A new report by the International Labour Office (ILO) says that while social security measures have played a critical role in reducing the social impact of economic crises both now and in the past, basic social security coverage remains out of reach for most of the world, especially in low-income countries.
The “World Social Security Report 2010-2011: Providing coverage in times of crisis and beyond” – the first in a series to be published every two years – also examines the gaps in access to social security programmes in areas such as health care, pensions, social assistance, and unemployment benefits. It also finds that most of world’s working age population and their families lack effective access to comprehensive social protection systems.
On average, 17.2 per cent of global GDP is allocated to social security. However, these expenditures are concentrated in higher-income countries.
The report says that social security plays an important role in times of crisis, including the current one, as an “irreplaceable economic, social and political stabilizer” that provides income replacement and helps stabilize aggregate demand, without negatively effecting economic growth.
However, the ILO study also warns that cutting social security due to fiscal consolidation aimed at coping with increased deficits and public debt “may not only directly affect social security beneficiaries and consequently the standards of living of a large portion of the population but also, through aggregate demand affects, slow down or significantly delay a full economic recovery”.
The reports says that in high income countries, 75 per cent of people aged 65 or over are receiving some kind of pension while in low-income countries less than 20 per cent of the elderly receive pension benefits. Statutory unemployment social security schemes exist only in 42 per cent of the 184 countries covered by the report, often covering only a minority of their labour force. Less than 30 per cent of the global working-age population is legally covered by insurance for workplace accident and employment-related diseases. However, there are large regional differences in legal coverage.
Finally, the report says social security schemes need to adapt to lessons learned from economic crises and various criteria such as increasing life expectancy and keeping adequate income security. “The crisis and the consequential losses in pension reserves clearly demonstrated the vulnerability of pension levels, and hence old-age income security, to the performance of capital markets and other economic fluctuations”, it says.
