## The Case for UNIVERSAL SOCIAL PROTECTION

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**Canonical URL:** [The Case for UNIVERSAL SOCIAL PROTECTION](https://www.imf.org/-/media/files/publications/fandd/article/2018/december/case-for-universal-social-protection-ortiz.pdf)

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### Main argument and context
- Countries aim to provide social protection for all citizens or residents by a combination of public social insurance and social assistance.
- Social protection, or social security, includes cash and in-kind benefits provided for children, mothers, and families; support for those sick and without jobs; and pensions for older and disabled persons.
- Universal needs reflect vulnerabilities that all people are likely to face at least once in their lifetime.
- At an international level, the United Nations Sustainable Development Goals, adopted by world leaders in 2015, commit countries to implementing nationally appropriate social protection systems for all (universal), including floors, for reducing and preventing poverty.
- This commitment reaffirms the global agreement on the extension of social security achieved by the International Labour Organization’s (ILO’s) 2012 Social Protection Floors Recommendation.
- The Global Partnership Universal Social Protection (USP2030) was launched at the United Nations in 2016, led by the World Bank Group and the ILO.

### Coverage and scale
- Only 45 percent of the global population is effectively covered by at least one social protection benefit, while the remaining 55 percent—4 billion people—are left unprotected.
- Coverage gaps are associated with significant underinvestment in social protection, particularly in Africa, Asia, and the Arab states.
- Many middle-income countries are advancing fast, and a significant number of countries have achieved universal or near-universal coverage.
- Over 100 developing economies are building social protection systems and fast-tracking expansion of benefits to new population groups.
- Pension privatizations were implemented in about 30 countries and underperformed: coverage stagnated, benefits decreased, gender inequalities were compounded, administration costs proved very high, systemic risks were transferred to individuals, and fiscal positions worsened significantly given the high transition costs. Many countries that had embarked on pension privatization are now reversing these reforms.

### Evidence on impacts of well-designed social protection
- Well-designed social protection systems with adequate benefits:
  - Contribute to inclusive growth: increase productivity and employability by enhancing human capital, boosting domestic consumption and demand, and facilitating structural transformation of the economy.
  - Promote human development: cash transfers facilitate access to nutrition, education, and healthcare; encourage higher school enrollment rates; and bring about a decline in child labor.
  - Protect people against losses due to shocks, such as economic downturns or natural disasters.
  - Build political stability and social peace, reducing social tensions and violent conflict.

### Risks of short-term fiscal reforms and austerity
- Since 2010 a number of countries have undertaken fiscal consolidation or austerity policies that cut social protection spending and undermine long-term development efforts.
- In high-income countries, reductions in social protection benefits, together with labor reforms that weakened wages and collective bargaining, have resulted in a declining labor share and contributed to an increase in poverty.
- Depressed household income levels lead to lower domestic consumption and lower demand, slowing economic recovery.
- Fiscal consolidation in developing economies often includes cuts or caps to the wage bill and reforms of health and social protection systems without sufficient attention to social impacts; measures that target expenditures to the poor rather than expanding coverage can punish the middle classes—the “missing middle.”
- Recent calls to cut employers’ social insurance contributions, so-called labor taxes, or introduce very low ceilings for insurable earnings could destroy social security systems by constraining their resources and making them unsustainable, thus further increasing poverty and inequality.

### Policy design and instruments (definitions and distinctions)
- Universal Social Protection: a policy objective anchored in global commitments such as Article 22 of the Universal Declaration of Human Rights and Sustainable Development Goal 1.3.
- Social protection floor: a nationally defined set of basic social security guarantees that should ensure, at a minimum, universal access to essential health care and basic income security; ensure adequate benefits for children, mothers with newborns, the poor, and the jobless, as well as the sick, disabled, and elderly, through a combination of contributory social insurance and tax-financed social assistance.
- Guaranteed minimum income: a means-tested scheme of social assistance generally implemented in countries undergoing austerity or fiscal consolidation; it is not universal but targeted to the poor.
- Universal basic income: an unconditional cash transfer to all residents in a country (a type of social assistance). Proposals vary considerably in terms of benefit levels, financing mechanisms, and the benefits and services offered; thus some universal basic income proposals have positive social impacts while others result in a net welfare loss.
- Social insurance: fundamental to ensure adequate levels of protection and needs to be strengthened.
- Relying on individual savings does not deliver meaningful protection for the majority of people; private saving schemes should be a voluntary option for those able to save, but should not replace mandatory public social insurance.

### Adaptation to demographic and labor-market change
- Building inclusive social protection systems means making them capable of adapting to demographic changes, the evolving world of work, migration, and fragile contexts.
- Public pension systems are constantly making minor parametric adjustments that, if well designed, should balance equity and financial sustainability, ensuring the primary objective of pension systems: to provide income security for older persons.
- Systems are adapting to new forms of employment; countries are experimenting with innovations that extend coverage to those in the informal economy and facilitate their transition to the formal economy.
- Example: a number of countries in Latin America have extended coverage to tens of thousands of enterprises and self-employed people by a subsidy combined with a simplified tax and social security contribution mechanism called monotax.

### Key policy recommendations and priorities
- Strengthen public social insurance rather than cutting employers’ social insurance contributions or privatizing mandatory systems.
- Avoid fiscal consolidation measures that cut broad-based social protection in favor of narrowly targeted safety nets, which can increase inequality and punish the middle classes.
- Expand coverage by extending social insurance to the informal sector and supporting that expansion with social assistance where needed.
- Design pension parametric adjustments to balance equity and financial sustainability and preserve income security for older persons.
- Support innovations (for example, subsidies plus simplified contribution mechanisms) that bring informal workers and self-employed people into social protection systems.
- Development partners, including the ILO, have roles in helping countries make universal social protection a reality.

- Coverage snapshot: "Only 45 percent of people worldwide are effectively covered by social protection."

*ISABEL ORTIZ is director of the Social Protection Department at the International Labour Organization.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2018/december/case-for-universal-social-protection-ortiz.pdf_