Productivity, Sequence and Fiscal Sustainability of Social Policy

Seoul Policy Dialogue 1 - 2 November 2012

UNDP Seoul Policy Centre and KDI

www.unrisd.org

ILCHEONG YI

Research CoordinatorSocial Policy and Development Programme

UNRISDGeneva, Switzerland

2

SOCIAL POLICY(NORMATIVE FRAMING)

Equality and Solidarity

Production

Protection

Reproduction

Redistribution

Social Cohesion/

Nation Building

Policy Instruments:

EducationHealthHuman Settlement/HousingAgrarian ReformLabour MarketEquity-Affirmative ActionFamily/ChildCareOld-AgeSocial InsuranceFiscal

Development Outcomes

ECONOMIC

SOCIAL

POLITICAL

[Norms of Equality and Solidarity]

Transformative Social Policy: norms, function, instruments and outcomes

Source: Jimi Adésínà

2. Sequence of Social Protection Measures

Scandinavian model (or Nordic welfare states): Stateness, universalism, and equality

Figure 1. WA: Work Accident, SI : Sickness Insurance, PI: Pension, and UI: Unemployment Insurance , Source: Kangas and Palme (2005)

Figure 1. WA: Work Accident, SI : Sickness Insurance, PI: Pension, and UI: Unemployment Insurance Source: author’s modification of Kangas and Palme (2005)

Since 1870, Nordic countries became the fast growing economies in Europe. (Emerging economies in the 19th century)

Figure 3. Coverage and generosity of social insurance, Nordic countries and selected OECD countries (Source: Kangas and Palme (2005))

In terms of coverage, Finland, and in terms of generosity, Norway was a laggard.

Figure 4. Unemployment insurance coverage among employees under voluntary, compulsory and all (non-targeted) legislation for 18 OECD countries, Source: Carroll 2005)

Compul.

Non-targeted

Volun.

Targeting vs. Universalism• Targeted social policy is target-efficient and poverty-

reduction-effective?|: Where poverty is widespread, targeting is unnecessary and administratively costly. Such problems as information asymmetries, incentive distortion, moral hazard, arbitrariness, stigmatization, invasive process prevent targeted social policy inefficient and ineffective. It is not politically sustainable either.

Universal Social Protection System

Social protection system is a major element of social policy. Social policy addresses issues of production, distribution, redistribution, protection, and reproduction and social protection is placed at the centre of social policy addressing the issues in these areas. Universal social protection is a system guaranteeing universal access to social transfers and services which meets the social need in solidaristic and democratic manner.

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Historical lessons about universal social protection system

1. You can implement a universal social protection scheme even with little resources. Universal social protection is not just the matter of resource.

2. No universal social protection programme started with a complete

universal coverage from the beginning. It started with either nominal universal programme or occupationally-based scheme and then extended to cover entire population. Universalisation should involve a process towards universal social protection, i.e. transformation.

3. The source of political will for universalism is often not from politicians but from civil society which creates a pressure on politicians and a window of opportunity for policy introduction. Civil society often fills the representational gaps (Recent process of ILO’s convention on domestic workers)

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4. In general, targeting social protection is much more costly, ineffective, and unstable than universalism.

5. However, there are two types of targeting approaches; exclusive and isolated targeting which tends to exclude people (targeting towards residualism or targeting without universalism) and inclusive and incorporated targeting which tends to integrate people into political, economic and social life (targeting towards universalism or targeting within universalism).

6. Universalism cannot be realised with sector-specific and one-dimension-focused silo approach.

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Origins of Social Protection Floor The World Commission on the Social Dimension of Globalisation’s

report “A Fair Globalisation: Creating Opportunities for All (2004) “A minimum level of social protection for individuals and families

needs to be accepted and undisputed as part of the socio-economic ‘floor’ of the global economy, including adjustment assistance to displaced workers. Donors and financial institutions should contribute to the strengthening of social protection systems in developing countries”.

-reduction-effective?|: Where poverty is widespread, targeting is unnecessary and administratively costly. Such problems as information asymmetries, incentive distortion, moral hazard, arbitrariness, stigmatization, invasive process prevent targeted social policy inefficient and ineffective. It is not politically sustainable either.

UN’s response to the current economic crisis

- In April 2009, the UN Chief Executives Board (CEB) launched a social protection floor as one of its 9 initiatives to cope with the global crisis.

- a core obligation of ensuring the realization of minimum essential levels of rights embodied in human right treaties.

- The term Social Protection Floor is a global and coherent social policy concept that promotes nationally defined strategies that protect a minimum level of access to essential services and income security for all in the present economic and financial crisis and beyond.

The social security components of the SPF(2010 version)

1. All residents have access to a nationally defined set of essential health care services

2. All children have income security, at least at the level of the nationally defined poverty line level, through family/child benefits aimed at facilitating access to nutrition, education and care

3. All those in active age groups who are unable to earn sufficient income on the labour markets should enjoy minimum income security through social assistance

4. All residents in old age and with disabilities have income security at least at the level of the nationally defined poverty line through pensions for old age and disability

Social Protection Floors (2012 version)• The Social Protection Floor approach promotes access to essential

social security transfers and social services in the areas of health, water and sanitation, education, food, housing, life and asset-savings information. It emphasizes the need to implement comprehensive, coherent and coordinated social protection and employment policies to guarantee services and social transfers across the life cycle, paying particular attention to the vulnerable groups.

Safety Nets vs. Social Protection Floor

Seven questions the SPFI do not answer 1. Does “nationally defined set of essential health care services for

all ” sufficiently guarantee “health” for all? -- Low quality of essential health service reduces uptake rate and it

is wrong to assume that a universal service provided by law is equitable in practice. Guaranteeing essential service should be accompanied with active promotion of policies in the health sector to enhance access to and control quality of care.

-- Benefit package and coverage of nationally defined set of essential health care service are getting smaller because of the shrink of public health care provision.

Seven questions the SPFI do not answer 2. Is “income security at the level of the nationally defined

poverty line level” sufficient enough to reduce poverty? -- Indonesian case

• A large proportion of population live only slightly above the poverty line

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0 10 20 30 40 50 60 70 80 90 100

Log Per Capita Expenditure

Pop

ulat

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Den

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5,9% = below 1USDPPP (2008)

15,4% = below Nat’l Poverty Line (2008)

42,6% = below 2USDPPP (2008)

Indonesian Case (A. Suryahadi, 2010)

3. What if “family/child benefits aimed at facilitating access to nutrition, education and care” mean a “means tested targeted CCT”?

-- Problems of targeted approach (ineffective, costly and inhumane approach). (see the numerous works by UNIRSD)

4. Can social assistance guarantee “minimum income security”?

-- Social assistance schemes cannot guarantee “minimum income” without addressing the informal, underemployed and working poor. (LA cases)

5. What kind of social assistance is going to be used for “minimum income security” ?

-- universal or targeting? (for instance universal social pension vs. means tested social assistance for the elderly)

6. How is social protection floor financed? – ILO emphasise the domestic resource mobilisation. It has been emphasised since the establishment of the first UN Resolutions on Financing Development in 1950. How can developing countries have a bigger policy space for mobilising and spending resources for social protection?

7. How is social protection floor situated within broad framework of social policy?

Social policy approach in development studies is emphasising the productive aspect as well as protection. How is SPF related to production?

Net financial transfers to developing countries (Source: World Economic Situation and Prospects, each year)

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Questioning Conventional Wisdoms

Suggesting Alternatives

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