Social security for all: Investing in people

1. Social security for all:Investing in people Presentation at UN DESA ForumProductive Employment and Decent Work Michael Cichon Social Security Department New York, 8 May 2006

2. Structure of presentation • Point One: Social security: Definition, objective and problematique • Point Two: Social security’s main challenges • Point Three:The rationale for social security in development • Point Four: Changing the development paradigm • Point Five : By way of conclusion: Accepting global responsibility for social security for all

3. Point One: Definition Definition: social protection/social security: formal or informal income transfers in cash or in kind that ascertain access: - to health and social services and - income security to cope with certain life risks that could lead to a loss of income (i.e. social assistance, pensions, short-term cash benefits in case of sickness, maternity, unemployment, employment injury…)

4. Point One: Objective Objective of social security systems:alleviate/or better abolish poverty and reduce social insecurity The Decent Work connection: Social protection/social security is one of basic pillars of decent work: without social security neither work nor life in the formal and informal economy can be decent

5. Point One: Problematique • 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) • And yet: 80% of people live in social insecurity, 20% in abject poverty • And yet: Social security is underutilized in national anti-poverty and development strategies

6. Point One: …present coverage

7. Point Two: Challenge One: The non- affordability arguments: Work and life cannot be made decent through social security, because … • Loss in potential GDP due to equity efficiency trade-off • Social expenditure too expensive for developing countries • Ageing poses an unsolvable problem • Unmanageable expenditure explosions - Competitive forces in globalization will limit fiscal space

8. The equity-efficiency trade-off: Empirical evidence in OECD

9. Assessing potential impact and costs of cash transfers in Senegal and Tanzania: Poverty rates before and after cash transfers

10. Assessing potential impact and costs of cash transfers in Senegal and Tanzania: Cost of benefit package as percentage of GDP

11. Affordability study, base scenario:2005-2035 projected benefit expenditure on old-age /disability pension and child benefit (% of GDP)But, in principle, both would be fiscally affordable now and in the future

12. Preliminary results for Tanzania: Expenditure

13. Preliminary results for Tanzania: Financing

14. Ageing: A catastrophe?

15. Ageing: A catastrophe? Global dependency rates

16. Non-manageable expenditure? Projected expenditure in the EU…

17. Challenge Two: Globalization, race to the bottom and the new uncertainty • There is evidence for a reduction of expenditure and benefit levels • BUT: There is no universal objective reason to assume that the fiscal space has to collapse completely – However, a challenge remains

18. Race to the bottom: The expected pension replacement rates

19. No fiscal space?

20. No policy and fiscal space?

21. Point Three: The rationale for social security in development • (1) Extensive welfare states and productive economies co-exist ==> The trade-off between equity and efficiency is wrong • (2) Some level of social security is affordable at any level of economic development • (3) Social security reduces poverty and inequality, facilitates LM adjustments, redistributes the proceeds of growth •  Social security is thus an investment in people, states and the global community

22. Point Four : Changing the development paradigm: towards progressive universalism

23. Let us start with: • Basic health care for all • Child benefits conditioned on schooling • Self targeting social assistance • Universal benefits in old age, disability and loss of breadwinner • …facilitated through international action guidelines which could look as follows:

24. Point Five: Accepting global responsibility for social security for all: Three complementary ways • Creating international standards to defend a global social floor • Accepting global responsibility for the fiscal space for social transfers (PRSP, debt relief, ODA etc.) • Supporting national administrations in improved resource allocation and mobilization mechanisms