The cost of closing national social protection gaps Michael Cichon Graduate School of Governance, UNU Maastricht International Council on Social Welfare (ICSW) Expert Group meeting, Report on the World Social Situation 2017, New York, 1-2 December 2016
Structure of the presentation The cost of closing social protection gaps: A narrow approach The cost of closing social protecion gaps: A wider approach The cost of closing social protecion gaps: A wide approach Conclusions 07/12/2016
Point One: A narrow approach to cost estimates: the SPF index 07/12/2016
The new SPF Indicator of the Global coalition for the SPF: Estimating the social protection gaps in % of GDP Where: CI i = composite index AGG ij = income security gap HG ik = health security gap i = for every country j = either (1) poverty line at $1.90 a day; or (2) poverty line at $3.10 a day of 50% of mean income k = either (1) benchmark with prof. attended birth; or (2) benchmark with average staffing ratio
Public health expenditure as percent of GDP HG i Public health expenditure as percentage of GDP HG B Benchmark public health expenditure as percentage of GDP Example calculation - expenditure Benchmark: 1)Average public health expenditure of all countries with staffing ratios between 4.7 and 6.9 physicians, nurses, midwives per 1,000 people (mean staffing ratio of all countries +/- 0.5 standard deviation, i.e. 38% of all values if normally distributed (= 4.0 percent of GDP)
Results composite index Ranking one example index (in % of GDP) Using a relative poverty line of 50% of median Income (or US$ PPP1.90 ) 1 Romania 0.3 2 Croatia 0.4 Czech Republic 4 Finland 0.5 Luxembourg Ukraine 7 Denmark 0.6 Germany Iceland 10 France 0.7 Ireland Kyrgyz Republic Netherlands Serbia Sweden 16 Belarus 0.8 Belgium Hungary Montenegro Poland Slovak Republic Slovenia St. Lucia Switzerland 25 New Zealand 0.9 Norway 27 Estonia 1.0 Moldova 29 Austria 1.1 Lithuania United Kingdom 32 Maldives 1.2 Mongolia Portugal Tunisia 36 Australia 1.3 37 Greece 1.5 38 Bulgaria 1.6 39 Italy 1.7 Seychelles Turkey 42 Spain 1.8 43 Albania 1.9 Israel Latvia 46 Macedonia, FYR 2.0 47 Bosnia and Herzegovina 2.1 El Salvador Kazakhstan Thailand United States 52 Congo, Rep. 2.3 Uzbekistan 54 Mexico 2.4 Uruguay 56 Swaziland 2.6 57 Mauritius 2.7 58 Armenia 2.8 China Russian Federation Trinidad and Tobago 62 Bhutan 3.0 Guyana 64 Azerbaijan 3.1 Gabon 66 Iran, Islamic 3.2 Rep.Vanuatu 68 Angola 3.3 69 Tonga 3.4 70 Fiji 3.5 Pakistan 72 Chile 3.6 73 India 3.7 Indonesia Panama Sao Tome and Principe 77 Brazil 3.8 Nepal 79 Colombia 3.9 Tajikistan Sri Lanka 82 Morocco 4.0 Peru Vietnam 85 Ecuador 4.1 86 Georgia 4.2 Turkmenistan 88 Costa Rica 4.3 Dominican Republic 90 Ghana 4.4 Suriname 92 Namibia 4.5 93 Jamaica 4.6 Philippines Sudan 96 Belize 4.7 Botswana Nicaragua Solomon Islands 100 Djibouti 4.8 Malaysia Mauritania 103 Timor-Leste 5.0 Venezuela, RB 105 Kiribati 5.1 106 Cote d'ivoire 5.2 South Africa 108 Cameroon 5.6 109 Paraguay 5.7 110 Papua New Guinea 5.8 Uganda 112 Guatemala 5.9 Micronesia, Fed. Sts. Nigeria 115 Senegal 6.2 116 Tanzania 6.3 117 Bolivia 6.6 118 Kenya 6.9 119 Zambia 7.6 120 Honduras 7.9 121 Ethiopia 8.0 122 Burkina Faso 8.1 Chad 124 Guinea 8.5 125 Benin 8.9 126 Sierra Leone 9.2 127 Gambia, The 9.3 128 Lesotho 9.4 129 Mali 9.8 130 Rwanda 10.3 131 Niger 12.1 132 Togo 13.5 133 Liberia 15.8 134 Haiti 16.1 135 Guinea-Bissau 17.0 136 Comoros 19.8 137 Mozambique 20.2 138 Madagascar 23.2 139 Central African Republic 24.0 140 Malawi 31.0 141 Burundi 32.9 142 Congo, Dem. Rep. 44.9
