Social Protection Floors for Inclusive Globalization
International Labour Organization | January 10, 2012
In 2004, the ILO World Commission on the Social Dimension of Globalization concluded that "a certain minimum level of social protection needs to be accepted and undisputed as part of the socio-economic floor of the global economy." The Commission called for a global commitment to deal with social and economic insecurity as a necessary condition to provide legitimacy to the globalization process.
The rationale behind this plea to strengthen the social dimension of globalization remains pertinent. This rationale lies in the fact that current growth patterns and an asymmetrical globalization process have produced uneven impacts and opportunities, widening income gaps within countries and development gaps across countries and increasing the exposure of already vulnerable groups to greater economic volatility and insecurity associated with globalization. In spite of the enormous amount of wealth generated over the past decades thanks to globalization, and the impressive economic performance of many emerging market economies, world poverty rates remain very high, inequalities have increased and informality, underemployment and lack of social protection have persisted.
Inequality is widening and continues to do so at unacceptable and unsustainable levels. High inequality combined with a lack of adequate social protection mechanisms threaten social cohesion and political stability worldwide. It is increasingly acknowledged that where there is income inequality and insecurity there is greater social and political antagonism. Inequality and insecurity go hand in hand with social instability. An economic growth pattern based on income and asset concentration and social exclusion is neither economically viable nor socially desirable.
The recent economic crisis and the political turmoil in Arab States and other countries have underscored the necessity of structurally improving income distribution and life conditions through decent work and comprehensive social protection policies, along with freedom and democracy. The impact of shocks such as the economic crisis is mediated through household coping mechanisms and can result in long-lasting human development impacts, even if the deprivations themselves are of relatively shorter duration. Strong international and national actions are needed to redistribute income and share the benefits of growth. The World Commission's call for a "socio-economic floor," which evolved into the term "social protection floor," remains as pertinent and as urgent as ever.
Social protection and income distribution are not only pillars of social justice and peace, but are also what Joseph Stiglitz has called core automatic stabilizers, cushioning the impact of crises on people while maintaining aggregate demand and enabling workers and their families to overcome poverty and social exclusion, as well as to find decent jobs. In the long term, as suggested by a recent IMF study, reduced inequality and sustained growth have proven to be two sides of the same coin. Countries with fairer income distribution are more likely to increase growth resilience and the duration of growth spells.
While globalization has been a source of opportunities for those able to seize them, it has left many others unprotected against economic volatilities and new global challenges and transformations that have deep repercussions at national and local levels. Social protection plays a pivotal role in relieving people of the fear of poverty and insecurity and helping them to adapt their skills to overcome the constraints that block their full participation in a changing economic and social environment. The consequent increases in their productive activity release previously untapped potential and thereby contribute to enhanced labor productivity. This bodes well for overall macroeconomic performance. Social protection is a win–win investment.
Social protection should be seen as part of social policy, and can be conceived as a key instrument that works in tandem with economic policy to ensure equitable and socially sustainable development. The last decade has witnessed unprecedented progress in social protection coverage in some countries. Large numbers of people have been included in basic social protection systems, providing income security and health care, over a very short timeframe, particularly in some emerging economies.
Historically, European and other countries, such as Australia, Canada or Japan, have built their comprehensive social protection systems over decades, expanding coverage gradually in line with increases in their per capita income. Now, in a new and historically unique phenomenon, countries such as China, Rwanda and Viet Nam, among others, have built their health protection systems almost from scratch, achieving large-scale and near-universal basic coverage in a very short period of time. Although these new schemes are not as comprehensive as in most higher-income economies, they signal a remarkable effort to provide at least minimum protection to large groups of people that have been historically excluded from the benefits of economic growth.
Thanks to these developments in many emerging countries, in the space of a decade or so social protection has become one of the main elements of national development strategies, along with economic growth and human development. Its conceptual basis has been clarified and extended, from a single focus on risk to a broader focus on a mechanism to help people meet basic needs and develop individual capabilities. This is also reflected in practice, with a rapid scaling-up of programs and policies that combine income transfers with basic services, employment guarantees or asset building. The swift increase in coverage promises to make a significant contribution to reducing global poverty and vulnerability (Barrientos and Hulme, 2008).
These experiences were taken into consideration by the ILO to elaborate the social protection floor as a new and innovative social policy approach to extend social protection coverage as part of the global campaign Social Security for All and as one of the strategic objectives of the Decent Work Agenda. In 2009, the heads of the UN agencies agreed on the ILO proposal to launch the Social Protection Floor Initiative (SPF-I) as one of the nine UN joint initiatives to cope with the effects of the economic crisis. In 2010, the Social Protection Floor Advisory Group was created within the SPF-I to enhance global advocacy activities and to elaborate further the conceptual policy aspects of the approach.
In many ways the force of the social protection floor lies in its simplicity. The floor is based on the idea that everyone should enjoy a basic income security sufficient to live, guaranteed through transfers in cash or in kind, such as pensions for the elderly and persons with disabilities, child benefits, income support benefits and/or employment guarantees and services for the unemployed and working poor. Together, cash and in-kind transfers should ensure that everyone has access to essential goods and services, including essential health services, adequate nutrition, primary education, housing, water and sanitation. Moreover, the floor's emphasis on policy coherence and coordination means that it can protect and empower individuals throughout the life cycle. A successful floor also needs to have strong links with employment policies. This will enable people to access productive and decent employment and exit from poverty.
The social protection floor concept focuses particularly on the use of income transfers as a means of ensuring access to basic services. In many countries this will enable people who would otherwise be excluded to benefit from primary education, better health care and other services that enhance life and livelihood. In many countries, however, measures to improve access will need to be complemented by measures on the supply side to reduce financial barriers (e.g. through removing school attendance fees or reducing cost of health care at the point of delivery). Moreover, in the poorest circumstances, increasing access alone will be insufficient if services are simply not available. In these cases the implementation of the social protection floor needs to work in coordination with the sectoral authorities responsible for extending the coverage of the education or health system.
It is important to emphasize that the social protection floor is neither a prescription nor a universal standard, but rather an adaptable policy approach that should be country-led and responsive to national needs, priorities and resources. It is a new and comprehensive approach to social protection focusing on basic benefits first, conceived and developed on the basis of recent innovative experiences. These benefits can be introduced gradually and in a pluralistic way according to national aspirations to fit specific circumstances and current institutional and financial capacities.
Certainly, the social protection floor must be financially feasible and sustainable given the circumstances prevailing in a particular country. It can only be country specific, reflecting these circumstances, although every country can build on international experience. The debt problems in a number of advanced economies, which are currently posing so many policy dilemmas, show how carefully fiscal space needs to be nurtured. This report is fully aware of the need for fiscal responsibility. The social protection floor must be financed, therefore, with sustainable resources, including in the case of some low-income countries concessional aid, and in an adequate macroeconomic and fiscal framework.
It is also important to highlight that the social protection floor can by no means be considered the magic solution to the world's social problems. However, a wide range of experiences from all over the world suggest that countries can move faster in reducing poverty, inequality, and social exclusion if these issues are addressed in a coherent and consistent way, starting by extending horizontally access to essential social services and income security. This report argues that the social protection floor is: necessary, feasible, and effective.
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