3

Social security and the institutional approach

In this chapter the main object of this study, social security, is delineated from a theoreti-
cal perspective. A number of questions on this issue were formulated in the Introduction,
and the topics to be discussed here derive from these. In §3.1 some traditional defini-
tions of social security as a theoretical notion are discussed and compared. Subsequently
the main elements of the theoretical analysis of institutions in the previous chapter are
applied to social security. §3.2 demarcates the concept from this institutional perspec-
tive. A number of specific types of social security rules are then described, as well as the
3
actors to which they apply (§3.3). The way in which actors generally acquire formal and
informal institutions was discussed extensively in the previous chapter. This is elabo-
rated in §3.4, which focuses on the rather ‘undersocialised’ character of social security
rules. §3.5 sketches various models of rule-driven interaction that may occur in social
security. A discussion follows of the theoretical results of such behavioural exchanges,
with the emphasis on the collective consequences (§3.6). The process through which
social security rules arise and change is elucidated on the basis of a historical example:
the transition from largely informal to predominantly formal systems (§3.7). The final
section sets out the main conclusions.

3.1 Traditional definitions of social security1

While several of the institutions to which the concept refers have a long history (espe-
cially in poor relief ), the notion of ‘social security’ itself is a fairly recent one. The earliest
examples of use of the term date from the 19th century. In a speech to mark the independ-
ence of Venezuela, Simón Bolívar (1819) pronounced that 2:
El sistema de gobierno más perfecto es aquel que produce mayor suma de felicidad posible,
mayor suma de seguridad social y mayor suma de estabilidad política.

The concept was also used in the proclamation of the first national congress of the Ital-
ian Labour Party (1894) and in a decree issued by the Council of People’s Commission-
ers of the Soviet Socialist Republic (1918) (see Veldkamp, 1978: 1-2). However, the actual
starting point lay in the us Social Security Act of 1935. This scheme, introduced as part of
President Roosevelt’s New Deal, was initially called the Economic Security Act, but follow-
ing a number of amendments during the passage of the bill through Congress it was pro-
posed that the name be changed. The term ‘social security’ referred simply to all issues
covered by the scheme, and reflected the fact that through the Act society was providing
some degree of economic security to its citizens. The Act aimed to protect insured workers
in industry and commerce against the major “hazards and vicissitudes of life”; and, in the
midst of the Great Depression, to guard society against the widespread poverty and social
unrest that could result from mass unemployment.

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 The Atlantic Charter (1941), in which Roosevelt and Churchill set out the usa’s and Britain’s
shared objectives of post-World War ii policy, also used the concept. Its fifth principle
aims
[...] to bring about the fullest collaboration between all nations in the economic field with
the object of securing, for all, improved labour standards, economic advancement and social
security.

In the Beveridge Report the term is used as an overarching concept to describe the three
collective methods of covering the economic risks of households: “social insurance for
basic needs; national assistance for special cases; voluntary insurance for additions to the
3
basic provision”. In the report, social security refers in particular to the body of income
regulations, but it also implies care and reinsertion (Beveridge, 1942: 120):
The term ‘social security’ is used here to denote the securing of an income to take the place
of earnings when they are interrupted by unemployment, sickness or accident, to provide for
retirement through age, to provide against loss of support by the death of another person, and
to meet exceptional expenditures, such as those connected with birth, death and marriage.
Primarily social security means security of income up to a minimum, but the provision of an
income should be associated with treatment designed to bring the interruption of earnings
to an end as soon as possible.

