Social Protection: An Indispensable Tool for a New Social Contract Rethinking Social Protection in the Arab Region Amman, 13-15 May 2014 Isabel Ortiz Director Social Protection Department International Labour Organization
Distribution of World Income: Development for Whom? Global Income Distribution by Countries, 1990-2007 (or latest available) in PPP constant 2005 international dollars Q5 Q4 Q3 1990 Q2 2000 Q1 2007 0 20 40 60 80 100 Source: Ortiz and Cummins. 2011. Global Inequality. UNICEF
Distribution of Income in the Arab Region Countries where data is available, latest year Source: Ortiz and Cummins. 2011. Global Inequality. UNICEF
Historical Perspective: Income Inequality Increasing Year Gini 1820 43.0 1850 53.2 1870 56.0 1913 61.0 1929 61.6 1950 64.0 1960 63.5 1980 65.7 2002 70.7 Source: Milanovic (2009) World Bank
Trends in Inequality in the Arab Region Gini Indices and Changes years 1990, 2000 and 2008 (or latest available) Source: Ortiz and Cummins. 2011. Global Inequality. UNICEF
Inequality Slows Down Economic Growth Per Capita Growth and Change in Income Inequality in 94 Developing Countries, 1990-2008 (or latest available) Source: Ortiz and Cummins. 2011. Global Inequality. UNICEF
Inequality Generates Violence and Crime Source: Ortiz and Cummins (UNICEF 2011)
Inequality Generates Political Instability Source: Ortiz and Cummins (UNICEF 2011), based on Solt (2009) and Kaufmann et al. (2009) Note: -2.5 is high political instability and politically-motivated violence/terrorism; 2.5 is the absence of
The Case for Social Protection Social Justice it is a Human Right Article 22 of the Universal Declaration of Human Rights It contributes to growth: Inequality is economically inefficient / dysfunctional Consumption concentrated in top income deciles in all countries 2013: Depressed world markets, low demand and low growth. Questioning export-led model, need for domestic markets as a development strategy. Raising the incomes of the poor increases domestic consumption And enhances human capital and productive employment It builds political stability Poverty and gross inequities tend to generate intense social tensions and violent conflict Social benefits ensure the political/electoral support of citizens
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 200 Social Protection Also Needed Because of High Food Prices 190 180 170 160 150 140 130 120 110 100 Local Food Price Index (UNICEF, 55 countries) Global Food Price Index (FAO, March 2013) Source: Ortiz and Cummins. 2012. A Recovery for All. UNICEF
Social Protection Important Because Not Everybody can Work A Long Jobs Crisis Employment to Population Ratios 1990-2011 Source: Ortiz and Cummins. 2012. A Recovery for All. UNICEF.
Declining Demand for Young Labour Youth Employment to Population Ratios 1990-2011 Source: Ortiz and Cummins. 2012. A Recovery for All. UNICEF.
Further, Countries Contracting Public Expenditures Number of Countries Contracting Public Expenditures as a % GDP, 2008-16 106 114 122 125 121 75 74 56 42 89 91 94 90 82 90 85 Source: ILO World Social Protection Report 2014-15 - based on IMF s World Economic Outlook (October 2013)
2013-15: A fifth of countries excessive contraction (expenditures below pre-crisis levels) Changes in Total Government Spending as a %GDP, 2013-15 avg. over 2005-07 avg.
Main Adjustment Measures by Region, Developing Region / Aggregates 2010-13 (number of countries) Limiting subsidies Wage bill cuts/caps Increasing consumption taxes Pension reform Rationalizing targeting safety nets Health reform Source: ILO World Social Protection Report 2014-15 based on 314 IMF country reports 2010-2013 Labor Reform East Asia and the Pacific 12 13 8 4 9 0 2 Eastern Europe and Central Asia 9 15 13 16 15 9 6 Latin America and Caribbean 11 14 13 12 11 0 1 Middle East and North Africa 9 7 7 5 5 3 1 South Asia 6 4 4 1 4 0 2 Sub-Saharan Africa 31 22 18 9 11 0 3 Developing countries 78 75 63 47 55 12 15 High-income countries 22 23 31 39 25 25 17 All countries 100 98 94 86 80 37 32
Development Impacts 122 countries contracting public expenditures in 2014 (106 developing) Eliminating subsidies (food and fuel) in 100 countries, despite record-high food prices in many regions Wage bill cuts or caps in 98 countries, reducing the salaries of public-sector workers who provide essential services to the population. VAT increases on basic goods and services that are consumed by the poor and which may further contract economic activity in 94 countries Rationalizing and targeting safety nets are under consideration in 80 countries, at a time when governments should be looking to scale up benefits though social protection floors Reforming pension and health care systems in 86 and 37 countries Labor flexibilization reforms in 30 countries, eroding workers rights Source: ILO World Social Protection Report 2014-15 based on 314 IMF country reports 2010-2013
A New Deal, or a New Social Contract, is Feasible Current situation presents an opportunity to rethink socioeconomic policies for all persons 1929 financial crash led to a New Deal that radically altered the development model of the day: Stimulated economic growth and employment Regulated the financial sector Expanded social security A comparable policy push is needed today Policy shift started in a few Asian and Latin American countries, concerned on low growth and demand for their exports, they are building internal markets (bold expansion social protection, minimum wage policies, social services, etc)
