UN DESA Department of Economic and Social Affairs

1. UN DESA Department of Economic and Social Affairs MOVING THE SOCIAL POLICY AGENDA FORWARD Isabel Ortiz Senior Interregional Advisor United Nations DESA UN Commission for Social Development New York, February 2007

2. Development for whom? Inequality has risen in the last decades: • Within countries • Among countries Inequality keeps rising UNUWIDER 2006 • The benefits of globalization, as it is managed/mismanaged, go to a few companies and individuals, in a few countries. • This is a result of the choice of economic and social policies • Business as usual not an option

3. Business as Usual not an Option • Standard Policy Advise 1980s-90s: • Caused poverty and increased inequality (adjustment programs, severe financial crisis) • Interrupted nation-building development processes • Increased political instability and conflict • It constrained growth in developing countries! • Remains part of conventional development thinking • Are attempts to redress it (ie. PRSPs) good enough? • General Issues: targeting and residualism, employment, choice of social protection instruments, participation, trade, finance… • What happens in non-IDA middle income countries where no PRS?

4. Bringing Equity to the Development Agenda • 1995 Copenhagen World Summit: “A society for all” – United Nations DESA mandate to implement it – work on: • Employment and Poverty Reduction • Social groups (persons with disabilities, youth, older persons…) • 2005 World Summit: governments’ pledged more ambitious National Development Strategies, backed by increased international support • 2005: UNDESA, UNDP and World Bank reports on Equity • DESA works on governments’ requests – Advisory services on demand Since 2005, main focus on National Development Strategies • 2006: United Nations Policy Notes to guide National Development Strategies, on critical areas Developed with Nobel Laureate Joseph Stiglitz, Jomo K. Sundaram and other alternative economists/sector specialists, with inputs from UN agencies

5. Bringing Equity to the Development Agenda

7. How to prepare an equitable National Development Strategy Prerequisites: • National Coalitions: Strategies not technocratic; require national alliances to be sustainable; social pacts • Integrating economic and social policies STEPS: • Diagnosis of social and economic issues for all social groups • Policy Priorities to build countries that are socially inclusive, employment generating, economically robust and politically stable: • Macroeconomic policies • Sector priorities (i.e. energy, water…) • Social policies (i.e. decent work, social protection…) • Budget in a multiannual MTEF • Implementation arrangements • Monitoring mechanisms including • comparable poverty line • indicators for each of the social groups – preferably in the form, of National Action Plans for youth, elderly, indigenous populations, disabled, etc (reality check: what happens to people?)

8. Sector Priorities for Equity and Poverty Reduction I

9. Sector Priorities for Equity and Poverty Reduction II

10. National Social Policies • Reasons of social policy: • Intrinsic: • Social justice • Instrumental: Governments use it pragmatically to: • Enhance human capital and productive employment • Boost domestic demand • Secure political support of citizens • Prevent conflict, create stable cohesive societies • Social policies- issues: • Universal vs. targeted policies • Importance of speed • How to create employment? • Expanding coverage of social services and protection • Preventing conflict and building social cohesion • Affordability • Cross-border issues: Regional social policies • International aid supporting equity

11. Universal vs. Targeted Social Policies • Residual approach 1980s-90s: • Public services only for the poor • Main reforms focused on privatizing/commercializing services for middle and upper classes (health, pensions, education) • In a context of fiscal austerity, cost recovery mechanisms such as fees for services were introduced Problems of targeting: • Expensive, at about 15% total programme costs • Complex to implement – not advised when poor large numbers • It backfired politically, middle classes had to pay for both expensive services and for the poor • Public services became of bad quality (and not accessible when fees) • United Nations agencies defend UNIVERSAL services (= for all, including middle classes, as part of a country’s social contract) combined with targeting to fast-track access of the poor. • Targeting is administratively complicated: • Undercoverage of the “Success” Stories in the Americas • Brazil: Bolsa Escola 73% of poor not reached • Mexico Oportunidades 40% of poor not reached • United States Food Stamps 50% of poor not reached

