Dynamics of the Social Security Index in the Context of the Economic Crisis in Romania

Abstract

In conditions of uncertainty, social protection issues are of paramount importance, and supporting measures are needed for the vulnerable population with an impact on social costs. Those costs have to be included in the state budget, and they generate budgetary imbalances that need to be counterbalanced by relevant budgetary policy measures. This paper proposes to develop, on the basis of state budgets and of demographic indicators, a social security index, whose dynamics will reflect the impact of the necessary measures in a period of economic and financial uncertainties. The key indicators used for calculating the social security index are composite financial risk, which is quantified using the budget’s dynamic expenditures, composite labour risk using employment stock, and unemployment and composite social risk using equilibrium between labour and retired labour. The paper studies the evolution of this index to identify inflection points that impact social security policy. We have dynamically identified the evolution clusters that differentiate the variability of the social security index over time, translated into the social security matrix proposed by the study for each composite index. The used methods in the study are empirical and analytical in nature, consisting of an econometric definition of the index structure and a dynamic analysis of the results obtained over the period 2010–2020. The results of the study will identify the financial risk diagram, which, based on the forecasted clusters of financial, social, and labour market risks, will create a useful picture for social policy makers that will highlight the current vulnerabilities of the three clusters from a social perspective. Last but not least, the presentation of the social security index is a valuable result for practitioners in their efforts to optimise social policies and increase socio-economic welfare. The results of this research will allow decision-makers to adjust their social policies on an informed basis in relation to the elements of vulnerability during periods of uncertainty, in comparison with the elements of stability identified during periods of economic growth.