was firstly intended to cover the whole population. Social Security consists of a set of institutions that serve to protect individuals from the consequences of various events or situations, usually referred to as social risks. There are four branches in the social security system in France. These are illness, old age/retirement, family and work accident/occupational disease. The compulsory “general scheme” covers the general population and mostly the employees. Another one is the agricultural scheme that includes agricultural-sector employees and non-salaried workers against all risks. Moreover, the last one is the supplementary pension schemes, ARRCO and AGIRC, which are compulsory for all private-sector employees affiliated to the general and agricultural schemes.
Social security expenditures: A historical perspective
The table shows that total social security expenditures between 1980 and 2013. In 2009, public social expenditure amounted to 22.1% of GDP on average in the OECD area, but this varied considerably between countries. France had the highest rate which is %32.10 of GDP in 2009. Last 8 years, expenditures increase gradually except 2011. In 2013, the total amount of social security expenditures is %33.02 of GDP.
Social Security Payment system (Pay-as-you go or fully funded or a mixture), describe.
In an unfunded defined benefit pension, no assets are set aside and the benefits are paid for by the employer or other pension sponsor as and when they are paid. Generally many countries ensure unfunded pensions arrangements, workers have benefits paid directly out of current taxes and social security contributions. We called this method as a Pay-as-you-go method. Generally most European countries are applying this method. However, many countries like France, have a hybrid systems which means they are partially funded. France set up the Pension Reserve Fund in July, 2001. The pension Reserve Fund, originally “Fonds de Reserve pour les Retraites”, has an aim of using funds from privatisalitions of state holdings to finance the future shortfall of the state PAYG pensions system.
Data for Dependency Ratio (demographic data): changes over time. Show the data on a graph and describe the trend
Age dependency ratio is the rate of dependents which are people younger than 15 or older than 64 divided to the working-age population which are between 15-64 age. The birth rate in France decreased to 12.70 in 2011, and death rate increased to 8.50 in 2011. Population ages between 0-14 in France was also decreased to 18.26 in 2012. The latest value for Age dependency ratio (% of working-age population) in France was 54.58 as of 2012. Over the past 51 years, the value for this indicator has fluctuated between 61.54 in 1961 and 51.31 in 1987.
Income Distribution among the Aged Population
The population of France was estimated 64,612,939 in 2014 and the income per household is 2,140 € nets/month. France is one of only five OECD countries where income inequality and poverty have declined over the past 20 years. Income distribution among the aged population is in below;
People near retirement-age (aged 51 to 65) have seen their incomes go up more rapidly than any other group. In 2009, It decreased 28,306 to 28,700. Poverty rates for this group have fallen from 10% to 5%. They have also fallen for people aged over 65 (from 10% to 8%)
Describe the Structure of Social Security Tax: Employers and Employees contributions. Need also historical data for this.
European countries’s social security systems collect taxes to finance their system. In France, this is financed by social security contributions. Spesific social changes(prélèvements sociaux and contributions sociales) are seemingly a payment (to social security system), however mostly they are seemed part of the taxation system. The table below shows the contributions of the both employer and employee. They are payable. But we should consider that; the rates has changes baceuse of type of industy, companies mass, kind of job and wages. The OECD says that, the employers social securtiy contributions are 30% of the employees salary in France. The employer social security contributions in France is one of the biggest in the world rank. This is because the calculation method is still below 50% of the significant number in the table.
Collect Data for the Structure of Social Security Benefits (a measure such as the GRR) and show the re-distributional aspect of it (if present) on a graph.
Social security benefits in France are Health Care Benefits, Sickness Benefits, Accidents at work, Occupational diseases, Family benefits, Maternity and Paternity benefits, Unemployment benefits, basic retirement benefits, and Death.
The gross replacement rates are the most popular indicators in pension analysis. It refers to the retirement benefit per month divided by monthly labor earnings during the years before one’s retirement. In other words, GRR is only applicable for pensionable persons. One first qualifies for a full public pension after 40 years of contribution. This has been since 2003. Before that, it was 37.5 years. In recent years, there have been increased plans to raise this to 41 years.
Generally, the public pension aims for a replacement rate of 50 percent after a person’s full career. There are penalties for missing years or a given number of months, such as a reduction of 1.25-5 percent of each missing year.
The GRR in France is divided in three categories: low earners; average earners; and maximum earners. The low earners get a 53 percent gross replacement rate, the average earners get 39.9 percent and maximum earners get 24.8 percent. This variation in earnings across categories is based on an individual’s pre-retirement earnings.