In 1944 the International Labour Organisation, which had been charged with working
out the detail of the social objectives of the Atlantic Charter, published a report entitled
Approaches to Social Security. It contains one of the oldest substantive definitions of the con-
cept (ilo, 1944: 80):
Social security is the security that society furnishes, through appropriate organisation,
against certain risks to which its members are exposed. These risks are essentially contin-
gencies against which the individual of small means cannot effectively provide by his own
ability or foresight alone or even in private combination with his fellows. It is characteristic of
these contingencies that they imperil the ability of the working man to support himself and
his dependants in health and decency. Accordingly, as the State is an association of citizens
which exists for the sake of their general well-being, it is a proper function of the State to pro-
mote social security. While all State policy has some bearing on social security, it is convenient
to regard as social security services only such schemes as provide the citizen with benefits
designed to prevent or cure disease, to support him when unable to earn and to restore him
to gainful activity. Not all such measures, however, can be considered as affording security.
For security is a state of mind as well as an objective fact. To enjoy security, one must have
confidence that the benefits will be available when required, and, in order to afford security,
the protection must be adequate in quality and quantity.

Following these publications ‘social security’ became the umbrella term used to denote
both the post-wwii national provisions and the older social insurances and poor relief
arrangements3. The European Union, in particular, uses the related concept of ‘social
protection’, which has a similar meaning4.

In current scientific literature social security is delineated in various ways. The more com-
mon approach equates social security to the collective instruments which under certain

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 circumstances offer income protection in the form of benefits and provisions. There is
also a broader approach in which social security serves other ends as well, is not limited
to what the government provides, and is not confined to awarding income entitlements
in cash or in kind. The main elements of both traditions will be discussed below.

3.1.1 The narrow approach

When interpreted in sensu strictu, social security is often regarded as the entire body of
government provisions aimed at providing a cushion for private households which as a
result of specific events or circumstances have ended up in a weak income position. The
3
following elements characterise this interpretation:
- The objective of social security is to offer a certain degree of income protection;
- The instruments used to achieve this goal comprise social insurance and national pro-
visions regulated by law;
- The main intervention implied in these instruments is to provide benefits in money or
in kind;
- Social security focuses on specific, clearly defined risks.

These four aspects of the narrow approach of social security are discussed in more detail
in the rest of this section.

Income protection as an objective

According to Deleeck (1991: 18), modern social security has a dual income protection
purpose: it has to guarantee a minimum income for everyone, and in addition it has to
maintain the existing standard of living to a certain degree. Historically, the ‘universal
minimum income’ goal supplanted the ‘income continuity’ objective. The main purpose
of the pre-wwii system of social insurances was to maintain the standard of living of the
working population to a certain extent. Some later authors still regard income continuity
as the primary objective of social security, arguing that this should be assured as far as
possible for all citizens. This is expressed for example in Laroque’s (1966: 84) definition
of the concept:
A guarantee by the whole community to all its members of the maintenance of their standard
of living, or at least of tolerable living conditions, by means of a redistribution of incomes
based upon national solidarity.

In the wake of the Second World War, however, the goal of assuring a minimum level of
income for all became predominant. In the Atlantic Charter the hope was expressed that
after the War, “all the men in all the lands may live out their lives in freedom from fear
and want”. In the Beveridge Report, the universalistic principle was given shape in the
form of a blueprint for post-war social security, which was intended to guarantee “the
abolition of want” for the entire British population5 (Beveridge, 1942: 7-9). The Van Rhijn
Commission (1945/1946: part I, 13), which was charged with drawing up general guide-
lines for the Dutch system after the War had ended, defined social security as

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 A body of rules whose intended purpose is (a) to compensate wholly or partly loss of income
arising from certain specifically defined risks (such as illness, old age, etc.) or the additional
expenses brought on by certain events (e.g. an increase in family size); and (b) to provide med-
ical and nursing care as well as the opportunity for rehabilitation.

On reading further it becomes apparent that social security is intended primarily to

meet situations of financial uncertainty and, in line with international developments at
the time, should focus on “providing indemnity against want”, or providing protection
against poverty for all inhabitants.
Deleeck’s ‘dual objective’ was present in many of the collective social security systems
3
that actually emerged after the Second World War. In spite of their marked structural dif-
ferences (which will be discussed in chapter 4), the modern schemes often guaranteed
both a minimum income to the most vulnerable groups, and some kind of income conti-
nuity to the working population.

