The Indispensability of Social Protection and the Costs of Inaction

H.E. Ambassador Noel White, Ireland’s Permanent Representative to the United Nations and other International Organisations in Geneva, welcomed Mr Gilbert Houngbo, Director General of the International Labour Organization, to the Development Matters lecture series supported by Irish Aid. He noted that Mr Houngbo is a former Prime Minister of Togo, the 11th person to hold the position of Director General at the ILO, and the first African to do so.

Ambassador White remarked that the discussion on the indispensability of social protection and the costs of inaction is “both important and timely”, as the world faces immense challenges such as food and nutrition insecurity, deeply entrenched poverty, and the existential threat of climate change. In his view, while there is no one solution to said complex challenges, he believes social protection is one of the most powerful tools for shaping our response to them.

Ambassador White added that social protection is an established and essential feature of Ireland’s social contract, which Irish society is fortunate to have and should not take for granted, considering that an estimated 4 billion people globally remain without access to any form of social protection. He reminded the audience of the transformative power of social protection and how it can be used quickly, innovatively, and effectively to respond to new challenges such as the pandemic. Social protection, he said, is also fundamental to Ireland’s international development work, including its humanitarian commitments, where the ILO is a critical partner in the implementation of those commitments. Ireland and the ILO have similar priorities in this area as they focus on strengthening national protection systems and share the ambition to advance towards a human rights-based and universal approach to social protection. He believes this can deliver cost-effective, transformative, and scalable change where and when it is needed most.

Ambassador White expressed his gratitude to Mr Houngbo for speaking about the important work that the ILO is doing in this area, mentioning his many years of experience in development matters. He highlighted Mr Houngbo’s invaluable insight into the fundamentals of food and nutrition security and into the global structures of development assistance as a former president of IFAD. Furthermore, as a former prime minister of Togo, he has an instinctive appreciation for the politics and the wider context in which development matters play out.

Ins and Outs of Social Protection

Mr Houngbo then delivered a speech titled The Indispensability of Social Protection and the Costs of Inaction. He began his address by clarifying that social protection is not charity but a right that dovetails all human beings and their needs. It was first recognised as a human right in Article 22 of the 1948 Universal Declaration of Human Rights under social security and is anchored in many other human rights instruments and international social security standards. However, almost half of the global population still cannot enjoy this right and remain unprotected, while others are only inadequately covered. He found this point to be unacceptable and impeding development. He used the Covid-19 pandemic as an example of the power of social protection in protecting people and enterprises. During that time, the ILO saw up to 2000 different types of measures adopted by different countries to contain the crisis, which would have had much worse outcomes without said measures. Still, most of the policy responses were temporary and nearly all have already ended.

Even in less turbulent times, social protection is still indispensable for addressing the day-to-day life cycle challenges we all face. It ensures access to health care and income security in case of illness, unemployment, maternity, parental leave, old age, etc. It is a way of preventing poverty and reducing inequality, including gender-based inequalities. The redistributive effect of social protection creates more equal societies, making social protection a key ingredient of social justice. Hence, social protection is a well-established element of our social contract.

Mr Houngbo stated Ireland was a very good example of this, along with Europe in general, while many other countries in the rest of the world have come to understand that they do not need to wait to build a social protection system after they have developed. Instead, a social protection system should be built in order to develop.

Global Figures on Social Protection

He continued by describing the current state of social protection globally, expressing disappointment that progress has been too little and too slow. For example, only 17.4% of people in Africa are known to have some kind of coverage, known in the ILO as the ‘floor’, which does not even include food. In Mr Hougbo’s opinion, this undermines the continent’s economic and social development. Worldwide, less than 20% of unemployed workers receive unemployment benefits and 2.7 billion people are not protected by any kind of health protection scheme.

Lack of Social Protection Impeding Development

In his view, these protection caps hold back our social and economic development. Furthermore, the cost of not investing in social protection is enormous. “We need to start looking at social protection as an investment instead of a budgetary expenditure,” he claimed. The absence of social protection has adverse implications for human well-being and social and economic development. Therefore, social protection supports economic dynamics by unlocking productive potential and investing in human capabilities. It also stimulates entrepreneurship, contributes to the productivity of enterprises, and encourages growth, particularly regarding micro-, small- and medium-sized enterprises, while it can be particularly critical during an economic downturn. In short, it is irrational not to invest in social protection.

