WORLD OF WORK
No. 39, June 2001

Social protection in Central and
Eastern Europe ten years after

In 1991, the International Social Security Review published a special issue on "Social security without socialism: The next steps for central and eastern Europe". Ten years on, the Review is again focusing its attention on the region. In his introduction to a new special issue, guest editor Vladimir Rys, Co-director of the University of Geneva Study Centre on Social Security Developments in Western and Central Europe, briefly reviews the issues facing policymakers today. The following is an extract.

While the communist countries never presented a monolithic block of social security measures applied everywhere in the same way, their systems were built on a number of common principles, such as state responsibility for the organization and finance of provision, or universal coverage, of all working people. Hence, in the early transition stages the reaction of these societies to the challenge they were faced with bore a certain number of similarities, be they with regard to the emphasis placed on the increased responsibility of the individual, or the reintroduction of social insurance. It was thus possible to deal with these reactions for the group as a whole. This is no longer the case, and the different socioeconomic and political conditions of transition countries produce different institutional replies to the problem of securing the existence of their citizens.

Health care

We are aware that in many countries "the transition from a centrally planned economy to a market economy has caused significant declines in output, employment, wages and indicators of health" ¹ . The statistical data point to, among other things, the role of ineffective healthcare reforms. Hungary and Poland have come to represent the opposite poles of health reform strategies. While a Hungarian legislative experiment of 1992 brought medical care under the general social insurance scheme - only to establish a special health insurance administration several years later - the Poles preferred first to improve the operations of the existing health services before reforming them, as late as in 1999. Admittedly, an overall assessment of reforms in health care has to take into account the impact of general problems, such as the advance of technological progress increasing the need for cost containment, which amplify the specific difficulties of transition countries.

The same remark can be made with regard to unemployment insurance, which is another field in transition countries which is broadly dependent on worldwide developments. In the early years, this risk was dealt with overgenerously by governments fearing the reaction of their populations faced with the unknown evil. Subsequently, a common sense attitude among people used to getting by even in situations of extreme stress permitted a radical retrenchment of benefits and eligibility conditions so as to bring the respective levels below those known in western Europe.

Pensions

One field which continues to attract attention to this region is that of pension reform. This is mainly due to the appearance of partial privatization of public pension provision in some countries of central and eastern Europe.

Study of the latest developments in the Czech Republic, Hungary and Poland provides an opportunity to go more deeply into some fundamental questions. The fact that, unlike the other two, the Czech Republic has refrained so far from transferring part of its pension provision to a mandatory, funded and privately administered system is possibly related more to the political imperatives of a particular period than to some hard facts of their economic situation.

Three countries of the former Soviet Union show a different picture corresponding to a different level of development. The pension plans of Belarus indicate the presence of a pre-reform stage, the attention being focused on improving some basic functions of the existing scheme rather than on a radical change. The Russian Federation seems to be closer to the application of a pension plan along the lines of the Polish reform, but the most recent changes in the collection of contributions point to an unsettled social environment. Lithuania, whose public-sector pensions were reformed in the middle of the last decade, offers the experience of a country where a recently introduced, voluntary, private funded system failed to get off the ground for lack of interested insurers.

Accession to the EU

The countries of central Europe illustrate the dominant role of political decision-making, albeit vicissitudinous in nature, in the formulation of social security legislation. By definition, the potential impact of demographic and economic factors forming part of the global societal environment has to pass through the screen of political evaluation by all relevant actors concerned. Encouragingly, some developments also point to increasing involvement of civil society in this process.

This is particularly important in view of the current debate on the accession of several transition countries to the European Union. Not many critical voices can be heard in these countries referring to the undue speed of the accession process; those to be noticed are often associated with the supporters of the previous regime. For the majority, accession has become a symbol of achievement and a matter of national prestige. Real preoccupation with the social protection issue is felt more strongly in certain circles within the Union. The danger of lowering European standards in this field comes only partly from the economic weakness of prospective new members; it derives more importantly from EU accession procedures, which - in spite of social cohesion rhetoric - are only interested in the financial aspects of social protection institutions. And yet it would seem to be a matter of common sense that for well-balanced and sustainable development (to use a fashionable term), targets should be set on both the economic and the social side of the balance.

Social budgeting

Over the past decade, transition countries of central and eastern Europe have achieved undeniable progress in restructuring their social protection systems. After the years of crystal gazing, public debate is again moving closer to social security planning, a subject that has been abandoned since the outbreak of postwar economic crises. But, today just as much as 30 years ago, social budgeting is not a panacea devised to solve all problems; it is only an important tool designed to help governments in their task of competently running the social protection sector of modern society. The best model will be of little use unless there is a political will on the part of governments to proceed with the development of coherent social security concepts and corresponding policies.

The 1990s witnessed an increasing diversity in the response of transition countries to the challenge of economic transformation. From what originally was only a set of measures designed to cushion its adverse impact on the population, social protection has again become a policy goal of fundamental importance for further development. The more these countries advance towards the normalization of their societal environment, the clearer it becomes that the adaptation of their social security systems to new material and cultural conditions of life in a global world will take one full generation. But it also means that, within this time span, the countries concerned should be able to contribute, on the strength of their unique experience, to the universal search for improved ways of living in society.

(For further information on issue Nos.2-3, 2001 of the International Social Security Review, "Central and eastern Europe: Transition and beyond", see "Media shelf" on page 34.)

¹ Regional brief on central and eastern Europe in Colin Gillion et al., eds.: Social security pensions: Development and reform. Geneva, ILO, 2000, p. 554.