Universal social security benefits against poverty and social exclusion

1. Universal social security benefitsagainst poverty and social exclusion Michael Cichon Social Security Department International Labour Office, Geneva Lisbon, 2 October 2006

2. “The world does not lack the resources to eradicate poverty, it lacks the right priorities.” Juan Somavia, Director General of the ILO

3. Structure of presentation • Point one: The Problematique • Point Two: Debunking the theoretical non-affordability myth of social security • Point Three: Debunking the practical non-affordability myth - or : Can low income countries affoard basic social transfers ? • Point four: Conclusions - Changing the social security development paradigm

4. Point One: Problematique • 80% of people live in social insecurity, 20% in abject poverty • 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) • Hence social security transfers are a pivotal tool to combat poverty and social exclusion and yet social security is underutilised in national anti-poverty and development strategies

5. Point Two: Debunking the theorectical non-affordability myth • The « conventional old » argument is : There is loss in potential GDP due to equity efficiency trade-off • Conclusion: That trade – off is a myth: « Countries can grow with equity » (Hilary Benn)

6. Empirical evidence? OECD

7. Point three: Debunking the practical non-affordabilty myth: Can low income countries afford basic social security? • Two ILO costing studies and one distribution study on basic social protection package in low-income countries • Costing min. benefit packages in seven countries in Africa (Pal et al. 2005) • Costing min.benefit packages in five countries in Asia (Mizunoya et al. 2006) • Assessing the poverty in effects two low income African countries (Gassmannn and Behrendt, 2006)

8. Benefit assumptions for calculations • Basic old age and invalidity pensions: • Senegal/Tanzania: Benefit of 70% of food poverty line • 12 countries: Benefit of $0.5 PPP per day • Child benefits: • Senegal/Tanzania: Benefit of 35% of food poverty line half a pension), paid to all children in school age (7-14) and orphans also below 7 • Benefit of $0.25 PPP per day (half of pension), paid to all children up to the age of 14 • Essential health care: Annual per capita costs based on the Commission on Macroeconomics and Health estimates of US$ 34 by 2007 and US$ 38 by 2015 • Administration cost: 15% of benefit expenditure for universal cash benefits

9. Cost of universal basic old age and disability pension

10. Cost of universal child benefit for children aged 0-14

11. Cost of essential health care based on CMH estimates

12. Cost of basic social protection package

13. Share of total costs covered by domestic financing (assumed government contribution 20% of govt. expenditure)

14. Financing alternatives: here Cameroon

15. Estimated effect of cash transfers on reduction of poverty (headcount)

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

17. Estimated effect of a basic benefit package on poverty headcount: Tanzania

18. Other relevant experience • A GTZ-sponsored targeted cash transfer pilot in Zambia has shown that a scaled up social assistance to a national level is estimated to cost 0.5% of GDP. • Universal pension schemes in Botswana, Brazil, Lesotho, Mauritius, Namibia, Nepal, and South Africa, cost between 0.2 and 2% of GDP • The old age grant in South Africa improved the well-being of older persons but also of other household members, namely children living in the household • The Mexican conditional cash transfer programme Progresa has shown positive effects on children’s nutritional and health status and vaccinations and school enrolment.

19. Other relevant research: effect of universal pensions on old age poverty (ECLAC)

20. Point Four:Changing the social security development policy • Social security is thus an investment in people and states through • reduction of poverty and hence social exclusion • fostering productive economies through decent working and living conditions (if set-up right…) • fostering nation building • Contributing to a socially beneficial globalisation

21. The developmental policy paradigm of the Global campaign:Towards progressive universalism •  Universal but progressive could mean: • Building progressively higher levels of protection • Based on a basic layer of protection consisting of • Basic health care for all within a pluralistic system • Child benefits to foster school attendance • Pro-active (self targeting) social assistance • universal benefits in old age, disabilty and loss of breadwinner

22. Point Four:Conclusions • Coordinated forward looking national social protection policy strategies should sequence implementation of various social programmes • Capacity should be built in coordinating government agencies, line ministries and then at the local level in the areas like: • Social protection development, analysis and design • Administration of social protection programmes • THE TIME TO ACT IS NOW