Promoting the Social Protection Floor

Consequently, there is an urgent need to provide at least a basic level of social security for all, which is why the ILO promotes a social protection floor to ensure that everyone has access to this basic level of social protection throughout their lives. The floor provides income security for children, persons of working age, older persons, and persons with disabilities. It also ensures everyone has effective access to at least essential health care.

He continued by clarifying what the social protection floor does not mean. It does not implement social safety nets that provide limited time bounds of unpredictable protection people cannot count on. Instead, the social protection floor needs to be part of a universal scheme based on promoting both a horizontal and vertical extension strategy in line with international social security standards, especially ILO’s Convention 102, which defines the minimum standard in social security, and the Social Protection Floors outlined in Recommendation 202.

Mr Houngbo explained that the horizontal dimension seeks to extend at least a basic level of core benefits to as many population groups as possible and as fast as possible, which could include providing universal benefits for children, basic old age pensions, or social assistance for vulnerable groups. The vertical dimension refers to the increase in the scope of coverage or the range and level of benefits, often through social insurance schemes, which can provide higher value and more comprehensive benefits. This can be financed by a mix of social insurance contributions and complemented by tax financing.

Such universal social protection systems need to be comprehensive, adequate, and sustainable, as the ILO affirmed at the 2021 International Labour Conference. Therefore, the ILO supports countries in progressively building systems that are universal and accessible to all: systems that are non-discriminatory and respond to specific needs, sustainable and equitably financed, covering the full range of risk ‘from the cradle to the grave’. Systems that provide adequate benefits to ensure decent living standards anchored in national legislation with an effective complaint-correction connection mechanism.

Ireland as a Partner Encouraging Social Protection

In this context, Mr Houngbo acknowledged the excellent partnership of the Irish Government, particularly Irish Aid, in supporting several countries to build their social protection systems. For countries to build social protection systems and close the social protection gap, they need more investment, particularly in low-income countries, which he acknowledged has been Ireland’s focus. While high-income countries allocate 16.4% of their GDP to social protection (outside the healthcare perspective), low-income countries mainly assign 1.1%. This means there is a huge financing gap, and the fiscal challenge is exacerbated by the pronounced income concentration. He reminded us that the poorest half of the global population barely owns anything at all, possessing just 2% of the total global assets, whereas the 10% richest of the global population owns 76% of all the wealth. A great concern he expressed in this context was the surge in military expenditure, which reached a new all-time high of 2.2 trillion in 2022, particularly given Russia’s invasion of Ukraine. This may undermine existing commitments by diverting resources away from ODA or spending resources that could be added to ODA instead. Another important dimension is the distribution of labour income, which shows that pay inequality remains an issue. The lower half of the workers globally earn about 8% of the total labour income. Debt distress and widespread austerity exacerbate this troubling context and make it even more difficult to achieve the Sustainable Development Goals.

Filling the Financing Gap

Thus, the challenge of finding fiscal space to fill the financing gap is a difficult and daunting one. While many claim the current state of play of power, wealth, and distribution has led the financing of universal social protection to become unsurmountable, Mr Hounbgo rejected this defeatist attitude. He called for a more determined political will and decisive resolve to support the total reset of our global fiscal and monetary framework that will truly and equitably bring together the three pillars of our common destiny: 1) the necessary economic growth, 2) the protection of the environment, coupled with scientific and technological progress, and 3) social justice. This will require a concerted effort by a coalition of actors in the multilateral, bilateral, private sector, academia, etc. For this reason, Mr Houngbo is calling for a coalition for social justice at the ILO to be able to move the needle and not become defeatist. “Our global ambition must be commensurate with the scale of the challenges we face, harnessing our unique tripartite convening power in the ILO and guided by our principles and values”, he said.

In conclusion, he reiterated the importance of focusing, as part of our fight against inequality, on the Global Accelerator on Jobs and Social Protection for Just Transitions launched in 2021, which contributes to helping countries, particularly low-income ones, to sustain their ability to finance a minimum floor in terms of social justice.

Disclaimer: The ideas, opinions and comments in this blog are entirely the responsibility of its author and do not necessarily represent or reflect Irish Aid policy.