Luxembourg’s Welfare State in the Crisis: A Semi Success Story

Kerschen, Nicole

doi:10.1007/978-3-319-07680-5_20

Nicole Kerschen⁴

Abstract

The chapter on Luxembourg demonstrates that the financial and economic crisis from 2008 onwards had little impact on a very generous welfare state. The Luxembourg government opted for a pragmatic approach to resolve the immediate effects of the crisis. Moreover, major reforms, which were underway before the crisis, were speeded up because of it. For example, the pension system was adapted to demographic changes in an ageing society. Primary health care strategies were introduced to improve management and to control the financial system. Regarding family policy, a new approach ‘investment in children' based on the United Nations Convention on the rights of the child was implemented. Last but not least, Luxembourg’s Public Employment Service underwent major changes linked to developments in the economic situation.

But this success story also showed a darker side. On the one hand, the crisis altered the Luxembourg social model based on confidence between the public authorities, the employers and the trade-unions and on consensus building (the famous ‘Tripartite'). On the other hand, case-law from the Court of Justice of the European Union regarding rights of the frontier workers, a major component of the Luxembourg labour market, showed the limits of the autonomy of public authorities to shape the Luxembourg Welfare State.

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Notes

1.
Luxembourg’s automatic wage indexation is a mechanism of compensation in case inflation. If the national consumer price index reaches a difference of 2.5 % compared to the last indexation, wages will automatically increase by 2.5 %. The aim of this measure is to maintain the purchasing power of the workers by neutralizing the impact of inflation. Automatic wage indexation has always been considered as the essential counterpart of the ‘industrial peace’ and the high level of productivity in Luxembourg.
2.
All legislation referenced in this chapter is listed in Annex 2, where it is also indicated how to search for the original text.
3.
See Annex 2.
4.
The Labour Code offers four different schemes: solidarity pre-retirement with replacement by a jobseeker (Article L.581-1 to L.581-9), adjustment pre-retirement avoiding mass redundancies (Article L. 582-1 to L.582-3), pre-retirement linked to shift work or night work (Article L. 583-1 to L.583-4) and progressive pre-retirement (Article L. 584-1 to L. 584-6).
5.
See Annex 2.
6.
In 2012, the reserve fund was of 11 bill. Euro, which was equivalent to 3.8× the annual expenses.
7.
‘Assimilated periods’ are considered as working periods. Contributions are paid. They include periods during which an unemployment benefit or the guaranteed minimum income is paid, training and military service periods, child-raising and informal care periods in the framework of the long-term care allowance.
8.
Retirement at 57 concerned 25 % of the blue-collar workers. 80 % of them retired before the age of 60. Only 30 % of the white-collar workers retired before the age of 60.
9.
‘Complementary periods’ are not considered as working periods. No contributions are paid. They are only relevant for the calculation of the duration of the professional career. They include education periods between the age of 18 and 27 and unemployment periods of young jobseekers, who are not entitled to unemployment benefits.
10.
1730 Euro per month (1 January 2015).

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Authors and Affiliations

Institute for Social Sciences of Politics (ISP), University Paris West Nanterre La Défense/ENS Cachan, Nanterre Cedex, France
Nicole Kerschen

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Nicole Kerschen
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Editors and Affiliations

Westfälische Wilhelms-Universität, Münster, Germany
Klaus Schubert
Fac. de Ciencias Políticas y Sociol, Universidad Complutense de Madrid, Madrid, Spain
Paloma de Villota
Institut für Politikwissenschaft, Westfälische Wilhelms-Universität, Münster, Germany
Johanna Kuhlmann

Appendices

Annex 1. New Pension Replacement Rules from 2013 to 2053

Year of the beginning of the pension right	Flat-rate part	Income-related part
Year of the beginning of the pension right	Rate (%)	Rate (%)	Threshold	Increase
Before 2013	23.500	1.850	93	0.010
2013	23.563	1.844	93	0.011
2014	23.625	1.838	93	0.011
2015	23.688	1.832	93	0.012
2016	23.750	1.825	93	0.012
2017	23.813	1.819	93	0.012
2018	23.875	1.813	94	0.013
2019	23.938	1.807	94	0.013
2020	24.000	1.800	94	0.013
2021	24.063	1.794	94	0.014
2022	24.125	1.788	94	0.014
2023	24.188	1.782	94	0.015
2024	24.250	1.775	95	0.015
2025	24.313	1.769	95	0.015
2026	24.375	1.763	95	0.016
2027	24.438	1.757	95	0.016
2028	24.500	1.750	95	0.016
2029	24.563	1.744	95	0.017
2030	24.625	1.738	96	0.017
2031	24.688	1.732	96	0.018
2032	24.750	1.725	96	0.018
2033	24.813	1.719	96	0.018
2034	24.875	1.713	96	0.019
2035	24.938	1.707	97	0.019
2036	25.000	1.700	97	0.019
2037	25.063	1.694	97	0.020
2038	25.125	1.688	97	0.020
2039	25.188	1.682	97	0.021
2040	25.250	1.675	97	0.021
2041	25.313	1.669	98	0.022
2042	25.375	1.663	98	0.022
2043	25.438	1.657	98	0.022
2044	25.500	1.650	98	0.022
2045	25.563	1.644	98	0.023
2046	25.625	1.638	98	0.023
2047	25.688	1.632	99	0.024
2048	25.750	1.625	99	0.024
2049	25.813	1.619	99	0.024
2050	25.875	1.613	99	0.025
2051	25.938	1.607	99	0.025
2052	26.000	1.600	100	0.025
After 2053	26.000	1.600	100	0.025

