Study “”Evaluation of the Quality, Structure and Development of Social Policy in Lithuania”

Findings and proposals

The purpose of the research “Evaluation of the Quality, Structure and Development of Social Policy in Lithuania” was to analyse and assess the social security system in Lithuania as well as to offer guidelines for its further development. We began the analysis by looking at general goals assigned to social security and the utility of individual means for the attainment of these goals.

It appeared that there are no clearly defined goals of social policy in Lithuania. The government’s programme outlines separate measures and vague promises “to improve the social insurance system,” “to develop social services,” “to protect children’s rights,” and the like. In “The Social Report 1997” the Ministry of Social Security and Labour defined its mission as “the co-ordination of the labour market policy, the creation of favourable conditions for safe work and adequate remuneration, and the provision of extensive support for people unable to take care of themselves due to a loss of income or health.” This may be regarded as the overall purpose of the social policy carried out by the ministry.

This goal, as you may see, is very broad and paternalist. It fails to define the role of the state in social security. The government thus gives people hope that it will takes care of them in any circumstances. In reality, however, it is unable to do so. On the other hand, such expectations can hardly be satisfied in any country, and so disappointment of social policy “consumers” is certain. Opinion polls, which were a part of our survey, suggest the same. It is time the government formulated clear-cut objectives and declared what it can do for people’s welfare and what not.

In the absence of explicit goals, the provision of social support is scrappy and fragmentary: efforts and resources are dissipated on many different needs so that no palpable results are ever achieved in any of them. If reduction of poverty were the main task of social policy, social aid would be extended only to those who really need it, rather than to those who are traditionally regarded as socially supported groups. In some cases, social policy is used to perform atypical functions: to make up for past injustice or to reward for merits (supplemental pensions), to stimulate births (family benefits), to facilitate tax collection (labour policy), and so on. It is essential to determine the principles of social aid provision and to make it more focused and well-targeted. This would help achieve a more efficient use of resources and better results.

The current social policies are oriented towards offsetting consequences rather than meeting the main purpose of any social policy, people’s material welfare. The primary concern of the state should be to create conditions for people to take care of themselves so they would not require support from the state. The most effective way to achieve this is by removing barriers to employment and economic activity. If social aid were confined to such goals, it would be tailored for those segments of the population who have no means to take care of themselves.

Many of today’s social measures integrate both social aid and insurance. The very formula of social insurance pension shows that it combines minimum retirement provision (the basic pension) and additional income linked personal earnings (a pension supplement). Likewise, widow’s pensions involve social assistance rather than insurance. Despite the fact that eligibility for unemployment benefits depends on the insurance record, the size of the benefits has nothing to do with personal earnings and thus with insurance. Such a mess of principles leave the goals in conflict. In order to rationalise the social security system, the components of social insurance and social aid should be separated and their principles should not be confused.

The provision of pure insurance payments from the social insurance system would facilitate its privatisation, that is, the transfer of social insurance to private insurance enterprises and the introduction of voluntary insurance. This especially concerns health insurance, which would be negotiated between the employer and employee: the employer would pay health allowances, buy an insurance policy or pay higher salaries. Parenthood insurance could also go private and voluntary. Given that the Lithuanian insurance market is still developing and people are not yet willing to assume responsibility, such changes would need to be gradual.

If the insurance component of social security were privatised, the state would be responsible only for providing social assistance on a means-tested basis. Naturally, these outlays would rise dramatically as compared with the present ones, but they would be offset by the shrinking need for social insurance payments.

Social assistance needs comprehensive change as well. It should be allotted only based on formal means-testing, without splitting potential recipients into categories, such as unemployed, pensioners, large families or sole proprietors. The only exception may apply to people with disabilities, who may be entitled to a higher minimum income as their expenditures are objectively higher. The experience shows that potential beneficiaries of social support are impossible to categorise. There may always occur some unpredictable circumstances which may require the provision of aid.

The level of minimum supported income should be way higher than today. They should suffice to cover daily expenses plus minimum housing outlays. However, the level of compensation of actual family income should be lower (50-70 percent instead of the current 90 percent) in order to give the recipients incentives to seek jobs and earn.

All social aid payments (compensations for heating, transport concessions, children allowances) should be combined into one social benefit and granted on a means-tested basis. At present, social benefits are paid to essentially the same groups according to different criteria and so the overall amount of social payments is much bigger than one could earn. Such a system is not only costly. It compels people to seek the status of socially supported individuals and to live on welfare.

The existing category-benefits should be scrapped as ineffective. These benefits (e.g. granted for families with children) are too small to solve the problems of inadequate family income. On the other hand, they are also granted to those who don’t need them at all. If category-benefits were abolished and the budget earmarked for them was merged with social benefit funds, the resources would be used much more efficiently. Category-benefits might remain only for orphans who do not receive state or any other assistance.

The research shows that social policy needs wholesale change. As the first step, it is necessary to define the goals of social security and the most effective means to attain these goals. Social policy is a very sensitive issue, so reforms should be carried out gradually, yet coherently.