Social Policy Responses to Global Financial Crisis
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Social policy response to financial crisis in small states
Naren Prasad International Institute for Labour Studies, ILO
London 7 July 2009Commonwealth Meeting: Sustainable development in small states in a turbulent
global economy
Social Policy • Social policy “Social policy “is state intervention that is state intervention that
directly affects social welfare, social directly affects social welfare, social institutions and social relations. It involves institutions and social relations. It involves overarching concerns with overarching concerns with redistributionredistribution, , productionproduction, , reproductionreproduction and and protectionprotection and works in tandem with and works in tandem with economic policyeconomic policy in pursuit of national in pursuit of national social and economic goalssocial and economic goals””
» UNRISD. 2006. UNRISD. 2006. Transformative social policy: Transformative social policy: lessons from UNRISD Research, (p. 1)lessons from UNRISD Research, (p. 1)
• 16 lessons!
A UN Report of 1957
• Social policy should not be treated “as a housemaid whose function is to tidy up human suffering and insecurity left in the wake of economic development”.
• Social objectives should be built in on an equal footing with economic objectives into comprehensive social and economic planning”
• Report on a Co-ordinated Policy regarding Family Levels of Living, United Nations, 1957, Sales no. 57.IV.7 (p. 18). ).
Recovering from the crisis:A Global Jobs Pact
• Accelerating employment creation, jobs recovery & sustaining enterprises
• Building social protection systems & protecting people
• Strengthening respect for international labour standards
• Social dialogue: Bargaining collectively, identifying priorities, stimulating action
…the way forward: Shaping a fair and sustainable globalization
GJP: Generating growth
• Stimulus packages• Boosting demand• Wage maintenance
• Supporting enterprises • Green investments• Effective & efficient regulation to
promote employment generation
GJP: Protecting employment
• Employment-oriented stimuli • Public works & job guarantees, training & skills development,
and employment services • Supporting enterprises to retain workforce• Supporting job creation in enterprises, especially
smaller businesses• Protecting labour standards & strengthening labour
inspection • freedom of association, the right to organize & collective bargaining• prevention of forced labour, child labour & discrimination at work
… aiming for full and productive employment
Mauritius: Saving jobs – Riding our the global crisis: saving bobs-
protecting people-preparing fro recovery– Stimulus package
• saving jobs – 2,700 jobs saved through the Mechanism for Transitional
Support, by helping enterprises that are at the breakdown point, 3000 indirectly
• Public infrastructure • Manufacturing Adjustment and SME Development Fund (500
million rup, 0.2% of GDP)• Save jobs 4 billion rup (1.7% GDP)
– 14.7 billion to stimulate economy (6.1% GDP)– 27.4 bn rup for infrastructure & transportation development
(12% of GDP)» 126.3 bn rup over 10 yrs PPP
Mauritius: GDP growth
-2.0
-1.0
+0.0
+1.0
+2.0
+3.0
+4.0
+5.0
+6.0
2006 2007 2008 2009
GDPtextile
tourism
GJP: Guaranteeing social protection/security
• Introducing cash transfer schemes for the poor• Guaranteeing basic social protection for all
• access to health care• income security for the elderly & persons with disabilities• child benefits • income security combined with public employment guarantee
schemes
• Extending the duration & coverage of unemployment benefits
• Protecting temporary & non-regular workers• Avoiding deflationary wage spirals
Why social security?
• Social security – Human rights (article 22 of UDHR)
– “Everyone.. has the right to social security.. through national effort and international co-operation …”.
– plays a crucial role in protecting people from risks such as income loss, sickness or old age
– Old age, work injury, sickness & maternity, unemployment benefit, family assistance, other cash transfers
– it can boost demand, create consumer confidence and create employment in crisis times
Guaranteeing social protection
Type of social protection Social protection instrument Role in Crisis
Protective(social assistance)
Social transfersDisability benefitsPension schemesSocial services
Immediate protection and relief from poverty and deprivation
Preventive (insurance)
Social transfersSocial insuranceLivelihood diversificationSaving clubs
Prevents damage to coping strategies
Promotive(Economic opportunities)
Social transfersAccess to creditSchool feedingPublic works program
Promotes resilience through livelihood diversification and improves security
Transformative(addressing underlying social
vulnerabilities
Promotion of minority rightsAnti-discrimination campaignsSocial funds
Transforms social relations to reduce exclusion
Social security: Current status
• 20% of population covered by social security globally
• Developed countries– Generous welfare system
• Social democratic: Nordics• Conservative: Europeans• Liberal: Anglo-saxons
• Developing countries• Underdeveloped, informal employment
Old age social security• Pensions have a strong redistributive effect, and in reducing
poverty– But in developing countries, pensions only to formal sector
Distribution of public social spending by quintlies (average for 9 Latin American countries)
010
20304050
6070
I II III IV V
%
Education
Health
Social Security
Pension coverage
0
10
20
30
40
50
60
70
80
90
100
Pak
ista
n
Indi
a
Bol
ivia
Vie
tnam
Indo
nesi
a
Chi
na
Thai
land
Phi
lippi
nes
Mex
ico
Sri
Lank
a
Arg
entin
a
Bra
zil
Chi
le
Kor
ea
OE
CD
(30)
Ger
man
y
Fran
ce
Can
ada
Italy
US
Aus
tralia UK
Japa
n
%
– In Asia only 20% of the population have access to health care, 30% of the elderly receive pensions, 20% of those unemployed receive some kind of unemployment benefit such as training, public works (UNESCAP 2009).
