A guide through challenges and options

Social security represents an investment in a country's "human infrastructure" no less important than investments in its physical infrastructure. At an early stage of economic development the priority is, of course, to put in place a basic level of provision; the evidence adduced in this Guide points to its affordability for, essentially, every country. While this message lies at the heart of the Guide, it is important to keep in mind that, at a later stage, the basic level can and should be augmented, and the ILO's long-standing approach to social security offers the framework to do so.

While the financial, fiscal and economic affordability and sustainability of social protection systems has become – rightly or wrongly – a major concern for countries at all stages of economic development, the Guide provides testimony showing that some level of social security can be afforded even at early stages of national development. Social security systems remain affordable moreover when economies mature and population age. Hence, a country’s national investment in social security can be well justified, whether or not an extensive social security system has already been developed.

Table of contents

Page

Foreword and acknowledgements iii

Selective list of abbreviations xi

Introduction 1

PART I The policy framework 5

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1. Needs, rights and a promise unfulfilled 7

1.1 Needs 7

1.1.1 Diversity of circumstances 7

1.2 The right to social security 13

1.3 Closing the coverage gap: Latest global policy initiatives 17

2. An emerging policy framework for adequate social security for all 19

2.1 Principles for the extension of social security 19

2.1.1 Universality 20

2.1.2 Progressiveness 20

2.1.3 Pluralism 21

2.1.4 Outcome focus 21

2.2 The “social security staircase” policy paradigm 23

2.2.1 The horizontal dimension 23

2.2.2 The vertical dimension 24

2.2.3 The social security staircase 25

2.3 A minimum set of social security guarantees as part of a social protection floor 25

2.4 The affordability of social security 28

2.4.1 The affordability of mature social security systems 28

2.4.2 The affordability of basic systems 31

2.5 Strategic challenges 36

2.5.1 Combining effective protection with organizational flexibility 36

2.5.2 Achieving a coherent architecture of national social security systems 37

2.5.3 Creating the necessary fiscal space 37

2.6 Defining ILO support  40

3. Practical policy options and policy design issues 43

3.1 Current status 43

3.2 Issues in access to health care 45

3.2.1 Health-care benefit packages 45

3.2.2 Financing of the health systems, financial protection and targeted interventions 47

3.3 Issues in income security schemes 48

3.3.1 Targeting based on conditions of personal income or wealth 48

3.3.2 Conditionality 51

3.3.3 Social assistance: From redistribution to social inclusion 54

4. Summary and conclusions 57

4.1 In summary 57

4.1.1 The social security development paradigm 57

4.1.2 The concept of a social protection floor 58

4.1.3 Affordability and financing of the social protection floor 59

4.1.4 Instrumental aspects of the ILO’s ongoing approach 59

4.2 Conclusions 60

PART II. Facts and evidence 63

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5. A statistical analysis of the coverage gap 65

5.1 Conceptual aspects 65

5.2 Statutory schemes 66

5.3 Old-age pensions 72

5.4 Social health protection 84

6. Country experiences 97

6.1 Essential health care 97

6.1.1 Thailand 97

6.1.2 Ghana 97

6.1.3 Mongolia 99

6.1.4 Sierra Leone 100

6.2 Income security: Old age 102

6.2.1 South Africa 102

6.2.2 Namibia 104

6.2.3 Brazil (Previdência Rural or “rural pension”) 105

6.3 Income security: Child benefits 106

6.3.1 Brazil (Bolsa Família) 106

6.3.2 Mexico (Progresa/Oportunidades) 108

6.4 Income security: Other cash transfers 109

6.4.1 South Africa 110

6.4.2 Zambia (Kalomo District pilot social cash transfer scheme) 111

6.5 Income security: Working-age population 113

6.5.1 India (NREGS) 113

6.5.2 Chile (Solidario) 114

6.5.3 Bangladesh (Targeting the ultra-poor) 115

6.6 Income security: Self-employed 117

6.6.1 Three Latin American countries 117

7. Effects of non-contributory social transfers in developing countries: An overview 121

7.1 Introduction 121

7.2 Enhancing human development 123

7.2.1 Nutrition and health 124

7.2.2 Education 127

7.2.3 Child labour 129

7.3 Supporting the full utilization of productive capacity 130

7.3.1 Employment and labour market participation 130

7.3.2 Social transfers and productive activity 133

7.4 Enhancing and stabilizing consumption 134

7.4.1 Raising consumption 135

7.4.2 Protecting consumption 136

7.4.3 Social inequality 137

7.5 Facilitating social inclusion and cohesion 138

7.5.1 Empowerment and gender 139

7.5.2 Social cohesion 140

7.6 Conclusions 141

Bibliography 167

Annexes

I. Tripartite Meeting of Experts on Strategies for the Extension of Social Security Coverage,
Geneva, 2-4 September 2009: Chairperson’s Summary 145

II. List of participants 149

III. Terminology 159

IV The Global Extension of Social Security (GESS) Internet Platform ..................................... 165

