Governments across the Organisation for Economic Co-operation and Development (OECD) and the European Union are facing increasing pressure to maintain social protection programmes as populations age, healthcare needs rise and labour markets undergo structural changes.

Social protection expenditure accounts for approximately 23% of gross domestic product (GDP) across OECD and EU countries, according to an OECD report published in September 2026. With spending demands expected to increase further, governments are examining how to build financially sustainable systems without weakening essential support for vulnerable populations.

Ageing Populations Increase Spending Requirements

Pensions, healthcare, disability support and long-term care represent major areas of social protection expenditure. As life expectancy increases and populations grow older, more people are expected to depend on public assistance and retirement benefits.

OECD projections indicate that pension spending is expected to rise by 1.1 percentage points of GDP across OECD countries between 2023 and 2045. In the EU, the projected increase is one percentage point over the same period.

Healthcare and long-term care costs are also expected to rise, creating additional demands on public budgets.

Financing Social Protection Becomes More Challenging

Social security contributions remain an important source of funding for social protection programmes. However, population ageing, changing employment patterns and uncertainty surrounding future wages are putting pressure on traditional financing arrangements.

The expansion of part-time work, self-employment and other non-standard employment arrangements also raises questions about whether all workers contribute sufficiently to social protection systems and receive adequate coverage.

According to the OECD report, self-employed people account for approximately 14% of employment in the EU but contribute only around 4% of social security contributions. This difference highlights potential gaps in coverage and financing that policymakers may need to address.

How Governments Can Build Sustainable Systems

Governments have several options for improving the long-term sustainability of social protection programmes.

First, they can diversify funding sources by balancing social security contributions with appropriate general tax revenues. Broadening the financing base could reduce excessive dependence on wages and traditional employment.

Second, policymakers can improve coverage for self-employed and part-time workers, ensuring that changing employment arrangements do not leave people without adequate protection.

Third, governments can strengthen administrative efficiency, reduce unnecessary expenditure and make benefits easier for eligible people to access. Better targeting and effective programme management can help ensure that available resources deliver meaningful results.

Finally, policies that support employment, workforce participation and productivity can help strengthen the revenue base that finances social protection.

Balancing Financial Stability With Public Needs

The challenge facing governments is not simply how to control expenditure, but how to maintain effective protection while ensuring that programmes remain affordable over time.

Reducing access to essential benefits may increase financial hardship among vulnerable groups, while failing to address long-term funding pressures could threaten the stability of social protection systems.

Governments therefore need to evaluate both the financial sustainability and the social outcomes of their policies. Transparent financing arrangements, inclusive coverage and evidence-based reforms can help countries prepare for demographic and economic changes.

As spending needs continue to evolve, the ability to balance reliable public support with sustainable financing will remain a central issue for economic and social policy across OECD and EU countries.