Results composite index Comparing the cost at three different poverty lines for the 13 countries with cost over 10% of GDP Country SPF Index at $ 1.90 SPF index at $ 3.10 SPF Index at relative measure (i.e 50% of median income) (1) in % of GDP in % of GDP in % of GDP Rwanda 10.3 31 10.3 Niger 12.1 44.7 12.1 Togo 13.5 35.1 13.5 Liberia 15.8 51.6 15.8 Haiti 16.1 33.5 16.1 Guinea-Bissau 17 41.2 17 Comoros 3.8 11.4 19.8 Mozambique 20.2 53 20.2 Madagascar 23.2 51.5 23.2 Central African Republic 24 57.8 24 Malawi 31 78.3 31 Burundi 32.9 85.6 32.9 Congo 44.9 103.2 44.9
Results composite index The order of magnitude of the Problem Cost of closing the SPF gap at US$1.90 In % of Minimum Maximum Average Country tax-togdp ratio since 2000 tax-togdp ratio since 2000 tax-togdp ratio since 2000 Rwanda 85.1 75.4 80.0 Togo 97.2 67.4 84.8 Mozambique 125.3 99.2 109.8 Madagascar 302.5 178.7 224.4 Central African Republic 386.4 255.5 291.1 Congo 5758.6 486.0 782.3
Results composite index The order of magnitude of the Problem Intra-African comparison Cost of closing the SPF gap at US$1.90 Comparison to Namibia In % of Minimum Maximum Average Country tax-togdp ratio since 2000 tax-togdp ratio since 2000 tax-togdp ratio since 2000 Rwanda 47.4 34.0 39.3 Togo 62.2 44.6 51.5 Mozambique 93.0 66.7 77.1 Madagascar 106.8 76.6 88.5 Central African Republic 110.5 79.3 91.6 Congo 206.8 148.3 171.3
Point Two: A wider approach: Resource requirements to achieve the narrow SDG social protection agenda 07/12/2016
The quantitative methodology: example for 10 Asian countries Calculated are: A lower cost estimate for the closure of the social protection cash benefit gap assuming the filling of the protection gaps through a perfectly targeted social assistance scheme, An upper cost estimate assuming the filling of the SP cash benefit gap through universal transfers to children (50% of national PL) and elderly (70% of PL) and an employment guarantee scheme for the population in active age (100% of min.wage for 100 days per annum )
Results : The potential difference between a universal benefit solutions to close the gap and a perfectly targeted social assistance solution, SP proper only ( a 10 country Asian sample) SP Proper Lower estimate SP proper Higher estimate Difference factor Difference in % of GDP Cambodia 2.3 9.5 4.2 7.2 Indonesia 2.1 5.4 2.6 3.3 Lao PDR 3.0 6.8 2.3 3.8 Malaysia 0.1 6.0 78.3 5.9 Myanmar 4.7 11.1 2.3 6.4 Nepal 2.1 11.8 5.5 9.7 Philippines 2.0 5.7 2.8 3.7 Sri Lanka 0.0 1.1 1132.5 1.1 Thailand 0.4 4.9 12.5 4.5 Viet Nam 1.3 7.3 5.4 6.0 Simple average lower estimate 1.8 7.0 3.9 5.2
Results : Tyical composition of expenditure higher estimate here Cambodia - around 2015 Old age pensions 1,89 Active age 0,71 Children 4,28 Invalidity 0,11 Maternity 0,10 Admin 0,71 Health 1,70 Old age pensions Active age Children Invalidity Maternity Admin Health
Point three: A wide approach: Resource requirements to achieve the full SDG social protection agenda 07/12/2016
The New ADB SDG costings: Starting with A PRAGMATIC Definition of Social Protection Social protection systems are here defined as combined transfer and service delivery schemes aiming at guaranteed income security and access to essential health care. This definition as clearly intended in ILO R.202 - is much wider than the one commonly used. Social protection cash transfers are meant to enable the recipients to buy essential goods and services. What social protection schemes providing cash benefits could never ensure was the availability of such essential goods and services. Other generally public institutions have to ensure that the delivery infrastructure for these goods and services is available and functioning. => Social protection is only complete when transfers and infrastructure complement each other so that all people have de facto access to essentially goods and services of adequate quality.
