ILO: developing countries should ‘prioritise social protection over spending cuts’

19 Nov 14
Developing countries continue to fund their social protection schemes rather than focus on fiscal consolidation, the International Labour Organisation – the United Nations’ human and labour rights agency – has recommended.

By | 19 November 2014

Developing countries continue to fund their social protection schemes rather than focus on fiscal consolidation, the International Labour Organisation – the United Nations’ human and labour rights agency – has recommended.

The report, called Social protection global policy trends 2010-15, examined the International Monetary Fund’s government spending projections for 181 countries, identifying two main phases: fiscal expansion (2008-2009) and fiscal consolidation (2010 onwards).

In 2015, cuts in public spending are expected to intensify significantly, according to the report, with a fifth of countries cutting public expenditures below pre-crisis levels.

But the report noted that public spending on social protection had played a strong role in expanding economies immediately after the global financial crisis. Despite this, many governments embarked on fiscal consolidation and premature cuts from 2010 onwards.

As a result, cutbacks on social protection spending were being passed on to people already coping with fewer jobs and lower incomes. Depressed household income levels were leading to lower domestic consumption and lower demand, slowing down recovery, the ILO warned.

It flagged up the experience of many middle-income countries were ‘boldly expanding their social protection systems, with direct impacts on reducing poverty and inequalities that contribute to their domestic-led growth strategies’.

Isabel Ortiz, ILO’s director of social protection, stressed that this offered a powerful development lesson.

She said: ‘The global financial and economic crisis has forcefully underlined the importance of social security as an economic and social necessity... even in the poorest countries there are options available to expand fiscal space for social protection.’

Countries like Argentina and South Africa have introduced universal child benefits in recent years, while Bolivia, Botswana, Brazil, China, Maldives, Namibia, Panama, South Africa, Swaziland and Timor-Leste have achieved universal or nearly universal coverage of pensions, the ILO report noted.

The report said: ‘The strong push for the expansion of social protection ...often [forms part of] longer-term structural policies aiming at promoting human and economic development, as well as political stability.’

Many developing countries’ financed expansion of social protection from the proceeds of phasing out or eliminating subsidies, cutting or capping wage bills and increasing taxes on consumption.

 

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