Testing novel approaches: Two takes on individual activity accounts
A lever for more inclusive social protection
By Vincent Aussilloux, France Stratégie
Today’s systems of social insurance are built around a person’s status — whether they’re self-employed, salaried, or work in the private or public sector — and benefits are mostly contingent on a person’s job. In France, as in other European countries, this has resulted in a split job market consisting of ‘insiders’ who are protected and have access to many benefits; and ‘outsiders’ who shoulder the burden of job flexibility. Further, as some company benefits are tied to seniority, people working a succession of short-term contracts are unlikely to ever be able to take advantage of them.
The individual activity account seeks to break up this duality and give outsiders a chance to get a foothold in the market.
The central idea is to link benefits to the individual — rather than to their job. Every worker has an account in which his or her social benefits are accumulated in the form of points — regardless of employment status. In this way, they can carry their benefits with them even when switching employer, going freelance or taking a career break.
Currently, in the model rolled out in France, the individual activity account connects three existing accounts: for job-related training and education, days off not taken, and strenuous work. By linking them together, it provides people with more freedom and flexibility to manage their skills development needs and careers. It also allows them to combine points awarded by different authorities, e.g. federal or local government levels.
Individual accounts can also play an important role in correcting inequalities, as points can be granted to at-risk population categories. For example, young people who leave school early may receive more points than their peers who go to university, thereby allowing them to access further learning and get a leg up later on. In the same way, someone who has suffered an illness and been forced out of work could be attributed points to access training so that they can re-enter the job market once recovered.
In its essence, the individual activity account redefines and updates social protection systems to better match the needs of a society where non-standard work forms and continuous upskilling are taking on increasing importance.
Such an approach could also be rolled out at a European level. Providing every European with an individual activity account could, for instance, enable the EU to grant direct subsidies to specific categories of people for social and training programmes — thereby creating a direct link between the EU and individual citizens.
* In July 2015, the French Prime Minister charged France Stratégie with developing the idea of an individual activity account (Compte personnel d’activité or CPA) to store social benefits. Based on France Stratégie’s report, and following consultations with unions and employers’ associations, a bill was drafted and the CPA has been in place since early 2017.
Sounds good, but comes with challenges
By Monika Queisser, Head of OECD Social Policy Division, and Raphaela Hyee, Economist, OECD
The idea is simple: instead of linking social protection to jobs and employers, every person would have one account in which contributions are made and entitlements saved. This is not a new idea but one that is becoming increasingly popular given digitalisation and the rise in contract work and self-employment — all of which increase the risk of gaps in social protection coverage.
With such a system, workers could carry their entitlements with them when they move across borders and use them whenever needed: to start a new business, take time out for further training or care for family members. The advantages appear manifold.
However, individual accounts also come with challenges.
First, how do we retain the benefits of redistribution and risk-sharing of classic social protection systems?
For instance, without substantial subsidies, individual accounts would be worthless to many low-income and part-time workers. Similarly, without risk-sharing, individual accounts would be unable to protect individuals against major risks, such as disability.
Second, how do we make sure that employers continue to offer benefits — which they often use as a means to attract and retain staff?
Some benefits are tied to jobs for a reason. Employers might resist new employees arriving with extensive leave entitlements, for example. As for the self-employed, meaningful benefits will remain elusive unless ways are found to levy social contributions from customers.
Finally, how convertible should the account balance be?
The experience with the (now abolished) Dutch lifecycle savings account, which could be used for multiple purposes, showed that participants used their entitlements mainly for early retirement rather than training or caring.
Giving people more say in their social protection is a great idea but policymakers need to be prepared to deal with the fact that not all individuals will be able to put enough money in their accounts, and that their choices will not always be what governments are hoping for, nor even what might be in the individual’s best interest.
