All lessons focus on the situation in European Small States involved in this Erasmus+ project. These are, in alphabetical order: Andorra, Cyprus, Estonia, Iceland, Liechtenstein, Luxembourg, Malta, Montenegro, and San Marino.

Country reports for this lesson were presented at the Erasmus+ meeting on 29 May 2020 in Montenegro (virtual format).

... let us see if you have ever reflected about the content of this lesson. So we start with a few introductory questions. You will receive answers as the course progresses.

In the following chapters we will go into some aspects of European small states in more detail. Please note that you will find more details in other lessons.

You can learn more about:

• Social security systems
• Poverty in the small states
• Unemployment
• Most vulnerable groups

At the end of this lesson, we also offer numerous links which you are welcome to select to deepen your knowledge. There you will also find presentations on all our small states with additional in-depth information regarding this lesson.

It is self-evident that all states have some kind of social security system. This usually includes various elements such as health insurance and health care, old-age benefits, support for people with disabilities or the unemployed, protection against poverty, support for children and families, disability benefits, possibly also minimum wage regulations and other social security measures.

It is not easy to compare the social systems in the various European small states, as they differ significantly in their tradition and development of social policy, the financial resources available and many other aspects.

For those affected, it makes a big difference whether individual elements of social security are designed according to the Bismarck or Beveridge model. The Bismarckian model focuses strongly on the employed, whereby social benefits are dependent on the contributions previously paid in. The Beveridge model, on the other hand, includes the entire population and aims to guarantee social security irrespective of income and contributions paid in.

Below we present the important pillars of social security in the individual European small states in brief, as they are mentioned in the project contributions (for more information see the slide sets on the individual states at the end of this lesson).

Andorra. The design of the general, administrative, financial and technical regulations of the Social Security of Andorra is mainly inspired by the French Social Security system, but being a much more simplified regulation than the French one. Moreover, development of social and health policies in Andorra is inspired by the neighboring models such as the Catalan, Spanish, and French models, always adapted to the Andorran specificities.

Cyprus. The national social policy is shaped (a) by the country's turbulent political history, (b) the influence of the colonial/post-colonial context and (c) transnational developments. The tradition of strong corporatism in the regulation of social security based on tripartite agreement began to decline in recent years. Strong familialism is still in place, where family is considered as the main care-giver and locus of welfare provision, as well as residual social protection. The calculation of welfare takes note of the family situation. One has to state a delay in building a coherent national health system (introduced for the first time in 2019-2020). There is a focus on allowance benefits for targeted groups. A guaranteed minimum income benefit which is non-contributory as it is not linked to contributions by employers, workers or insured people was introduced in 2014. On the other hand, this excluded many previously eligible welfare receivers from welfare. For example, minimum income receivers are required to accept any available job in their relative fields and are automatically excluded from the system if they turn down job offers.

Estonia. Estonia represents a newly emerged welfare state.  The current Estonian welfare regime has evolved step-by-step since regaining independence in 1991. With the radical change of political and economic systems, all the welfare policies had to be reformed too. Today, the Estonian welfare regime is a combination of different approaches that is closest to the liberal model. The social protection system is characterised by contributory social security schemes, low redistribution, and the aim of stimulating labour supply and incentivising individuals to work/to seek jobs. The role of private insurance schemes and employer-provided social protection is modest.

Iceland. Iceland wishes to align itself with the Nordic welfare model in all areas regarding health, disability, unemployment, etc. The health care system is both public and private. Most other sectors of the welfare system are public. Iceland's social policy model in fact is highly influenced by the Nordic welfare model.

Liechtenstein. Liechtenstein has a broad system of social insurance and social assistance: compulsory health and accident insurance, state old-age and survivors' insurance, unemployment insurance, occupational pension insurance, social assistance, etc. Social policy is strongly influenced by developments in neighbouring countries, especially Switzerland. Corresponding legal regulations in Switzerland are usually autonomously transferred into Liechtenstein law – although monthly contributions, state subsidies et al. may deviate from the Swiss model. The state usually sets the legal framework, with implementation being carried out by state institutions (old-age insurance, social assistance, unemployment benefits) or by private insurance companies (health insurance, accident insurance, pension fund).

Luxembourg. Luxembourg traditionally has a corporatist welfare system, which has recently shifted towards traits of a universal welfare system. Any employee has to enroll in one of the welfare schemes.The welfare system is a continental (Bismarck) type welfare system managed primarily by the Centre Commun de la Securite Sociale (CCSS). It is extensive and comprises for example pensions, health, unemployment, maternity, work-related accidents, disability, a basic minimum income, child and family benefits, and long-term care insurance. 

Malta. The project report stats high levels of care, health and social assistance. The origins and philosophy of the welfare system lie in philanthropy, christian democratic ethos and third world socialism. Private practices in health and education exist alongside state provision. Most practices are at national level; but there are regional health clinics. A mixed approach to social protection is in place: e.g. mandatory social security payments for those in work, but universal minimum rates for pensions with capping, while private pensions and insurances are encouraged.