The instruments: social insurance and national provision

The social security systems which evolved in the 20th century were generally a hybrid form
of the ‘pure’ models of social insurance and national provision (cf. table 3.1). Social insur-
ance is also referred to as the ‘Bismarckian’ model of social security, which developed
in the later part of the 19th century in Germany. Historically, this system represented
an important change: certain risks – initially mainly old age, illness and occupational
accidents – that had previously been the responsibility of the individual or the local and
church community were now covered by collectively funded arrangements. The need for
this state interference was argued in both negative and positive terms. On the one hand
a stronger government role was regarded as indispensable for combating certain social
ills (poverty, social unrest), while on the other it was considered as a means of supporting
the process of nation building. For the rising working classes and the poorer sections of
the bourgeoisie (such as the Protestant kleine luyden in the Netherlands), state interven-
tion was moreover one of the instruments for achieving their emancipation. In Western
Europe, the struggle to achieve statutory protection for socio-economic risks ran largely
parallel to the controversies on universal suffrage and the right to education for all chil-
dren.
The primary objective of social insurance is to ensure continuity of income, to main-
tain the existing standard of living at a certain level. It is aimed at a limited target group,
generally employees in a specific sector. The coverage provided by social insurance is
limited to events that are actuarially insurable; selection of risks is unavoidable, which
means for example that someone who is already ill can be excluded from a disability ben-
efit insurance scheme.
Social insurance entitlements (either in the form of cash benefits of benefits in kind)
depend on two things: the contributions made by the insured parties – without payment
of contributions there is no entitlement to benefit – and the extent of the loss suffered.
The principle of equivalence means that there is a causal link between contribution,
potential and actual risk, and benefit level, sometimes referred to in the literature as the

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 Table 3.1
Social insurance and national provision: pure model s

Pure model of:

 Social insurance
Target group selective (employees in various sectors)
Covered risks individual insurable risks
(individual risk selection)
Benefi t level dependent on own contributions and
extent of loss suffered (equivalence)
Funding source earmarked contributions from employers
and employees
Contribution level based on actuarial risk
(contribution differentiation)
Funding method capital fund or pay-as-you-go among
employers and employees
Organisational structure autonomous organisations per sector,
non-governmental (with official recognition);
one body for benefi t payments and collection
of contributions
Responsibility for benefi t autonomous fi xing of premiums and benefi ts
and contributions levels by administration
Administration perspective mainly endogenous (insurance principles)
Relation with other policy self-contained, no connection with other
sectors policy areas
Supervision self-regulation, insurance autonomy
National provision
universal (all citizens)
risks considered to be a collective
responsibility (no individual risk selection)
dependent on neediness of applicants;
possibly means-tested
general revenue or earmarked contributions
from entire taxable population
3
based on ability to pay
(solidarity principle)
pay-as-you-go (apportionment) among
taxable population
limited number of (semi-)government
organisations;
benefi t payments and collection of
contributions may be split
central government sets contribution
and benefi t levels
mainly exogenous (general interest, clients)
explicit ties with health care, education, etc.
independent supervision by separate
(semi-)government agency

Sources: Veldkamp (1984); Geleijnse, Vrooman & Muffels (1993); adapted

‘causality triptych’6. Social insurance is funded by the collection of contributions (pre-

miums) from the employers and employees concerned. The amount of the premiums is
geared to the actuarial insurance risk, and can therefore differ from one sector of indus-
try to another, between age groups, etc. The total premium required may be apportioned
among the individual participants of the scheme so that current contributions are used to
pay current benefits (pay-as-you-go schemes), or reserves may be built up to cover future
financial obligations (funded schemes). The administration of social insurance regula-
tions is placed in the hands of autonomous organisations for each branch of insurance.
These organisations collect the premiums and distribute the benefits. This process takes
place purely from an endogenous insurance perspective: benefits are paid in accordance
with the policy conditions, without considering the general interest or social position of
the insured parties.
Social insurance is regulated by law, but need not be administered directly by the
government. This ‘insurance autonomy’ is reflected among other things in the autono-
mous fixing of the contribution level by the agency concerned, and the absence of inde-
pendent supervision. To the extent that supervision does take place, it is regulated by the
sector itself, or possibly by a separate body with a limited mandate.

