Overview of Means testing in MISSOC Countries, November 2013

Even though, as demonstrated by Eurostat data, the bulk of social protection benefits in Europe are non-means-tested, all MISSOC countries, to some degree or another, resort to means testing in social protection. The picture of means testing in Europe is very diverse, which may be explained by differences in cultural and political environment, economic situation and the background of social protection structures.

On the basis of the legal information in the MISSOC Tables, the MISSOC Analysis portrays the different aspects of means testing in the MISSOC countries, and attempts to identify patterns and trends. Before doing so, the report sketches the context of means testing and clarifies its articulation with such concepts as social insurance, universality and non-contributory benefits. Attention is also paid to the rationale of means testing and the potential perverse effects associated with its use. The report uses a broad definition of means testing, covering not only situations where entitlement is made conditional upon the beneficiary’s income and/or assets falling below a specified level, but also cases where the benefit amount is inversely dependent upon the beneficiary’s resources.

The core of the report is dedicated to an examination of the scope of means considered (which and whose means tend to be taken into account?), to an analysis per branch (which branches are more or less prone to means testing?) and to an analysis of the impact of exceeding the threshold on the benefit entitlement and/or amount.

In terms of the scope of means ratione personae, for example, the report finds that the collective approach prevails; for the purpose of the means test, a vast majority of European countries require that both the claimant’s means and that of his/her family are to be combined. From the analysis per branch, it follows that the means test is a tool for social assistance everywhere in Europe, whereas insurance/universal schemes are less inclined to use it. Interestingly, two risks covered by this report are more associated with the means test: family and sickness (benefits in kind).

Another tendency relates to the impact of threshold excess on the benefits. On the basis of a distinction made in this report between the “cliff edge” and “decrease” methods, it seems that the latter is largely preferred in European countries; to avoid the cliff-edge effect associated with a single, fixed means ceiling, mechanisms were developed whereby the benefit amount decreases according to the available income. The report expands on several decrease methods that are in use, notably differential benefits and the taper method.

Based on comparative legal social security data, the report acknowledges the limits of the research in the face of the particular complexity of the topic. To carry out a complete analysis, tax policies, economic reforms, labour law mechanisms and labour market structure, family and social organisation are all national elements which need to be taken into account. Input from disciplines other than the legal field, in particular social policy and statistics, would be required.

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