Transcript ILO_Dakar_English

International
Labour
Office
Can developing countries afford basic
social security?
Social Security Department
International Labour Office
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Can developing countries afford
basic social security?
International
Labour
Office

The right question is the reversed one:
Can developing countries afford not to have basic
social security?
 The answer is: no, they have to build basic
social security as social security is a human
right and economic and political necessity
Further questions to be asked and answered:
 How much it costs?
 How to find money?
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We know that:
Everybody has a right to social security
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Human right (articles 22 and 25
Universal Declaration)
Labour standards - Convention no
102 (Minimum Standards) and other
ILO conventions
SADC Social Security Code
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We also know that:
Social security is an economic necessity
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It reduces poverty and income inequality and it is
proved that iinequality is economically inefficient
It generates growth as:
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Raising the incomes of the poor increases domestic
demand and, in turn, encourages growth by expanding
domestic markets
It enhances human capital and productive employment
thanks to a better educated, healthy and well
nourished workforce
Is indispensable part of institutional tissue of an
efficient market economy
Without social security poverty reduction and
development are not possible
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We also know that:
Social security is a political necessity
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Promotes peace, stability and social cohesion
through social justice
Helps to prevent conflict and create politically
stable societies
Well designed and governed social security
ensure the political/electoral support of citizens
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We also know that:
Even basic social security package would
bring a change
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There is ample evidence that investments in health care,
education and properly designed cash transfers have
positive economic and social effects in countries at any
stage of development
There is also already plenty of evidence which social
groups are vulnerable and what their needs and priorities
are
The choice of policy instruments to meet these needs and
priorities is also well known (various cash transfers as well
as mechanism assuring affordable access to health care
and education)
Various simulations show impact these instruments would
have on reducing poverty and vulnerability
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We also know that:
There is already a growing political
commitment in Africa to develop basic social
security
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To all the national and international
commitments referred during this conference
one can add:
Resolution of 11th International Labour
Organisation African Regional Meeting (Addis
Ababa, 24-27 April 2007)
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Where tripartite African ILO members committed
themselves to develop national action plans to build
basic social security to all
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What is basic social security?
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Universal affordable access to basic health benefits:
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provided through family/child benefits aimed to
facilitate access to basic social services: education,
health, housing.
Income security for older persons, persons with
disabilities and those who lost the main breadwinner
in a family:
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provided through a public health service funded by
taxes, social and private insurance and microinsurance systems linked together into one system.
Income security for all children:
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provided through basic universal non-contributory
pensions.
Social security to working poor and unemployed in
active age groups
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provided through social assistance and employment
guarantees
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A new developmental policy
paradigm for social security for all
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After gradually building basic social
security system, countries should - as
they develop economically - build
progressively higher levels of
protection.
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How much basic does basic social
security cost?
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International
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Office
ILO Social Security Department: Can
low-income countries afford basic
social security?, Geneva 208
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6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
Old-age pensions
Health care
Administrative costs
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0.0%
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in per cent of GDP
Costs for components of a basic social protectionInternational
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package as a percentage of GDP for selected countries
in Africa and Asia, 2010
Child benefits
Social assistance/employment scheme
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Costs for basic social protection package as a International
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Office
percentage of GDP for selected countries in Africa
and
Asia (selected years)
12.0%
8.0%
6.0%
2010
4.0%
2020
2.0%
2030
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0.0%
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in per cent of GDP
10.0%
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International
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2010
2020
2030
ina
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Ca as o
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100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Bu
rk
per cent of total expenditure on basic
social protection
Share of total costs possible to be covered by
domestic financing (share of budgets allocated to
basic social protection increases to 20%)
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How to find money?
(1) – Creating political will
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Affordability ultimately means willingness of the
society to pay taxes and contributions to finance
certain programmes
This willingness has to be translated into “political
will” to reallocate available and create new
domestic and donor funded resources to finance
social expenditure programmes
Society willingness to finance specific
programmes depends on how they are designed
and how they deliver
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Universal programmes can sometimes attract more
support than narrowly targeted ones
If the existing public programmes are badly
designed, badly managed and do not deliver
according to expectations, there will be no support
for the new similar programmes
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How to find money?
(2) Creating new fiscal space – within existing
resource envelope
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Revising current expenditure programmes to release fiscal
space or use it in accordance with social security policy
objectives
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Rationalization: making expenditure more effective (like:
decreasing administration costs in existing pension
programmes)
Re-assessment: are the existing spending meeting our policy
objectives (like: is there sufficient economic justification to
existing fuel (or similar) subsidies – “cash” transfers to the richer
part of the society?
Integration, coordination, redesign of existing programmes:
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There is plenty of small, under funded, uncoordinated poverty
alleviation programmes – government or donor funded. Integration
or coordination can increase effectiveness of existing expenditure
Redesign of existing social insurance programmes to make them
meeting priorities and expectations of different categories of
potential contributors may not only rationalize use of existing
resources but open space for new revenue from new contributors
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How to find money?
(3) Creating new fiscal space – within existing
resource envelope
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The above review has to be done as a first step as:
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There will be no political support for new spending programmes
if the existing ones are not meeting expectations
And thus:
Mobilizing new domestic or foreign resources will be difficult
without making current spending programmes right
Such a review should be done along a similar social impact
analysis of taxation
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How to find money?
(4) Creating new fiscal space – extending fiscal
envelope
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Sources:
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Mobilizing domestic revenue:
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Improving effectiveness in tax collection
Broadening tax base
Increased or new taxation
Securing increased grants from donors
Borrowing from domestic and foreign sources
(concessional versus non-concessional)
Past experience
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Sub-Saharan African countries increased on
average domestic revenue from 15% to 19% of
GDP between 1997 and 2006
Revenue is generally lower in lower-income
countries (average below 17% in 2006) but can be
22% in Ghana or 14% like in Tanzania
Grants in lower-income countries are on average
4-5% of GDP (3% in Ghana and 6% in Tanzania)
but not increasing since 2003.
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How to find money?
(5) Creating new fiscal space
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Coordinated forward looking national social
security action plans should sequence
development of different elements of the basic
social security package, reforming and
reorganizing at the same time existing
programmes (including converting non-social
transfers (like fuel subsidies) into more social
ones
Such plans should be costed within the medium
term expenditure framework
Resources have to be secured:
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through rationalization of current expenditure
through medium term strategy to increase domestic
revenue
through securing sufficient and sustainable levels of
grants to fill the transitory financing gap
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