Trillions spent on health, safety net credited with narrowing EU wealth gap

Over the past two decades, EU spending on welfare programs has increased by billions of euros.

(CN) — The top 5% of the richest people in the European Union earn almost five times as much as the bottom 5%, but its statistics agency found that social transfers — including welfare and sickness benefits — reduce income inequality by nearly 60%. Analyzes of healthcare and child benefits published by Eurostat on Monday reveal parallels between a strong social safety net and lower income inequality.

Similar to the American concept of welfare, Eurostat defines social protection benefits as “transfers, in cash or in kind, made to relieve households and individuals of the burden of one or more social risks or needs”.

Using standardized currency, the average person in the EU has 17,871 units of disposable income, ranging from 7,724 in Romania to 28,675 in Luxembourg. Luxembourg also ranks among the highest in the EU for healthcare and other benefits.

In 2019, the EU spent €1.1 trillion ($1.14 trillion) on health benefits, nearly 8% of GDP and 30% of total social security spending. More than 40% of benefits went to hospital care, while 30% went to outpatient care and 14% to paid sick leave.

At nearly 4,000 euros ($4,100) per person, Germany spends the most on health care per person, followed by Luxembourg and the Netherlands. At 10% and 9%, Germany and the Netherlands also spend the highest parts of GDP on health benefits.

At the bottom end, Bulgaria, Latvia and Greece spend less than €1,000 ($1,025) per person.

Bulgaria, Romania and Lithuania report the largest income gap among EU member states. In the second highest category are Greece and Latvia.

According to the National Health Expenditure Accounts, approximately 20% of US health care spending ($830 billion, or €850 billion) is covered by federal Medicare and 16% ($671 billion, or €655 billion) by Medicaid for people with low income families.

Other social benefit spending in the EU includes programs for the elderly and survivors, disability, unemployment, housing and social exclusion, and families and children.

EU spending on social protection programs covering family and child benefits exceeded €315 billion ($323 billion) in 2019, about 2.3% of the region’s GDP. Despite accounting for 8.4% of welfare spending, child and family protection rose from 27% to 39% in the two decades after 2000, as the number of children in the EU fell by 8%.

By comparison, the US spends 7% of its federal budget ($482 billion or €470 billion) on children. According to the National Bureau of Economic Research, the US spent $200 billion in 2016 on programs that provide assistance to low-income families with children.

The increase in benefits in the EU followed increased costs of benefits, maternity benefits and childcare.

“The increase in childcare costs is perhaps not surprising given that EU employment policy strongly promotes the importance of affordable childcare to allow parents to work (if they wish) while raising family,” the report explained.

Using a purchasing power standard that takes into account the different costs of living across member states, the average EU country spends 3,875 units per child. Luxembourg spent the most per child, 12,237 standard purchasing power units, and allocated the highest part of the budget for social benefits, 15%, to families and children.

In the other Member States, the cost per child ranges from 7,891 units in Germany to 481 units in Cyprus.

Ranking at the top, Luxembourg, along with Germany and Denmark, each spent 3% of GDP on family child benefits in 2019. At 0.8%, Malta spent the least on family child benefits, followed by Cyprus , 1%, and Italy, 1.1%.

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