Changes in the provision of social protection in MENA since the Arab uprisings

The ‘Changes in the provision of social protection in MENA since the Arab uprisings’ webinar, held on 11 June 2018, offered a closer look at the social protection systems in the Middle East and North Africa (MENA) region, and the challenges they face. The webinar was organised by the International Policy Centre for Inclusive Growth (IPC-IG) and the United Nations Children’s Fund’s Regional Office Middle East and North Africa Office (UNICEF MENARO).

The event was moderated by Charlotte Bilo (Researcher, IPC-IG), who was joined by discussants Rana Jawad (Senior Lecturer in Social Policy, University of Bath) and Markus Loewe (Research Team Leader, German Development Institute, DIE).

The recording is available here and the presentation here.

 

Is there a new politics of entitlement in the Middle East and North Africa?

Rana Jawad kicked off the webinar by reflecting on the changes in the provision of social protection in the Middle East and North Africa. Reviewing several non-contributory programmes over the past years brings up the question whether we are indeed witnessing a shift in social provisioning in the region, or whether this change is only happening at the operational level. According to Rana, the discursive shift in social protection observed in recent years is not matched on the ground in terms of policy delivery.

The necessity to reconsider social protection not only as a technical fix for policy problems (targeting different groups, the delivery of in-kind transfers, etc.) was emphasised, highlighting the need to think about the way social protection is framed, and the types of policies this framing allows. Providing a conceptual analysis of social protection, Jawad proceeded in defining it as a broad concept, composed of public expenditure (social assistance or social security), but also addressing the role of taxation and social regulation.

 

Some authors, such as Standing (2010), have highlighted the challenges that social protection faces in the Global North:

• Linguistic crisis: Social safety nets and active labour market policy.
• Fiscal crisis: Higher unemployment, more flexible employment, a rising need for income transfers, as well as an ageing population.
• Legitimation crisis: Declining social solidarity. Fortune and misfortune has affected the various social strata leading to detachment.
• Moral crisis: Moral hazard and adverse selection.
• Social dumping crisis: Cuts in welfare spending are justified to increase competitiveness.
• Governance crisis: Social solidarity; oligarchy of private providers of services; rush to selectivity (benefits specifically for the poor will be poor benefits) .
• Work crisis: What should count as gainful employment?
• Social justice crisis: Social protection systems no longer offer the prospect of income security or poverty-reduction

 

Targeted versus universal social protection

Another important parameter in the debate of social protection is the traditional distinction between targeted social assistance (safety nets) and the universalist approach to social protection. Although a universal public service approach has shown to be one of the best ways to reduce social inequalities, countries in the MENA region tend to focus on targeted social assistance – reinforcing it as the dominant social protection paradigm.

 

Social protection in the MENA region

It is important to emphasise that the logic of social assistance and cash transfers has been a long standing one, especially when one considers the actions of religious organisations. In addition, employment related social insurance has a long tradition in the region. Lastly, most MENA countries offer – in law at least – public services, such as housing, health and education.

 

Arab Spring aftermath

Despite the Arab Spring, the logic of targeted social assistance persists in the region.  The case of Tunisia was mentioned, due to the country’s success in pursuing constitutional reform. However, most of the MENA countries have adopted a form of cash assistance, or an expansion on employment-based health insurance. Most of the attempts of breaking free from the targeted social assistance approach have been failures, even in countries such as Iran, which endeavored to employ a universal basic income approach.

In light of these findings, Rana concludes that social assistance does not disturb the status quo in the MENA region, explaining the salience of the concept as well as the political attachment to conditional donor funding. In this sense, social protection needs to be critically analysed as a body of policy knowledge in relation to social and economic rights. There should be less concern about whether more or less social protection policies are needed, instead addressing how these policies impact on social policy concerns with inequality, social welfare and social solidarity.