Intead of Adjustment, Investing in People Investment in social protection Sustainable development based on inclusive economic growth Healthier and better educated population Human Rights Social justice Domestic consumption + demand Higher productivity 18
Social Protection Contributes Effectively to Development Goals Proven results: Reduced poverty, better nutrition, improved household income stability (MDG 1, 4, 6) Improved preventive health care (MDG 4 and 5) Higher immunization rates (MDG 4) Higher school enrollment rates reduced school drop-out (MDG 2,3) Decline in child labour among children in rural areas (MDG 2, 8) See: Social Protection: Accelerating the MDGs with Equity http://www.unicef.org/socialpolicy/index_55915.html
. Household Minimum Income Support Social Pensions Child and family benefits Cash-for-Work Health Protection Chile, China, Cyprus, Mozambique, Rwanda, Zambia Argentina, Bolivia, Bangladesh, Brazil, Botswana, Cabo Verde, Chile, Costa Rica, India, Lesotho, Mauritius, Moldova, Namibia, Nepal, Peru, Samoa, South Africa, Tajikistan, Thailand, Uruguay, Vietnam Argentina, Bangladesh, Bolivia, Brazil, China, Colombia, Costa Rica, Ecuador, Ghana, Honduras, Indonesia, Jamaica, Kenya, Malawi, Mexico, Mongolia, Mozambique, Nepal, Nicaragua, Philippines, South Africa, Senegal, Tanzania, Uruguay How older poor spend pension cash transfer Argentina, Burkina Faso, Cambodia, Colombia, Cameroon, Egypt, Ethiopia, Ghana, Guinea, Honduras, India, Kenya, Madagascar, Malawi, Mali, Nepal, Niger, Panama, Rwanda, South Africa, South Korea, Tanzania, Uganda, Vietnam, Yemen, Zambia, Zimbabwe China, Lao PDR, Ghana, Rwanda, Tanzania, Thailand
Social Protection Floors Recommendation 202 approved by world countries June 2012: The Recommendation Concerning National Floors of Social Protection adopted at the 101st session of the ILC in Geneva, by governments, unions and employers. July 2012: Rio+20 The future we want UNGA A/RES/66/288 Para 156. We stress the need to provide social protection to all members of society, fostering growth, resilience, social justice and cohesion, including those who are employed in the informal economy. We strongly encourage providing social protection floors for all citizens June 2011: Endorsed by G20 Leaders at Cannes Summit
Basic Pillars of Recommendation 202 Social Protection Floors Higher levels of protection NATIONAL SOCIAL SECURITY SYSTEM ESSENTIAL HEALTH CARE Including MATERNITY care NATIONAL SOCIAL PROTECTION FLOOR: nationally defined basic social security guarantees basic income security for CHILDREN AND FAMILIES basic income security for WOMEN AND MEN IN WORKING AGE unable to earn sufficient income OLD AGE PENSIONS
A Change in Paradigm: The Social Protection Floor Aims To Provide Universal Minimal Guarantees
Child and Family Benefits
Social protection for the lifecycle: Working age Unemployment benefits Employment injury benefits Disability benefits Maternity protection
Old Age Pensions Source: ILO, World Social Protection Report 2014-15
Shifting policy paradigm: The role of social protection in a development context Washington consensus Grow first, distribute later (if at all) Consolidate public budgets Cuts in public services Short-term, minimal social safety nets to cushion the consequences of adjustment policies Pro-poor growth Focus on social protection targeted on the poor and vulnerable Risk management approach Support for (conditional) cash transfers, health and education Inclusive growth and development Social protection indispensable for social and economic development Social contract = for all (not just the poor) Universal and progressive approach
14. How to Build Social Protection Floors? Formulating and implementing national social security strategies When formulating and implementing social security extension strategies, Members should (para. 14 of Recommendation 202): SPF Guarantees Existing Gaps Reccomend ations (a) set objectives reflecting national priorities; (b) identify gaps in protection; HEALTH CHILDREN ELDERLY WORKING AGE (c) determine appropriate social protection schemes, whether contributory or non-contributory, or both, as well as the time frame and sequencing for the progressive achievement of the objectives (d) Cost selected schemes (e) Discuss financial and human resources with Ministry of Finance (f) raise awareness about their social protection floors and their extension strategies, and consult options through social dialogue. 28
Estimated cost for package of basic transfers old-age and disability pensions, child benefits, unemployment support Source: ILO 2008, Geneva
Fiscal Space for Social Protection Floors Exists Even in the Poorest Countries There is national capacity to fund social protection floors in virtually all countries. There are many options, supported by UN and IFIs policy statements: Re-allocating public expenditures Increasing tax revenues Increasing contributions Fighting illicit financial flows Lobbying for increased aid and transfers Tapping into fiscal and foreign exchange reserves Restructuring debt Adopting a more accommodative macroeconomic framework (e.g. tolerance to some inflation, fiscal deficit)
Thank you Contact: Isabel Ortiz, Director Social Protection Department, International Labour Organization. Email: ortizi@ilo.org Visit: www.social-protection.org http://www.ilo.org/