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World Social Security Forum - Building a “Social Security Floor” worldwide where growth can meet equity

Only one in five people in the world has adequate social security coverage. Last week, the first ever World Social Security Forum organized by the International Social Security Association (ISSA) and the Russian authorities in Moscow discussed social security’s contribution to build productive economies and more inclusive societies. Interview with Michael Cichon, Director of the ILO’s Social Security Department.

Article | 28 September 2007

Only one in five people in the world has adequate social security coverage. Last week, the first ever World Social Security Forum organized by the International Social Security Association (ISSA) and the Russian authorities in Moscow discussed social security’s contribution to build productive economies and more inclusive societies. The ILO presented its Global Campaign for Social Security and Coverage for All, promoting the idea of a “social security floor” aimed at achieving the UN Millennium Development Goal N° 1 of halving poverty by 2015. ILO Online spoke with Michael Cichon, Director of the ILO’s Social Security Department.

The extension of social security to all has recently moved to the top of the international agenda. How did this happen?

Michael Cichon: For decades we have been following a development paradigm according to which developing countries had to grow before starting to redistribute income and combat poverty. But growth doesn’t work for the poor by itself; countries with the same level of income per capita may have different levels of poverty. The new development paradigm, aims to stabilize societies first before stabilizing economies.

If we want to meet the UN Millennium Development Goals by 2015, especially goal N°1 of halving poverty, we have to build the channels that make growth trickle down to the poor and that’s what social security systems in a developing country context should do: create the re-distributive systems that actually benefit the poor, directly. In fact, the G8 acknowledged that social security should be part of a development paradigm. There is a commitment now to improve the advisory services and technical assistance for the build-up of social protection systems.

What about the cost for developing social security systems in developing countries?

Michael Cichon: Above all, social security contributes to social cohesion, which is the prerequisite for any long-term investment. Nobody invests in the long-run in a socially unstable, insecure society. The World Bank acknowledges that poverty and inequality in a country can lead to insecurity which is a major infringement on international and local investments in a country.

Moreover, it contributes to increase labour productivity. A study conducted in Mexico, for example, showed that people who have been benefiting from youth and family health programmes during their adolescent years, had showed labour productivity (indicated by the level of earnings) about 20 per cent higher over a lifetime, compared to those who have not benefited. This productivity shift alone would pay for the transfers by itself.

We consider social protection as being an investment in development, and a right balance has to be found between social and economic investments. If you build a road before providing health and education, you will have these roads but nobody to travel on them, because nobody knows how to drive. People cannot work if they are not healthy; and they are not productive if they cannot afford to go to school and have to work at a very early age. You can build as many roads and airports as you want, that doesn’t create a productive workforce.

Is universal social security coverage financially and technically feasible?

Michael Cichon: We have done simulations on how many countries could actually afford a basic system in the developing world, and in 10 out of the poorest 12 countries that we actually analyzed, and where such systems don’t exist, could have afforded some form of basic social security without external assistance provided. In a country like Tanzania or Senegal, if you were to spend between 3 to 4 per cent of GDP on social security, you could reduce the number of people living in poverty by 40 per cent, which is – of course – a rule of thumb.

Policy priorities need to be shifted towards redistribution rather than towards something else. Apart from the political will, a national consensus process is needed with the employers and the workers on board. You can’t do it overnight, you can’t do it next year, but you can do it over a ten-year development plan.

Are there any examples for developing countries that have successfully extended their social security system?

Michael Cichon: Looking back in history, all of the OECD countries which are now prosperous had started to develop their social security systems when they were poor, and it was part of their growth pattern. But today for example, Namibia has a modest universal pension scheme which has clear effects on old age poverty; but what’s more interesting is that universal pension schemes also have an impact on whole families: school attendance rate of girls as well as their height and their weight are correlated to the existence of a pension in the family, for in this country, grandmothers buy or finance school fees and food for the family.

The question is how can you deliver a pension in remote villages? It happens in South Africa, it happens in a country like Namibia. It does happen in a country like Nepal. So it can be done. It’s not principally impossible. If we can send Coca-Cola cans to the remotest African villages, we should be able to deliver a pension.

What does the ILO do to extend social protection to all?

Michael Cichon: The ILO’s Global Campaign for Social Security and Coverage for All promotes the idea of a social security floor. As a standard setting organization, the ILO is undertaking a process aimed at fixing a globally accepted minimum level of benefits and securities that anybody in the world should enjoy, and that shouldn’t be undercut. The classical instruments often only protect people who are paying taxes, contributing from regular incomes, but they are not necessarily reaching out to those who don’t.

We have to come back to the ILO recommendations, that as early as 1944, requested universal basic income security and universal access to health care, and turn these ideas into an instrument that makes them a real social floor for all. There is no doubt that our global society can afford that. At the same time we will continue to help countries implement basic social security system through our Strategies and Tools against Social Exclusion and Poverty (STEP) programme and other activities.