– Latin America, less than 30% of the labour force are covered by any pension (Rofman & Lucchetti 2006).
Pension in small states
BHS
BLZ
BRB
CYP
DMA
FJI
GRDGUY
JAM
KIR
KNALCA
MLT
MUS
PNG
SLB
SYC
TTO
VCT
VUT
WSM
46
810
12P
ensi
on in
dex
0 5 10 15Social welfare spending (% GDP)
Current levels of revenue & spending
19.9
678
20.3
219
.831
954
4.33
24
2.46
081
21.5
771
21.6
607
3.85
301
4.97
327
3.55
251
17.9
332
18.5
321
1.09
747
5.45
578
3.55
732
32.8
386
33.2
248
12.4
736
5.57
99
6.37
722
010
2030
40
Africa Latin America Asia High income
Revenue Expenses Social security Education Health
% G
DP
Revenue, expenses % social security in small states0
1020
3040
50%
GD
P
BRB
CP
V
CY
P
FJI
JAM
KN
A
MD
V
MLT
MU
S
PN
G
SYC
TTO
revenue expenses social security
Developing/small countries social security
• Social security (& labour standards) – Too expensive - unaffordable– First we need development
• Universal pension – Mauritius (1958), Namibia (1990), Samoa (1990),
Bolivia (1996), Botswana (1996) and the City of Mexico (2001)
• Near-universal pension– South Africa, Argentina, Brazil, Chile, Cost Rica and
Uruguay
Social security: Its possible… – Suppose a country provides…
• Universal pension – 30 % GDP per capita to all 65+
• Basic health– 300 medical staff to 10,000 people
• Child benefit– 15% GDP per capita to all children 0-14
• Social assistance/employment scheme– 30% of GDP per capita to the poor, – 10% of working age population for 100 days per year
– What will it cost…..?
Basic social security (% GDP)
0
1
2
3
4
5
6
%
pension health child assistance
Its possible for small states
GJP: Recovering with employer-employee dialogue• To reduce social tensions• To inspire confidence in the results
achieved• To promote decent work solutions
What social policy works
• Evidence shows…– Minimum old age pensions and cash transfers to
families seem to have the biggest poverty impact with the lowest transactions costs
– Employment intensive schemes• Public infrastructure renewable energy sources, waste
management, low cost housing, sanitation, etc• Micro, small and medium-sized enterprise support• Skills development• Youth employment schemes• Improved public employment services
G-20 stimulus packages, 2008-2010%GDP (PPP-weighted)
Shaping a fair andsustainable globalization
• Using the decent work agenda to create a sustainable future
• Social protection, job creation, social dialogue, standards
• Investing in a green recovery• Ensuring developing countries have the fiscal
space to stimulate their economies• Reforming the financial sector
• to serve the real economy, promote sustainable enterprises & decent work, and protect people’s savings and pensions
Conclusion • Social policy & economic policy goes hand in hand• Universal provision of social security
– This is perhaps the only message you should take home and influence your policy makers….
• Tends to be universal policies • Multiple roles of social policy
– nation building, promoting development– Production, protection, reproduction, distribution
• Democratic and good governance– No 1:1 relation, but democracy provides space for social
articulation of interests• Governments associated with social justice
Conclusion
– State-led provision of social services• Education, health, • Strong political leadership and will to improve
welfare of citizens– State capacity & infrastructure to deliver– State as organizer, provider, ability to regulate & stimulate
non-state actors
– Countries with high growth tend to have better social policies
History….some reflections
• Preamble 1919– Whereas universal and lasting peace can be
established only if it is based upon social justice;
– … provision for old age and injury
Philadelphia 1944
• labour is not a commodity • poverty anywhere constitutes a danger to prosperity
everywhere • it is a responsibility of the ILO to examine and consider
all international economic and financial policies• policies in regard to wages and earnings, calculated to
ensure a just share of the fruits of progress to all, and in need of such protection;
• the extension of social security measures to provide a basic income to all in need of such protection and comprehensive medical care
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