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Financing Social Protection

12 December 2018
The international labour movement is examining the question of financing social protection on the national and international levels. PSI and other unions took part in the Global Conference on Financing Social Protection organised by the International Trade Union Confederation (ITUC) and Friedrich Ebert Stiftung (FES), on 17-18 September 2018, in Brussels.

PSI has a long-standing record of campaigning for publicly-funded universal social protection. Realising the need for concerted efforts to attain universal social protection and the importance of social protection floors, PSI was one of the founding member organisations of the Global Coalition for Social Protection Floors (GCSPF) and remains active in the coalition’s Core Team, as a Global Union Federation, along with the ITUC.

Social protection floors are relevant to achieving three key Sustainable Development Goals Targets:

  • SDG 1.3: Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable
  • SDG 3.8: Achieve universal health coverage (UHC), including financial risk protection, access to quality essential health care services, and access to safe, effective, quality, and affordable essential medicines and vaccines for all
  • SDG 8.b: By 2020 develop and operationalize a global strategy for youth employment and implement the ILO Global Jobs Pact.

The responsibility for implementing social protection systems and social protection floors rests on governments. It is thus important to challenge perspectives which present private sector-driven means of financing social protection as value-neutral alternatives to publicly provided social protection. The September global conference was an opportunity to engage in discussions that highlighted the adverse consequences of such “innovation.”

Social protection is a human right[1], which is key to achieving sustainable development, including reducing poverty and social inequality and building a more inclusive society. Consequently, governments are bound to take decisive actions nationally and internationally, to realise universal social protection[2].

The “social protection is not affordable” argument is not tenable, as “there are alternatives even in the poorest countries”[3]. These include: re-allocating public expenditures; increasing tax revenues; expanding social security coverage and contributory revenues; eliminating illicit financial flows; using fiscal and foreign exchange reserves; managing debt i.e. borrowing or restructuring existing debt, and adopting a more accommodative macroeconomic framework.

There are definitely challenges to financing social protection. However, these have to be situated within a broader perspective of the neoliberal “consensus”, with its pillars of cuts in social spending, privatisation and deregulation. Confronting the challenges to financing social protection requires that we strive for policy influence, including an alternative approach that clearly puts people before profit in the policy process, both nationally and internationally.

Ten years into the global economic and financial crisis, austerity measures have only worsened the sorry state of vulnerability faced by most of the human population, particularly in low and middle-income countries. It is thus essential at this moment for the trade union movement and civil society to send a clear message that sustainable social protection financing is not only possible, but indeed necessary to ensure social stability and economic recovery. The voice of workers and the broader civil society movement must be loud in the development discourse and policy process in pointing out that only a rights-based approach can ensure this.

Thus, we need to be wary of “innovations in social protection financing” which are firmly rooted in the logic of privatisation, such as Social Impact Bonds. They are presented as an “evidence-based solution”[4]. And Colombia’s launch of SIBs in 2017 was heralded as “an innovative PPP” means of social protection financing[5]. This reflects the increasing expansion of SIB projects as the new face of “privatisation by stealth”[6]. But PPPs in general have “widespread shortcomings and limited benefits”[7] and should be rejected in our consideration of social protection financing.

PSI is committed to research work and policy advocacy in line with the ILO Transition from the Informal to the Formal Economy Recommendation 2015 (No. 204), particularly in the Latin American sub-region. The example of AMUSSOL in the Dominican Republic shows that “encouraging formalisation” is necessary for consolidating gains made in expanding social protection for workers in the informal economy[8]. Related to this is the centrality of public provision of social security for achieving universal social protection. 

The 2019 World Development Report frames universal social protection as a response mechanism to the increasing number of people not covered by contributory schemes, due to the changing nature of work. But the changing nature of work is not merely technical. Precarious work is becoming widespread precisely because safeguards of Labour Market Institutions have been rolled back over the last few decades. In essence, “universal social protection” as envisaged by the report, is more of a renewed form of “targeting” Social Protection benefits and “social safety nets”, on one hand, and the IFIs expansion of Social Protection to “social spending” on the other.

Further, as the International Steering Committee of the Global Labour University correctly points out, “what is proposed in the draft Report effectively amounts to shifting the entire burden of financing social protection to the nation state,” to the benefit of multinational enterprises.

The evidence abounds, as Ortiz et al (Op cit), stressed, that the major challenge confronting social protection spending is not so much a lack of resources but rather public policy choice, including those inspired by international finance institution conditionalities, and tacit support for profit over people by states. The artificial constriction of social protection financing has “been worsened by austerity and earlier labour reforms, including freezing wages or lowering minimum wages, labour market deregulation, social security privatisation and targeted social protection schemes”.[9]

PSI thus urges restraint in consideration of “innovative” ways that are not evidently situated within an anti-austerity, human rights-based logic. At the heart of social protection is the essence of our solidarity as human beings and the primacy of public financing and provision. It thus has to be hinged to other relevant areas of our work geared towards building better and more inclusive society, including tax justice and building people-centred development cooperation.      

[1] Article 22 of the Universal Declaration of Human Rights

[2] International Covenant on Social and Economic Rights, ILO Social Security (Minimum Standards) Convention, 1952 (No. 102), SDG 1.3

[3] Ortiz, I., Cummins, M. and Karunanethy, K., 2015. Fiscal space for social protection and the SDGs: Options to expand social investments in 187 countries., ESS Working Paper 48, International Labour Office, Geneva

[4] Sharma, A., 2017. Innovations in social protection financing: Impact Bonds. http://socialprotection.org/learn/blog/innovations-social-protection-financing-impact-bonds

[5] Ortiz et al, Op cit.

[6] NUPGE, 2016. Privatization by Stealth: The Truth About Social Impact Bonds. https://nupge.ca/sites/default/files/documents/Privatization-by-Stealth-...

[7] ECA 2018. Public Private Partnerships in the EU: Widespread Shortcomings and Limited Benefits. https://www.eca.europa.eu/Lists/ECADocuments/SR18_09/SR_PPP_EN.pdf   

[8] Ghesquière, H.,2016,  Amussol: informal workers have access to social security in the Dominican Republic!, WSM Thematic Report Latin America No. 2, Wereldsolidariteit – Solidarité Mondiale.

[9] Open letter of Mr Juan Pablo Bohoslavsky the United Nations Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights to Mr Jim Yong Kim, the World Bank President: https://www.ohchr.org/Documents/Issues/Development/IEDebt/LetterWorldBankAugust2018.pdf

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