While universal social protection may be beyond reach for some of the poorest countries, all countries can contribute to the achievement of the social protection agenda of the Sustainable Development Goals (SDGs) by providing for Social Protection Floors (SPFs). As of 2017, 55% of the global population are not covered by any social protection benefits (ILO, 2017). As such, the guarantee of SPFs may entail difficult trade-offs. Even so, strong political will can drive strategic public policy choices to enable the expansion of fiscal space necessary for increasing social investment; prioritised according to societal demands and conditions (Wening Handayani, 2018).
The social protection agenda
Achieving the current global development agenda, as espoused by the United Nations’ (UN) 2030 Agenda for Sustainable Development and its corresponding set of 17 goals, requires addressing inequality and poverty — including the multiple forms of deprivation of which this consists. The goals encompass an explicit social protection agenda, which includes a commitment to the implementation of inclusive and nationally appropriate social protection systems, including floors — as described by the 2012 International Labour Organisation (ILO) Recommendation 202 , outlined in SDG target 1.3 (ILO, 2017; PSI, 2018).
Social protection systems are one of the most effective responses for addressing poverty and inequality while ensuring that no one is left behind — particularly the most vulnerable (Cichon, 2018). As defined by the UN Department of Economic and Social Affairs (DESA), these systems include “all public measures providing benefits to guarantee income security and access to essential health care, such as unemployment insurance, disability benefits, old-age pensions, cash and in-kind transfers, and other contributory and tax-financed schemes (2018, XV). Effective, long-term implementation can therefore contribute meaningfully to the social, economic, and environmental dimensions of sustainable development.
Social protection gaps and fiscal space
Despite strong international consensus on the merits of social protection systems, gaps in system coverage are apparent; particularly among developing countries across Africa, Asia, and the Arab States (ILO, 2017). This indicates significant underinvestment in the social protection systems within these regions (ILO, 2017). Closing these global gaps to meet the SDGs’ social protection agenda will therefore necessitate the generation and mobilisation of additional resources to expand fiscal space, enabling greater levels of investment in national social protection systems (Wening Handayani, 2018).
It is a myth that social protection systems are unaffordable for some governments. In the context of the post-2008 global economic recession, many developing countries were — and may continue to be — confronted by pressing socio-economic demands in conjunction with government expenditure cuts, driven by low economic growth (Ortiz, Schmitt, & De, 2019).
To foster economic recovery, fiscal consolidation reforms were widely implemented to achieve cost-savings (ILO, 2017). Additionally, labour reforms, such as labour market deregulation and the lowering of minimum wages, austerity measures, and mass privatisation of social security are some of the other measures noted as having constricted national social protection systems (PSI, 2018).
While these measures have challenged governments’ capacity to finance and sustain social protection systems, this context cannot take precedent over the commitment to ensure minimal levels of social protection through SPFs. (Herman, 2018; ILO, 2017)
The ILO defines social protection floors as:
…nationally defined sets of basic social security guarantees that should ensure, as a minimum that, over the life cycle, all in need have access to essential health care and to basic income security which together secure effective access to goods and services defined as necessary at the national level (ILO, accessed 2019)
Though the cost of universal social protection systems may be prohibitive for some governments, especially given the lingering effects of the global economic recession, the large majority of countries should still have the capacity to finance SPFs, given the right priorities. The issue of affordability is one active public policy choice. It is possible to maintain SPFs in both economically good and bad times so long as governments prioritise social sector investment and strategically choose financing mechanisms that are supported by reliable resources (Herman, 2018, p.5).
Alternative financing options
Broadly speaking, there are two categories of financing social protection systems: Contributory programmes and non-contributory tax-based schemes (Herman, 2018; ILO, 2017):
- Contributory programmes typical cover social protection in the form of social insurance. Therefore, entitlement to these programmes tends to be conditional on individuals’ participation in the formal labour market (DESA, 2018).
- Alternatively, non-contributory, tax-based financing does not have such implicit conditions. It is therefore suited to the provision of universal guarantees. This renders this approach more inclusive and considered as foundational for the provision of SPFs (DESA, 2018; Herman, 2018).
Policy statements by the UN and international financial institutions support eight financing options to enable the generation and mobilisation of resources by even the poorest countries. These options include the following (Ortiz et al., 2019; PSI, 2018):
1. Increasing social security coverage and contributory revenues
Where possible, increasing the collection of contributory revenues can free fiscal space to expand social expenditures, impacting the most vulnerable groups. Moreover, in some cases, greater emphasis on employment-based contributions can lead to increased formalisation within the informal economy, thus increasing social security coverage (Ortiz et al., 2019).
