The OECD Social Expenditure database (SOCX) was created to meet the growing demand for data on social policies. It helps analyse trends in social spending and provides reliable and comparable statistics on public and private social spending, even at detailed program levels. It also looks at how tax systems affect social spending, which varies across countries. SOCX covers all 38 OECD countries, with some data going back to the 1960s. Updates are expected in early 2025.
Social spending
Social spending aims to support individuals facing challenging circumstances by redistributing resources across households. It includes providing financial assistance and services to those experiencing poverty, unemployment, or elderly individuals who are not part of the workforce. Additionally, social spending includes funding for healthcare benefits, family assistance programmes, and housing support initiatives.
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Key messages
With the outbreak of the COVID-19 pandemic, the public social spending-to-GDP ratio increased from 20% of GDP in 2019 to 23% in 2020 across the OECD on average. This surge in the spending-to-GDP ratio was largely (over 80%) due to an increase in spending rather than a decline in GDP. After the initial rise with the outbreak of the pandemic, spending-to-GDP ratios declined almost as rapidly as they increased: public social spending fell from 23%, on average across the OECD, in 2020 to an estimate of 21% in 2022.
Private social spending – mainly health insurance and pensions -- is worth about 3.1% of GDP, on average in the OECD; it comes in addition to public social spending which amounts to about 21% on average. At around 12-13% of GDP, private social spending was highest in the Netherlands and the United States in 2019.
Context
Public social spending
The size of welfare states differs markedly across OECD countries. At just over 30% of GDP in 2022, public social spending was highest in France and Italy, but a quarter of OECD countries devote around 25% or more. In contrast, public social spending in countries such as Colombia, Costa Rica, Ireland, Korea, Mexico and Turkey, accounts for 15% of GDP or less.
It takes some time for social protection systems to develop into comprehensive welfare states. Across the 17 OECD countries (which were members at the time and for which data is available) public social spending to GDP-ratios more than doubled between 1960 (7.9%) and 2000 (17.9%). This trend also played out in other countries, but at a later stage: for between 2000 and 2020.
Private social spending
Private social spending refers to the financial resources allocated by non-governmental entities, typically businesses and organisations, to address social needs and provide support or services to individuals or communities. Private social expenditure can be mandatory (e.g. compulsory private health insurance) or voluntary (e.g. pensions benefits based on past voluntary contributions).
In 2019, private social spending amounted to, on average, 3.1% of GDP across the OECD. It was largest in the Netherlands (13.1% of GDP in 2019), the United States (12.5%) and Switzerland (11.6%); whilst it amounted to 5 to 7% of GDP in Australia, Canada, Iceland, and the United Kingdom.
The tax system can have a big impact on social spending
Tax systems can have a big impact on social spending levels as some governments levy direct tax on benefit income or put indirect taxation on income through sales tax . On the other hand, governments can also use the tax system to pursue social policy objectives, such as by offering tax breaks to help low- to moderate earners (e.g. the Earned Income Tax Credit in the United States) .
The “net tax effect” of these features can be considerable, particularly in European countries. It amounted to 5% of GDP or more in Austria, Finland, Greece, Italy, Norway and Sweden and highest at 7.6% of GDP in 2019 in Denmark. It is smallest in Korea, Mexico and Türkiye at below 0.5% of GDP.
Total social spending: The full picture
Considering both public and private social spending and the impact of tax systems on social spending gives a very different picture of countries’ social spending levels than the usual comparison based on gross public spending alone.
For example, the size of private social spending in the Netherlands moves it up the ranking by 24 places. The United States, with a small “net tax effect” and much larger private social spending (including health and pensions), moves from 23rd in the ranking of gross public social spending to 2nd place for net total social spending.
France’s ranking does not change because both private social spending and the net tax effect are moderate compared to other countries.
