Lack of confidence in the welfare state in the year 2050
Rising EU life expectancy and declining fertility represent major challenges to welfare states in the European Union, in particular with respect to future pension and health systems. The European Commission's Ageing Report (2015) states that the EU will move from four working-age people per person over 65 today, to about two working-age people in 2040. This will affect both revenue and spending: there will be less revenue because of the shrinking working-age population, and more spending because of higher costs for pensions, health and long-term care.
The survey shows that EU citizens are well aware of these developments: when asked about their confidence in the welfare state in 2050, respondents across the eight countries surveyed feared that the provisions of pensions, as well as care for the elderly, would no longer meet citizens’ needs. Another important fear is the adequacy of unemployment benefits, as well as health care in general.
Figure 1: Lack of confidence in the welfare state in the year 2050
Source: Vision Europe Summit Survey Results: Note: Diagrammed is only the “no”-option in different policy fields as an average across eight countries.
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Table 1 reports country-level results and reveals that compared to other countries, German respondents are most worried when it comes to pensions and the care of the elderly in the future, with 70 % of respondents fearing that pensions will no longer meet citizens’ needs and 63 % fearing the same when it comes to care for the elderly. Moreover, 67% of French and 63% of Italian and Polish citizens, are pessimistic about the adequacy of pensions
Another important policy measure questioned by citizens is support for the unemployed in the year 2050. Only in Germany and the United Kingdom did fewer than 50 % of citizens express doubts about adequacy looking ahead. The situation is different in Italy, which is recovering slowly from the recent crisis, and reports that 59% of respondents are pessimistic about unemployment benefits.
Table 1: In the year 2050, do you think that the public welfare system in your country will cover the needs of citizens in the following fields? Answers possible: Yes and No, Diagrammed is only the "No"-option.
Source: Vision Europe Summit Survey Results. Note: The heat-map ranges from yellow to red following the increasing “No”-answers in the single countries. Answers possible: Yes and No, Diagrammed is only the "No"-option.
Orientation of the future welfare state
In recent years, the importance of a ‘social investment’ approach to the welfare state has emerged (see i.e. European Commission), which sees a shift from a ‘compensating’ welfare state to a ‘capacitating’ welfare state, focusing on policies designed to strengthen people’s skills and capacities and support them to participate fully in employment and social life. Investments in early childhood education and training are one of the pillars of social investment. In line with this paradigm shift, 47% of citizens regard education as the most important aim of the welfare state looking ahead (Figure 2). Health as well as care for elderly people follow closely, with respectively 46% and 43% of respondents classifying these two aims as extremely important.Orientation of the future welfare state
Figure 2: Orientation of the future welfare state
Source: Vision Europe Summit Survey Results: Note: Diagrammed is only the “extremely important”-option as an average across eight countries.
On a country level (Table 2), education represents the most important aim in the United Kingdom, Germany, Belgium and Italy, while French and Polish citizens give more or less the same importance to both education and health care. By contrast, respondents in Portugal and Finland find health to be the most important goal looking ahead, as opposed to education. Interestingly, child care gains absolute importance only in Poland.
Table 2: Thinking about the future public welfare system in your country how important should the following aims be? Answers possible: Extremely important, Very important, Somewhat important, Somewhat unimportant, Unimportant. Diagrammed is only the "Extremely important"-option.
Source: Vision Europe Summit Survey Results. Note: The heat-map ranges from yellow to green following the increasing importance of policies in the single countries. Answers possible: Extremely important, Very important, Somewhat important, Somewhat unimportant, Unimportant. Diagrammed is only the "Extremely important"-option.
Reform options and future financing
As Table 1 shows, across all eight countries citizens question the adequacy of welfare state provision in the future. In this respect, the topic of citizens’ preferences on the nature of future financing is interesting. Figure 3 reports respondents’ preferences, which can be divided into maintaining the current level of public welfare and increase taxes, as opposed to maintaining taxes and reducing the current level of public welfare.