Source: Article 214 Social Security Code

Annex 2. Legislation Since 2007

-------------------------

The official language of legislation in Luxembourg is French. The original text of all legislation referenced in this Chapter can be searched Online, in the Archives of the Memorial A, which is listed per year, month and N°: http://www.legilux.public.lu/leg/a/archives/index.html . Accessed 30 January 2015.

For instance, reference N°1. can be found under Memorial A—2007—December—N°234.

1.
Law of 21 December 2007 (…) 2) introducing the law regarding child bonus. Memorial A N°234 of 27 December 2007, p. 3954.
2.
Law of 13 May 2008 introducing the ‘statut unique’. Memorial A N°60 of 15 May 2008 p. 790.
3.
Law of 16 December 2008 regarding Welfare for children and the family. Memorial A N°192 of 22 December 2008 p. 2584.
4.
Grand-ducal regulation of 13 February 2009 introducing a childcare service voucher. Memorial A N°26 of 18 February 2009 p. 376.
5.
Law of 11 November 2009 regarding temporary measures for youth employment. Memorial A N°222 of 19 November 2009 p. 3909.
6.
Law of 26 July 2010 concerning a financial aid of the State for higher education. Memorial A N°118 of 27 July 2010 p. 2040.
7.
Law of 3 August 2010 introducing temporary measures for the promotion of employment, Memorial A N°137 of 13 August 2010, p. 2212.
8.
Law of 17 December 2010 regarding reform of the health care system. Memorial A N°242 of 27 December 2010 p. 4042.
9.
Law of 18 January 2012 concerning the creation of ADEM, Memorial A N°11 of 26 January 2012 p. 168.
10.
Law of 28 March 2012 regarding reform of professional training. Memorial A N°67 of 4 April 2012 p. 754.
11.
Grand-ducal regulation of 21 July 2012 concerning modifications of the grand-ducal regulation of 13 February 2009 introducing a childcare service voucher. Memorial A N°162 of 3 August 2012 p. 1918.
12.
Law of 21 December 2012 concerning reform of the pension insurance. Memorial A N°279 of 31 December 2012 p. 4370.
13.
Grand-ducal regulation of 26 December 2012 concerning modifications of the grand-ducal regulation of 13 February 2009 introducing a childcare service voucher. Memorial A N°300 of 31 December 2012 p. 4785.
14.
Law of 19 July 2013 regarding modifications of the law of 22 June 2000 concerning a financial aid of the State for higher education. Memorial A N°132 of 25 July 2013 p. 2724.

--------------------------

The Labour Code (Code du Travail) and the Social Security Code (Code de la Sécurité sociale) are also available on Internet:

1.
Code du Travail 2015

http://www.legilux.public.lu/leg/textescoordonnes/codes/code_travail/

Accessed 29 January 2015
2.
Code de la Sécurité sociale 2014

http://www.legilux.public.lu/leg/textescoordonnes/codes/code_securite_sociale/

Accessed 29 January 2015.

Annex 3. ECJ Regulation and Case-Law

------------------------------------------------

EC Regulation N°883/2004 of the European Parliament and of the Council on the coordination of social security systems is available on Internet:

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32004R0883&qid=1422617316801&from=EN.

Accessed 30 January 2015.

----------------

ECJ case-law referenced in this Chapter can be searched on the Website of the European Court of Justice : http://curia.europa.eu/jcms/jcms/j_6/ . Accessed 30 January 2015.

The easiest way is to search by Number.

For instance, reference N°1) can be searched by Number C-379/11.

1.
ECJ 13 December 2012 Caves Krier Frères C-379/11 (subsidy for employers recruiting jobseekers aged 45 and over)
2.
ECJ 20 June 2013 Elodie Giersch and others C-20/12 (financial aid for young people in higher education)
3.
ECJ 24 October 2013 CNPF v Salim Lachheb and Nadia Lachheb C-177/12 (child bonus)

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Kerschen, N. (2016). Luxembourg’s Welfare State in the Crisis: A Semi Success Story. In: Schubert, K., de Villota, P., Kuhlmann, J. (eds) Challenges to European Welfare Systems. Springer, Cham. https://doi.org/10.1007/978-3-319-07680-5_20

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DOI: https://doi.org/10.1007/978-3-319-07680-5_20
Published: 09 February 2016
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-07679-9
Online ISBN: 978-3-319-07680-5
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