1. UN Department of Economic and Social Affairs
Establishing a Social Floor for the Global Economy
Isabel Ortiz
Senior Interregional Advisor
United Nations DESA
UN Commission for Social Development
Side Event by ILO-HelpAge-UNDESA
New York, 7 February 2008

2. Distribution of World Income Globalization for whom?
Distribution of world GDP, 2000
(by quintiles, richest 20% top, poorest 20% bottom)
Source: UNDP Development Report 2005

3. Inequality Keeps Rising Year Ratio
Historical Trend:
Inequality Keeps Rising
Ratio of the Income of the Richest 20% to the Poorest 20%
Year
Ratio
1820
3:1
1870
7:1
1913
11:1
1960
30:1
1991
61:1
1997
74:1
2005
103:1
The benefits of globalization, as it is managed/mismanaged, go to a few companies and individuals, in a few countries.
Inequality has risen more in the last decades:
Within countries
Among countries
Imperative to address a global social floor
Source: UNDP Human Development Reports 1999 and 2005, New York

4. Apartheid at a Global Scale? Need of a Global Social Floor
Source: Sutcliffe, Department of Economic and Social Affairs.
WP 2. United Nations

5. A Global Social Floor
Defined as a basic and modest set of social security benefits for all citizens
Financing universal access to essential health care
Income security for all children through child benefits
Some modest conditional support for the poor in active age (employment programmes, benefits), and
Income security through basic, tax-financed, universal non-contributory pensions for older persons, persons with disabilities and those who lost the main breadwinner in a family
All countries have some form of social security but few provide a basic social floor for all

6. The case for a Global Social Floor: Social Justice Arguments
Unacceptable levels of poverty and inequality
Half of the world lives below the $2-a-day poverty line
The poorest 50% of the world’s adult population receives 1% of global wealth (UN WIDER, 2006)
Social security is a human right:
Article 22 of the Universal Declaration of Human Rights states: “Everyone, as a member of society, has the right to social security”
But 80% of global population remains without access

7. But Also Strong Economic Arguments
Inequality is economically inefficient / dysfunctional
World problem of overproduction and global excess capacity in the context of weak effective demand
Consumption concentrated in top income deciles
Raising the incomes of the poor increases domestic demand and, in turn, encourages growth by expanding domestic markets
A Global Social Floor can be an effective instrument to:
Boost economic growth by raising domestic demand / internal markets
Enhance human capital and productive employment - a better educated, healthy and well nourished workforce.
Firstly, because poverty is re-emerging in developed economies, poverty is no longer a Third World phenomenon. Two decades of neoliberal policies have eroded the living conditions of citizens in the West. The end of the post-war boom in the 1970s made Organization for Economic Cooperation and Development (OECD) policy makers abandon Keynesian approaches and replace them with supply-side policies, under the correct assumption that growth would be helped if companies sharpened their competitive edge. But global demand continued stagnating leading to a squeeze of corporate profits, shakeout of labor, slow down of growth of fixed investment and thus a decrease in demand for capital. This generated pressure on lowering wages and making labor markets more flexible which increased income inequality. Gross public sector debt became as high as 70% of national income in OECD countries, and this made policy-makers to further curtail social expenditures and privatize social services. Paradoxically, most of these savings went to support private sector companies in the public effort to generate growth (tax breaks, incentives, bailouts, etc), so the average citizen has experienced a significant decrease in welfare, while growth has remained low, unemployment and public debt high, because these neoliberal short-term policies do not address the long-term structural causes of the problem: overproduction and global excess capacity in a context of weak effective demand.
Social transfers serve as cash injections to local economies, having a positive impact on their development.

8. … and Political Arguments
A Global Social Floor can be effective to prevent conflict and create politically stable societies
Poverty and gross inequities tend to generate intense social tensions and violent conflict
The huge disparities in income inequality encourage uncontrolled migration
At the international level, globalization will find further resistance unless it deals with its social aspects
=> Need of a global social contract

9. Transfers Reduce Poverty more than 50% in OECD countries
Source: OECD

10. South Africa Social Transfers Effective to Reduce Poverty and Destitution – Cost 3% GDP
Source: Sampson, M. 2006, EFPRI South Africa
=> However social transfers are rarely considered in National Development Strategies/Poverty Reduction Strategies in Developing Countries => Social Transfers can make the difference between achieving MDG1 of halving poverty by 2015 or not

11. Redressing Income Assymmetries and Reducing Poverty Requires:
HOUSEHOLD INCOME = Earnings + Rents/Private Transfers + Social Transfers – Taxes
National Development Strategies that include
1. Employment-generating macroeconomic and sector policies
2. Adequate labour regulations and standards
3. Social Transfers – A Social Floor
4. Progressive fiscal policies

12. A Social Floor is Affordable even in Low Income Countries
Affordability in African and Asian countries
(old-age /disability pension and child benefit) (% of GDP)
Source: ILO, Social Security Department, Geneva

13. Social Pensions Cost less than 1% GDP in Most Countries
Source: UN DESA, 2007: World Economic and Social Survey 2007, United Nations

14. Is there an Old-Age Crisis
Is there an Old-Age Crisis? Future contingent liabilities not a problem because of changes dependency ratios
Source: UN DESA 2007

15. Financing a Global Social Floor
National Sources:
A Social Floor is affordable, estimated at an average 2-4% GDP in developing countries
Several countries have started building a social floor: Namibia, South Africa, Botswana, Mauritius, Bolivia, Brazil, Argentina, Thailand…
Social transfers have to grow with the fiscal space made available by increasing GDP or Aid
Domestic resources exist:
Budget reallocation
Billions lost through tax evasion and inadequate tax systems
Currently South-North flow of funds that needs to be reversed

16. Financing a Global Social Floor
International Sources:
Strong argument given world inequalities, 70% explained by differences in income between countries
ILO estimates that Global Social Floor would cost between 2%-6% of global GDP
Mechanisms:
Increased Official Development Aid
Multilateral and bilateral ODA to governments
New instruments like SWAps and Budget Support ideal
A Global Welfare Fund? (Milanovic, to citizens)
Global tax justice
Collecting a minimum tax on corporate profits and strengthening tax cooperation
An International Tax Agency?
Voluntary donations: Global Trust (ILO)

17. It Can Be Done: Remember that Not Long Ago
There were children working in England’s mines and factories…
…Spanish low class emigrants going to Latin America in search of any job…
… poverty was widespread in the US or South Korea…
…and in South Africa’s apartheid

18. United Nations Department of Economic and Social Affairs
Thank you
United Nations Department of Economic and Social Affairs