15/11/2012 - Public social spending has increased to 22% of GDP on average across the OECD in 2012, up from 19% in 2007. Rising spending-to-GDP ratios are due to a combination of governments increasing expenditure on social supports as unemployment and income support benefits but also because of GDP stagnating or declining in many countries.
A new OECD report, “Social Spending after the Crisis”, analyses how changes in prices show that real social spending has risen on average by around 10% since 2007/2008. In only two countries has real social spending fallen – by 14% in Greece and by 13% in Hungary. Spending rose most in Korea, by 29%, reflecting increasing spending on pensions and other benefits such as childcare. France spends most on social policy, at 32.1% of GDP, followed by Denmark (30.2%) and Sweden (29.8%).
Public spending on unemployment benefits has increased from an average of 0.7% of GDP in 2007 to 1.1% in 2009 and stayed at that level since. Highest rises from 2008 to 2009 were in Iceland (0.3% GDP to 1.7%), Ireland (1.4% to 2.6%) and Spain (2.2% to 3.5%). On the other hand, spending on active labour market programmes, such as job centres and training, has risen little across the OECD, from 0.5% in 2007 to 0.6% of GDP in 2009.
Spending on family benefits, such as childcare allowances and tax credits, has also increased slightly to 2.7% of GDP. Ireland and the United Kingdom, which have income-tested family benefits, now spend the most on family benefits, at around 4.2% of GDP each, ahead of France which spent the most before the crisis (3.7% of GDP) and 4% today.
Population ageing will also drive up pension and health spending in the years ahead. The challenge now, the OECD says, is to safeguard social support for future generations. Public social spending on the elderly amounted to 11% of GDP in 2009. The proportion of elderly in the population is around 15% across the OECD and on average they receive 40% of all public social spending. In Japan and Italy, where senior citizens make up about 20% of the population, public social spending on the elderly is about 60% of the total.
Public social spending covers government expenditure on old age, survivors, incapacity-related benefits, health, family, active labour market programmes, unemployment, housing and other social policy areas.
For more information or comment, journalists should contact Willem Adema of the OECD’s Social Policy division at + 33 1 45 24 15 57.
The report together with the data is available at www.oecd.org/els/social/expenditure.