 

Pension schemes in the MENA region

The second half of the webinar was dedicated to the discussion of old-age pension schemes in the MENA region. Markus Loewe started his presentation by highlighting that the multiple challenges that existing pension schemes in the region face with regards to social fairness, efficiency and sustainability. Over the past years, some countries in the region have introduced reforms to address these problems, such as:

• Efforts to increase coverage rates in Tunisia
• Merger of pension schemes in Jordan
• Plans to replace Egypt’s Pay As You Go (PAYG) insurance system by a funded scheme, though without privatisation (still not implemented)

However, most of the proposed reforms have not taken place: Policy makers in the region are reluctant to implement reforms that aim to improve the equity or sustainability of pension schemes, largely due to political reasons.

 

Challenges for existing pension schemes

Similar to Rana, Markus also highlighted that funding is not the main challenge to social protection in the region: On average, governments in MENA spend more on social protection and health than other countries. The main challenges for pension schemes in the region are:

1. Low effective coverage rates
2. Fragmentation
3. Regressive redistribution
4. Deficient sustainability

1. Low effective coverage rates: This is caused by gaps in legal coverage. While in all MENA countries, the army and civil servants are covered, temporary employees, self-employees, domestic workers, and foreigners are usually excluded from the pension schemes. This means that the informal sector, which usually represents half of the labour force in these countries, is excluded.

2. Fragmentation: The fragmentation of services and the segmentation of society challenge the establishment of broader access to pension schemes. A very small share of the population actively profits from benefits from targeted social assistance, while a large share of the population is stripped of any access to social insurance schemes, having to rely on informal approaches to social security.

 

 

3. Regressive redistribution: Many schemes in the region suffer from regressive redistribution, being financed by indirect taxes. This means that even people from the informal sector, who will not benefit from the benefits of contributory schemes will indirectly pay for it. In the case of Jordan, the scheme only benefits limited sectors of the population, namely those with the lowest income, or people at the top of the social pyramid, as shown in the graph below:

 

 

4. Deficient sustainability: Pensions schemes in the region show difficulties in proving themselves as sustainable.  This is due to:

• High administration costs (e.g. 25% in Bahrain, 32% in Mauritania, 47% in Oman).
• Incentives for manipulation (employers and employees overreport wages during the last 3-5 years, while underreporting them before).
• Very generous minimum pension rules (e.g. 3 times the poverty line in Algeria, 2,5 times in Jordan).
• Very generous early retirement options (e.g. at age 32 in the previous Jordanian Military Scheme, age 35 in the general schemes of both Jordan and Bahrain).
• Inefficient investment of reserves (lending to the government at low, partly negative real interest rates. In addition, there is the question if government can ever pay this back).

 

Pension reform initiatives

Some countries in the MENA region have implemented parametric reforms:

• In Oman, Kuwait, Jordan and Lebanon, an independent investment unit has been established; in Jordan and Yemen, the minimum age for retirement has been raised.
• In Egypt, the pension levels have been capped.
• In Jordan, the minimum pensions have been reduced.
• In Algeria, Tunisia and Yemen the pension increases are now indexed to changes in average wages.

However, there have been very few attempts to conduct systemic reforms. Jordan is the only country that has allowed for all pension schemes to merge over time – a considerable success. Furthermore, efforts have been made to raise the effective coverage rate of pension schemes by the inclusion of informal sector workers in Algeria, Bahrain, Egypt, Kuwait, Libya and Tunisia, being that for the last two countries, the experience was deemed successful.

Markus concluded by arguing that governments in the MENA region are reluctant to implement more comprehensive reforms, especially due to concerns that reforms might be at the expense of powerful and other strategically important social groups (e.g. in the field of pensions, subsidies, and labour market constitution) and due to worries that reforms might consume significant financial resources that the government could need elsewhere (e.g. in the field of basic social transfer schemes).

 

This blog post is part of the Social Protection in the MENA region webinar series, which brings together the summaries of webinars organised by IPC-IG and UNICEF MENA Regional Office on the topic. Please join the Online Community Social Protection in the Middle East and North Africa region (MENA) if you are interested in following the most recent discussions on the topic. If you have any thoughts on this webinar summary, we would love to hear from you. Please add your comments below!