Investing in People:

Social Protection for All

Isabel Ortiz, Associate Director
Jennifer Yablonski, Social Protection Specialist

Manila, 21 April, 2010

Disclaimer: The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the
views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent.
ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any
consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.
 Presentation Overview
1. Adequate Social Protection for all
ƒ Reduces poverty fast
ƒ Contributes to MDGs and human development
ƒ Generates economic growth and political stability
ƒ Social security is a human right

2. Key Policy Issues:

ƒ Expanding pension coverage
ƒ Social protection for children
ƒ Unconditional or conditional transfers?
ƒ Universal or Targeted?
ƒ Affordability
ƒ The costs of keeping 80% of world’s population excluded
 Social Protection and Crisis

• ADB Social Protection Strategy developed in

response to Asian Financial Crisis
• Clear international calls for social protection
response
• 25% of fiscal stimuli went towards social
protection in high and middle income countries
• The crisis as an opportunity to develop social
protection systems
Social Protection in Fiscal Stimulus Plans

Source: UNICEF, based on Zhang, Thelen & Rao, 2010
Beyond Crisis: Distribution of World Income
- Apartheid at a global scale?
Distribution of world GDP, 2000
(by quintiles, richest 20% top, poorest 20% bottom)

Source: UNDP Development Report 2005

 The case for Social Protection:
Social Justice Argument – It is a Human Right

• Social protection is a human right: Articles 22 and 25

of the Universal Declaration of Human Rights
“Everyone, as a member of society, has the right to
social security”

= >But 80% of global population remains without

access
 Social Protection Reduces Poverty
• OPORTUNIDADES (Mexico)
– 10% reduction in poverty headcount ratio
– poverty gap by 30%, poverty severity index by 45%
• BPC and Bolsa Familia in Brazil contributed 28 per cent of
the fall in the Gini, 1995-2004.
• South African social transfers reduced poverty gap by 48%
EU: Social Protection Reduces Poverty by 50%

Source:  Caminada & Goudswaard, 2009, EUROSTAT data
 Poverty Reduction: Senegal

Source: Gassmann & Behrendt 2006

Social Protection Contributes Effectively to MDGs

Proven results:

• Reduced poverty, better nutrition, improved household

income stability (MDG 1, 4, 6)

• Improved preventive health care (MDG 4 and 5)

• Higher immunization rates (MDG 4)

• Higher school enrollment rates reduced school drop-out

(MDG 2,3)

• Decline in child labour among children in rural areas

(MDG 2, 8)
 Social Protection Contributes to Growth
ƒ Inequality is economically inefficient / dysfunctional
ƒ Consumption concentrated in top income deciles in all
countries
ƒ Raising the incomes of the poor increases domestic demand
and, in turn, encourages growth by expanding domestic
markets
ƒ Social Transfers can be an effective instrument to:
ƒ Boost economic growth by raising domestic demand /
internal markets
ƒ Enhance human capital and productive employment -
a better educated, healthy and well nourished
workforce.
 … and Political Stability
ƒ Social protection can be effective to prevent conflict and
create politically stable societies
ƒ Poverty and gross inequities tend to generate intense social
tensions and violent conflict
ƒ Social benefits ensure the political/electoral support of
citizens
 Key Issues: Social Protection
Social protection programmes include:
ƒ Social insurance (old-age pensions, disability, etc)
ƒ Social assistance (cash transfers, social services, etc)
ƒ Schemes to assist communities and the informal sector include
agricultural insurance, food security programmes, social funds...
ƒ Child protection is included in ADB SP Strategy given the large
number of children in Asia and the Pacific.

ƒ Not all instruments have the same distributional impacts

ƒ Key policy issues:
ƒ Expanding pension coverage
ƒ Social protection for children
ƒ Unconditional or conditional transfers?
ƒ Universal or Targeted?
ƒ Affordability
 Key Issues: Expanding Pension Coverage (I)
• 1990s: many pension reforms in developing countries,
particularly L. America and E. Europe.
• Debate imported to Asia and remains influential in policy
discussions
• However, World Bank, ILO, UNRISD, other research evidence
that 10 years of pension reforms:
• Did NOT Expand Pension Coverage
• High Transition Costs
• High Administrative Costs
• Risks of Financial Instability
• Less Government Resources
• Positive Impact on Capital Markets – but not the objective
of SP systems (provide old-age income security)
 Key Issues: Expanding Pension Coverage (II)
Social transfers are the right instrument to expand pension coverage.

