Social policy response to financial crisis in small states Naren Prasad International Institute for Labour Studies, ILO London 7 July 2009 Commonwealth Meeting: Sustainable development in small states in a turbulent global economy

Social Policy Social policy “ is state intervention that directly affects social welfare, social institutions and social relations. It involves overarching concerns with redistribution , production , reproduction and protection and works in tandem with economic policy in pursuit of national social and economic goals ” UNRISD. 2006. Transformative social policy: lessons from UNRISD Research, (p. 1) 16 lessons!

Social policy “ is state intervention that directly affects social welfare, social institutions and social relations. It involves overarching concerns with redistribution , production , reproduction and protection and works in tandem with economic policy in pursuit of national social and economic goals ”

UNRISD. 2006. Transformative social policy: 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). ).

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

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

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

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

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

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

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

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 transfers Disability benefits Pension schemes Social services Immediate protection and relief from poverty and deprivation Preventive (insurance) Social transfers Social insurance Livelihood diversification Saving clubs Prevents damage to coping strategies Promotive (Economic opportunities) Social transfers Access to credit School feeding Public works program Promotes resilience through livelihood diversification and improves security Transformative (addressing underlying social vulnerabilities Promotion of minority rights Anti-discrimination campaigns Social 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

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

Pensions have a strong redistributive effect, and in reducing poverty

But in developing countries, pensions only to formal sector

Pension coverage 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).

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

Current levels of revenue & spending

Revenue, expenses % social security in small states

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 (& 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…..?

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) 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

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

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 and sustainable 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

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

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

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

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

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