat (spr_exp_sum)

Expenditure on pensions Expenditure on pensions across the EU-28 was equivalent to 12.8 % of GDP in 2016. Among the EU Member States, the share of expenditure on pensions was particularly high in several of the southern members and France (15.1 %), for example, Portugal (14.6 %) and Italy (16.0 %), with the highest share in Greece (17.5 %). At the other end of the range, shares between 6.8 % and 8.0 % were recorded in the three Baltic Member States of Estonia, Latvia and Lithuania, in Romania and in Malta, while an even lower ratio was recorded in Ireland (5.7 %) — see Figure 6.

(% of GDP)

Source: Eurostat Figure 6: Expenditure on pensions, 2016(% of GDP)Eurostat (spr_exp_pens) Pension expenditure per beneficiary varies according to the different types of pension (see Figure 7). In 2016, the aggregate expenditure per beneficiary on pensions relating to old age was estimated to be EUR 14 100 across the EU-28. This was slightly lower than the average expenditure recorded for anticipated old age pensions (EUR 14 .200 per beneficiary) but sligthly higher than for early retirement (due to a reduced capacity to work) where expenditure averaged EUR 13 800 per beneficiary. Expenditure on partial pensions, meanwhile, averaged just EUR 2 700 per beneficiary, much lower than for any other type of pension; this is to be expected, given that recipients of these types of pensions are also receiving an income from employment.

(EUR)

Source: Eurostat Figure 7: Pension expenditure per beneficiary by type of pension, EU-28, 2016(EUR)Eurostat (spr_pns_ben) and (spr_exp_pens) It is important to note that data relating to pension expenditure per beneficiary do not necessarily reflect the level or adequacy of individual old age pensions. The figures are based on aggregate expenditure and the number of beneficiaries for a wide range of different types of pension — granted under different circumstances and serving various distinct purposes — in each of the EU Member States; invariably, different pension schemes provide different levels of benefits, while the combinations of different pension schemes in each of the Member States will have a significant influence on the figures recorded at an aggregate level. Furthermore, data on pensions refer to gross expenditure and do not take into account the effect of taxes and social contributions (where relevant), as these vary both between and within Member States. For example, while all pensions may be tax free in one Member State, taxes may be applied to particular types of pensions in another. In 2016, pension expenditure per beneficiary for old age pensions (the most common type of pension) varied across the EU Member States from EUR 1.9 thousand in Bulgaria to EUR 26 600 in Luxembourg (see Figure 8). Comparing the data in terms of purchasing power standards (PPS) generally reduces the differences between Member States (as it adjusts for different price levels). Average expenditure per beneficiary peaked at 19 500 PPS in Austria, just ahead of Luxembourg (19 400 PPS), while the lowest level of pension expenditure per beneficiary was recorded in Bulgaria (4 300 PPS).

Source: Eurostat Figure 8: Pension expenditure per beneficiary for old age pensions, EU-28, 2016Eurostat (spr_pns_ben) and (spr_exp_pens) Average (median) pension levels for 65 to 74 year-olds across the EU-28 in 2018 were lower than average earnings for people aged 50 to 59 years (see Figure 9). The difference between these two averages was particularly large in Ireland, where pension levels represented just 35 % of the average earnings among those aged 50 to 59 years. By contrast, this ratio — known as the aggregate replacement ratio — was particularly high in Luxembourg (87 %) and was also relatively high in Italy, Spain, France and Portugal (where the median pension of people aged 65 to 74 years was more than two thirds of the average earnings received by people aged 50 to 59 years). Low aggregate replacement ratios may reflect low coverage and/or low income replacement from pension schemes within current pension systems, as well as incomplete careers or an under-declaration of earnings.

(%)

Source: Eurostat Figure 9: Aggregate replacement ratio, 2018(%)Eurostat (ilc_pnp3)

Expenditure on care for the elderly Social protection expenditure on care for the elderly covers care allowance, accommodation, and assistance in carrying out daily tasks. In 2016, this type of expenditure in the EU-28 was equivalent to 0.5 % of GDP. In Sweden and Denmark, the ratios for expenditure on the care for the elderly relative to GDP were 2.2 % and 1.9 %, approximately four times as high as the EU-28 average. Social protection expenditure on care for the elderly was less than 0.1 % of GDP in Bulgaria, Cyprus, Germany, Ireland, Greece and Luxembourg (see Figure 10).

(% of GDP)

Source: Eurostat Figure 10: Expenditure on care for the elderly, 2016(% of GDP)Eurostat (spr_exp_fol)

Social protection receipts An analysis of social protection receipts across the EU-28 in 2016 shows that the majority of receipts could be attributed to general government contributions (40.3 %) and employers’ social contributions (34.9 %), while around one fifth (19.7 %) of social protection receipts in the EU-28 were social contributions paid by protected persons (see Figure 11).

(% of total receipts)

Source: Eurostat Figure 11: Social protection receipts, EU-28, 2016(% of total receipts)Eurostat (spr_rec_sumt) Social protection receipts in the EU-28 grew from EUR 7 300 per inhabitant to EUR 8 700 per inhabitant between 2008 and 2016, as overall receipts rose by a total of 20.5 %. The biggest change in the structure of receipts over this period was in relation to general government contributions, whose share in total receipts grew from 38.3 % in 2008 to 40.3 % by 2016. By contrast, there was a reduction in the relative share of employers’ social contributions, from 36.5 % to 34.9 % over the same period. The structure of receipts used to finance social protection varies: three groups of EU Member States can be identified (see Figure 12). The largest group was composed of those Member States where government contributions formed the largest component of receipts in 2016: Denmark, Malta, Ireland, Sweden, the United Kingdom, Italy, Cyprus, Finland, Bulgaria, Portugal, Luxembourg, Latvia, Greece, Croatia and Austria. In the first four of these, government contributions accounted for more than half of all receipts (this was also the case in Iceland and Norway), with this share peaking at more than three quarters of total receipts in Denmark (77.0 %). In the remaining EU Member States, social contributions — from employers or from the protected persons — represented the largest component of receipts. In Estonia and Lithuania, the contribution from employers to finance social protection accounted for more than half of all receipts, while employers made the biggest contribution to total receipts in Czechia, Poland, Slovakia, Spain, Hungary, France, Romania, Belgium and Germany. There were two Member States where the highest share of social protection receipts could be attributed to contributions paid by protected persons, namely Slovenia (40.9 % of total receipts) and the Netherlands (33.6 %). Note that in most of the EU Member States other receipts tended to be relatively insignificant: they only contributed more than 10.0 % of total social protection receipts in the Netherlands, Poland and the United Kingdom; this was also the case in Switzerland (10.5 %).

(% of total receipts)

Source: Eurostat Figure 12: Social protection receipts, 2016(% of total receipts)Eurostat (spr_rec_sumt)





↑ This article is based on the same reference year for both gross and net benefits; since net benefits are available several months after gross benefits, you can find more recent data for gross benefits in other articles on social protection and in the database.

Source data for tables and graphs Social protection statistics: tables and figures