12. Key Issues: Education and Health Social Services For social services, it is generally suggested: • On the supply side: • To increase budgetary allocations for social programmes to expand coverage, aiming at universal provision. • To eliminate barriers to access for poor and excluded groups such as: • Fees for services and hidden fees such as school uniforms, extracurricular activities, under-the-table payments, etc. • Complicated or restrictive administrative procedures. • Services provided in languages not spoken by the population. • To address the differing needs of women and men • To target inaccessible remote areas. • To include minorities and special population groups, designing targeted programmes if necessary. • To improve the quality of services from a user-perspective. • On the demand side: • To raise awareness and promote behavioural change. • To support demand for services (e.g. ensuring that people have knowledge of them, using conditional cash transfers if necessary).

13. Speed Matters • Most development programs tend to take a long time to show results (ie. education). When a government intends to develop equitable social policies, it may want to consider two different sets: • Medium and long-term policies include most important initiatives such as expanding coverage of education services, health and social security, improved labour standards, adequate wage and employment policies, etc • Short-term high-impact initiatives: A set of fast high impact initiatives can assist governments address basic needs among the neediest segments of the population. These programs may contain components such as: • free school meal programmes • nutrition, vitamin and micronutrient supplements for mothers and children, • upgrading programmes for substandard housing (water, household repairs), • social pensions for the elderly poor or persons with disabilities. • Low cost (Zero Hunger 0.2%GDP, rural pensions 1% GDP) • Examples: • Fome Zero Brazil (2003) • Hambre Urgente Argentina (03) • Bolivia Urgente (2006) • Pobreza O Nicaragua (2007)

14. Key Issues: Employment – Jobless growth, Labour Flexibility • Growth does not necessarily generate employment => It does in China, but in most countries the experience has been “Jobless Growth” • In most developing countries, particularly in Africa, the number of “working poor” has increased; labour reforms led to increased informalization of the labour force, predominantly in Latin America, Easter Europe and the former Soviet Union. • In 1965, CEOs were paid 51 times as much as a minimum wage earner in the United States; in 2005, this had risen to about 821 times • Increased precariousness of work not only had negative impacts on people selling their labour, it also reduced national tax bases and induced migration. • 1980s-90s standard policy advise fostered labour market reforms, as an investment incentive. • However, labour flexibility not accompanied by increased employment • The strong welfare states of northern Europe (Denmark, Netherlands, Norway and Sweden), with employment rates as high as the US and the UK, demonstrate that employment is fully compatible with “rigid” labour markets, high social protection and collective bargaining. • Employment is not related to labour market flexibility, but to economic policies that are effectively coordinated with adequate social policies. • Generating DECENT employment must be first priority of a National Development Strategy

15. Key Issues: Employment II HOW TO CREATE EMPLOYMENT? Employment is a result of: • Promotion of growth through macroeconomic and sector policies • Effects of expansive monetary and fiscal policy on aggregate demand; debate tight monetary policy does not generate employment. • Adequate exchange rate policy combined with industrial policy stimulates output growth; gradual and sequential trade opening to support it • Adequate Labour Policies: It is not only about generating employment, many people work but cannot bring their families out of poverty, adequate salary and working conditions essential => Decent work agenda. • Main labour policies: • Active labour market programmes • Direct employment generation (promoting SMEs, cooperatives, wage subsidies, public works, guaranteed job schemes). • Labour exchanges or employment services (job brokerage, counselling offices) • Skills development programmes (training and retraining of labour to enhance employability and productivity). • Special programmes for youth and persons with disabilities. • Passive Labour market policies • Unemployment insurance, income support policies. • Labour regulations and standards such as adequate wage policies (minimum salaries, wage indexation, equal pay for work of equal value), job security provisions (recruitment/dismissal of employees), working conditions (occupational health and safety minimum age, maximum working hours and overtime, leave provisions), special protection for mothers, and antidiscrimination provisions to protect women and minorities. • Social Pacts/Dialogue – Collective Bargaining

