1. International Labour Office Social security for all: Investing in people Presentation at UN DESA Forum Productive Employment and Decent Work Michael Cichon Social Security Department New York, 8 May 2006

2. International Labour Office 2 Structure of presentation Point One: Social security: Definition, objective and problematique Point Two: Social security’s main challenges Point Three: The rationale for social security in development Point Four: Changing the development paradigm Point Five : By way of conclusion: Accepting global responsibility for social security for all

3. International Labour Office Point One: Definition Definition: social protection/social security: formal or informal income transfers in cash or in kind that ascertain access: - to health and social services and - income security to cope with certain life risks that could lead to a loss of income (i.e. social assistance, pensions, short-term cash benefits in case of sickness, maternity, unemployment, employment injury…)

4. International Labour Office Point One: Objective Objective of social security systems: alleviate/or better abolish poverty and reduce social insecurity The Decent Work connection: Social protection/social security is one of basic pillars of decent work: without social security neither work nor life in the formal and informal economy can be decent

5. International Labour Office 5 Point One: Problematique 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) And yet: 80% of people live in social insecurity, 20% in abject poverty And yet: Social security is underutilized in national anti-poverty and development strategies

6. International Labour Office 6 Point One: …present coverage

7. International Labour Office 7 Point Two: Challenge One: The non- affordability arguments: Work and life cannot be made decent through social security, because … – Loss in potential GDP due to equity efficiency trade-off – Social expenditure too expensive for developing countries – Ageing poses an unsolvable problem – Unmanageable expenditure explosions - Competitive forces in globalization will limit fiscal space

8. International Labour Office The equity-efficiency trade-off: Empirical evidence in OECD

9. International Labour Office 9 Assessing potential impact and costs of cash transfers in Senegal and Tanzania: Poverty rates before and after cash transfers

10. International Labour Office 10 Assessing potential impact and costs of cash transfers in Senegal and Tanzania: Cost of benefit package as percentage of GDP

11. International Labour Office 11 Affordability study, base scenario: 2005-2035 projected benefit expenditure on old-age /disability pension and child benefit (% of GDP) But, in principle, both would be fiscally affordable now and in the future

12. International Labour Office 12 Preliminary results for Tanzania: Expenditure

13. International Labour Office 13 Preliminary results for Tanzania: Financing

14. International Labour Office 14 Ageing: A catastrophe?

15. International Labour Office 15 Ageing: A catastrophe? Global dependency rates

16. International Labour Office 16 Non-manageable expenditure? Projected expenditure in the EU…

17. International Labour Office 17 Challenge Two: Globalization, race to the bottom and the new uncertainty There is evidence for a reduction of expenditure and benefit levels BUT: There is no universal objective reason to assume that the fiscal space has to collapse completely – However, a challenge remains

18. International Labour Office 18 Race to the bottom: The expected pension replacement rates

19. International Labour Office 19 No fiscal space?

20. International Labour Office 20 No policy and fiscal space?

21. International Labour Office 21 Point Three: The rationale for social security in development (1) Extensive welfare states and productive economies co-exist ==> The trade-off between equity and efficiency is wrong (2) Some level of social security is affordable at any level of economic development (3) Social security reduces poverty and inequality, facilitates LM adjustments, redistributes the proceeds of growth  Social security is thus an investment in people, states and the global community

22. International Labour Office 22 Point Four : Changing the development paradigm: towards progressive universalism

23. International Labour Office 23 Let us start with: – Basic health care for all – Child benefits conditioned on schooling – Self targeting social assistance – Universal benefits in old age, disability and loss of breadwinner – …facilitated through international action guidelines which could look as follows:

24. International Labour Office 24 Point Five: Accepting global responsibility for social security for all: Three complementary ways Creating international standards to defend a global social floor Accepting global responsibility for the fiscal space for social transfers (PRSP, debt relief, ODA etc.) Supporting national administrations in improved resource allocation and mobilization mechanisms