Understanding social security trends: an expenditure decomposition approach with application to Australia and Hong Kong. Issue 2 (4th May 2017)

• Record Type: Journal Article
• Authors: Saunders, Peter
• Is Part Of: Journal of Asian public policy. Volume 10:Issue 2(2017)
• Page Start: 216
• Page End: 229
• Publication Date: 2017-05-04
• Subjects: Expenditure growth -- demographic factor -- coverage ratio -- benefit generosity; Asia -- Economic policy -- Periodicals; Asia -- Government policy -- Periodicals; 320.6095
• DOI: 10.1080/17516234.2016.1195562
• Languages: English
• ISSNs: 1751-6234

Abstract

ABSTRACT: The social security system is a central feature of the social protection system in all countries. It provides support (generally in cash) for vulnerable groups and thus plays an important role in poverty alleviation and in income redistribution generally. In Western countries, social security expenditure accounts for a large proportion of total government social spending and continues to grow despite sustained efforts to control its growth through a variety of measures. Although social security systems are still maturing in most Asian countries, spending is growing rapidly there too, but with little apparent effect on poverty rates, raising concerns about financial sustainability and policy effectiveness. The expenditure decomposition framework was developed at the OECD in the 1970s and decomposes the growth in total expenditure into changes in three factors: external (demographic) pressures; the benefit coverage ratio; and benefit generosity (or payment adequacy). It can be used to better understand the relative importance of these factors in explaining past spending growth, to make future expenditure projections and to focus on what kinds of policy reforms are needed to keep future spending growth within prescribed limits. This paper applies the expenditure decomposition framework to examine past changes in spending on age and disability pensions in Australia, and in assistance for older people in Hong Kong. The findings illustrate the strengths and weaknesses of the approach and highlight some of the similarities and differences within and between the two countries.