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 National provision is an exponent of the ‘Beveridgean’ perspective, after the influential
report drafted during the Second World War at the request of the British government.
This too marks a turning point in thinking on social security. After the economic crisis in
the 1930s, the misery that the War visited on the people and the threat emanating from
rising Communism, it was considered desirable to increase government responsibility
for the welfare of the population. State intervention to ameliorate acute social ills was
no longer enough; what was needed now was to establish the principle of government
responsibility to offer all citizens security of income, regardless of the contribution they
had made to society in the form of their labour and social insurance premiums7.
The system of national provision focuses on the minimum income goal, and there-
3
fore seeks to guarantee a certain threshold amount, usually graded by various household
types. The entitlements are universal in nature: all citizens who fall within the terms may
apply for it. There is no risk selection because the minimum income guarantee applies to
risks that cannot be borne by every individual, and therefore is a collective responsibility.
The amount of the benefit does not depend on the contribution paid or the extent of the
loss suffered, but on the neediness of the applicants. The right to benefit is accordingly
sometimes made dependent on an assessment of actual need through means testing.
The scheme may be financed either out of the general revenue (taxation) or through ear-
marked contributions from the entire taxable population. Where contributions are lev-
ied, a key difference compared with the social insurance model is that the amount of the
contribution is not based on the insurance risk, but on the ability of the contributors to
pay, the ‘solidarity principle’. Generally an apportionment method is used to determine
the contribution levels: the estimated amount needed in order to pay benefits in a given
year is divided among the entire taxable population. A contribution-based provision
without means testing is regarded as a form of national insurance; a means-tested scheme
that is funded from general revenue is designated as national (social) assistance.

Organisationally, national provisions are administered by a limited number of government

or semi-government agencies. Collection of contributions and payment of benefits may
be kept separate, for example split between the tax authorities and a benefits agency.
The exogenous perspective of the collective interest and the clients drives the admin-
istration of national provisions; it is also regarded as desirable to establish a connection
with other policy sectors, such as health care and education. There is powerful independ-
ent supervision and close financial control (e.g. by an Audit Chamber). Government and
Parliament play an important role in the national provision model: the level of contribu-
tions and taxes, as well as the amount of the guaranteed minimum income, are fixed at
the national level.

In practice these models do not occur in their pure forms. Many social insurances have
acquired provision-like features over time, for example due to a broadening of the target
group, the introduction of need elements in determining the level of benefits, and more
attention for the social implications of awarding benefits and collecting contributions.
Conversely, insurance elements often crept into national provisions; the covered popula-

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 tion may be limited (e.g. by restricting survivor’s benefits to older widows or widows with
young children), benefit levels may be made dependent on the number of years resided
in the country, etc.

Providing benefits as the main intervention

In its narrow sense social security consists mainly of transfers in the form of money or in
kind. The income security which is the aim of the statutory systems of social insurance
and national provision is achieved primarily by providing households with financial sup-
port and compensations when they have difficulty in meeting certain costs. This empha-
sis on the ‘benefits’ side of social security is illustrated by the definition formulated by
3
Halberstadt (1976: 22‑24), who characterises it as
The entire body of discretionary or automatic individual, financially appraisable entitlements
to a certain standard of living.

This is in fact a fairly broad definition, since it refers to entitlements which can occur
both in the form of generic transfers (old age pensions, unemployment benefit, social
assistance) and of earmarked retributions (student grants, housing subsidies, health
care, subsidies for utilising public transport, sports facilities, libraries, museums etc).
However, the focus on the standard of living suggests the monetary, compensatory char-
acter of social security is its central feature; other possible interventions, such as pre-
venting someone from becoming unemployed or incapacitated for work, or promoting
reintegration into employment, play a subordinate role. In this view, social security is
above all a monetary issue, a system that converts financial contributions into benefits
and compensations.