The social Protection Agenda of the SDGs Out of the 17 SDGs 11 have a direct links to social protection systems as defined above. Twenty-seven of the targets belonging to these 11 goals likewise have a link to social protection. Together these 11 goals and 27 targets constitute the social agenda of the SDGs. These targets can be grouped into: SP cash transfers Essential health services, Education services, Other essential services (Target 6. 2 sanitation and hygiene. Target 7.1 universal access to affordable, reliable and modern energy services, Target 11.1 adequate, safe and affordable housing and basic services, Target 11.2 of affordable, accessible and sustainable transport systems)
The quantitative methodology Calculated are: A lower cost estimate and upper cost for SP cash transfers as in the last sections plus Estimates for other services. These gaps are assumed to be closed by simply adjusting present government expenditure levels in the respective category from the present level of access to full access.
Results.
Results.
Results.However increasing revenue-to GDP-ratios till 2030 to the regional average would make the picture look much friendlier except for two countries Status quo estimates 2030 Projected government finances 2030 Projected government finances 2030 after closure of SDG gap if revenues were to be increased LOWER estimate to 21.5% of GDP (a) (average developing ADB member states in Asia) if lower under status quo Government revenue in % of GDP Government expenditure in % of GDP Deficit/sur plus in % of GDP Government revenue in % of GDP Government expenditure in % of GDP Deficit/surplus in % of GDP Government revenue in % of GDP Government expenditure in % of GDP Deficit/surplus in % of GDP Cambodia 15 20.9-5.9 15 25.8-10.8 21.5 25.8-4.3 Indonesia 14.6 16.6-2 14.6 19.6-5.0 21.5 19.6 1.9 Lao PDR 17.5 25.2-7.7 17.5 34.2-16.7 21.5 34.2-12.7 Malaysia 19.6 24.2-4.6 19.6 24.7-5.1 21.5 24.7-3.2 Myanmar 22.8 27.5-4.7 22.8 36.2-13.4 22.8 36.2-13.4 Nepal 17.2 18.8-1.6 17.2 24.0-6.8 21.5 24.0-2.5 Philippines 13.9 15.6-1.7 13.9 18.9-5.0 21.5 18.9 2.6 Sri Lanka 17.2 19.3-2.1 17.2 23.5-6.3 21.5 23.5-2.0 Thailand 17.5 20.5-3 17.5 21.9-4.4 21.5 21.9-0.4 Viet Nam 25.1 27.6-2.5 25.1 29.0-3.9 25.1 29.0-3.9
Preliminary fiscal space considerations: But there are voices that indicate that in many countries overall tax levels are too low: UN ESCAP states Tax collection in Asia-Pacific developing countries is currently neither sufficient nor equitable. Only a few countries collected tax revenues of more than 20% of GDP in 2011 far from the 25-35% of GDP that is considered one of the prerequisites for being able to provide the financing and expenditure to become a developed country. In particular personal income taxes are notoriously low in a number of Asian countries. Increasing them would certainly have a positive impact on the level of income equality in the region. Better enforcement of tax laws alone could be a major source of additional revenues. Overall UN ESCAP (UN ESCAP.2014.p.x) considers that in many countries tax collection is below potential. In some countries, the gap between actual revenues collected and the level that would be appropriate given the economy s structure is equivalent to 5% of GDP or more.
Summary and interpretation of findings No more than about 20 countries have complete SPF level SP systems About 100 countries can probably afford to close their basic (narrow) SPF social protection gaps by realistic efforts to increase tax compliance or reallocate resources till about 2030 (by resource increases that are less than the difference between the lowest and highest average Tax-to-GDP (TGRs) ratio in subsaharan Africa between 2000-2015) At least 43 have SPF gaps that are bigger than 10% of their tax-to-gdp-ratios, i.e. about one third of countries in the SPF-index and probably have to increase their tax compliance, their base, tax rates or introduce new taxes (notbaly income taxes) Of these 43 countries 38 have TGRs of less than the average for sub-saharan Africa and need a major re-engineering of their tax systems At least 13 countries need substantial help from the international community Closing the full SPF gaps exclusively by universal schemes may not be possible for about 80 countries in the short run (as the cost may be as much as four times as high as the cost of a narrow approach) in particular when seen in the context of a wider definition of SP in line with the SO agenda of the SDGs 07/12/2016