Quantitative model family

ILO actuaries were in the vanguard of the development of actuarial techniques for social insurance schemes. As national social protection systems are long-term commitments of society, the objective of the methodology is to develop a long-term view of possible economic, financial and fiscal developments in a particular country, which permits the assessment of long-term commitments and whether they are fiscally and economically sustainable. ILO FACTS PC-based models on pensions, health care financing and unemployment benefits, separately or together with the social budget model will thus clearly help constituents and practitioners improve their social security schemes. The models can also be used to evaluate:

• alternative options for the extension of coverage at the national level and
• the economic, financial and fiscal viability and social relevance (in terms of maximum coverage and adequacy of affordable benefit levels) of unemployment benefit schemes in emerging market economies.

ILO FACTS regularly updates and improves the set of models which have been developed. The methodologies used are presently embedded in a family of models.

The ILO model family

• Population projections : ILO-POP... produces population forecasts which match the standard UN methodology for demographic projections on the basis of an initial population structure combined with mortality, fertility and migration assumptions. Since it operates on single ages and forecasts for several decades the model is also used as a standard input producer for the ILO actuarial pension model and the ILO social budget model which require long-term population forecasts. A specific population forecasting model has recently been developed to take into account the HIV/AIDS epidemic and its effects on mortality.
• Social budgeting : ILO-SOCBUD... consists of four submodels : the labour force submodel (ILO-LAB) and the economic submodel (ILO-ECO) which together provide employment and earnings data to the social expenditure submodel (ILO-SOC). ILO-SOC calculates functional expenditures (expenditure by function of social protection) for the major social protection expenditure subsystems (pensions, health, etc.). ILO-GOV then aggregates the functional expenditures into government accounts and institutional accounts of the main programmes of social security systems.
• Pension model : ILO-PENS... is an actuarial pension model which is traditionally used to undertake stand-alone long-term financial and actuarial projections for national pension schemes. It provides the estimated expenditure and insurable base and builds long-term accounts based on a specific financial system. It can also be used as input producer for the pension part of ILO-SOCBUD.
• Wage distribution : ILO-DIST... was developed to generate data on salary distribution. It is used primarily for pension projections, but as social protection systems are redistributive, it is necessary to take into account the income distribution when providing policy advice on the design and financing of such systems.
• Health model : ILO-HEALTH... is the latest arrival in the ILO social protection modelling family and is still in the process of being tested. It is designed as a tool to undertake stand-alone assessments of the financial status and development of national health-care schemes. It can also be used to generate inputs for the health part of ILO-SOCBUD.