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The article “SDG 1 – Applying human rights standards for the governance of social protection will unleash its transformative potential”, by the Global Coalition for Social Protection Floors is published on the Spotlight on Sustainable Development 2019: Reshaping governance for sustainability. Global Civil Society Report on the 2030 Agenda and the SDGs.
Download this chapter in pdf format here.
This article is also available in Spanish. Download the article “ODS 1. La Aplicación de las normas de derechos humanos a la gobernanza de la protección social permitirá aprovechar su potencial transformador”.
By Sylvia Beales and Nicola Wiebe, Global Coalition for Social Protection Floors (GCSPF)
“Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable” (SDG Target 1.3).
The 2030 Agenda and its 17 interrelated goals are grounded in the Universal Declaration of Human Rights, international human rights treaties, the Millennium Declaration and the 2005 World Summit Outcome Document. The Agenda recognizes that economic growth alone misses those left furthest behind, and its transformative vision is to reach the furthest first, to leave no one behind, to empower the disadvantaged and to end poverty in all its forms everywhere by 2030.
Social protection is key to accomplishing this vision and is mandated in SDG 1, target 1.3. When properly designed, social protection effectively prevents and reduces poverty and inequality. Guaranteed social protection supports improved nutrition and access to essential services and can therefore interrupt the vicious cycle of poverty and its intergenerational transfer. Universal access rights to social protection means that those at extreme disadvantage can be reached, which contributes to overcoming deeply rooted experiences of discrimination and exclusion, disempowerment and gender inequality. But currently only 29 percent of the global population count on comprehensive social protection over the lifecourse and for the different contingencies that may occur. 1 Fewer than 16 percent of older people in low-income countries have a pension, with older women less likely than older men to receive one. 2
The human rights framework sets out the moral and humanitarian imperative for social protection for all. Good governance based on this framework is essential to the effective delivery of social protection, necessary to unleash its transformative potential. Adherence to a human rights-based approach necessarily translates into a clear legal framework, transparency and accountability. It requires appropriate institutional capacity and coordination, and bottom-up participation of relevant stakeholders. It also requires global social governance coherent with 2030 Agenda commitments.
Human rights framework and international commitments
Social protection, social security and social and economic guarantees in the event of unemployment, sickness, widowhood, old age or other lack of livelihood beyond a person’s control, with special attention for mothers and children, are explicitly embedded in the human rights framework articulated in the Universal Declaration of Human Rights (UDHR 1948, Art. 22, Art. 25) and the International Covenant on Economic, Social and Cultural Rights (ICESCR 1966, Art. 9).3 By ratifying the Human Right treaties, states assume the role of principal duty bearer to guarantee these rights, by respecting, protecting and fulfilling. This translates into national and extraterritorial obligations (UDHR 1948, Art. 22).
ILO Recommendation 202 (2012) sets out standards on social protection floors, stipulated in SDG 1, target 1.3. It provides clear guidance on national policy dedicated to social progress, giving a definition of basic social protection as a ‘floor’ that must be available to all and upon which higher levels of security should be built for as many people as possible, as soon as possible. The floor and additional levels of protection together create a comprehensive national social protection system. The interlinkages of the floor to the vision of the 2030 Agenda can be seen in the commitment to end poverty (SDG 1), hunger (SDG 2), ensure healthy lives (SDG 3), quality education (SDG 4), gender equality, including the recognition of unpaid care and domestic work (SDG 5), decent work (SDG 8), reduce inequality (SDG 10) and build effective and accountable institutions (SDG 16).
It is important to understand how the right to social protection for all is critical for breaking the cycle of poverty, marginalization and exclusion over time. Schemes with arbitrary eligibility requirements, time limits on benefits or which lack adequate budget do not take into account dynamic patterns of poverty and consequently do not guarantee the continuous realization of human rights. They can embed rather than overcome endemic poverty and gender inequality, and are antithetical to the human rights approach.
Applying the principles of accountability, equality, non-discrimination and participation to social protection implementation will guarantee access of rights holders to minimum income security, health and education.
Legal framework
A legal framework that is based on the human rights framework defines rights and entitlements in a clear and transparent way, sets out parameters for duty bearers in terms of programme design and monitoring and legal recourses for rights holders to ensure their enforcement.
Legal frameworks are also essential for defining the roles and responsibilities of the different actors involved in designing, implementing, monitoring and enforcing social protection systems. Such frameworks can and should prepare the ground for bottom-up participation of rights holders (citizens and residents) and their organizations.
Transparency and accountability
An established legal framework consistent with human rights, that is clearly defined and widely communicated, is a prerequisite for accountability relationships. There has to be commitment on the part of duty bearers to effective and equitable delivery of entitlements to rights holders. There should be effective means of redress when governments fail to deliver services to which they have committed. There also needs to be active communication about what is available, how to claim and the method of receiving the transfer. Without obligations set by national legislation, transparent grievance mechanisms and public knowledge of them, accountability will remain weak.
In order to ensure accountability, monitoring and evaluation must be institutionalized elements of social protection programmes. Government should bear primary responsibility for monitoring policy compliance and evaluating impact on human rights. But transparency also means providing public access to accurate data. Without data, governments cannot be held to account, either on national level or regarding international commitments.4
Tools exist to measure rights performance of countries and fulfilment of the right to social protection, and human rights arguments can be used effectively to encourage governments to improve their policies, including the linkages between human rights and the SDGs. A useful resource is the training package of the Office of the High Commissioner of Human Rights.5 Data collected through National Human Rights Institutes (NHRIs) can be used also to assess progress towards the SDGs.6 Obligatory reporting on rights commitments could reinforce the voluntary reporting required by the 2030 Agenda.
