Transcript DESA : Establishing a Social Floor for the Global Economy

UN Department of Economic and Social Affairs
Establishing a Social Floor for
the Global Economy
Isabel Ortiz
Senior Interregional Advisor
United Nations DESA
UN Commission for Social Development
Side Event by ILO-HelpAge-UNDESA
New York, 7 February 2008
Distribution of World Income
Globalization for whom?
Distribution of world GDP, 2000
(by quintiles, richest 20% top, poorest 20% bottom)
Source: UNDP Development Report 2005
Historical Trend:
Inequality Keeps Rising
Ratio of the Income of the Richest 20% to the Poorest 20%
Year
Ratio
1820
3:1
1870
7:1
120
1913
11:1
80
1960
30:1
1991
1997
2005
61:1
Ratio of the Income of the Richest 20% to
the Poorest 20%, 1820-2005
RATIO
100
60
40
20
0
74:1
1820 1870 1913 1960 1991 1997 2005
103:1
YEAR
Source: UNDP Human Development Reports 1999 and 2005, New York
Apartheid at a Global Scale?
Need of a Global Social Floor
Source: Sutcliffe, 2005. Department of Economic and Social Affairs.
WP 2. United Nations
A Global Social Floor

Defined as a basic and modest set of social
security benefits for all citizens
1. Financing universal access to essential health
care
2. Income security for all children through child
benefits
3. Some modest conditional support for the poor
in active age (employment programmes,
benefits), and
4. Income security through basic, tax-financed,
universal non-contributory pensions for older
persons, persons with disabilities and those
who lost the main breadwinner in a family

All countries have some form of social security
but few provide a basic social floor for all
The case for a Global Social Floor:
Social Justice Arguments


Unacceptable levels of poverty and inequality
• Half of the world lives below the $2-a-day poverty
line
• The poorest 50% of the world’s adult population
receives 1% of global wealth (UN WIDER, 2006)
Social security is a human right:
• Article 22 of the Universal Declaration of Human
Rights states: “Everyone, as a member of society,
has the right to social security”
• But 80% of global population remains without
access
But Also Strong Economic Arguments





Inequality is economically inefficient / dysfunctional
World problem of overproduction and global excess
capacity in the context of weak effective demand
Consumption concentrated in top income deciles
Raising the incomes of the poor increases domestic
demand and, in turn, encourages growth by expanding
domestic markets
A Global Social Floor can be an effective instrument to:
 Boost economic growth by raising domestic
demand / internal markets

Enhance human capital and productive
employment - a better educated, healthy and well
nourished workforce.
… and Political Arguments
 A Global Social Floor can be effective to
prevent conflict and create politically stable
societies
 Poverty and gross inequities tend to
generate intense social tensions and violent
conflict
 The huge disparities in income inequality
encourage uncontrolled migration
 At the international level, globalization will
find further resistance unless it deals with its
social aspects
=> Need of a global social contract
Transfers Reduce Poverty more than
50% in OECD countries
Source: OECD
South Africa Social Transfers Effective to
Reduce Poverty and Destitution – Cost 3% GDP
Source: Sampson, M. 2006, EFPRI South Africa
=> However social transfers are rarely considered in National
Development Strategies/Poverty Reduction Strategies in Developing
Countries
=> Social Transfers can make the difference between achieving MDG1
of halving poverty by 2015 or not
Redressing Income Assymmetries and
Reducing Poverty Requires:
HOUSEHOLD INCOME = Earnings + Rents/Private Transfers + Social Transfers – Taxes
National Development Strategies that
include
1. Employment-generating
macroeconomic and sector policies
2. Adequate labour regulations and
standards
3. Social Transfers – A Social Floor
4. Progressive fiscal policies
A Social Floor is Affordable even in Low
Income Countries
Affordability in African and Asian countries
(old-age /disability pension and child benefit) (% of GDP)
Source: ILO, 2007. Social Security Department, Geneva
Social Pensions Cost less than 1% GDP
in Most Countries
Source: UN DESA, 2007: World Economic and Social Survey 2007, United Nations
Is there an Old-Age Crisis?
Future contingent liabilities not a problem
because of changes dependency ratios
Source: UN DESA 2007
Financing a Global Social Floor
 National Sources:
 A Social Floor is affordable, estimated at an
average 2-4% GDP in developing countries
 Several countries have started building a social
floor: Namibia, South Africa, Botswana, Mauritius,
Bolivia, Brazil, Argentina, Thailand…
 Social transfers have to grow with the fiscal space
made available by increasing GDP or Aid
 Domestic resources exist:
 Budget reallocation
 Billions lost through tax evasion and
inadequate tax systems
 Currently South-North flow of funds that needs
to be reversed
Financing a Global Social Floor

International Sources:
 Strong argument given world inequalities, 70%
explained by differences in income between
countries
 ILO estimates that Global Social Floor would cost
between 2%-6% of global GDP
 Mechanisms:
 Increased Official Development Aid
 Multilateral and bilateral ODA to governments
 New instruments like SWAps and Budget Support
ideal
 A Global Welfare Fund? (Milanovic, to citizens)
 Global tax justice
 Collecting a minimum tax on corporate profits and
strengthening tax cooperation
 An International Tax Agency?
 Voluntary donations: Global Trust (ILO)
It Can Be Done: Remember that Not
Long Ago
There were children working in
England’s mines and factories…
…Spanish low
class emigrants
going to Latin
America in search
of any job…
… poverty was widespread in
the US or South Korea…
…and in South Africa’s
apartheid
Thank you
United Nations Department of
Economic and Social Affairs
http://www.un.org/esa/
Email: [email protected]