TYPE OF TRANSFERS COUNTRIES

Unconditional

Household Income Chile, China, Mozambique, Rwanda, Zambia

Support
Social Pensions Argentina, Bolivia, Bangladesh, Brazil, Bostwana,
Chile, Costa Rica, India, Lesotho, Mauritius, Moldova,
Namibia, Nepal, Samoa, South Africa, Tajikistan,
Uruguay, Vietnam
How older poor spend
Child/Family Benefits Mozambique, South Africa, Mongolia, Senegalpension cash
ƒ
Conditional transfer

Cash for Work Argentina, Ethiopía, India, South Korea, Malawi,

Rwanda, South Africa
Cash for Human Argentina, Bangladesh, Brazil, Colombia, Ecuador,
Development Honduras, Indonesia, Jamaica, Kenya, México,
Mongolia, Nicaragua, Phillipines, Tanzania
Old-Age Crisis? Changing Dependency Ratios

Source: UN DESA 2007

 Children and youth often overlooked in social
protection policy - over half the world’s population

Source: UN, 2009, World Population Prospects (medium variant projections)
Importance of Investing in Children
NOW
• Number of children
• Early years critical for physical, cognitive and
psychological growth
• Malnutrition and missed schooling have long-
term costs: negatively impact adult productivity
and adult earnings.
• E.g. Malnutrition in pre-school children leads to
a loss of lifetime earnings of approximately 12%.
• Aggregate consequences: wage losses in India
due to malnutrition $2.3 billion, or .4 percent of
GDP annually
Social Protection, Human Development & Children:
Early childhood development - Rates of return
Pre-school
Intervention

Brain
Growth

Schooling

Job Training

Human Capital Rates

of Return

Pre-school School Post-School

Age
Michael Samson, 2008, based on Heckman & Carneiro, 2003 and Handa, 2007
 Yet Cash Transfers have clear impacts:
Nutrition (MDG 1, 4, 6)
• Nicaragua cash transfer programme reduced
stunting by 5.3 % points among children 6-59
months; stronger among poorer families.
• Reductions in stunting - South Africa, Mexico,
Malawi, and Colombia
• Children in South African households receiving a
pension have on average 5cm greater growth -
equivalent of ½ year’s growth
• Cash transfers improve quantity & diversity of
food consumption, and protect during shocks
 Yet Cash Transfers have clear impacts:
preventative health care (MDG 4 & 5)
• Cash transfer programmes decreased incidence
of illness, particularly younger children (where
data, except Jamaica)
• In Mexico,17% decline in rural infant mortality (8
% points)
• In Kenya, cash transfers were used to increase
ARV treatment for children and adults
• Uganda 2001 - uptake of immunisation services
doubled after public health services were made
free
 Yet Cash Transfers have clear impacts:
enrollment & attendance (MDG 2 & 3)
• 2002-2005, gross enrollment rate in Kenya
increased from 88 percent to 112 percent due to the
abolition of school fees
• Transfer programmes in Ethiopia, South Africa,
Malawi, Mexico, Nicaragua, Brazil, Ecuador,
Cambodia, Pakistan and Turkey all demonstrate
significant % point increases in enrollment and/or
attendance.
• Design features, size of transfer and previous levels
of attendance, appear to affect size of changes
among different ages and between girls and boys.
 Key Policy Issues:
Unconditional or Conditional Transfers?
• Mostly conditional in Latin America and unconditional in Africa
• Both conditional & unconditional achieve positive outcomes –
unclear effects due to conditionality
• Arguments for: behavioral incentives, maximize links with services
However, serious questions about value-added:
• Costs and difficulty of ensuring compliance & administrative
burden, particularly where limited administrative capacity
• If service supply is weak or unequally distributed, conditionality
may impose large costs for beneficiaries and unintentionally
exclude those most in need
• Is conditionality consistent with principles of empowerment and
human rights, or does it betray attitudes that ‘the poor’ cannot
make wise choices?
 Key Policy Issues:
Universal vs. Targeted Social Policies
Social policy approach 1980s-90s:
• Public services only for the poor
• Privatizing/commercializing services for middle and upper classes
• Means-testing was central to this approach

However, targeting (means-test)

• It is expensive
• it is administratively complex to implement
• It often often leads to large under-coverage. Eg. US Food Stamps 50% of
poor not reached
• It can backfired politically, middle classes had to pay for both expensive
services and for the poor
• Means-testing may not adequately take into account other dimensions of
poverty, such as lack of access to clean water or health facilities.

Universalism currently reconsidered - for all, including middle classes, as

part of a country’s social contract
Is It Affordable? Cost of Old-Age Universal
Pensions ($1 day) in 100 countries

Source: UN DESA, 2007: World Economic and Social Survey 2007, United Nations
Estimated cost for package of basic transfers
old-age and disability pensions, child benefits,
unemployment support
 Affordability
• Social expenditures generally grow with fiscal space
• Countries at same level of economic development differ
significantly in terms of social spending
• Affordability is an issue of political will: how much society is
willing to redistribute
80
R2 = 0.3756
Social expenditure (% of total)

70

60

50

40

30

20

10

-
0 10 20 30 40 50 60 70
G o v e r n m e n t e x p e n d it u r e ( % o f G DP )
What are the costs of keeping 80% of the
world’s population excluded?

Thank you