international labour office 1 the ilo global campaign to extend social security to all a new deal...

The ILO Global Campaign to extend Social Security to all

InternationalLabourOffice

1

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



2

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



3

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



4

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



5

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



6

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



7

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



8

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…



9

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



10

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



11

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



12

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



13

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



14

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 -



15

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)



16

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



17

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



18

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

international labour office 1 the ilo global campaign to extend social security to all a new deal...

Documents