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The world's population is ageing at a rapidly increasing pace. As the number of elderly people rises so does the need to ensure their social inclusion.
The ILO has long been committed to the issue of older workers and population ageing, specifically elaborating international labour standards on older workers in employment, invalidity, old-age and survivors benefits, standards and guidance on retirement policies, the level of pension entitlements, and maintaining the standard of living of pensioners.
The Second World Assembly on Ageing: The General Assembly of the United Nations at its 54th Session, decided to convene the Second World Assembly on Ageing (WAA-2) in 2002, on the occasion of the twentieth anniversary of the First World Assembly on Ageing which was held in Vienna in 1982. The Government of Spain hosted the WAA-2 in Madrid, from 8 to 12 April 2002. The ILO had a strong commitment to the success of the Second World Assembly on Ageing. IFP/SKILLS and the Social Security Department prepared a written contribution to the Assembly in the form of a report entitled An inclusive society for an ageing population: the employment and social protection challenge (pdf 106 KB) and organized a side event to present issues contained in the report.
Today about 1.2 billion people are living on an income of less than US$1 per day. According to ILO estimates about 100 million of these extremely poor people are older than 60. Being old and poor means that people have little hope and few means to improve their lot. Poverty and destitution tend to become permanent. The risk management strategies that are open to younger members of a society (holding multiple jobs, subsistence farming, selling of assets, acquiring new skills in an effort to improve employability) are often no longer available to the elderly. In many developing countries, notably in Africa the elderly - due to the high prevalence of HIV/AIDS in the active generation - also often have to take charge of caring for sick family members and the educational responsibility which is normally borne by the active generation. They might also have to use whatever little earnings capacity that they have left to generate some income in kind and in cash for their family, neglecting inevitably, some of the caring needs in the household. In addition they might have to send children to work rather than to school. There are studies from South Africa which demonstrate that the payment of a small old-age pension to the elderly on a universal or means-tested and tax-financed basis, not only improves the life of the elderly and helps to reduce old-age poverty, but it also has beneficial effects for whole family - notably for families in rural settings or the informal economy. They could probably raise school attendance rates and there is evidence that average weight, notably for girls, is highly correlated to the receipt of basic pensions by the grandparents. The elderly are thus used as "agents" for social assistance in their families, as they are often the ones deciding on spending priorities in the households if they are the only persons that are bringing cash income into the household. It appears that tax-financed basic pensions could be a powerful tool against poverty. For example, a study on South Africa's social pension made by Case and Deaton uses a US$1 poverty line to examine the impact of the pension programme on poverty. Using data for 1993, the authors estimate that the poverty headcount would have been 5 percentage points higher at 40 per cent if "the pension incomes were removed" (Case and Deaton 1998, p.1342).
So far, basic tax-financed pensions were deemed unaffordable in most developing countries. Hence, social insurance pension schemes covering initially only part of the workforce in the formal economy were advocated in many developing countries. It was expected that, as the formal economy would grow, the coverage of these pension schemes would also automatically increase. So far, it turned out that the process of extension of coverage was much slower than expected and that, in addition, many of theses schemes are inefficient. They spent, for example, far too big proportions of their contribution income on administration. The latter is the consequence of an - inevitably - complicated social insurance administration, as well as often simply bad governance in the absence of proper administrative monitoring through the countries' executive or legislative organs. While these schemes still may help to prevent some proportion of potential future old-age poverty, the process is lengthy and has almost no impact on immediate poverty levels. Recent indicative calculations by the ILO and others show that modest universal basic pensions (one US$ per day or less) could possibly be financed in at least some African countries by about 1 per cent of GDP. This, of course, would require substantial public spending shifts in countries with an overall tax revenue of the Central government between 10 and 20 per cent of GDP. In some countries national financing might be possible, others - almost certainly - would require transitional foreign financing.
For further information contact by email:
Krzysztof Hagemejer
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