Social Spending: Europe and the World

Europe’s social programs are well-known for their generosity. The recent recession, however, has European government’s rethinking the cost of these programs. We wonder: What percentage of world spending on social programs does Europe currently account for?

A. 7%
B. 20%
C. 54%

A. 7% is not correct.

The European Union — which has 28 member countries after Croatia joins in July 2013 — has a total population of 503 million. That accounts for 7.1% of the world population.

Among the larger countries in Western Europe, Germany, France, the United Kingdom and Italy each account for more than 5% of total world spending on social protection and assistance programs, according to calculations by the World Bank.

All four of these countries support some form of near-universal health coverage for their citizens. Germany, France and Italy also offer free post-secondary education. The prosperous nations of Western Europe also provide generous pension benefits, unemployment insurance and other social assistance programs.

Germany — Europe’s largest nation in terms of both population and economy — is the continent’s biggest spender on social protection programs. The German government’s social spending is equal to 12.6% of the world total, even though this nation of 82 million represents just 1.1% of the world population.

However, government spending on social protection programs varies significantly across the EU. The ten Eastern European nations that were once in the Soviet sphere — including Poland, Hungary, Romania and Lithuania — cumulatively account for less than 3% of total world spending on social programs.

B. 20% is not correct.

With a cumulative GDP of $16.4 trillion, the EU accounts for 21.3% of the world economy — or three times its 7% share of world population. Its $16.4 economy is 8% larger than the $15.2 trillion U.S. economy — and 45% larger than China’s $11.3 trillion economy.

With 4.5% of the world population, the United States accounts for almost 19% of world spending on social protection programs. While Germany’s proportion of spending on social programs is almost 12 times larger than its proportion of the world population, U.S. spending on social assistance programs is just over four times larger than its share of world population.

Despite the passage of President Obama’s health care reforms and the popularity of social protection programs such as Social Security, Medicare and Medicaid, these programs remain vulnerable to budgetary pressures.

Spending on social programs varies greatly between the largest countries in Asia. Japan accounts for 11.4% of world social spending, while China contributes 2.5% and India just 0.6%, according to World Bank data.

C. 54% is correct.

The 28 nations of the European Union account for 54.2% of world spending on social protection and assistance programs. In other words, the European Union spends more on social protection and assistance programs than all other nations and regions combined.

The EU’s share of global spending on social programs is thus close to eight times its share of the global population — and two-and-a-half times its share of global GDP.

Following a prolonged period of recession and slow growth following the global financial crisis, however, Europe is facing the prospect that its generous programs will be difficult to sustain for future generations.

In Germany, these budgetary pressures are compounded by negative population growth. The country’s current population of 82 million is expected to fall to 75 million by 2050, meaning there will be relatively fewer workers paying taxes to finance the country’s social programs.

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