Social protection for low-income families in 2025. The impact of austerity measures

Article by Cristina Raț 

Austerity measures introduced by the "train ordinance" O.U.G. 156/30.12.2024, reiterated and extended by the government through Law 141/25.07.2025, undermined the emerging trend of improvement in the economic situation of families with children, visible in the statistics for the period 2020-2024. The freezing of the minimum wage and social benefits has widened the gap between family budgets and the minimum cost of living. The incremental increases in child allowances and social assistance over the last four years risk being completely eroded by inflation and new obligations regarding contributions to the public health insurance system. If the suspension of indexation provided for in social policy legislation can be cynically considered a "temporary" measure (ignoring the needs of beneficiaries), the abolition of co-insurance status and the exemption of vulnerable groups from paying health insurance contributions represents a historic turning point in relation to the established insurance system model, inspired by conservative-corporatist European models. This measure will particularly affect agricultural workers' families and the unemployed, who lack the financial resources to pay the contribution and will lose subsidized access to medical services, except for medical emergencies and national health programs.

Poverty reduction – an abandoned goal?

At the end of 2025, the prospect of achieving the poverty reduction targets set for 2027 seems uncertain. Romania's national strategy on social inclusion and poverty reduction for the period 2022-2027, adopted by Government Decision No. 440/2022, sets the following objective "to reduce the share of the population at risk of poverty or social exclusion by at least 7% by 2027 compared to 2020" (National Strategy, 2022: 15). If we consider only the monetary dimension of poverty, the National Institute of Statistics (INS) reported a relative poverty rate of 23.4% for 2020, which gradually decreased to 19% in 2024, indicating a reduction of 4.4% (see Figure 1). A 7% decrease would mean reaching a poverty rate of 16.4% in 2027. The austerity measures of 2025 and those already announced by the Government through O.U.G. 87/23.12.2025 for 2026 undermine the possibility of such a development. 

On July 24, 2025, just a few days before the adoption of Law 141/28.07.2025, which introduced an austerity package comparable only to that of May 2010, the Organization for Economic Cooperation and Development (OECD) published a report assessing labor and social protection policies in Romania[1]. The report acknowledges recent progress, such as the reform of the minimum inclusion income (VMI), but points out that Romania's poverty rate remains higher than in OECD member countries, and public social spending is lower. Furthermore, if we analyze the contribution of social transfers to poverty reduction based on Eurostat data, we see that in 2024 only 20% of people with incomes below the relative monetary poverty threshold were able to avoid poverty because they benefited from social transfers. By comparison, the EU average was 35%. The gap was even wider for families consisting of two adults and two children: 22.5% in Romania compared to the EU average of 43% (see Figure 2). Although poverty rates are falling overall in the period 2020-2024, and poverty reduction through redistributive measures will improve, 2022 is an exception: it was the year in which the real increase in the minimum wage was very low, with its indexation of 4.95% well below the inflation rate of 13.8%. This gap will only be corrected by the 2023 indexation[2]. Child allowances, although increased annually in line with the average annual inflation rate since January 2020 (Law 214/2019), have a modest compensatory effect. Data for 2025 are not yet available, but the discrepancy between the inflation rate and wage increases[3] can only lead to an increase in poverty. The measures announced for 2026, discussed below, risk a repeat of the 2022 situation for families with children, and the future evolution is uncertain.

The OECD's recommendations include increasing the adequacy of unemployment benefits and social assistance, as well as improving access to social services for vulnerable groups, i.e., older people, people with disabilities, homeless people, Roma, and rural residents. While in the first case, the failure to index benefits will certainly lead to a decline, in the case of social services, the situation remains problematic, marked by the overload of social workers[4] and the predominance of funding through European projects, which calls into question the predictability and long-term continuity of services.

The number of social assistance beneficiaries and beneficiaries of assistance for families with children (the new name for "support allowance") increased following the (delayed) implementation, in January 2024, of the reform of the minimum inclusion income (VMI) through Law 196/2016 and the moderate increase in the eligibility threshold and the value of benefits (see Figure 3). However, the adequacy of the benefits available remained low and, in real terms, deteriorated in 2025. 

