Social protection on the rise?

The principle of providing social protection for the poor and vulnerable is on the rise, but some countries have cut welfare benefits due to recession.

by Martin Khor

“Social security” and “social protection” feature increasingly in the global policy discourse these days. These two terms encapsulate the idea that people should be able to have a basic income and access to healthcare and education, and that includes those who are poor or jobless.

In May, the World Health Assembly of health ministers agreed to the principle of universal health coverage. This is taken to mean that everyone should be able to enjoy basic health services. 

On 3 June, the World Social Protection Report 2014-15 that examines recent social security trends in the world was launched by the International Labour Organization (ILO). 

It looks at how persons are covered by social security at all stages of life, from birth, as children and mothers, as workers (how they are covered by schemes involving work injury, maternity leave, disability, etc.), as unemployed (whether there are benefits), and as older persons (for example, whether they are covered by pensions).    

It is a great aspiration for a society to guarantee or at least pledge that everyone, however poor, has access to the basic elements needed for a decent life. But is it feasible to implement such a high goal? It is often argued that countries that spend a lot to provide welfare and benefits for the lower-income groups may face unsustainable budget deficits.

The counter-argument is that governments can raise revenues in various ways, including different types of taxes, and that social security should be on a high priority for public spending. It will boost the level of demand in the economy and improve social stability.

It was a kind of received wisdom that rich countries can afford social protection but poor countries just don’t have the funds.

The recent experience of Brazil showed that a middle-income country could channel government funds to the poor, so that there would be “zero hunger”, a pledge that the former President Lula da Silva had made to his people.

Brazil has also argued that the funds provided to the poor have boosted effective demand and contributed to economic growth.  Thus social redistribution not only alleviates poverty and hunger but also reduces inequality and boosts growth.

An increasing number of developing countries have recently developed their own forms of income support for poor families.  This has usually proven popular, and especially welcomed by the beneficiaries.

Lessons are still being sought on making the financing of these and other welfare schemes sustainable.  

Austerity measures

Another major issue is how the current recessionary situation affects social security.  The ILO report devotes a section to this, raising concerns that austerity measures are affecting social security and creating new poverty, in Europe but also in developing countries.        

The report finds that “most people are without adequate social protection at a time when it is most needed”.  Only 27% of the world population enjoy access to comprehensive social security.

Social security and healthcare for children, working-age people who face unemployment or injury and older persons is a universal human right, but the promise of universal social protection remains unfulfilled for the large majority, says the ILO.

In the first phase of the global financial crisis (2008-09), at least 48 high- and middle-income countries put in place stimulus packages totalling $2.4 trillion that devoted roughly a quarter to social protection measures. This helped the economies to regain balance and protected the unemployed and vulnerable from economic disaster in these countries.  

But in the second phase of the crisis, from 2010 onwards, many governments reversed course and embarked prematurely on fiscal consolidation.

“As many as 122 governments are contracting public expenditures in 2014, of which 82 are developing countries,” according to Isabel Ortiz of the ILO.

The austerity measures include reforms to the pension, health and welfare systems that often reduce coverage or funding of these systems, eliminate subsidies and cut the number of health and social workers. 

“In effect, the cost of fiscal consolidation and adjustment is passed on to populations at a time of low employment and when support is most needed,” Ortiz added.

High-income countries are contracting their social protection. In Europe this has contributed to increases in poverty now affecting 123 million people or 24% of the population.

In contrast, many middle-income countries are expanding their social protection systems, supporting household incomes. China has sharply increased minimum wages and is close to achieving universal pension coverage, and Brazil has further increased the rate of social protection coverage and minimum wages since 2009.

Due to their low income, the poorer countries have lower social security levels.  However, some countries, such as Mozambique, have also extended social protection, yet often through temporary safety nets with very low benefit levels.

At the global level, governments allocate only 0.4% of GDP to child and family benefits.  This should be scaled up, since many of the 18,000 child deaths a day could be averted through social protection.

Expenditures for social protection for working-age people (in the event of unemployment, maternity, disability or work injury) vary widely across regions.  Worldwide, only 12% of unemployed workers receive unemployment benefits, ranging from 64% in Western Europe to less than 3% in the Middle East and Africa.

On pensions, 49% of all people over pensionable age worldwide do not receive a pension, while the pension levels are too low for many recipients to avoid poverty.

The good news is that social protection has been endorsed by the ILO and some other parts of the UN. It is expected to be included in various ways in the Sustainable Development Goals which are now being negotiated by the UN in New York.

If the principle of social protection is increasingly adopted, the discussion, globally and nationally, will focus more on how to implement this, with all the problems and options to be considered.p

Martin Khor is Executive Director of the South Centre, an intergovernmental policy think-tank of developing countries, and former Director of the Third World Network. This article first appeared in The Star (Malaysia) (9 June 2014).

Third World Economics, Issue No. 571, 16-30 Jun 2014, p8