Coverage of a limited number of risks

In the narrow approach social security only offers income protection when certain events
or emergencies occur, also referred to as ‘social risks’. Generally, the events covered are
those referred to in Convention No. 102 of the International Labour Organisation (ilo)
(the Social Security (Minimum Standards) Convention, 1952). This is a limitative summary; social
security incorporates the provisions that come into effect when households have insuf-
ficient income or have difficulty in meeting costs as a result of specific events8. These
‘contingencies’ are:
– Survival beyond a prescribed age, to be covered by old age benefit;
– The loss of support suffered by a widow or child as the result of the death of the bread-
winner (survivor’s benefit);
– Responsibility for the maintenance of children (family benefit);
– The treatment of any morbid condition (including pregnancy), whatever its cause
(­medical care);
– A suspension of earnings due to pregnancy and confinement and their consequences
(maternity benefit);
– A suspension of earnings due to an inability to obtain suitable employment for pro-
tected persons who are capable of, and available for, work (unemployment benefit);

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 – A suspension of earnings due to an incapacity for work resulting from a morbid condi-
tion (sickness leave benefit);
– A permanent or persistent inability to engage in any gainful activity (disability benefit);
– The costs and losses involved in medical care, sickness leave, invalidity and death of
the breadwinner due to an occupational accident or disease (employment injuries).

For each of these risks the convention lays down what part of the population at least has
to be covered, the minimum level and duration of benefits, and the basic conditions for
entitlement. It also stipulates this can be achieved through social insurances or national
provisions (including social assistance; ‘indigence’ is not considered a separate risk).
3
However, the limitative summary excludes a number of risks from the domain of social
security. Events such as divorce, excessive housing costs, high transport costs, etc., are
not covered as independent items, and neither are the costs which relate to prevention
and restoration.

3.1.2 The broad approach

In recent decades wider views on social security have emerged in the literature. In this
broad approach, all the features mentioned above are extended. The objective of social
security is not only to provide income protection, but also security of work, health, and
social participation. In addition, social security instruments are not limited to collective
insurance and provisions regulated by law, and payment of benefits is not by definition
predominant; interventions aimed at prevention and restoration theoretically play a key
role. And according to this view, social security relates to more than just the traditional
social risks.
These elements of social security in sensu largo also require some explanation.

Limiting ‘human damage’ instead of income protection

In the broad approach, the object of social security is not restricted to guaranteeing a
minimum subsistence income or assuring a certain continuity of the acquired living
standard. A definition used by Berghman (1990: 6) is illustrative here9; he characterises
social security as
A state of complete (or optimum) protection against human damage.

The notion of ‘human damage’ is given central prominence in the Flemish social security
literature (cf. Viaene et al., 1990: 61‑65). Human damage means the loss of certain capaci-
ties by an individual which disrupts the relation with their social and natural environ-
ment. From this perspective, Viaene et al. (1976) define social security as
A permanent evolution towards offering the highest possible level of protection against
human damage for the highest possible number of people.

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 According to this view, social security should be focused on two theoretical forms of dam-
age: loss of income and loss of health. In order to achieve these aims social security has
three theoretical ways of intervening, or ‘modes of operation’ (Viaene et al., 1990: 65):
This evolution is sought in the first place through the prevention of health damage; secondly,
where damage occurs, through its rapid and complete restoration; and, in last and subordi-
nate place, through a policy of compensation of labour income losses, which underpins the
prevention and restoration policy.