The austerity measures introduced by the "train ordinance" O.U.G. 156/30.12.2024, then reinforced and extended by the Bolojan government through Law 141/25.07.2025, froze the social reference indicator (ISR) used to calculate a range of social benefits and subsidies (including unemployment benefits, job placement bonuses, disability benefits, and the minimum child-rearing allowance). The ISR was last indexed in March 2024, at 660 lei (see Figure 4), which primarily affected people with disabilities and unemployed people receiving benefits, but also parents who are entitled to the minimum child-rearing allowance (1,651 lei in 2025) or foster care allowance. The decision not to increase child allowances in line with the average annual inflation rate (Law 214/2019) and, similarly, not to increase the minimum inclusion income (Law 196/2016, implemented since January 2024) follow the same pattern of regression. Under current inflation conditions, estimated by the National Institute of Statistics (INS)[5] at 9.5% in real terms, these benefits will be able to cover even less of families' needs.

In the following, we will focus on two of the issues raised by the austerity measures that marked 2025: (1) the situation of families with children who earn minimum wage or face long-term unemployment and become recipients of social assistance through VMI (directly affected by the freeze on the minimum wage and social benefits) and (2) the abolition of co-insurance status and the introduction of contributions to the public health insurance system (CASS) for a number of vulnerable categories that had previously been exempt. 

1. Budgets of low-income families with two school-age children 

If we take a family consisting of two adults earning the minimum wage and two school-age children, their total income, including child allowances and energy subsidies, amounts to only about half of the minimum consumption basket for a decent living calculated by the Friedrich-Ebert-Stiftung (FES)[6], estimated at 11,370 lei/month for such a family. In a situation where only one parent earns the minimum wage and the other parent has no income, their budget covers only 36% of the value of the basket; while a family of long-term unemployed people, beneficiaries of VMI, reaches about one-fifth of the value of the basket (see Annex 1). Compared to the relative monetary poverty threshold (4,070 lei/month in 2024), which is less than half the price of the minimum basket, the family receiving VMI reaches only 43.8% of the threshold value. A family in which one of the adults earns the minimum wage slightly exceeds the threshold, which means that any unexpected expense can push the household back into poverty. A family in which both adults earn the minimum wage exceeds the poverty threshold by 43% (see Annex 1). It should be noted that in the case of families receiving VMI, social scholarships obtained by children (conditional on fewer than 10 unexcused absences per month) account for a quarter of the household budget, while the assistance provided through VMI for families with children (which replaced the support allowance) accounts for only 12%. In the case of families where only one parent earns a salary, social scholarships account for 15% of total income, and assistance for families with children accounts for only 5.5%. If both parents earn at least the minimum wage, the family no longer qualifies for either of these two benefits.

Figure 5. Income of a family with two adults and two school-aged children in 2025

Source: Author's graph. Calculation details can be found in Annex 1. 

If only one of the children is of school age and the other is a preschooler who regularly attends kindergarten, the family receiving the minimum inclusion income receives an "educational incentive" in the form of a social voucher worth 133 lei/month, which will remain in force in 2025. The other two types of families do not benefit from this form of support. 

Regarding the prospects for these families in 2026, it should be noted that, although the government had initially announced a freeze on the minimum wage for this year, at the end of 2025 it decided to index it to 4,325 lei starting in July 2026[7]. However, along with the indexation, the amount exempt from taxes (income tax and social security contributions CAS and CASS) will decrease from the current 300 lei to 200 lei, and the threshold up to which the exemption applies will increase from 4,300 lei to 4,600 lei[8]. In other words, part of what minimum wage employees will receive in addition through the 6.8% increase in the gross minimum wage will be given back as a result of the reduction in deductions from taxable income. Net minimum wages will increase by only about 5%, depending on family situation (see Annex 2). It should be noted that the values of deductions from taxable income for low-wage employees are low in Romania. For example, a parent who supports a spouse and two children will have an additional 81 lei in their net salary, compared to an employee with no dependents. The increase in the minimum wage means higher amounts transferred to insurance systems and higher taxes. By reducing the non-taxable amount, this effect will be amplified. At the same time, the introduction of progressive taxation remains off the political agenda, despite the recommendations of the International Monetary Fund[9]. 

