A turning point for pensions as well

VS – 04/2023

At the invitation of the Centre for European Policy Studies (CEPS) and in cooperation with the Spanish Ministry of Social Affairs, a high-level discussion about the “Public Pension System: Changing Narratives, Changing realities?“ was held in March. The consequences for public pension systems arising from major societal changes such as demographic developments, changes in the working world and changes caused by climate change were discussed at academic and political levels by two panels. Efficient pension systems must also be guaranteed in the future. Europe needs to take a new look at its pension policies to ensure this and this issue became the tenor of the event.

Resilience through investment in occupational training

Those present agreed that high levels of social protection, high labour force participation and steady productivity growth are needed to face the demographic challenges. This will require significantly increased investments, especially in occupational training and advanced training. Comprehensive qualification measures as well as prevention, rehabilitation and occupational health and safety are also necessary in order to be able to successfully counter the consequences of climate change, the European Green Deal as well as digitisation. As previously recommended in the Final report from the HLG (High-Level Expert Group) for the future of social protection and the welfare states in the EU, citizens must be able to participate successfully and for as long as possible during their working lives.

Europe still has a lot to do here. Too many young adults still have no, or only inadequate, occupational training. Young adults' entry into the labour market is increasingly characterised by precarious and temporary jobs in many member states. This will also have long-term consequences for pension entitlements in old age. A complete working career is included in the calculations made in almost all member states. According to the Spanish Minister for Social Affairs, José Luis Escrivá, entering the workforce will be a priority for the Spanish Council Presidency during the second half of 2023.

Access to social protection for all employees

Minister for Social Affairs Escrivá, the Belgian Minister for Pensions, Karine Lalieux and the German State Secretary at the Federal Ministry for Labour and Social Affairs, Dr Rolf Schmachtenberg, all agreed that the existing gaps in accessing social protection must be closed - as agreed in Principle 12 of the European Pillar of Social Rights (EPSR). The present pension systems are still too heavily geared towards traditional employment models. An initiative in each member state is needed to deal with the relevant social protection gaps. It is also important to shape the changes in the working world at European level. The European Commission’s proposed directive covering platform working will be an important step in this direction. An efficient pension system needs high-quality jobs for qualified and socially secure employees.

Demography can be shaped

Contrary to all the forecasts made during the last three decades, the pension system in Germany is actually stable. The reason is the strong increase in employment subject to social security contributions, which, according to Schmachtenberg, now has five million more employees today than was predicted a good ten years ago. The reasons for this are increased labour force participation – especially of older people and women – and migration. The example shows that demographic development can be shaped. Even if migration is a much-discussed political issue, it is still important for Europe's future viability.

The European social model – a competitive advantage

Pension systems and social security systems as a whole have contributed significantly to stabilising the economic situation during the past crises. Those crises also taught us that member states with efficient social security systems came through them better and they made and continue to make a significant contribution to further economic development. The performance of the social security systems is also noticed in non-European countries. This is one of or even Europe's decisive trump card in the competition for skilled workers.

A new “golden rule” for Europe

Europe must also define itself through the performance and sustainability of the social security systems in its member states. Common objectives and principles as in the ESSR as well as their consistent implementation must be the pillars of the European social model. Minister Escrivá and Schmachtenberg explicitly support the new "golden rule" formulated by the HLG: the task of fiscal policy in the EU is to ensure the future need for social protection and social investment against the background of climate change and digitisation.