The largest share of citizens advocating the preservation of current benefits can be found in Finland, where 66% support an increase in taxes to maintain current levels of public welfare. A similar picture emerges for the United Kingdom and Germany, where respectively 56 % and 52% of respondents are in favour of increasing taxes. Importantly, these are also countries with levels of public debt between 60 and 90 % of GDP (see right side column in Figure 3), whereas citizens in countries with higher public debt seem to be less in favour of increasing taxes. Indeed, only 46 % of Italian and 39% of Portuguese citizens support an increase in taxes over the reduction of the current level of benefits. Poland is an exception, as people still favour a reduction of current level of public welfare over an increase in taxes, despite a relatively low public debt ratio.
Figure 3: Future financing
Source: Vision Europe Summit Survey Results. Note: the figures are adjusted for “don’t know” answers; GGD = General Government Debt in % of GDP, 2014.
Conclusion
Looking ahead, Europe’s citizens are most worried about the adequacy of pensions and care for the elderly. When it comes to future aims of the welfare state, citizens in each of the eight countries surveyed highlight the importance of education, knowledge and skills. And looking at preferences over the future financing of the welfare state, countries with comparatively lower levels of public debt are willing to contribute more in order to maintain the current level of public welfare benefits, while countries with higher levels of public debt prefer cuts in benefits over increases in taxes.
Guntram Wolff is a Senior fellow at Bruegel. He is also a Professor of Public Policy and Economics at the Willy Brandt School of Public Policy. From 2022-2024, he was the Director and CEO of the German Council on Foreign Relations (DGAP) and from 2013-22 the director of Bruegel. Over his career, he has contributed to research on European political economy, climate policy, geoeconomics, macroeconomics and foreign affairs. His work was published in academic journals such as Nature, Science, Research Policy, Energy Policy, Climate Policy, Journal of European Public Policy, Journal of Banking and Finance. His co-authored book “The macroeconomics of decarbonization” is published in Cambridge University Press.
An experienced public adviser, he has been testifying twice a year since 2013 to the informal European finance ministers’ and central bank governors’ ECOFIN Council meeting on a large variety of topics. He also regularly testifies to the European Parliament, the Bundestag and speaks to corporate boards. In 2020, Business Insider ranked him one of the 28 most influential “power players” in Europe. From 2012-16, he was a member of the French prime minister’s Conseil d’Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed member and co-director to the G20 High level independent panel on pandemic prevention, preparedness and response under the co-chairs Tharman Shanmugaratnam, Lawrence H. Summers and Ngozi Okonjo-Iweala. From 2013-22, he was an advisor to the Mastercard Centre for Inclusive Growth. He is a member of the Bulgarian Council of Economic Analysis, the European Council on Foreign Affairs and advisory board of Elcano.
Guntram joined Bruegel from the European Commission, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission, he worked in the research department at the Bundesbank, which he joined after completing his PhD in economics at the University of Bonn. He also worked as an external adviser to the International Monetary Fund. He is fluent in German, English, and French. His work is regularly published and cited in leading media.
Pia Hüttl is an Austrian citizen and joined Bruegel as an Affiliate Fellow in 2015. Her research interests include macroeconomics, financial economics and monetary policy as well as European political economy.
Prior to this, Pia worked as Research Assistant for Bruegel, and as a Trainee in the Monetary Policy Division of the European Central Bank. Also, she worked as a Blue Book Stagiaire in the Monetary policy, Exchange rate policy of the euro area, ERM II and Euro adoption Unit in DG Ecfin of the European Commission.
She holds a Bachelor's degree in European Economics and a Master's degree in International Economics from the University of Rome Tor Vergata. She also obtained a Master's degree in European Political Economy from the London School of Economics, with a thesis on Current Account imbalances in the Euro area and the role of financial integration.
Pia is currently pursuing a PhD in Economics at the Humboldt University in Berlin.
She is fluent in German, Italian and English, and has good notions of French.