2. Abolition of co-insured status and introduction of contributions to the public health insurance system for a number of vulnerable categories

One of the austerity measures with problematic medium- and long-term consequences was the abolition of the category of co-insured persons in the public health system and the introduction of compulsory health insurance contributions (CASS) for vulnerable categories that had been exempt until 2025: unemployed persons receiving benefits, parents on parental leave/accommodation leave, and recipients of guaranteed minimum income (inclusion). Justifying this measure by invoking the principle of fairness, stating that, on the brink of financial collapse, everyone must contribute to resolving the crisis, sounds illogical, if not downright perverse. The status of "beneficiary" of unemployment benefits or social assistance is a direct consequence of structural problems that systematically affect disadvantaged population groups: those with low levels of education, from geographical regions where less investment has been made, young people who cannot yet prove their work experience, Roma people who have been discriminated against for generations and often find themselves in situations of segregation and precariousness. These are all groups that have barely benefited from the positive effects of economic growth in recent decades. Instead, the only types of work they have had access to, at home or abroad, have been physically demanding, often precarious and poorly paid, mainly in the informal sector. Similarly, parents on parental leave or on leave following an adoption are in a particularly vulnerable situation. And if we add up approximately how much their CASS contributions could bring to the budget of the National Health Insurance House (CNAS), the resulting amount is not impressive at all. Let's do the math. 

Unemployed persons "receiving benefits" (Law 76/2002) represent a fraction of approximately 20% of registered unemployed persons, according to statistics provided by the Ministry of Labor[10]. In its press release of August 1, 2025[11], CNAS indicates a number of 44,096 beneficiaries of unemployment benefits. We do not have data on the amount of benefits they receive, but we can estimate (or rather overestimate) an average monthly amount of 862 lei/month (unemployed for 5 years, previously employed at the minimum wage)[12]. For 12 months, the 10% CASS contribution corresponding to the cumulative value of these benefits would be approximately 45.6 million lei.

Social assistance is probably the most underfunded and stigmatizing social protection measure in Romania. The January 2024 reform reduced bureaucracy, but did not significantly improve the adequacy of benefits. For a single person of working age with no income (except for day labor), the maximum amount is 366 lei/month. For a person aged 65 or over, the benefit is 533 lei/month. The benefit is granted at the family level, using an equivalence scale to adjust the amount. The statistical bulletin of the Ministry of Labor's[13] provides only an overview, but the structure by age and size of beneficiary families remains unclear. In the first half of 2025 (January-June), a total of 841.4 million lei was paid for inclusion benefits, corresponding to an average monthly number of 236,449 families and single persons. Considering that this configuration will remain unchanged in the second half of the year (July-December 2025) and applying the 10% CASS rate to the cumulative amounts, the result is approximately 168.3 million lei. 

With regard to parents who are on leave to raise and care for a child under the age of 2 (or 3 in the case of a child with a disability)[14] or on leave to adjust to adoption, according to the National Agency for Payments and Social Inspection (ANPIS)[15], in June 2025, there were 151,249 recipients of child-rearing allowances, and the average benefit paid was 3,596 lei/month. If we consider the number indicated in the CNAS press release of 127,054 people to be relatively stable for the following year, this means that the allowances paid for the next 12 months would total 5,482.6 million lei. At a rate of 10%, the total CASS contributions of parents on parental leave/accommodation following adoption would be approximately 548.2 million lei.

In total, the CASS contributions to be paid over the next 12 months by parents on parental leave, those who have adopted a child, registered unemployed persons receiving benefits, and those eligible for social assistance would be approximately 762.1 million lei. 

The category of co-insured persons includes the spouse or parents of insured persons who are dependent on them and who do not have health insurance by virtue of their status as employees or pensioners. Among them are unpaid family workers—people who are not homemakers but work in family businesses, mostly in agriculture. In the first quarter of 2025, according to the NIS, the 202,575 unpaid family workers represented 2.6% of the employed population, 60% of whom were women. It is unlikely that these categories will be able to afford to pay health insurance contributions: an initial installment of 607.5 lei would have been payable by September 2025, followed by a further 1,822.5 lei by May 2026 – that is, for one year of insurance, a contribution equivalent to six minimum wages. If they manage to pay, the contributions of the 650,431 co-insured persons indicated by CNAS[16] would amount to 1,580.6 million lei. However, it is unlikely that these persons have the necessary financial resources. At the end of 2025, CNAS had not yet published statistics on persons who, from co-insured status, had acquired insured status by paying the contribution required by September 2025. 