Montenegro. A mixed Bismarckian-Beveridgean system is in place. The social insurance system includes several branches, for example health insurance, pension and disability insurance, and temporary unemployment insurance. It is legacy of Yugoslavian model  which was a rather generous welfare system. Numerus social and economic problems that came about as a result of the process of transition have prevailed up to the present day, despite certain optimistic expectations. The state is the key actor of social policy. Very small influence of civil society and private sector exists.

San Marino. The nature of welfare policy in San Marino includes health, disability, unemployment, poverty, education. The social security system was established in 1955 by a government made up of Socialists and  Communists but with a favourable vote of all the political forces present in parliament. health and education were considered fundamental rights and as such free and provided directly by the state.  Since then there have been changes but their fundamental structure remains intact and is one of the founding elements of San Marino's identity. The main model or reference was the National Health System of the United Kingdom (Beveridge Plan 1942).

A good indicator of the distribution of wealth and income and the corresponding influence on living conditions is the proportion of people affected by poverty in a country. This is first measured by whether someone's household income is below 60 per cent of the median income in the respective country and thus takes into account the different income levels and cost of living in the respective state. This is referred to as at risk of poverty or social exclusion. The median income is the income where one half is above and the other half is below that line.

The data situation in this regard is weak in Liechtenstein and San Marino. For some of our small states, we can rely on the EU survey (EU-SILC) - not only member states, but also Montenegro and Iceland are partially recorded there. Andorra has its own surveys or statistics.

Of the states with corresponding data, Iceland and Andorra provide a relatively favourable picture: around 11 to 13 percent are at risk of poverty. Malta, Luxembourg, Cyprus and Estonia are above 20 per cent. Montenegro is even above 30 per cent.

Poverty risk does not say all about actual poverty, since the social security systems can prevent someone from falling below the at risk of poverty or poverty threshold (which is normally put at 50 or 40 per cent of the median income) thanks to transfer payments. Where social security is well developed, the slide into poverty can eventually be prevented completely - at least if the claims are asserted, and always only in relation to material poverty. However, if the social system is weak or does not cover all population groups equally, the drop into poverty can become a fact.

At risk of poverty rate (%)

Source: EU-SILC for Cyprus, Estonia, Iceland (2018 data), Luxembourg, Malta, Montenegro.

The time of the survey of the unemployment rate is not identical in the following table. Nevertheless, the figures give an impression of in which country unemployment is a serious or major problem, and in which states the situation on the labour market is quite favourable or even more than that.

The unemployment rate in the European small states varies between 1.8 per cent in Liechtenstein and 15.9 per cent in Montenegro. Apart from Liechtenstein, the situation also looks relatively favourable in Andorra and Malta, with rates well below 5 per cent. The unemployment rate in the other states ranges between 6.7 and 7.3 per cent, i.e. within a narrow range.

Unemployment rate 2020/2021 (%)

Source: Wikipedia.org for EU member states. Other states: knoema World Data Atlas; the Global Economy.com.

Below we provide some additional information on the situation in the individual small states.

Andorra. The unemployment rate in Andorra was only 1 per cent in the fourth quarter of 2018, when it was at its lowest, and also only 1.4 per cent in the third quarter of 2019. But then the rate rose to a maximum of 3.3 per cent in the 3rd quarter of 2020 - though still far below the level of almost all European states. Immigrants are particularly vulnerable, especially those from outside the EU.

Cyprus. Cyprus has one of the highest unemployment rates in the EU. The unemployment rate for women is about twice as high as that of men.

Estonia. The unemployment rate increased significantly as a result of the Covid pandemic. It had already led to a jump in unemployment in 2000 and 2010. People with low professional qualifications, minorities with weak knowledge of the Estonian language and people with disabilities are particularly hard hit.

Iceland. Traditionally, the unemployment rate in Iceland has been low, averaging around 4 per cent from 1991 to 2019 - even as low as 3.3 per cent if the crisis from 2009 to 2012 is excluded. the Covid pandemic again led to a sharp increase in unemployment, up to 9.9 per cent in May 2020, but has fallen back somewhat thereafter.

Liechtenstein. The unemployment rate in Liechtenstein is not only extremely low at present, but has also been so in past decades. Women and foreigners are disproportionately affected, mostly also the youngest age group. The labour market is that strong that more than half of all employees are now commuters, mainly from the neighbouring countries of Switzerland and Austria.

Luxembourg. The unemployment rate rose almost continuously from around 2.5 per cent to 7 per cent from 2000 to its previous peak in 2014, before falling back below 6 per cent. In the course of the Covid pandemic, however, the rate rose again to over 6 per cent. Almost a quarter of the unemployed are long-term unemployed; youth unemployment is also particularly high, at 23.1 per cent in 2019.

Malta. The unemployment rate has been in almost continuous decline over the past decade, reaching around 3.5 per cent in 2018/2019 - down from almost 7 per cent in 2011. The Covid pandemic has led to an increase, but not dramatic, to a maximum of 4.5 per cent. More than half of the increase was Covid-related.