Retirement and Age Benefits:
Retirement Age did not change from 2012 to 2013 in France and it is 62. The retirement age increase 60 to 62 during the previous President Nicolas Sarkozy. The average retirement age of woman is 62.17 in 2009-2013. It reached its highest level (65) in 2012 and its lowest rate (60) in 2010. The French scheme provides for two compulsory retirement systems for employees. First of all; basic retirement system, in other words “social security retirement”. This pension is implemented after the age 62. Another important point about retirement in France is pensions may be claimed later if desired. People who continue to work after the their retirement and paid contributions for more than the attributed period for a full retirement (depending on the year of birth) can be granted a higher pension. There is also an opportunity to take an early retirement under certain restrictive conditions. Early retirement is possible at age 56 for people that born in 1952. If they born in 1952 and entered the labour force before at age 16, it means that they have validated at least 43.5 years. Moreover, it is also possible at age 59 for people that stared working before age 16. They also made at least 43.5 years of effective contributions. Moreover, pensions will be increase in certain circumstancess; those are raising child, awarded in respect of a dependent spouse and constant attendance allowance.
Secondly, suplementary pension schemes are administrated by Association for Employees’ Supplementary Schemes (ARRCO) that covers employeees and General Association of Retirement Institutions for Executives (AGIRC) for executive staff. ARRCO includes both managerial and non managerial employees. In private sector, the pension system has two mandatory tiers: an earnings-related public pension and occupational schemes, based on a points system. For the these types of retirement the age have to be 65-67 relying on birth date. However, there is also possible to claim early retirement pensions of age of 55 or 57.
The annual values of ARCCO and AGIRC points in 2011, 2012 and 2013 are:
Facts and data for Benefits for Family Relations: Spouses/domestic partners Benefits, Dependent Children’s Benefit, Widowers’ Benefits, etc.
Family benefits are granted for illegitimate, legitimate, adopted and foster children on condition that they are dependants of the beneficiary. Individuals should exceed age 20 to benefit from “Family benefits”.
Family benefits include “basic benefits for maintenance”, “early childhood benefit” and “benefits for special purpose”. Basic benefits for maintenance are child benefit, flatâ€‘rate allowance, and meansâ€‘tested family income supplement. Child benefit is paid to families that live two or more dependent children in France. Since April 2014, child benefit rates are 32% of the monthly benefit base (€129.99) for two children and it increases to 41% (€166.55) for each additional child. Families that have at least three children aged between three and 21 years can benefit from “Family income supplement”. In France, individuals should exceed age 20 to benefit from “Family benefit” but there is an exceptional situation which is flat-rate allowance. A flatâ€‘rate allowance is paid to balance the financial loss incurred by families with three or more children when the eldest child turns 20.
“Early Childhood Benefit” includes birth adoption grant, basic allowance, a supplement for free choice of working time and supplement for free choice of childcare. Birth adoption grant is the coverage of expenses of a child birth or adoption.The amount of the grant is €927.71 for a birth and €1,855.42 for an adoption. The amount of basic allowance is €185.54 per month and it is paid after the birth/adoption grant. “Supplement for free choice of working time” has a purpose to allow family to stop working or work less and to be more interested with their child. The last early childhood benefit is “a supplement for free choice of childcare” and it is is paid to parent using the services of a registered child-care worker or a baby sitter in the house.
“Benefits for Special Purpose” includes education allowance for disable children, back to school allowance, family housing allowance, moving allowance or daily parental attendance allowance for looking after a child suffering from a severe disease or handicap.
Widower’s benefit: This benefit paid to surviving widows. The surviving spouse without resources or whose resources are not sufficient benefits from a pension, based on the pension the deceased would have enjoyed or benefited. In the special schemes, the pension is paid regardless of age. In the general scheme, it is paid from 55. Before that age, widows and widowers are eligible for insurance widowhood. The widow allowance is paid for two years.
Unemployment Insurance Benefits Program:
This program is only applicable for the employed persons. To understand what this means, below is an explanatory list of requirements needed for one to qualify for the unemployment benefits (EU 22):
- One must be unemployed through no fault of his/hers
- He/she must be a registered jobseeker and willing to abide by a personalized back-to-work plan of action
- He/she must be genuinely and continuously looking for work
- He/she must be physically fit for work
- He/she must not meet the full pension schemes, and
- He/she must produced evidence of their insurance under unemployment insurance scheme for four of the last 36 months and 28 months for those over and under 50 years age respectively
Those who qualify get a daily allowance consisting of fixed reference wage (and variable parts. The variable part ranges between 57.4 and 75 percent of the reference wage. This scheme allows a payment for a period of 4 to 24 months (for under-50s) and 36 months (for over-50s). It also depends on the job seeker’s prior insurance period and age (EU 22).