Alternatively, applying a rate of 0.7% of the wage fund to constitute the employers' CASS contribution could bring in approximately 5.1 billion lei annually, significantly more than what could be collected from the categories discussed above. We recall here that at the end of 2017, when through OUG 79/2017 almost all social contributions were moved from the employer to the employee, CASS lost 0.7%. Previously, employers contributed 5.2% of gross salaries to the health insurance fund, and employees contributed 5.5%. Since January 2018, only employees contribute, with 10% of their gross salary. Let's imagine that we recover the 0.7%, and this contribution would be paid by employers for all categories of employees. Currently, employers pay CASS contributions only for employees with special working conditions (4%) and those with special working conditions (8%). Otherwise, they pay a single social contribution for all employees of 2.25%, the insurance contribution for work. Let's assume that they would pay an additional 0.7% CASS contribution. According to INS[17] , in the first quarter of 2025 there were 6,648,593 employees, and the average gross salary for the economy was 9,187 lei. If we apply a 0.7% CASS contribution from the employer for 12 months, an additional amount of 5,130.7 million lei would be collected. And 5.1 billion lei is significantly more than what could be collected from vulnerable groups. 

Food for thought: what should be done? 

The austerity measures introduced in 2025 undermined the emerging trend of relative improvement in the situation of low-income families, particularly visible in the case of families with at least one employed member. The contribution of social benefits to poverty reduction, although slightly improved following the minimum inclusion income reform in January 2024, remained well below the European average and inadequate in relation to the minimum consumption basket for a decent living. Changes to the public health insurance system, with the introduction of compulsory contributions for previously exempt vulnerable groups and the abolition of co-insurance status (present in most countries with a Bismarckian insurance model), have reduced the disposable income of social benefit recipients and exposed former co-insured persons to the risk of being excluded from the system. Capping financial support for families with children eligible for VMI has had the indirect effect of increasing the importance of social school scholarships and other forms of support that are similarly conditional on school attendance, which may not reach the most vulnerable children who are at risk of absenteeism and school exclusion. What should be done? 

• Indexing the gross minimum wage in line with the inflation rate, maintaining the value of 300 lei exempt from taxes and social contributions for those employed at or close to the minimum wage, and increasing tax deductions for employees with incomes below the national average in a fair manner; Compensate for losses by introducing a progressive tax rate.

• Enforce legislation on indexing universal child allowances to the inflation rate; 

• Improving the adequacy of social benefits for the unemployed and very low-income families by adjusting the social reference indicator and the minimum inclusion income to the relative monetary poverty threshold; 

• Returning to the CASS regulations prior to Law 141/2025 and reintroducing the employers' contribution at a modest rate of 0.7% of the wage fund; 

• Increasing the coverage of social scholarships granted to students so that families with taxable income per family member equivalent to 50% of the minimum net wage in the economy or exceeding this value by less than 5% can also benefit. In this way, low-income families with children would be supported in overcoming temporary financial instability, which can otherwise negatively affect children's school attendance and performance. 

Annexes to the essay Social protection for low-income families in 2025. The impact of austerity measures, by Cristina Raț: Document

[1] OECD. 2025. OECD Reviews of Labor Market and Social Policies: Romania 2025, OECD Reviews of Labor Market and Social Policies, OECD Publishing, Paris, https://doi.org/10.1787/f0532908-en.

[2] For the evolution of the gross minimum wage indexation in nominal terms and adjusted for inflation between 2007 and 2025, see the statistics of the Hunedoara Territorial Labor Inspectorate: https://itmhunedoara.ro/ro/activitatea-itm/relatii-de-munca/evolutia-salariului-minim-brut/.

