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ILO basic social protection costing models and policy implications ODI International Conference on Financing Social Protection in LICs: Finding the Common Ground London, 26-27 May 2011 Christina Behrendt, ILO Social Security Department How it all began... Results of the first ILO costing model (2005-06) Assumptions: 6.0 Old-age pensions Child benefits 5.0 Health care Social assistance/employment scheme Administrative costs 3.0 2.0 1.0 Viet Nam Pakistan Nepal India Bangladesh United Rep. Tanzania Senegal Kenya Guinea Ethiopia Cameroon 0.0 Burkina Faso Per cent of GDP 4.0 Old age pensions: all men and women 65+, 30% of GDP per capita, max US$1 PPP. Child benefits: children 0-14, benefits for max. 2 children per mother, 15% of GDP per capita, max US$0.5 PPP. Health care: cost of 300 medical staff per 100,000 population plus overhead of 67% of wage cost. Social assistance/ employment scheme: 10% of population for 100 days of employment/year, 30% of GDP per capita, max US$1 PPP. Administrative cost (cash benefits): 15% of benefit expenditure. ILO, 2008: Can Low-income Countries Afford Basic Social Security?, Social Security Policy Briefings 3 (Geneva: ILO), http://www.ilo.org/public/english/protection/secsoc/downloads/policy/policy3e.pdf ILO modelling results and policy context: Some examples Modelling results and related publications Advocacy and policy documents First results for 7 African and 5 Asian countries (ILO Discussion Papers, 2005/6) Commission for Africa Report (2005) Can low-income countries afford basic social protection? (ILO Policy Brief, 2008) Building Decent Societies (P. Townsend (ed.), 2009) Extending Social Security to All (ILO, 2010) Social Security for Social Justice and a Fair Globalization (ILO, 2011) Full references: see last slide. Livingstone Call for Action (AU et al., 2006) Promoting Pro-poor Growth (OECD DAC, 2006) Social Policy Framework for Africa (2008) Social Protection Floor (UN joint crisis response initiative, 2009) Global Jobs Pact (ILO and UN, 2009) European Report on Development: Social protection for inclusive development (2010) The emergence and context of ILO basic social protection costing models GENERIC First ILO costing model (2005) • 7 African and 5 Asian low income countries • Developed in cooperation with DfID Social Budgets SPERs* Actuarial models COUNTRY-SPECIFIC * SPER = Social Protection Expenditure and Performance Review Joint ILO/UNICEF costing tool Rapid Assessment Protocol (RAP) Social Protection Floor Quantitative Tools COSTING TOOL RAPID ASSESSMENT PROTOCOL 1. Fixed and pre-defined format 1. Flexible format 2. Time demanding 3. The construction of the model goes hand in hand with a dialogue process involving national authorities and other actors dealing with social protection 4. Previous knowledge on Excel modelling, demographics, macroeconomics, government finances, benefit design or poverty impact is required. 2. Not time demanding 3. Features: pre-defined scenarios, types of benefits; pre-defined poverty impact module 4. No previous knowledge on Excel modelling, demographics, macroeconomics, government finances, benefit design or poverty impact is necessary . 4 SPF Quantitative Tools: Model uses and trade-offs COSTING TOOL Quantitative technical background not absolutely necessary Early stages, prior to detailed consultations Useful for testing standard predefined benefit designs Rapid results RAPID ASSESSMENT PROTOCOL WHO? WHEN? Quantitative technical background indispensable Early and intermediate stages of the discussion WHAT FOR? Useful for (a) testing different benefit designs (tailor made) and policy options in national dialogue process (b) Fiscal space analysis RESULTS More robust results Rapid Assessment Protocol README POP AR INFORMATION INSTRUCTION S POPULATION BY AGE AND SEX ACTIVITY RATES BY AGE AND SEX One Excel Workbook EAP ECO GGO (SQ) ECON. ACTIVE POPULATION MACROECONOMIC FRAMEWORK GENERAL GOVMNT. OPS. SQ GGO (BS) GENERAL GOVMNT. OPS. BS BEN (n) BENEFIT – MODELING BEN (...) EXERCISE BENEFIT – MODELING BEN (2) EXERCISE BENEFIT – MODELING BEN (1) BENEFITEXERCISE – MODELING EXERCISE BENEFIT COST ESTIMATES • Benefit parameters • Reference, target and covered population •Total costs Example: Analysis of cost to close the SPF Gap in Viet Nam 3.0 3. Working age income security (scenario 1 - high cost ) 0.7 0.6 0.6 0.80 0.79 0.77 2020 2019 2018 2017 2016 2.b Child benefit (scenario 2bTargeted for ALL poor children cash and kind ) The impact of filling the SPF gap on the General Government deficit as a percentage of GDP 1b. Old age universal pension (65+) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0,0 As a percentage of GDP 0.7 0.82 0.79 0.8 0.85 0.82 0.81 0.89 0.91 0.7 0.88 2015 2014 2013 0.56 0.5 0.37 0.0 2012 0.5 2011 0.170.2 0.35 0.6 1.0 0.6 0.71 1.5 0.92 0.93 2.0 1.00 1.02 2.5 2010 Total child benefit cost as percentage of GDP Total additional costs to fill the gaps toward the SPF components as a percentage of GDP -1,0 -2,0 -0,2 -3,3 0,0 -1,2 -2,5 -3,0 -3,0 -3,0 -3,0 -3,0 -3,0 -3,9 -3,8 -3,6 -3,3 -3,0 -4,0 -5,0 -6,4 -9,0 -0,9 -0,8 -0,8 -0,8 -0,8 -0,8 -0,4 -0,6 -0,9 -0,7 -0,2 -0,2 -0,8 -0,7 -0,7 -0,6 -0,6 -0,5 -0,6 -0,4 -0,6 -0,7 -0,9 -0,9 -0,8 -0,8 -0,8 -1,0 -1,0 -0,9 -6,0 -7,0 -8,0 -9,0 Source: Compatibility analysis of the national Social Protection Strategy and the UN Social Protection Floor Initiative: Costing and financial projections to implement social protection policies 2011-2020 (Draft), ILO, Geneva. -10,0 3. Working age income security 2.b Child benefit (targeted for ALL poor children | cash and kind ) 1b. Old age universal pension (65+) General government fiscal balance (IMF) - STATUS QUO 7 Example: Assessing potential poverty impacts (poverty gap in % of GDP) in Viet Nam Working age 12,000,000,000 0.80 Elderly 0.70 Children 11-15 10,000,000,000 Children 6-10 0.60 Children <5 8,000,000,000 Total poverty gap as a percentage of GDP 0.50 0.40 6,000,000,000 0.30 4,000,000,000 0.20 2,000,000,000 0.10 0.00 Initial situation | Poverty rate BEFORE benefit ELD2 | Poverty post CHILD 1 | Poverty CHILD2 | Poverty WA1 | Poverty post Poverty post ALL universal pension to post means-tested post means-tested 100 days three benefits (ALL all (Same as scenario children (all children children (limited to 2 employment Elderly ELD2 + ALL 1 + 50 % poverty line in poor HH) per poor HH) guaranteed and children per poor HH for contributory disability benefit CHILD1 + WA) scheme pensionners) Poverty post ALL three benefits (ALL Elderly poverty line ELD2 + limited to 2 children per poor HH CHILD2 + WA) Source: Compatibility analysis of the national Social Protection Strategy and the UN Social Protection Floor Initiative: Costing and financial projections to implement social protection policies 2011-2020 (Draft), ILO, Geneva. Total poverty gap as a percentage of GDP Total poverty gap BEFORE and POST benefits (Millions VND) Total poverty gap (Millions VND) and composition 8 Where do we stand today? Ongoing Social Protection Floor costing assessments and national dialogue processes: Important features ● Nationally dialogue process ensuring national ownership ● Benin ● ● El Salvador ● Haiti Detailed and comprehensive assessment including existing schemes ● Mozambique ● Priority-setting and sequencing for gradual implementation ● Nepal ● ● Togo Strengthening national institutional capacities ● Viet Nam ● Fiscal space: detailed assessment of status quo and options for extension as necessary ● Collaboration with IMF, UNICEF and other partners 9 Moving forward... Some policy implications and challenges 1. Financing of social security, particularly with respect to national Social Protection Floors ● Identifying and extending fiscal space within current budgets (collaboration with IMF) ● Challenge: Identifying possible options for more effective collection of taxes and other sources of revenue 2. Effective policy dialogues at national level ● Identification of priority benefits, priority target groups and sequencing in gradual implementation processes ● Dynamics of national policy dialogues ● Including estimates on direct impact on poverty 3. Strengthening national institutional capacities ● Starting from existing institutional frameworks where possible ● Building up sustainable institutional capacities and ensuring their effectiveness ● Importance of monitoring and policy planning 10 Further references ● ILO, 2008: Can low-income countries afford basic social security?, Social Security Policy Briefings 3 (Geneva: ILO), http://www.ilo.org/public/english/protection/ secsoc/downloads/policy/policy3e.pdf ● Townsend, P. ed., 2009: Building decent societies: Rethinking the role of social security in state building (London: Palgrave), http://www.palgrave.com/ products/title.aspx?pid=370307n ● Pal, K. et al., 2005: Can low income countries afford basic social protection? First results of a modelling exercise, Issues in Social Protection Discussion Paper (Geneva: ILO), http://www.ilo.org/public/english/protection/secsoc/ downloads/policy/1023sp1.pdf ● ILO, 2010: Extending social security to all. A guide through challenges and options (Geneva: ILO), http://www.socialsecurityextension. org/gimi/gess/RessFileDownload.do?ressourceId=16152 ● Mizunoya, S. et al., 2006: Can low income countries afford basic social protection? First results of a modelling exercise for five Asian countries, Issues in Social Protection Discussion Paper (Geneva: ILO), http://www3.ilo.org/public/english/protection/secsoc /downloads/1527sp1.pdf ● Gassmann, F. and Behrendt, C., 2006: Cash benefits in low-income countries: Simulating the effects on poverty reduction for Senegal and Tanzania, Issues in Social Protection Discussion Paper (Geneva: ILO), http://www.socialsecurityextension.org/gimi /gess/RessFileDownload.do?ressourceId=6813 ● ILO, 2011: Growth, employment and decent work in least developed countries (Geneva: ILO), http://www.ilo.org/wcmsp5/groups/ public/---ed_emp/--emp_elm/documents/publication/ wcms_153868.pdf ● UNDP; Special Unit for South-South Cooperation, and ILO, 2011: Sharing Innovative Experiences: Successful social protection floor experiences (New York and Geneva: UNDP, Special Unit for South-South Cooperation and ILO), http://www.socialsecurityextension.org/ gimi/gess/RessFileDownload.do?ressourceId=20840 ● ILO, 2011: Social security for social justice and a fair globalization (Geneva: ILO), http://www.ilo.org/wcmsp5/groups/public/---ed_norm/--relconf/documents/meetingdocument/ wcms_152819.pdf More info: [email protected]