Slow Progress in Social Welfare Budget Consolidation

Social welfare expenditures rose by 4.6 percent in 1989; as a share of GDP they fell below 27 percent for the first time in five years. Due to the favourable business cycle outlays for unemployment compensation have remained stable for the last two years, new claims for early retirement pensions, however, have not fallen significantly from their earlier peak. The old-age dependency ratio declined marginally in 1989 to 598 pension recipients per 1.000 active insured. Some 30 percent of old-age insurance expenditure is covered by federal budget subsidies, with little change in the ratio since the last cyclical trough. The real value of retirement benefits rose ¾percent in 1989, a similar increase in 1990 is brought about only by an extra cost-of-living adjustment. Net incomes of many pensioners were raised substantially by the tax reform in 1989.