International Labour Office 1 The ILO Global Campaign to extend Social Security to all A new deal for people in a global crisis - Social security for all: Making the economic, financial and fiscal case Michael Cichon Social Security Department International Labour Office New York, February 2009

International Labour Office 2 The ILO Global Campaign to extend Social Security to all Structure of the presentation One: Social security is an economic necessity Two: Social security is fiscally affordable Three: Expected and observed social impact Four: Financing strategies

International Labour Office 3 The ILO Global Campaign to extend Social Security to all One: …in addition to a social necessity social security is an economic necessity… Economies cannot develop and grow without a productive workforce. In order to unlock a country’s full growth potential one has to fight social exclusion, ignorance, unemployability…through social transfers Access to social health protection and education improves productivity levels (we have ample research evidence…) The famous trade-off between growth and equity is a myth… Investments on social security and economic development coincided in OECD countries Cash transfers in developing countries have multiplier effects on local markets (stimulate local production inter alia of food) and Social transfers stabilise domestic demand in times of crises

International Labour Office 4 The ILO Global Campaign to extend Social Security to all Two: Basic social security/essential cash transfers are affordable: A simulation exercise – Assumptions Basic old age and invalidity pensions: – 30% of per capita GDP capped at US$ 1 PPP per day Child benefits: – 15% of per capita GDP capped at US$ 0.50 PPP, for a max. of two children in age bracket 0-14 Essential health care: – based on an health system staffing ratio of 300 medical professionals per 100,000 population, overhead 67% of staff cost … Basic social assistance for the unemployed: – 100 day guaranteed employment paid by 30% of per capita daily GDP to 10% of the population Administration cost: 15% of cash benefit expenditure

International Labour Office 5 The ILO Global Campaign to extend Social Security to all Two Four:… cost of universal pensions

International Labour Office 6 The ILO Global Campaign to extend Social Security to all Two:… a basic social protection package is affordable: Total cost of all basic benefit package components

International Labour Office 7 The ILO Global Campaign to extend Social Security to all Point Two:… a basic social protection package is affordable: share of total cost that can be covered by domestic resources

International Labour Office 8 The ILO Global Campaign to extend Social Security to all A closer look at Tanzania…

International Labour Office 9 The ILO Global Campaign to extend Social Security to all Point two: Other studies and experience In Latin America the cost of a modest package of conditional child cash transfers, universal pensions and basic health care can be kept under 5% of GDP; the poverty headcount effects can reach a reduction of more than 50% Universal pension schemes in Botswana, Brazil, Lesotho, Mauritius, Namibia, Nepal, and South Africa, cost between 0.2 and 2% of GDP. Global view: Less than 2% of Global GDP are needed to provide all the world's poor with a basic benefit package

International Labour Office 10 The ILO Global Campaign to extend Social Security to all Point Three: Estimated social impact of cash transfers: reduction of poverty (headcount)

International Labour Office 11 The ILO Global Campaign to extend Social Security to all Point three: Estimated effect of a basic benefit package on poverty headcount: Tanzania

International Labour Office 12 The ILO Global Campaign to extend Social Security to all Point three: Social impact – lessons learned in developing countries Coverage: Basic social transfers presently already cover million people in about 25 to 30 countries Poverty impact: the old age grant in South Africa decreased destitution gap by 45 %, oportunidades in Mexico reduced poverty rate of beneficiary households by about 12-points, similar order of magnitude in Brazil Education: positive enrolment effects and school attendance duration in Mexico, Brazil, Colombia, Bangladesh, Nicaragua and Zambia Health: positive effects on height, weight of children and nutritional status in Colombia, Mexico, Chile, Malawi, South Africa

International Labour Office 13 The ILO Global Campaign to extend Social Security to all Point three: Social impact – Preliminary Results of an ILO Meta study “Compendium of Cash transfer programs in Developing Countries” Number of countries in study: in Africa, 9 in Asia, 11 in Latin America Number of studies: 80 studies during 1999 and 2008 Number of programmes: 63 Estimated number of total beneficiaries (primary and secondary, at the end of 2008): – Programmes for the active population: 43 Million – Programmes for the elderly and disabled: 30 Million – Programmes for children:146 Million

International Labour Office 14 The ILO Global Campaign to extend Social Security to all Point three: Social impact – Preliminary Results of an ILO Meta study CriteriaNumber of studies that found Effect positive Effect small/neut. Effect negative Poverty/Vulnerability Poverty Inequality Health/nutrition251- Education Enrolment Quality Labour Market Participation953 Child labour123- Prod. Investments/act’s405- Social Status/bonds2312 Gender134-

International Labour Office 15 The ILO Global Campaign to extend Social Security to all Point Four: Financing strategies: Lack of fiscal space? The good news – part I

International Labour Office 16 The ILO Global Campaign to extend Social Security to all Point four: Good news part II: Growing fiscal space Sub-Saharan African countries increased on average domestic revenue from 15% to 19% of GDP between 1997 and 2006 …and after Monterrey domestic resources increased (source OECD and ECA)…

International Labour Office 17 The ILO Global Campaign to extend Social Security to all Four: Financing strategies- revisited Domestic resource mobilisation – Increase the efficiency of tax collection – Reduce waste – Broaden tax base – Reduce tax evasion and avoidance – Introduce self financing insurance systems (largely health care) – Increase overall tax rates International resources (transitional financing) – Modified social security targeted budget support ? – Project financing to build national delivery capacity – International financing of health care goods and services – People-to-People Partnerships: Global Social Trust – A new Fund finance the start-up of basic social security schemes ? …or can we use the World Solidarity Fund that is already existing but empty…l

International Labour Office 18 The ILO Global Campaign to extend Social Security to all Four: What can be done now…? National social security development plans cum social budgets required, that Determine social security gaps, priority needs and fiscal requirements for the crisis and the next 10 years Develop national fiscal space \through tax reform Specify transitional external funding for basic benefits Determine the capacity requirements