‘Fiscal redistribution’ includes targeted transfers.

25. In practice, social protection systems in all OECD countries involve a mix of redistribution between rich and poor and risk insurance or lifecycle redistribution, but the balance between these various motives differs between countries. In turn, the extent to which social support accrues to low-income households depends primarily on the prevailing mix of insurance-type and assistance-type transfers. As a way to tentatively shed light on the balance between these two types of redistribution, Figure 6 presents the overall composition of cash transfers and that of income taxes relative to social security contributions across deciles of the household income distribution, while country-profiles are available in Annex A1 (Figure A1.2): 20

• Assistance transfers (i.e. social, unemployment, family and education assistance, often subject to income or assets tests), are most directly targeted to low-income households and are therefore major instruments of income redistribution to poorer households insofar as they secure minimum living standards.21 Indeed, on average across OECD countries, they represent around 24 per cent of disposable income at the bottom, being negligible in the upper-half and broadly absent at the top of the distribution.

• Insurance transfers (i.e. unemployment insurance, sickness, maternity leave, work-injury benefits) are by definition best suited to provide income support in the face of adverse events. In contrast to assistance transfers, the share of work-related insurance transfers in disposable income declines mildly across the distribution, from 14 per cent in the bottom decile, to 11 per cent in the fifth decile and 5 per cent in the top decile.

• Universal transfers (i.e. disability, family, education-related transfers covering the whole population or part of the population on the basis of criteria other than income or previous employment) contribute most to the objective of redistribution across the lifecycle. Since their eligibility is based on conditions other than income, they accrue to all income groups but their share in disposable income declines sharply across the income distribution, being 1 per cent at the top and 17 per cent at the bottom. 26.