Tables

1.1 Percentage of households who are: always poor, sometimes poor, never poor  9

2.1 Expected increases in European Union social expenditure, 2007–2060 29

3.1 Effect of existing social transfer schemes in 30 countries: A summary 43

3.2 The extension of health-care coverage can be accelerated 44

5.1 Employees (wage and salary workers) in the labour market worldwide, 2008 66

5.2 Participation in the labour market of elderly (65+), and life expectancy at age 65,
1980 and 2005 76

5.3 Projected elderly population, proportions in 2010 and 2050 84

5.4 Population with formal social health protection coverage, selected African countries, 2007 93

5.5 Population with formal health protection coverage, selected Latin American countries and selected years between 1995 and 2004 93

6.1 Thailand: Overview of social health protection, 2007 96

6.2 Thailand: Selected indicators of social health protection, 2007 96

6.3 Ghana: Selected indicators of social health protection, 2006 99

6.4 Mongolia: Legal coverage of population groups, 2008 100

6.5 Argentina, Chile and Uruguay: Coverage of independent workers as the proportion paying social security contributions, latest available year 117

Figures

2.1 The scope for increasing coverage to population groups 23

2.2 The social security staircase 25

2.3 Costs for components of a basic social protection package for selected countries in Africa and Asia, 2010 32

2.4 Costs for basic universal old age and disability pensions for selected countries in Africa and Asia, 2010, 2020 and 2030 33

2.5 Total public expenditure and social expenditure at different levels of GDP per capita, latest available year 34

2.6 Increase of domestic public resources, selected African countries, 2002-07 35

2.7 Total public social expenditure, regional estimates weighted by GDP, latest available year between 2002 and 2007 38

2.8 Total public social expenditure, regional estimates weighted by population, latest available year between 2002 and 2007 38

2.9 Size of government and proportion of government expenditure allocated to social security, latest available year 39

5.1 Percentage of wage workers among those employed worldwide, latest available year 68

5.2 Number of social security branches covered by statutory programmes, 2008–09 69

5.3 Scope of legal social security coverage: Countries with statutory programmes or limited provision, latest available year .................................................................. 70

5.4 Legal coverage for unemployment as a percentage of the working-age population and economically active population, regional estimates, latest available year 71

5.5 Effective coverage as a percentage of the unemployed receiving unemployment benefits, regional estimates, latest available year 71

5.6 Legal coverage for employment injury as a percentage of the working-age population and economically active population, 2008–09 72

5.7 Old age: Legal coverage and effective coverage, contributors as a percentage of the working-age population, by region, 2008–09 73

5.8 Old-age pension beneficiaries as a proportion of the elderly by income level, various countries, latest available year 74

5.9 Old-age pensions: Effective active contributors as a percentage of the working-age population by share of wage employment in total employment, latest available year 75

5.10 Persons above retirement age receiving pensions, and labour force participation of the population aged 65 and over, latest available year 77

5.11 European Union: Old-age pension recipients, ratio to population over the legal retirement age (excluding anticipated old-age pensions), 2006 78

5.12 Africa: Old-age pensioners (at all ages) as a proportion of the elderly population, latest available year) 79

5.13 Asia and the Middle East: Old-age pensioners (at all ages) as a proportion of the elderly population, latest available year 80

5.14 Latin America and the Caribbean: Old-age pensioners (at all ages) as a proportion of the elderly population, latest available year 81

5.15 Africa and the Middle East: Male and female old-age pensioners (at all ages) as a proportion of respectively male and female populations of age 60 and over, latest available year 82

5.16 Latin America and Caribbean: Male and female old-age pensioners (at all ages) as a proportion of respectively male and female populations of age 60 and over, latest available year 83

5.17 South-East/Eastern Europe and ex-Soviet Union: Male and female old-age pensioners (at all ages) as a proportion of respectively male and female populations of age 60 and over, latest available year 83

5.18 Inequalities in access to maternal health services in rural and urban areas in countries of different national income levels, 2006 85

5.19 Inequalities in access to maternal health services by wealth quintile, 2006 86

5.20 Out-of-pocket expenditure as a percentage of total health expenditure in low-, upper middle- and high-income countries 87

5.21 Out-of-pocket expenditure as a percentage of total health expenditure by poverty incidence, 2006 87

5.22 Total and public expenditure on health care per capita ($PPP) in countries by their national income level, 2007 89

5.23 Health-care financing levels by source of funds, 2006 90

5.24 Achieving universal coverage in social health insurance 92

5.25 Formal health coverage: Proportion of the population covered by law, latest available year 92

5.26 Multidimensional health coverage deficit for countries at different levels of vulnerability 94

5.27 ILO access deficit indicator, 2006 95

6.1 Thailand: Social health protection coverage, 2006 97

6.2 Public perceptions in Sierra Leone: Social security priorities and needs, 2007 101

7.1. Intergenerational poverty traps 123

7.2 Impact of social transfers on school enrolment, 1997–2008 128

Boxes

5.1 Employment informality and deficit of social and employment protection among
wage workers: Latin America and Africa (Zambia and United Republic of Tanzania)