## Reimagining Social Protection

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**Canonical URL:** [Reimagining Social Protection](https://www.imf.org/-/media/files/publications/fandd/article/2018/december/world-bank-reimagining-social-protection-rutkowski.pdf)

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### Changing nature of work and challenges for traditional social insurance
- Global drivers—technological advances, economic integration, demographic shifts, social and climate change—are challenging industrial-era social insurance policies tied to stable employment contracts.
- Traditional payroll-based insurance systems were built for “jobs for life” and are increasingly mismatched with working arrangements outside standard employment contracts.
- In developing economies:
  - Informality persists at very high levels—“as high as 90 percent in some low- and middle-income countries.”
  - In Bangladesh, India, Indonesia, Nigeria, and Pakistan, which account for about a third of the world’s population, “the number of people covered hovers around a single digit, with virtually no change in decades.”
- Technology is changing how people work:
  - Worldwide, the total freelancer population is estimated at about 84 million, or less than 3 percent of the global labor force of 3.5 billion.
  - Digital technology is increasing short-term, platform-mediated work (“gigs”), blurring the divide between formal and informal work.
- Consequences for workers in informal or short-term arrangements:
  - Many lack pensions, health or unemployment insurance programs, severance pay, or other protections tied to formal employment.
  - Labor laws are often unclear about employer versus employee responsibilities for these arrangements.

### Objectives and design principles for a new social contract
- Core purpose of social protection remains:
  - Prevent poverty, cover catastrophic losses, help households and markets manage uncertainty, and support efficient and equitable economic outcomes.
- Key design imperatives:
  - New systems should serve all people regardless of how they engage in the market.
  - Policies must be adaptable and resilient to dynamic economic, social, and demographic forces.
  - Move toward a more neutral policy stance with respect to factors of production and forms of work.
  - Distinguish more explicitly among social objectives—risk pooling, poverty elimination, and redistribution—and use different risk-sharing arrangements and financing channels accordingly.
- Suggested mix of instruments and sequencing:
  - Guarantee a minimum publicly financed core for the most catastrophic losses (largest social costs).
  - Layered protections: mandated contributory insurance and savings where feasible; voluntary and market options where appropriate; progressively subsidized programs to allow individuals to upgrade protections.

### Social assistance options and targeting approaches
- Social assistance modalities discussed:
  - Means-tested guaranteed minimum income: cash distributed with benefits declining as income rises; payments distributed monthly.
  - Universal basic income: unconditional monthly cash transfers to all, independent of income or employment.
  - Negative income tax: payments woven into the tax declaration cycle and “tends to be paid annually,” with a relatively high threshold and gradual withdrawal of benefits.
  - Intermediate mixes: smaller guaranteed minimum income supplemented by universal child allowances and social pensions.
- Targeting in informal economies:
  - Greater ability to identify individuals and households and monitor consumption enables blending elements of universal basic income, negative income tax, guaranteed minimum income, or a negative consumption tax.
  - Targeting can use proxy indicators from special surveys and linked administrative databases.
- Principle of “progressive universalism”:
  - As universality is pursued, the most vulnerable should be prioritized, given special attention, and receive adequate support.

### Architectural ideas and the “rings of protection”
- Stylized package of protection (rings of protection):
  - Innermost core: guaranteed minimum support—purely publicly financed from general expenditure (broad tax base)—covering the largest losses and most acute market failures (relatively rare events with greatest external social cost).
  - Outer rings: interventions for more frequent, lower-loss events where responsibility gradually shifts toward household or individual financing and market provision; includes mandated and individually financed, nudged/incentivized privately financed, and purely voluntary privately financed arrangements.
- Policy choice guidance:
  - Decide whether to use risk pooling, saving, or prevention based on the type of loss and what is available privately.

### Opportunities from technology and examples of innovation
- Technology can enable “leapfrogging” over industrial-era policies by improving identification, targeting, and payment systems.
- Examples cited:
  - India’s Direct Benefit Transfer: digital subsidies to bank accounts of the poorest.
  - Ghana’s Labor Intensive Public Works: digitization and biometric machines reduced payment time from four months to a week.
- Investments and scale:
  - The World Bank is currently investing $15.1 billion in delivery systems and related technology.
  - About 75,000 girls and women in rural Zambia can choose digital payments via bank, mobile wallet, or prepaid card.
  - In West Africa, a foundational ID platform aims to cover 100 million people regionally by 2028.
  - In Indonesia, a cash transfer program has reached 10 million poor households, expanding to remote eastern areas.
- Policy implication:
  - Low-income countries may have an advantage in adopting modern social protection systems because of limited legacy coverage, enabling easier adoption of new approaches.

### Policy recommendations and implications
- Design social protection systems that do not depend on standard employment contracts.
- Prioritize universal and progressive approaches that target the poorest first (progressive universalism).
- Use digital platforms—social registries, IDs, and payment mechanisms—to reach excluded populations.
- Align financing instruments with the nature of risks: use national budgets for catastrophic, poverty-preventing risks; use contributory or market mechanisms where appropriate.
- Invest in capacity to identify households, assess vulnerability and poverty, and deliver cash transfers efficiently to enable new policy possibilities.

*Source: Michal Rutkowski, Reimagining Social Protection, FINANCE & DEVELOPMENT, December 2018.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2018/december/world-bank-reimagining-social-protection-rutkowski.pdf_