Policy Note 25: Putting care financing on a stable footing

Austrian care financing is still facing unresolved challenges, particularly due to demographic change. "Care expenditure will increase massively by 2060. However, the financing of this cost increase is still unclear. In its current state, care financing is not financially sustainable," says Tobias Thomas, Director of the economic research institute EcoAustria

A recent analysis using EcoAustria's debt check shows that public care expenditure in Austria will increase from 1.2 percent of GDP in 2016 to 2.3 percent of GDP in 2060, according to OECD figures. However, the increase in care costs could be even higher. "Wages in the countries of origin of caregivers working in 24-hour care in Austria have been rising much faster than in Austria for years. The low fertility rate in Austria is not only leading to a decline in the potential number of caregivers, but also to a decrease in the number of children who are eligible for care within the family and the labor force participation of women is also increasing. This points to an increasing proportion of formal and more cost-intensive care," explains Thomas.

"Care financing must be put on a stable footing," says Thomas. In principle, a tax-financed system, a pay-as-you-go system with income-related contributions or a funded compulsory insurance scheme with solidarity protection are conceivable. In addition to financial sustainability, a higher degree of equal treatment of different generations should also be achieved with regard to the financial burden, according to the conclusion of an EcoAustria policy note published today.