Social security and the digital transformation of labour markets.

SW – 12/2019

Digitalisation and the use of artificial intelligence are impacting labour markets and are likely to change them forever. New forms of work are emerging while other jobs are disappearing. Predictions for the future range from normal shifts in jobs due to technology through to massive job losses.


Roberto Viola, Director-General of the DG for Communication Networks, Content and Technology, highlighted in a blog post that the structural shift in the nature of jobs requires corresponding adjustments to education and training. Around 90% of jobs today require at least basic digital skills. However, around one third of the EU workers lack these basic skills.

He also addressed the impact of digitalisation and the increase in non-standard forms of work on social security systems and their financing, while also referring to the Recommendation on access to social protection for workers and the self-employed formally adopted by the Council on 8 November 2019.


The Recommendation calls on Member States to make formal access to social protection benefits available for all workers, regardless of the nature of the employment relationship. This applies to the following work-related social protection benefits: unemployment; sickness and healthcare; maternity and equivalent paternity benefits; invalidity; old age and survivors’ benefits; work accidents and occupational diseases.

In the case of the self-employed, it is recommended that access be made possible at least on a voluntary basis and, where appropriate, made mandatory. However, the Recommendation is a legally non-binding document designed to stimulate reforms at national level. Member States are encouraged to implement the principles contained in the Recommendation as soon as possible and to present a plan by 15 May 2021 containing information on the measures to be taken at national level.

However, Director-General Viola said that the growing shift towards non-standard forms of work is putting pressure on the financing of social protection systems, including pension and health funds. This financing is largely based on contributions from traditional employer-employee relationships. The Recommendation requires the input and hands-on expertise of practitioners as well as the participation of online platforms in order to be of benefit to citizens. In addition, there is the issue of simplifying social entitlements, which are currently very fragmented across different types of workers, sometimes without obvious logical or functional reasons.


In its final report published on 8 April 2019, a high-level expert group (HLG) on the impact of the digital transformation on EU labour markets, set up by the European Commission in May 2018, set out much more far-reaching recommendations.


The HLG recommends social protection that is neutral in terms of technology, forms of employment and self-employment. This could include portable benefits that are linked to the worker and not to a particular employment relationship, as well as ‘underemployment insurance’ that takes into account fluctuating incomes. Neutral social protection should benefit all workers equally, including the self-employed. While the details may vary between EU Member States, this is an important policy initiative that the HLG believes should be planned and agreed at European level.

However, a report published by the European Policy Centre (EPC) in December 2019 warns against prematurely abandoning the foundations of past decades. This is a risky undertaking with serious consequences for individuals and society as a whole because a viable solution that ensures a balance between the greater need for social protection and adequate financial resources has yet to be found.


The report also discusses the possibility of financing social protection through taxation. Theoretically, a system financed purely through general taxation is possible. However, according to the authors, this raises the question of whether this would lead to a fair balance of responsibilities between workers and employers. The former would still have to pay social contributions, while it would be extremely difficult to ensure that the latter contribute their fair share to the public good in return for the labour they use. Another possibility could be new tax-funded resources coming from taxes on such things as gas emissions, financial transactions or robots.


The authors, however, are doubtful that these sources of revenue would compensate for the loss of employers’ contributions and fulfil the coverage needs of future social protection systems. In addition, they would not necessarily address the issue of employers’ responsibility towards their employees and their contribution to the public good. Finally, removing the traditional link between employment and social protection could increase the likelihood of mandatory contributions being replaced with voluntary contributions, which carries with it the risk of people opting out of insurance.