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In crisis conditions, the provision of social assistance and security benefits paid to unemployed workers and other vulnerable recipients act as social and economic stabilizers. It not only prevents people from falling further into poverty, but it also limits the fall in aggregate demand, thereby curtailing the potential depth of the recession.
While cash transfer programmes may embody help to address short-term crisis effects on poverty and insecurity, social transfers are most valuable as a systemic component of an overall national poverty reduction strategy. The Asian crisis in the 1990s has shown that the build-up of a system of basic social security also enhances the national crisis preparedness.
In particular, in countries that currently lack strong social security and income support programmes, a basic package of state-financed social transfers - as a part of a wider social floor - would mitigate the poverty fall-out of the crisis while at the same time providing a significant stimulus to the economy.
In the framework of its Campaign for the Extension of Social Security to All and as part of its constitutional mandate to promote the Extension of Social Security to All, the ILO is promoting a basic and modest set of essential social transfers that could ensure:
- universal access to essential health services for all residents;
- income security for all children through child benefits;
- modest income support for the poor in active age combined with employment guarantees through public works programmes; and
- income security through basic tax-financed pensions for the old, the disabled and those who have lost the main breadwinner in a family.
Our actuaries and economists have shown that such a set of minimum guarantees is affordable at least partially in almost all countries.
An ILO costing study (Note 1) of 12 developing countries shows that the initial gross annual cost of the overall basic social protection package (excluding access to basic health care that to some extent is financed already) is projected to be in the range of 2.3 to 5.5 per cent of GDP in 2010. Individual elements appear even more affordable. The annual cost of providing universal basic old-age and disability pensions, for example, is estimated in 2010 at between 0.6 and 1.5 per cent of GDP in the countries considered.
In some countries it may still require a joint effort between low-income countries and the international donor community for a transition period. However, even low-income countries may be able to increase domestic resources or reallocate some of their existing resources over the next decade.
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