Montenegro. Montenegro has the highest unemployment rate of our small states. In 2020 it was 15.9 per cent, but in 2013 it was even as high as 19.5 per cent. Young people are particularly disadvantaged and in the focus of government measures. Likewise, people with disabilities are at great risk of unemployment. There are also strong regional differences.

San Marino. At 7.3 percent, the unemployment rate is slightly lower than in 2019. 14 percent of them are long-term unemployed. Women are disproportionately affected by unemployment: They are affected about twice as often as men.

In many small states, it is named in a similar way who belongs to the most vulnerable groups. As in large states, these are often people with disabilities, migrants with low professional qualifications or lack of language skills, women and single parents, young people with difficulties in the labour market and lack of perspective, religious minorities, or sometimes the elderly. These are often particularly vulnerable and at risk of poverty or discrimination.

Nevertheless, there are considerable differences, depending on the extensiveness of social security systems, the financial power of the state, the socio-economic structure of the population, migration processes and other factors.

The special conditions in the European small states considered here are highlighted below.

Andorra. The project report states that women are at greater risk and suffer from situations of exclusion due to gender inequality in the family and work environment. Young people also have more difficulties in having a stable job and in good conditions, in accessing their own home and emancipating themselves. Older people are at greater risk of exclusion due to health problems, lack of personal autonomy, relational isolation and low income (pensions). Immigrants, especially those born outside the European Union, have fewer family and social networks (relational isolation), live in precarious employment conditions, do not enjoy all the rights of citizenship and social participation, etc., factors that increase the risk of social exclusion.

Cyprus. The project report lists a variety of vulnerable groups in Cyprus: Asylum-seekers; Victims of trafficking; Migrant workers, particularly those in abattoirs, farming and agriculture, including students who take up work irregularly or regularly to pay fees; Irregular migrants; Poor elderly; Women vulnerable to gender violence; Domestic workers; Roma; Persons with disability; Long-term and indefinitely detainees in refugee camps; Atypical and uninsured workers and single parents.

Estonia. With regard to unemployment, the project report states that the most vulnerable groups in Estonia are young people, older workers, persons with disabilities, non-Estonians and people from remote and underdeveloped areas.

Iceland. The project report lists the following most vulnerable groups: Homeless people; Immigrants; People with disabilities; Addicts; Old people.

Liechtenstein. It is criticised that the last poverty report was compiled in 2008 and that the data situation is therefore inadequate. Nevertheless, it can be assumed that at risk of poverty rather depends on social status than citizenship – a third of the population are foreigners. Following this general observation, it can be stated that women are more vulnerable than men, especially single household women; elderly, retired people are with higher probability to be at risk of poverty; persons with disabilities are mostly not included in the first labour market; and in some sectors salaries are not sufficient for life above the poverty threshold without social security transfers (which do exist); also mostly female care workers from abroad face insufficient working conditions. On the other hand, there is a very low unemployment rate.

Luxembourg. Single parents are the most vulnerable group in Luxembourg, then families with more than two children and childless singles. Expensive housing is a big risk factor, as the project report states.

Malta. The project reports with reference to a report of the Ministry for the Family, Children's Rights and Social Solidarity lists the following most vulnerable groups: children and young people; elderly persons; unemployed persons. In addition, the working poor/precariat and migrant workers and refugees must be mentioned.

Montenegro. The project reports mentions the following most vulnerable groups: Roma and Egyptian's (the most excluded category of Montenegro population because of  education, absolute poverty rate, limited participation on work market, cultural factors, etc.); people with disabilities because of social inclusion and minor participation on labor market; old age people due to negative effects to pension system as a result of demographic trends of aging population in Montenegro; young people due to employment and live conditions

San Marino. The project report states the following most vulnerable groups: one-person families which are prevalent and represent about 31% of all families - belonging to this type of families involves a greater risk of poverty. In addition to single persons, divorce or separation also leads to an increased risk of poverty.

Even more information on, for example, support for families and children, dealing with persons with disabilities or the level of government spending on social security can be found in the presentations on the individual small states. These are listed at the end of this lesson.

The financial situation of the individual small states and thus the possibility of guaranteeing state support varies greatly. This is related to the economic development of the individual states. States such as Liechtenstein or Luxembourg are in a much more comfortable position than Estonia or Montenegro, for example. However, social policy is not only influenced by financial possibilities, but is also based on traditional approaches. For example, Iceland's strongly developed social system, which is oriented towards the Nordic model, differs from the system in Cyprus, which still assigns an important role in social security to the family. In general, however, it can be said that the state plays an important role in all of the small states considered, even if legally mandated insurance and benefits are often outsourced to private providers - for example, private health insurance companies or company pension schemes.

Okay. Then let's see what you could remember from this lesson. Please tick the appropriate answer and you will see whether you are right or wrong.

Liechtenstein

The Principality of Liechtenstein
Government of Liechtenstein
Law Gazette
Social Services Office
Old Age Insurance