Social spending aims to support individuals facing challenging circumstances by redistributing resources across households. It includes providing financial assistance and services to those experiencing poverty, unemployment, or elderly individuals who are not part of the workforce. Additionally, social spending includes funding for healthcare benefits, family assistance programmes, and housing support initiatives.
Social policy
Social policy protects individuals and their families and helps them lead a fulfilling life, but not everyone receives the support they need despite social expenditures making up a large part of public spending. It is key that countries balance accessibility, inclusion and affordability to ensure the long-term sustainability of social protection.
Key messages
OECD countries will face major sociodemographic shifts, technological advances and climate change related challenges in the coming decades. These megatrends risk further straining social protection systems that already contend with issues around the financing, coverage, adequacy, delivery and take-up of benefits and services.
Global megatrends like population ageing, rising inequalities, climate change, and the changing nature of work are requiring changes in social protection systems to make them fit for the future. This requires a data-driven understanding of what social and economic risks people worry about – and how well they think their government addresses those risks.
Tax and benefit systems play a crucial role in redistributing income, ensuring economic stability and promoting social cohesion. However, their reduced capacity to tackle inequalities has been one of the factors behind the widening income gap between the rich and poor. It is crucial to strengthen redistributive policies by making social protection systems more accessible and inclusive while reinforcing financial work incentives and ensuring fiscal sustainability.
Context
Public social spending
The size of welfare states differs markedly across OECD countries. At just over 30% of GDP in 2022, public social spending was highest in France and Italy, but a quarter of OECD countries devote around 25% or more. In contrast, public social spending in countries such as Colombia, Costa Rica, Ireland, Korea, Mexico and Türkiye accounts for 15% of GDP or less.
Social protection systems developed gradually into comprehensive welfare states. Across the 17 OECD countries (which were members at the time and for which data is available) public social spending to GDP-ratios more than doubled between 1960 (7.9%) and 2000 (17.9%). This trend was also observed in other countries, but at a later stage, between 2000 and 2020.
Poverty rates
Social policy is crucial to both protect those at risk of poverty, and support those already living in poverty. The average OECD relative poverty rate (i.e. the share of people living with less than half the median disposable income in their country) was 11.4% in 2021. Poverty rates were highest in Costa Rica, Israel and the United States at over 18%, while poverty in Czechia, Denmark, Finland, Hungary and Iceland affected only 5-6% of the population. In general, Mediterranean countries, Baltic countries, and Latin American countries have relatively high poverty rates. Emerging economies also have higher levels of poverty than most OECD countries.
Economic security
Most people are demanding more from their country’s social protection system. The OECD’s nationally representative Risks that Matter survey asks people in 27 OECD countries about their economic and social concerns and their satisfaction with social programmes.
The survey finds that, on average, 74% of respondents want government to do more to ensure their economic and social security, with rates highest in Mexico, Chile, Portugal, Israel and Greece. Across countries, only 5% of respondents on average want government to intervene less – with the highest share in countries where social protection is already relatively advanced. Governments must do more.
