international labour office 1 the ilo global campaign to extend social security to all a new deal...
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The ILO Global Campaign to extend Social Security to all
InternationalLabourOffice
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A new deal for people in a global crisis - Social security for all:
Making the economic, financial and fiscal case
Michael Cichon
Social Security Department
International Labour Office
New York, February 2009
The ILO Global Campaign to extend Social Security to all
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Structure of the presentation
One: Social security is an economic necessity
Two: Social security is fiscally affordable Three: Expected and observed social
impact Four: Financing strategies
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One: …in addition to a social necessity social security is an economic necessity…
Economies cannot develop and grow without a productive workforce. In order to unlock a country’s full growth potential one has to fight social exclusion, ignorance, unemployability…through social transfers
Access to social health protection and education improves productivity levels (we have ample research evidence…)
The famous trade-off between growth and equity is a myth… Investments on social security and economic development
coincided in OECD countries Cash transfers in developing countries have multiplier effects on
local markets (stimulate local production inter alia of food) and Social transfers stabilise domestic demand in times of crises
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Two: Basic social security/essential cash transfers are affordable:A simulation exercise – Assumptions
Basic old age and invalidity pensions: – 30% of per capita GDP capped at US$ 1 PPP per day
Child benefits: – 15% of per capita GDP capped at US$ 0.50 PPP, for a max. of two children in age
bracket 0-14 Essential health care:
– based on an health system staffing ratio of 300 medical professionals per 100,000 population, overhead 67% of staff cost …
Basic social assistance for the unemployed: – 100 day guaranteed employment paid by 30% of per capita daily GDP to 10% of the population
Administration cost: 15% of cash benefit expenditure
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Two Four:… cost of universal pensions
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Burkin
a Fas
o
Camer
oon
Ethiop
ia
Guin
ea
Kenya
Seneg
al
United
Rep
. Tan
zania
Bangla
desh
India
Nepal
Pakis tan
Viet N
am
in p
er c
ent
of
GD
P
2010
2020
2030
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Two:… a basic social protection package is affordable: Total cost of all basic benefit package components
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Burkin
a Fas
o
Camer
oon
Ethiopia
Guinea
Keny
a
Seneg
al
United
Rep
. Tan
zania
Bangla
desh
India
Nepal
Pakist
an
Viet N
am
in p
er c
ent o
f GD
P
2010
2020
2030
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Point Two:… a basic social protection package is affordable: share of total cost that can be covered by domestic resources
0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%
100.0%
% o
f tot
al e
xpen
ditu
re o
n ba
sic
soci
al
prot
ectio
n
2010
2020
2030
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0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
4,5%
Child benefit
Old-age pension
Targeted socialassistance
A closer look at Tanzania…
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Point two: Other studies and experience
In Latin America the cost of a modest package of conditional child cash transfers, universal pensions and basic health care can be kept under 5% of GDP; the poverty headcount effects can reach a reduction of more than 50%
Universal pension schemes in Botswana, Brazil, Lesotho, Mauritius, Namibia, Nepal, and South Africa, cost between 0.2 and 2% of GDP.
Global view: Less than 2% of Global GDP are needed to provide all the world's poor with a basic benefit package
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Point Three: Estimated social impact of cash transfers: reduction of poverty (headcount)
0
5
10
15
20
25
Senegal Tanzania
Pove
rty ra
te (p
erce
nt o
f the
pop
ulat
ion)
Universal old age and disabilitypension
Universal child benefit for school-agechildren (7-14)
Simulated remaining poverty rate
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Point three: Estimated effect of a basic benefit package on poverty headcount: Tanzania
Simulated reduction of poverty rates in Tanzania
9.2
27.07.9
8.8
5.1
5.0
0
5
10
15
20
25
30
35
40
45
Food poverty line Basic needs poverty line
Po
vert
y ra
te (
he
ad
co
un
t)
Remaining poverty Old age and disability pension and benefit for children and orphans Access to health care
22.2
40.8
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Point three: Social impact – lessons learned in developing countries
Coverage: Basic social transfers presently already cover 150-200 million people in about 25 to 30 countries
Poverty impact: the old age grant in South Africa decreased destitution gap by 45 %, oportunidades in Mexico reduced poverty rate of beneficiary households by about 12-points, similar order of magnitude in Brazil
Education: positive enrolment effects and school attendance duration in Mexico, Brazil, Colombia, Bangladesh, Nicaragua and Zambia
Health: positive effects on height, weight of children and nutritional status in Colombia, Mexico, Chile, Malawi, South Africa
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Point three: Social impact – Preliminary Results of an ILO Meta study “Compendium of Cash transfer programs in Developing Countries”
Number of countries in study: 28 - 8 in Africa, 9 in Asia, 11 in Latin America
Number of studies: 80 studies during 1999 and 2008 Number of programmes: 63 Estimated number of total beneficiaries (primary and
secondary , at the end of 2008):– Programmes for the active population: 43 Million– Programmes for the elderly and disabled: 30 Million– Programmes for children:146 Million
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Point three: Social impact – Preliminary Results of an ILO Meta studyCriteria Number of studies
that found Effect positive
Effect small/neut.
Effect
negative
Poverty/Vulnerability
Poverty
Inequality
46
5
9
1
-
-
Health/nutrition 25 1 -
Education
Enrolment
Quality
30
9
-
5
-
-
Labour Market Participation 9 5 3
Child labour 12 3 -
Prod. Investments/act’s 40 5 -
Social Status/bonds 23 1 2
Gender 13 4 -
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Point Four: Financing strategies: Lack of fiscal space? The good news – part I
Combined
Ireland
France
Mauritius
Croatia
South Africa
Estonia
Panama
ThailandDominican Republic
Romania
Iran
Bulgaria
Senegal
Moldova
Seychelles
Malta
Estonia
Mexico
Dominican Rep.
Romania
China
Syrian Arab Rep.
Senegal
Moldova
Uganda
Congo,Rep
Congo, Dem Rep
Burundi
0
10
20
30
40
50
60
70
0 5000 10000 15000 20000 25000 30000 35000
Health+SP
gov exp
Linear (Health+SP)
Linear (gov exp)
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Point four: Good news part II: Growing fiscal space
Sub-Saharan African countries increased on average domestic revenue from 15% to 19% of GDP between 1997 and 2006
…and after Monterrey domestic resources increased (source OECD and ECA)…
-10
0
10
20
30
40
50
Chad
Congo
; R
Cape
Verde
South
Afri
ca
Swazila
nd
Benin
Ghana
Mad
agas
car
Seneg
al
Niger
Tanz
ania
Nigeria
before 2002
estimated 2008
difference
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Four: Financing strategies- revisited
Domestic resource mobilisation – Increase the efficiency of tax collection– Reduce waste– Broaden tax base– Reduce tax evasion and avoidance – Introduce self financing insurance systems (largely health care)– Increase overall tax rates
International resources (transitional financing) – Modified social security targeted budget support ?– Project financing to build national delivery capacity– International financing of health care goods and services – People-to-People Partnerships: Global Social Trust– A new Fund finance the start-up of basic social security
schemes ? …or can we use the World Solidarity Fund that is already existing but empty…l
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Four: What can be done now…?
National social security development plans cum social budgets required, that
Determine social security gaps, priority needs and
fiscal requirements for the crisis and the next 10 years
Develop national fiscal space \through tax reform
Specify transitional external funding for basic benefits
Determine the capacity requirements