UN International Forum on the Eradication of Poverty Poverty, Social Security and Human Rights: Lessons from OECD Experience Peter Townsend London School of Economics

Population Living Below $1.08 per day and $1.50 per day at 1993 PPP in 2001 RegionsWorld Bank($1.08) IPC ($1.50) World Bank ($1.08) IPC ($1.50) Percentage of poorNumber of poor (millions) East Asia Eastern Europe and Central Asia Latin Americ`a and Caribbean Middle East and North Africa South Asia Sub-Saharan Africa Total ,0981,865 Source: Kakwani and Son, 2006, Table 2. They reproduced World Bank estimates based on $1.08 per person per day, and then calculated estimates if the poverty line had been $1.50 per person per day, ie the median of the poverty lines of 19 low-income countries in Africa and Asia in the 1990s.

Table 2 Percentage of population no longer in poverty – post-social compared with pre-social transfers, by country and welfare regime (1999) Welfare regime/ countryPercent of population no longer in poverty Percent of population in poverty after transfers Mean percent in poverty (regime) Social Democratic/ Nordic Denmark Sweden35,510.2 Finland Netherlands Corporatist Austria Germany France Belgium Luxembourg Liberal/ residual UK Ireland South European Italy Spain Greece Portugal EE EE

Lessons of Substantial Commitment to Social Security on the Part of All OECD Countries 1. In the last half century all OECD countries, of every welfare regime complexion, have doubled, or more than doubled, their annual expenditure on social security. 2. This has applied particularly to universal and group benefit schemes, and not so much to safety net or social assistance schemes. 3. High social security spending countries have not, by and large, experienced lower than average economic growth. On the contrary, indicators of high economic and social performance are found to correspond (See, for example, Goodin, Heady, Muffels and Dirvan, 1999, who find that The Netherlands outstripped Germany, and both countries outstripped the US). 4. The most innovative and effective OECD schemes historically have simultaneously involved benefits as well as contributory obligations for the participants.

Table 3a Total Public Social Expenditure, and Total Public Social Security Expenditure (included), as %GDP [countries ranked highest-lowest for 2001] CountryTotal public social expenditure as % GDP (2001) Total public social security expenditure as %GDP (2001) Sweden Denmark France Germany Switzerland Austria Finland Belgium Italy Greece Norway Poland

Table 3b continued Country Total public social expenditure as % GDP (2001) Total public social security expenditure as %GDP (2001) UK Netherlands Portugal Luxembourg Czech Republic Hungary Iceland Spain New Zealand Australia Slovak Republic Canada Japan USA Ireland Turkey Korea Mexico

Table 3c Trends in Total Public Social Expenditure, and Total Public Social Security Expenditure (included), as %GDP CountryTotal public social security expenditure (ie cash benefits) as %GDP (new OECD series) Sweden Denmark France Germany Switzerland Austria Finland Belgium Italy Greece Norway Poland

Table 3d Trends in Total Public Social Expenditure, and Total Public Social Security Expenditure (included), as %GDP Lower spenders UK Netherlands Portugal Luxembourg Czech Republic Hungary Iceland Spain New Zealand Australia Slovak Republic Canada Japan USA Ireland Turkey.. Korea Mexico

Table 4 Total public social security expenditure as % GDP in selected high-, middling- and low-spending countries CountriesTotal High-spending France17.9 Germany15.6 UK14.2 Middling Australia 9.9 Japan 9.1 Chile 8.2 United States 7.9 Low Ghana 2.1 China 1.5 India 1.5 Indonesia 1.1 Mexico 1.1 Kenya 0.3 Zambia 0.3 Source: For low-spending countries – data adapted from ILO (2001), Social Security: A New Consensus, Geneva, ILO, Statistical Annex. The data for the low-income countries apply to 1996 (1995-China) and exclude health care (then counted in “social security expenditure”).

In January 1954 President Eisenhower strongly praised the social insurance system in the US developed from needs “arising from the complexities of our modern society…. The system is not intended as a substitute for private savings, pension plans, and insurance protection. It is, rather, intended as the foundation upon which these other forms of protection can be soundly built. Thus, the individual’s own work, his planning and his thrift will bring him a higher standard of living upon his retirement, or his family a higher standard of living in the event of his death, than would otherwise be the case. Hence the system both encourages thrift and self-reliance, and helps to prevent destitution in our national life.” Quoted by Christgau V. “Old Age and Survivors Insurance after 20 Years,” in Haber W. and Cohen W.J., eds., (1960), Social Security: Programmes, Problems and Policies, Illinois, Irwin, p. 168.

The Chairman of the first Advisory Council on Social Security in the late 1930s explained that the US system of political economy had to “shift, so far as the worker was concerned, to a system of benefits payable as a matter of right” (J.Douglas Brown, Haber W. and Cohen W.J., eds., (1960), Social Security: Programmes, Problems and Policies, Illinois, Irwin, 4).

Trends in the Funding of Social Security ( ) Funding of social security 1980 (EU 12) %1990 (EU 12)%1996 (EU 15) % All contributions (employers)(45.4)(41.8)(39.2) (employees etc) (22.0)(23.8)(23.7) General taxes Other receipts Total100 Source: Ministry of Social Affairs and Health, 1999, p. 213; and Eurostat, 1999

Two broad sets of recommendations 1)Turning research into action. First, to identify more exactly the social insurance and group tax-financed schemes in the OECD countries that have worked best in relation to their economic and social development. This will show how key principles and mechanisms might be applied by stages to the emerging institutions of developing countries. Second, if a scheme for tax contributions from the industrialised countries and/or corporations can also be worked out and agreed, poverty will be reduced much more quickly. Third, the developing countries can, at the same time, review how their own schemes for social protection can be most quickly extended and linked with the best models of OECD system development.

2) Universal coverage. To extend agreements by governments to give greatest weight to “universal” contributory social insurance and tax- financed group benefits in constructing social security systems to defeat poverty. Contribution-based social insurance depends on revenue willingly provided from wages by employers and employees to earn entitlement to individual and family benefits in adversity, including unemployment, sickness, disability, bereavement and retirement benefits. Tax-financed group schemes will be crucial for some groups unable to work, such as children, the severely disabled and the advanced elderly. Trans National Companies should play their part on behalf of sub-contracted labour in countries with which they trade. Similarly, Governments trading extensively with low-income countries must accept greater responsibility for the establishment and growth of social security in those countries.