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Safety nets

Beyond charity

by Vera Dicke

In brief

Mother sleeping on a sidewalk in Jakarta

Mother sleeping on a sidewalk in Jakarta

Social security serves development, but healthcare and welfare systems are complicated and require a competent state. A number of emerging market nations and developing countries are rising to these challenges with innovative approaches.

Social security is a luxury item internationally. According to ILO data, only 25 % of the world population currently enjoy adequate social protection. The rest are left without protection to the mercy of illness, the consequences of old age, the loss of family members or earning ­power. Even many advanced nations are cutting social spending in view of stretched national budgets.

In developing countries, however, social protection is generally not expen­sive. ILO studies show that the average cost is about one to two per cent of GDP. Such investment can pay off fast because good healthcare and welfare systems stimulate domestic demand and speed up qualitative growth. Therefore, develop­ing countries should invest in social security.

There is, however, no blueprint for success. Developing countries face many challenges for which the models devel­oped in the rich world offer no options. In early November, experts from several countries shared their experience in regard to social security during Friedrich Ebert Foundation’s International Justice Week in Berlin.

Individual challenges

One obstacle to establishing social security systems is distrust in the state, which is often justified. People do not pay social insurance contributions if they are not confident that they truly will have protection when they need it, says Ellen Ehmke of Kassel University.

Hasbullah Thabrany, professor at Jakarta’s School of Public Health, agrees, but also stresses the relevance of tradi­tion. When Indonesia introduced a health insurance scheme, he reports, the willingness to pay contributions was very low at first. It grew when the government rede­fined contributions as aid to the needy, thus linking them to Zakat, the Islamic duty to act charitably.

The size of the informal sector also plays a role, says Evance Kalula, professor at the University of Cape Town. According to him, just one third of South Africa’s workforce are employed in the formal sector and would be covered by state-run health, old age or unemployment insurances.

Cristina Bayón from the Universidad Nacional Autónoma de México laments another obstacle, the lack of a national consensus on social security. She says that inequality is traditionally accepted in her country, and she sees no political will for change. She believes the conditional cash transfer (CCT) programme Oportunidades – social assistance granted to poor fam­ilies provided they send their children to school – will probably remain the only national social security measure.

Innovative concepts

Many countries are coming up with ideas in order to improve the situation of their poor. One example is India’s National Rural Employment Guarantee Act (NREGA). This programme guarantees the rural popula-tion 100 days of work at the minimum wage in public projects, which are pro­posed and designed by the Panchayats, local government councils (see D+C/E+Z, 2009/12, p. 472 f.). Typical projects include building roads or repairing water supply infrastructure. NREGA boosts incomes as well as the sense of community in the villages. South Africa is currently testing a similar scheme, the Community Work Programme.

Brazil has also had positive experiences with innovative approaches. Its CCT programme Bolsa Família is famously successful. However, it is not the only social security programme in Brazil, as Lena Lavinas from the Federal University of Rio de Janeiro explains. There is a free healthcare system, and pension funds are funded by a mix of taxes and individual contributions. She sees room for improvement, but is confident her country is heading in the right direction.

Mixing individual contributions with public subsidies could provide relief in the informal sector, many experts agree. Kalula, the South African scholar, sees potential in the private sector too: subsidising microinsurance schemes could help to protect informal workers. However, microinsurance business models are still in their infancy.

International advice

Many researchers ponder how social security systems should be designed to fight poverty effectively and sustainably. Accord­ing to Shahra Razavi from the United Nations Research Institute for So­cial Development (UNRISD), individual ­measures normally do not achieve much. She says it is important that the state takes a comprehensive approach, and insists that social assistance must go along with better public facilities in the healthcare and education sectors. She is also in favour of ac­tive labour market policy. Otherwise, people will not escape poverty, she says, but when illness does not mean financial ruin, however, they can send their children to school instead of making them work.

Karin Roth, a Social Democrat member of the Bundestag, praises the Social Protection Floor (SPF), an approach developed by the ILO and WHO. It proposes strategies to implement healthcare and welfare systems, leaving it to individual countries to set their own priorities. According to the SPF, there are two pillars to social security: income support (benefits and pensions), and the provision of social services such as healthcare and education.

The SPF emphasises that social security systems depend on a stable institu­tional environment. In the long run, a system must pay for itself through taxes or contributions. Governments must ensure that payments reach the people who are entitled to them. The experience of other countries can help to avoid mistakes in designing institutions.

Many experts say that social security must not be a luxury. Much can be
achieved even with little financial leeway. The result of the conference in Berlin was that developing countries and emerging markets should tackle the issues with resolve. However, it must be remembered that all meaningful approaches require a minimum level of effective administration. There are no good answers for countries where statehood is fragile.

Vera Dicke