[3] For an analysis of policies unfavorable to workers in 2025, see Guga, Ștefan. 2025. Developments and trends in labor relations 2025-2026, Friedrich-Ebert-Stiftung, https://romania.fes.de/ro/e/evolutii-si-perspective-in-relatiile-de-munca-2025-2026.html.

[4] For an analysis of the problems faced by social workers in the exercise of their profession, see the Association of Social Workers in Romania (AsProAs). 2025. Memorandum on the need to recognize social services and the social work profession as essential infrastructure for the protection of the population. https://www.asproas.ro/memoriu-privind-necesitatea-recunoasterii-serviciilor-sociale-si-a-profesiei-de-asistent-social-ca-infrastructura-esentiala-pentru-protectia-populatiei/.

[5] National Institute of Statistics, press release of 12.12.2025 on inflation and consumer price trends, https://insse.ro/cms/sites/default/files/com_presa/com_pdf/ipc11r25.pdf.

[6] Friedrich-Ebert-Stiftung (FES). 2025. Updating the minimum consumption basket for a decent living in 2025. Bucharest: FES. https://romania.fes.de/ro/e/comunicat-de-presa-actualizarea-cosului-minim-de-consum-pentru-un-trai-decent-2025.html.

[7] https://mmuncii.gov.ro/wp-content/uploads/2025/12/HG_Salariul_minim_2026.pdf.

[8] https://mfinante.gov.ro/static/10/Mfp/transparenta/NFproiectOUGmodifL227_22122025.pdf.

[9] Executive Board of the International Monetary Fund. 2025. Conclusions of the 2025 consultation, Article IV. https://www.imf.org/en/news/articles/2025/11/12/pr-25368-romania-imf-executive-board-concludes-2025-article-iv-consultation.

[10] https://mmuncii.ro/j33/images/buletin_statistic/Ocupare_semI_2023.pdf.

[11] https://cnas.ro/2025/08/01/informare-principalele-noutati-privind-asigurarile-sociale-de-sanatate-prevazute-in-legea-nr-141-2025/.

[12] Unemployment benefits are granted for a period of between 6 and 12 months, depending on length of service. The amount of unemployment benefits for those with work experience consists of a fixed amount of 660 lei (the social reference indicator, not indexed in 2025), plus a variable amount between 3% and 10% of the previous salary, depending on the length of service. For someone who has worked for 5 years without interruption, earning the minimum wage, the unemployment benefit is approximately 862 lei/month and is granted, in this case, for 9 months. In the case of young graduates with no work experience, only 50% of the fixed amount is granted for 6 months. After the entitlement to benefits ends, if the person has not been able to find re-employment, they can apply for social assistance (see below). According to the CNAS, there are currently 44,096 recipients of unemployment benefits. We do not have data on the amount of benefits they receive. If we estimate, or rather overestimate, an average monthly amount of 862 lei/month (unemployed for 5 years, previously employed at the minimum wage), then, over a period of 12 months, the total amount paid to the unemployed would be approximately 456,129,024 lei. The corresponding 10% CAS contribution would be approximately 45,612,902 lei.

[13] Statistical bulletin of the Ministry of Labor, https://mmuncii.gov.ro/statistici/transparenta-statistici-asistenta-sociala/.

[14] Parents are entitled to financial assistance if they have worked for at least 12 months during the 24 months prior to the birth of their child. Student status, sick leave, or unemployment with benefits also make you eligible. The benefit is 85% of the previous net salary, with a minimum of 1,651 lei/month and a maximum ceiling of 8,500 lei/month.

[15] https://www.mmanpis.ro/wp-content/uploads/2025/07/ICC_Iunie_2025.pdf.

[16] https://cnas.ro/2025/08/01/informare-principalele-noutati-privind-asigurarile-sociale-de-sanatate-prevazute-in-legea-nr-141-2025/.

[17] http://statistici.insse.ro:8077/tempo-online/#/pages/tables/insse-table.

The views expressed in this article do not necessarily reflect the views of the Friedrich-Ebert-Stiftung (FES).

About the author:

Cristina Raţ is a lecturer at the Department of Sociology at Babeș-Bolyai University in Cluj-Napoca, where she teaches courses on class inequality and social policy.