Health Care Coverage for the eligible recipients and their dependents.
In 2000, the World Health Organization declared that France selected the “close to best overall health care” in the world. France health care system is financed by government National Health Insurance and France spent 11.6% of GDP on health care and $4,118 per capita. Even if this spending on health care is less than nine countries in the OECD (for example, Germany, Canada , Switzerland) , only two countries surpassed France’s health care spending as a percent of GDP of 11.6 %. Although the country has the second highest level of alcohol consumption in the world, France’s life expectancies is 82.2 which means one of the longest life expectancies in the world.
Health care system in France is financed by two system. One of them is called “L’assurance maladie” which is a state controlled health insurance social security system. The other one is called “L’assurance complementaire” which is a separate voluntary health insurance system.
“L’assurance maladie” is one the four branches of social security system. There are three main schemes that administred by NHI system according to occupation. First one is general scheme (CNAMTS : Caisse Nationale d’Assurance Maladie des Travailleurs Salariés) which funds almost 75% of health spending. It covers approximately 85% of the population working in industry and commerce. It also includes retired individuals. The General Fund is administered by theCaisse Primaire d’Assurance Maladie (CPAM). Individuals who live in France must register at their local CPAM for national health insurance coverage and people are issued with a “carte vitale” after registration. Card vitale is a second generation of smart card that indicates national insurance rights in electronic form. The carte vitale is not a means of payment, however it does enable the government to provide reimbursement immediately and it saves patients of the need for the huge amounts of form filling required under the old carte sociale system. Second one is agriculture scheme (MTA : Mutualité sociale agricole) which supports occupational health and prevention of occupational risks, and conducting activities to health and social. It covers 6 per cent of the population, including farmers, agricultural employees and their families. Final one is for the self employed (RSI : Régime social des independents) that covers artisans, traders, industrialists and professionals.
Social Security Reforms: pending or implemented.
To address the perceived payment gaps cited above, the Council of Ministers proposed the need to find a pension system balance (that is bring financial balance, and governance and fairness in the administration of the pensions scheme). This would ensure: the adaptation of the indexation rules; increased contribution period for full pension; reduced employers’ social contribution, among others (Embassy of France in London 1).
In relation to the welfare schemes, President Francois Hollande is reportedly currently looking for ways for reforms in pension, unemployment payments and family benefits. So far, the government has relied on tax increases to account for the huge deficits discussed above. However, in the future the government might increase charges on workers and employers, as well as taxes on pensioners; raise the contribution period before one qualifies for a full pension, among others (The Economist, 2013).
Problems and issues with the system.
A number of problems and issues have been raised over Frances social security system. In relation to pension scheme reforms, for instance, many cited financing gap between private sector employees and civil servants. The latter’s payments were included as part of state expenditure, placing them at an advantage over the former group. Therefore, there have been calls to address what many have come to see as financing gap in pension schemes for those in the private sector and civil servants (Embassy of France in London 1).
There have also been fears concerning the sustainability of the systems welfare schemes. The rising deficits are a cause for alarm. The deficits of these three on the country’s general social security systems are on the increase. By 2020, the deficits of the pension, family and unemployment pay are expected to reach €20.9 billion (about $25 billion), €2.6 billion and €4.8 billion respectively (The Economist, 2013).
- Embassy of France in London. The French Pension Reform- key Elements, Oct. 10, 2013. Web, June 18 2014
- European Union. Your Social Security Rights in France, 2013. Web, June 18 2014 OECD. Retirement-Income Systems in OECD Countries: France, OECD, 2013. Web, 20 June 2014
- The Economist. Must We Work Harder? June 22, 2013. Web, June 18, 2014
- Poindessault-Bernard, L., & Zuterek, A. (n.d.). Social security systems around the globe.. Retrieved June 20, 2014, from //www.pwc.be/en_BE/be/publications/2013/social-security-booklet-sept2013.pdf
- L’organisation de la Sécurité sociale. (2011, January 5).Le portail du service public de la Sécurité sociale / Usagers /. Retrieved June 11, 2014, from //www.securite-sociale.fr/L-organisation-de-la-Securite-sociale?type=part