In this definition, social security is not regarded as a complex of provisions, but as a pro­
cess of societal evolution, aimed at maximising protection levels for as many people as
3
possible. Combating human damage is the primary objective: the goal of social security
is to counter an actual or potential loss of income and health (the latter is sometimes
taken to include subjective well-being as well). The demarcation of human damage is a
wide-ranging one, including not only the immediate ‘utilitarian’ losses, such as the direct
income reduction suffered by an employee who is laid off, but also the long-term conse-
quences, the implications for the social and natural environment, and the repercussions
that cannot be expressed directly in economic terms (such as a decrease of happiness).
Health is therefore defined very broadly, as a state of optimum physical, psychological,
social and ecological well-being. Characteristic of this approach is also the fact that the
aims of social security are interpreted in a dynamic and forward-looking way. Human
damage is not seen as a one-off risk that can be compensated by a single benefit payment
(income substitution based on limited causality), but as an event which can continue to
have an impact into the future, and will continue to demand attention (‘finality’).

Because the notion of ‘damage’ thus tends to become all-embracing, some authors advo-
cating a broad approach reduce the objectives of social security to a limited number of
theoretical dimensions (see e.g. Muffels, 1993; Berghman & Verhalle, 2003). The purpose
of social security is then to correct losses in terms of:
a) income,
b) employment, and
c) health and social participation.

As a consequence, social security cannot focus solely on the traditional income protec-
tion functions, but also has to seek to increase labour market participation and to achieve
an optimum state of health and social integration. In principle these dimensions are not
independent of each other. People who become medically unfit to work not only suffer
a deterioration of their health but also lose their job, part of their income, their social
contacts at work, and the social status and social integration that being in employment
brings.
However, the various objectives may be difficult to achieve simultaneously in practice.
Geleijnse et al. (1993: 28-38) refer in this context to ‘policy contradictions’, implying that
seeking to achieve one objective cannot always be reconciled with realising another:

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 – If the income security objective is maximised and benefit levels are high, the incentive
for beneficiaries to look for work may be limited, and it may become too expensive
for employers to take on low-skilled workers. In addition, some groups of recipients
may not be regarded as meriting such high benefits; they then risk being stereotyped
as scroungers and lazybones, and they may consequently become isolated from main-
stream society. Maximising the income security objective can thus lead to an inad-
equate fulfilment of the objectives of securing employment and social integration;
– If on the other hand policy efforts are directed towards maximising participation in
employment, for example by keeping benefit levels very low and regarding all work as
in principle appropriate for everyone, this can undermine the objectives of guarantee-
3
ing income security, health and social participation. Groups which find themselves
unable to acquire work are then in danger of ending up in structural poverty (because
of the low benefit levels), while people may also feel compelled to accept jobs that
could harm their health or social life (hazardous or strenuous work, occupations that
do not reflect their training and capacities, night shifts);
– And finally: maximising health and social participation can undermine the income
and employment objectives. An example might be a medical examiner who too readily
declares someone unfit for work because this is the best solution given their current
health status. Such people thus lose their position on the labour market and may have
considerable difficulty finding work again at a later date. The disability benefit in most
cases will be less than the previous earnings, and in the long run the income loss may
become even greater, due to missed career opportunities and, possibly, as a result of
the limited indexing of benefits.

This implies that social security can at best aim for a simultaneous optimisation of the
objectives of income security, security of employment, and security of health and social
participation. Precisely where this optimum lies is socially and historically variable,
bearing in mind Coleman’s view that there is no such thing as a universal “right division
of rights” (see §2.4).

Not only social insurance and national provisions

Veldkamp (1978, 1984) has argued that social security should not be equated with the
existing systems of social insurance and national provisions. In his view all schemes and
arrangements – both collective and individual – aimed at securing the continuity of an
existing standard of living form part of social security. He uses the following extensive
definition (Veldkamp, 1978: 4):
Social security [comprises] the whole complex of institutions and provisions aimed at guar-
anteeing a certain standard of living [...] by substituting income as far as possible where the
existing source of income disappears and by compensating directly or indirectly for costs
which are difficult to bear [... as well as the institutions and provisions] aimed at removing as
far as possible the causes of the inadequacy or loss of income. [It thus includes] not only the
traditional social insurance and other social provisions, such as social assistance schemes,
but for example also the system of housing subsidies, employment policy, student grants, and
so on. Wherever a system of income guarantees, income substitution and income comple-
mentarity exists, this must be regarded as social security.

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