2. Increasing tax revenues
As the most significant source of funds, national tax systems must be efficient and well-administered to capture resources that may otherwise slip through the cracks. Additionally, altering different tax rates; such as those on extractive industries, property and wealth; and introducing innovative new taxes, such as Brazil’s financial transaction tax; expand fiscal space for social investment (Ortiz et al., 2019; Herman, 2018).
3. Re-allocating public expenditures
By appropriately shifting public policy priorities through actions such as reducing fuel subsidies, government revenue savings can be reallocated to social protection (Herman, 2018; Ortiz et al., 2019).
4. Lobbying for aid and transfers
By engaging with foreign governments and international organisations, countries can secure transfers to support social investments. Beyond traditional Official Development Assistance (ODA), this may include increased bilateral and regional South-South transfers (Ortiz et al., 2019).
5. Eliminating ilicit financial flows
Enormous financial resources escape developing countries on an annual basis through illicit flows. Greater attention by policymakers to issues of tax evasion, fraud, money laundering, bribery, and other financial crimes can enable governments to stem the loss of valuable resources that could otherwise be invested in maintaining social protection systems (Ortiz et al., 2019; Herman, 2018).
6. Using fiscal and central bank foreign exchange reserves
Some countries, such as Norway and Timor Leste, have tapped into their fiscal reserves to finance social investments, by drawing from sources such as special funds, including sovereign wealth funds (Ortiz et al., 2019).
7. Managing debt
Options may exist for domestic and foreign borrowing, or restructuring existing debt in order to generate additional funds for the social sector, while maintaining debt sustainability (Ortiz et al., 2019).
8. Adopting a more accommodative macroeconomic framework
With careful economic analysis, national macroeconomic frameworks can be adjusted to allow “for higher budget deficit paths and/or higher levels of inflation without jeopardising macroeconomic stability” (Ortiz et al., 2019).
Key to successfully generating the revenues for sustainably financing social protection systems is choosing a policy, or set of policies, that is contextually appropriate. This requires consideration of the national economic, social and demographic conditions, in conjunction with a realistic evaluation of fiscal capacity (Wening Handayani, 2018).
Budgetary constraints are an inevitable reality, which will influence the scope of what can feasibly be implemented and sustained. Given these constraints, decisions regarding the choice to invest public resources into financing SPFs is often contested (Herman, 2018).
Nevertheless, with several options available, it is national governments’ prerogative to proactively explore financing alternatives to provide for SPFs, in support of the advancement of the SDGs’ social protection agenda (ILO, 2017). Through active engagement in social dialogue, which includes civil society along with national and international actors, difficult public policy trade-offs can be negotiated to support the financing of the SDGs’ social protection agenda.
Cichon, M. (2018). “Hardly Anyone Is Too Poor to Share: A basic level of social protection is affordable nearly everywhere”, IMF Finance & Development, 55(4), 14-15. Retrieved from https://www.imf.org/external/pubs/ft/fandd/2018/12/affordability-of-basic-social-protection-cichon.htm
Department of Economic and Social Affairs/UNDESA (2018). Promoting Inclusion through Social Protection: Report on the World Social Situation 2018, United Nations. Retrieved from https://www.un.org/development/desa/dspd/wp-content/uploads/sites/22/2018/07/1-1.pdf
Herman, B. (2018). Sustainably Financing Social Protection Floors: Toward a Permanent Role in National Development Planning and Taxation [discussion paper], Brot für die Welt. Retrieved from http://www.socialprotectionfloorscoalition.org/wp-content/uploads/2018/06/2018-Publication-Analyse81-Barry-Herman.pdf
International Labour Organization/ILO (2017). World Social Protection Report 2017–19: Universal social protection to achieve the Sustainable Development Goals. Retrieved from https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_604882.pdf
Ortiz, I., Schmitt, V., & Loveleen De. (Eds.) (2019). 100 years of social protection: The road to universal social protection systems and floors (Vol 1), International Labour Organization. Retrieved from https://www.ilo.org/wcmsp5/groups/public/---ed_protect/---soc_sec/documents/publication/wcms_669790.pdf
Public Services International (2018, December 12). Financing Social Protection. Retrieved from http://www.world-psi.org/en/financing-social-protection
Social protection floor. International Labour Organization. Accessed 9 May 2019. Retrieved from https://www.ilo.org/secsoc/areas-of-work/policy-development-and-applied-research/social-protection-floor/lang--en/index.htm
Wening Handayani, S. (Ed.). (2018). Asia’s Fiscal Challenge: Financing the Social Protection Agenda of the Sustainable Development Goals, Asian Development Bank. Retrieved from https://www.adb.org/sites/default/files/publication/484991/asia-fiscal-challenge-social-protection.pdf