16. Key Issues: Social Protection I • Social protection programmes include: • Social insurance (old-age pensions, disability, etc) • Social assistance (programs for vulnerable groups like streetchildren, battered women, etc). • Schemes to assist communities and the informal sector include agricultural insurance, food security programmes, social funds, disaster prevention and management. • Because of the strong redistributive character of most social protection policies, they were not favoured by conventional approaches during the 1980s-90s (except pension reform projects).In extreme cases like Bolivia, the Ministry of Social Security was closed down. • In the 1980s-90s, push for pension reforms, moving away from PAYGO public systems towards funded systems (privately managed, invested in capital markets) (next slide) • Given the urgency to eradicate poverty, social protection, in particular social transfers/pensions, are currently at the forefront of the social development agenda.

17. Key Issues: Social Protection II - Pensions Funded pension systems (private pillars II-III) - Do not serve the poor or low income groups; pension coverage did not expand. - Are expensive (transition costs) – ie. In Brazil, 7.3% GDP, as compared to 1% of GDP public rural pensions for the poor - Administrative costs of pension funds are very high, making returns on investments lower. - Financial risk left to pensioners; the state has to bail out companies and provide safety nets in case of crisis. - By investing savings in capital markets, loss of resources to governments Social Pensions (public, pillar I): - Have high impact on poverty reduction (ILO: 35% to 40% reduction) - Older people spend their pensions supporting household, important for food security - Ideal to expand coverage - Monetizes rural economies - Countries like Brazil, Argentina, South Africa, Namibia, Zambia, have introduced non-contributory pension schemes as an instrument to fight poverty. - Increased donor support, relatively easy to implement through budgetary support Multi-pillar Pension System PILLAR I PILLAR IIPILLAR III Redistributive Funded Funded PAYGO Voluntary How older poor spend pension cash transfer

18. Preventing Conflict and Building Social Cohesion I • Most national and sector strategies, done by economists and sector specialists => blind to conflict matters, designed ignoring sources of tension as it is perceived as “political” beyond the development domain. Business as usual no longer possible. • Early warning: Conflict prevention starts by detecting its probability. • Tackling potential causes of conflict: National Development Strategies are the perfect setting to prioritize interventions to deal with the internal sources of tension identified, before conflict takes violent forms, for instance: • where male youth unemployment a factor = youth employment programs • where ethnic prejudice and myth-creation a factor = programs for changing values • where inequality a factor = equitable policies as described earlier Early Warning: Risk Screening Indicators: • History of earlier conflicts • High prevalence of poverty and inequality, elite capture of benefits • Dependency on a primary export (ie. natural resources) • Political instability and non-responsive governments • Denial of political and civil rights • Militarization and small arms proliferation • Ethnic dominance • Conflicts in neighbouring states • High male youth unemployment • Culture of violence, myth- making, public perceptions.

19. Building Social Cohesion/ Integration • Values, culture => intangible, not favoured by development aid (preferred investments, less sensitive). • Changing values, building social trust and cohesion is back in the development agenda • Essential to fight discrimination (women, ethnic, caste, persons with disabilities…) • Tolerance, respect for diversity, non-violence, solidarity, trust in society, contribution to the community, are beliefs and behaviours that can be taught. • Tackling Prejudice and Building Social Trust: • 1. Understand the existing cultural values. • 2. Have clear objectives on the values that need to be altered for social progress. • 3. Gain support from the local structures including religious leaders; a technique is providing solid scientific evidence of the benefits from other countries, putting aside emotions and value judgments. • 4. Support allies and “drivers of change”; encourage local level groups and organizations in dialogue. • 5. Design adequate programs such as: • Multicultural education • Media programs • Public information campaigns • Investing in popular culture (above all, avoiding myth-making) • Empowering people and supporting associations

