International Labour Office e 1 1e 1 1 1‹#›‹#› The ILO Global Campaign to extend Social...

The ILO Global Campaign to extend Social Security to all

InternationalLabourOffice

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Universal social security benefitsagainst poverty and social exclusion

Michael Cichon

Social Security DepartmentInternational Labour Office, GenevaLisbon, 2 October 2006



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“The world does not lack the resources to eradicate poverty, it lacks the right priorities.”

Juan Somavia, Director General of the ILO



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Structure of presentation

Point one: The Problematique Point Two: Debunking the theoretical non-

affordability myth of social security Point Three: Debunking the practical non-

affordability myth - or : Can low income countries affoard basic social transfers ?

Point four: Conclusions - Changing the social security development paradigm



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Point One: Problematique

80% of people live in social insecurity, 20% in abject poverty

Social security reduces poverty by at least 50% in almost all OECD countries

Social security reduces income inequality by about 50% in many European countries

Social security universally accepted as human right (article 22, Universal declaration)

Hence social security transfers are a pivotal tool to combat poverty and social exclusion and yet social security is underutilised in national anti-poverty and development strategies



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Point Two: Debunking the theorectical non-affordability myth

The « conventional old » argument is : There is loss in potential GDP due to equity efficiency trade-off

Conclusion: That trade – off is a myth: « Countries can grow with equity » (Hilary Benn)

The ILO Global Campaign to extend social security to all


Can low-income countries afford social security?

DfID-GTZ-ILO Research Seminar “Challenging the Development Paradigm: Rethinking the Role of Social Security in State Building” 4-5 September 2006, Geneva

Krzysztof Hagemejer and Christina BehrendtSocial Security Department, International Labour Office, Geneva

Empirical evidence? OECD

Correlations between per hour productivity and social expenditure per capita

in OECD countries in 2001

y = 0.0043x + 8.7845

R2 = 0.7812

0

10

20

30

40

50

60

0 2000 4000 6000 8000 10000 12000

Total public social expenditure per capita in PPP

Pro

du

ctiv

ity

(per

ho

ur

wo

rked

)

Source: OECD



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Point three: Debunking the practical non-affordabilty myth: Can low income countries afford basic social security?

Two ILO costing studies and one distribution study on basic social protection package in low-income countries

– Costing min. benefit packages in seven countries in Africa (Pal et al. 2005)

– Costing min.benefit packages in five countries in Asia (Mizunoya et al. 2006)

– Assessing the poverty in effects two low income African countries (Gassmannn and Behrendt, 2006)



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Benefit assumptions for calculations

Basic old age and invalidity pensions: – Senegal/Tanzania: Benefit of 70% of food poverty line – 12 countries: Benefit of $0.5 PPP per day

Child benefits: – Senegal/Tanzania: Benefit of 35% of food poverty line half a pension),

paid to all children in school age (7-14) and orphans also below 7– Benefit of $0.25 PPP per day (half of pension), paid to all children up

to the age of 14 Essential health care:

Annual per capita costs based on the Commission on Macroeconomics and Health estimates of US$ 34 by 2007 and US$ 38 by 2015

Administration cost: 15% of benefit expenditure for universal cash benefits



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Cost of universal basic old age and disability pension

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

Bang

lade

sh

Indi

a

Nepa

l

Pakis

tan

Viet

Nam

Burk

ina

Faso

Cam

eroo

n

Ethi

opia

Gui

nea

Keny

a

Sene

gal

Tanz

ania

Perc

ent o

f GDP

2010

2020

2030

Asia Africa



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Cost of universal child benefit for children aged 0-14

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Bang

lade

sh

Indi

a

Nepa

l

Pakis

tan

Viet

Nam

Burk

ina

Faso

Cam

eroo

n

Ethi

opia

Gui

nea

Keny

a

Sene

gal

Tanz

ania

Perc

ent o

f GDP

2010

2020

2030

Asia Africa



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Cost of essential health care based on CMH estimates

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Bang

lade

sh

Indi

a

Nepa

l

Pakis

tan

Viet

Nam

Burk

ina

Faso

Cam

eroo

n

Ethi

opia

Gui

nea

Keny

a

Sene

gal

Tanz

ania

Perc

ent o

f GDP

2010

2020

2030

Asia Africa



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Cost of basic social protection package

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Bang

lade

sh

Indi

a

Nepa

l

Pakis

tan

Viet

Nam

Burk

ina

Faso

Cam

eroo

n

Ethi

opia

Gui

nea

Keny

a

Sene

gal

Tanz

ania

Perc

ent o

f GDP

2010

2020

2030

Asia Africa



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Share of total costs covered by domestic financing (assumed government contribution 20% of govt. expenditure)

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

100.0%

Ban

glad

esh

Indi

a

Nep

al

Pak

ista

n

Vie

t Nam

Bur

kina

Fas

o

Cam

eroo

n

Eth

iopi

a

Gui

nea

Ken

ya

Sen

egal

Tan

zani

a

Per

cent

of t

otal

cos

t

2010

2020

2030

Asia Africa



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Financing alternatives: here Cameroon

-4

-2

0

2

4

6

8

Cameroon 2010

Total cost

govt.con

Hccon

Deficit



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Estimated effect of cash transfers on 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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Assessing potential impact and costs of cash transfers in Senegal and Tanzania:

Cost of benefit package as percentage of GDP

0%

1%

2%

3%

4%

5%

Senegal Tanzania

child benefit pension



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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

Pov

erty

rate

(hea

d co

unt)

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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Other relevant experience

A GTZ-sponsored targeted cash transfer pilot in Zambia has shown that a scaled up social assistance to a national level is estimated to cost 0.5% of GDP.

Universal pension schemes in Botswana, Brazil, Lesotho, Mauritius, Namibia, Nepal, and South Africa, cost between 0.2 and 2% of GDP

The old age grant in South Africa improved the well-being of older persons but also of other household members, namely children living in the household

The Mexican conditional cash transfer programme Progresa has shown positive effects on children’s nutritional and health status and vaccinations and school enrolment.



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Other relevant research: effect of universal pensions on old age poverty (ECLAC)

Effect and cost of universal pensions (ECLAC2006)

05

10152025303540

Arg

entin

a

Bra

zil

Chi

le

Mex

ico

Uru

guay

Latin

aA

mer

ica

and

Car

ibbe

an

Poverty before

Poverty rate after

Cost in % of GDP



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Point Four: Changing the social security development policy

Social security is thus an investment in people and states through– reduction of poverty and hence social exclusion – fostering productive economies through decent

working and living conditions (if set-up right…) – fostering nation building – Contributing to a socially beneficial globalisation


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The developmental policy paradigm of the Global campaign:Towards progressive universalism

Universal but progressive could mean:– Building progressively higher levels of protection – Based on a basic layer of protection consisting of

Basic health care for all within a pluralistic system Child benefits to foster school attendance Pro-active (self targeting) social assistance universal benefits in old age, disabilty and loss of

breadwinner



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Point Four: Conclusions

Coordinated forward looking national social protection policy strategies should sequence implementation of various social programmes

Capacity should be built in coordinating government agencies, line ministries and then at the local level in the areas like:

– Social protection development, analysis and design– Administration of social protection programmes

THE TIME TO ACT IS NOW

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