Covid led to massive boost in social spending
The OECD has released new data on social spending across OECD countries, going right up to 2022. All OECD countries saw a massive increase in social spending as a result of the Covid pandemic, with social expenditure rising from around 20% to around 23% of GDP on average between 2019 and 2020.
The OECD found that more than 80% of this increase was attributable to an actual increase in social spending, which it defines as government expenditure comprising ‘cash benefits, direct in-kind provision of goods and services, and tax breaks with social purposes’. The remaining 20% of the change was due to a fall in GDP.
Pension payments form the largest component of social expenditure across OECD countries – 7.7% of GDP on average – whilst health care is the second largest component at 5.8% of GDP on average.
According to the OECD, the increase in social spending was largely due to an increase in spending on health, unemployment and active labour market programmes as well as cash support programmes. These were increased by governments as a direct response to Covid and the economic difficulties caused by lockdown. Social spending peaked at the height of the pandemic in 2020, and then fell back to 22% of GDP in 2021 and 21% of GDP in 2022.
Canada, Spain and the US saw the highest jump in the social spending, with each seeing a more than six percentage point rise between 2019 and 2020. Denmark, Hungary and Sweden saw the smallest increases, each rising by less than one percentage point.
Click here to see the full OECD report.
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