20. Empowerment and Social Mobilization • Organizing excluded groups to fight for their rights: social development would not have happened in most countries without the fight of unions and civil rights groups • Empowering people and promoting associations: • Excluded people tend to internalize inferiority and repress their voice, may lead to violent conflict • When people associate and share their problems, the result is often increased encouragement, capacity for self-advocacy, ability to organize, to create positive change for their communities. • Associations help communities to defend their interests, and can be linked to microfinance, cooperatives and other local development programmes. • As people's associations sometimes stand up against powerful local interest groups, need to protect them from extortion and intimidation. • Not only local level: National Economic and Social Councils good practice to institutionalize participation of representative stakeholders in a society to: • monitor public policies, assessing social impacts • provide alternative proposals for employment-generating economic growth and social justice • Empowerment and social mobilization are intrinsically linked to the broader agenda of good governance.

21. Are Social Policies Affordable? • Social Ministries suffer from “second class” stigma, need to secure budgetary allocations • Often expenditures for poverty reduction and social policy are declined (“cannot be afforded”) because of: • a loss in potential investment/GDP due to a supposed equity/ efficiency trade-off, and • the assumption that large social needs will create unmanageable fiscal deficits Counterarguments: • Social development not a cost but an important investment. • Investing in people enhances their productivity and thus growth;raising the incomes of the poor encourages domestic demand therefore growth. • A significant proportion of national budgets is spent on non-productive activities, such as the military, or activities with very low returns. => Public Expenditure Reviews good tools to bring transparency. • Ultimately, affordability depends on a society’s willingness to finance social policies through taxes and contributions. Affordability is at the core of the social contract between governments and citizens: how much a society is willing to redistribute, and how. • Countries at the same level of economic development differ significantly in their social spending – OECD countries spend between 15-35%GDP on health, education and social protection alone (compare to 4% in S. Asia) • In developing countries, social policies have to grow with the fiscal space made available by increasing GDP or aid.

22. Global and Regional Social Policies • Urgent need for global social policies, to counterbalance economic globalization => but difficult agreements. Regional social policies are an easier form of transnational social policy • Examples of regional social policies: • Regional social redistribution mechanisms e.g. to target depressed areas or to redress inequalities. • Regional regulations e.g. regulation of private social services and utilities (water, electricity); regional formations are in a stronger position to negotiate with private providers to ensure access, affordability and quality standards. • Regional mechanisms that give citizens a voice to challenge rights abuse: e.g. the EU’s European Court of Justice or the Council of Europe’s Court of Human Rights • Regional cross-border investments addressing different social policy common priorities, for instance, the production of cheaper generic pharmaceuticals at regional level to benefit from economies of scale, or common programs to avoid cross-border spread of diseases (e.g. malaria, SARS, avian flu) • Regional technical co-operation in social policy • Financing: Global and regional funds Examples: - ALBA, the Latinamerican Bolivarian Alternative for the Americas 2007 - Southern Africa SADC Regional Social Policy 2006

23. International Redistribution and Social Justice • 2002 Monterrey; 2005 World Summit: donors recommit increased aid to support Millennium Development Goals = > Supporting committed governments with equitable National Development Strategies with increased aid, aligned and harmonized, particularly with general budget support(GBS), moving away from projects. CRITICAL ISSUES: • It is essential that new instruments of aid like SWAps and GBS be used as instruments of redistribution and social justice, this is, that they reach people, and are not utilized to sustain institutions (e.g. a Ministry) or development processes (e.g. completion of an MTEF), or are simply used as fast disbursing mechanisms of donors aid. • Some GBS donors like the European Union believe in linking disbursements to outcomes – this could include attainments in respect of effective impacts on excluded groups. • Social transfers (e.g. social pensions) become particularly attractive from the point of view of direct and quick impacts on low-income households; governments can finance social transfers through both GBS and SWAps. • Civil society activities at the national and local levels must be expanded, funded through special funds.

24. Thank you United Nations Department for Economic and Social Affairs http://www.un.org/esa/ Email: ortizi@un.org