Institutional capacity and coordination
Social protection programmes in many countries remain fragmented and uncoordinated. Coverage and adequacy remains low. Targeting systems are fraught with exclusion errors and the means of targeting are in many cases themselves associated with creating intolerable stigma.7 Large population groups are still excluded from access to services and benefits; among the excluded often are children, women, older persons, persons with disabilities, those living in extreme poverty and geographically and culturally marginalized groups. As a result social protection programmes do not comply with human rights standards and cannot advance society-wide solidarity and social cohesion.
If staff and institutional capacity are not secured, and the budget for social protection not created and guaranteed in the long run, the principles of a rights-based approach cannot be honoured. Ensuring effective cooperation between relevant ministries and implementing agencies is essential to coordinate programmes and create coherent systems. The political sustainability of social protection systems will be undermined if public administrations are not capable of delivering benefits reliably, swiftly and fairly.
Coordination also means taking into account the combined effects of social protection and its financing side on poverty and inequality. Fiscal policies, specifically the impact of fiscal policies on the beneficiary population, have to be analysed. Universal benefits, along with any benefit system included in the government budget must be funded through effective and progressive tax systems.8
Bottom-up participation of relevant actors
Involving rights holders and their organizations, such as civil society organizations and trade unions, structurally and effectively in establishing universal social protection is a matter of human-rights-based, democratic and inclusive governance. This is especially important, as poverty is often related to peoples’ exclusion from economic, social and political participation. Providing space for bottom-up participation has the potential to improve design and delivery, generate broader support for the social protection system and reaffirm the social contract, contributing to its transformative effect and long-term sustainability.
Civil society has an important role to play in this regard, helping to make the voice of otherwise powerless population groups heard in the public debate. Civil society brings extensive experience, often being able to include disadvantaged groups more successfully than government programmes.
Some civil society organizations, including faith-based organizations, have historically been in the forefront of providing social programmes including social protection benefits. Their experience and legitimacy can be an important input towards universal social protection. In some cases, they may serve as implementing agencies within public social protection programmes; in other contexts, they may implement complementary programmes that can help to tackle complex poverty situations and thereby enhance the overall impact of public policy through subsidiarity. Their engagement can also strengthen institutional capacity, albeit with the final responsibility resting with the government to guarantee that every resident enjoys social protection.
Experience shows that even in universal programmes the most disadvantaged groups remain excluded unless they are actively identified and invited. Civil society organizations inform excluded and disadvantaged groups on their rights and promote their empowerment to claim them. They interact with the State as a critical observer, monitoring government action, raising public awareness and advocating for policy changes; they channel feedback from rights holders and bring in their technical expertise into budget tracking or policy impact analysis.
Box 1.1: The work of the Africa Platform for Social Protection (http://africapsp.org/) demonstrates that monitoring the delivery of social protection services by civil society can help to hold government departments to account with regard to the standards which they have set for themselves. The Platform, which operates in 27 countries across Africa, regards accountability as building capacity and knowledge of rights to social protection of both policy makers as well as communities which they serve. Most government cash transfer programmes in Africa have used a top-down approach, lacking any input from beneficiaries and communities. These programmes begin to be implemented with very little awareness on what the programme is about, who it targets, what are the benefits and how beneficiaries can access the service. Bringing the voice and experience of the grassroots and the disempowered to policy-makers improves performance and supports long-term change. The Platform has therefore developed a social protection accountability tool to support communities to assess whether payments are made on time; how far people have to travel to payment points; to monitor transparency; the attitudes of civil servants providing the service and the response to complaints. A strong decentralized complaints and grievance mechanism has been found to be essential. Information is collected and analysed in order to generate evidence for informed change. Results of these assessments are taken into government negotiations about the benefit system that is resulting in improved social protection programmes. |
Coherent global social governance
Global governance coherent with the commitment to the 2030 Agenda and human rights standards requires stronger institutions and mechanisms capable of addressing the social dimension of globalization. A more systematic approach for global social regulation, global protection of social rights and global redistribution is indispensable.9
Bottom-up social governance not only refers to the direction of influence from local to national and from national to global, it also calls for more governance space and implementation to be retained at local, sub-national and national level. Social protection needs to be owned and governed by sub-national and national governments with fiscal space created in national budgets.10
However, current regulatory gaps at the international level can prevent national government from creating and protecting the fiscal space needed to finance social protection. In a globalized world national governments lack the range of influence to control global economic actors.11 Global governance is required, to reduce tax evasion by international private players, but also to avoid tax competition between governments to attract investors to locate in their countries. Enhancing progressive taxation and tackling tax evasion would contribute significantly to overcome budget shortfalls, as would expanding contributory revenues for social security coverage, along with policies to increase formal employment.12 The establishment of an intergovernmental tax body under the auspices of the UN would close an institutional and regulatory gap at the global level and thereby allow for more governance space at the national level.
Social protection, being a human right, needs to be guaranteed in the long run and protected and extended in times of crises. Social spending needs to be prioritized before debt servicing and protected from austerity measures. An important step towards global social governance could be the creation of a debt workout institution and procedures to facilitate debt restructuring processes within the UN system. Another instrument should be the creation of new rules and debt instruments with a fairer risk-sharing.
Global governance also needs to question the extreme level of global inequality, demand systemic change and create redistributive mechanisms. The dramatic rise of national and global inequality is not an inevitable result of economic policy. It is a result of policy choices.
Political will is a necessary starting point for change. Coherence with 2030 Agenda commitments and aligning policies and programmes with human rights standards requires an international financing mechanism to guarantee social protection floors in all countries - including the most vulnerable and those in crisis situations.13
Conclusions
No country will be able to end poverty and inequalities, including gender inequality, if it does not invest in the income security, health, and education of all of its population across the life course.14 States have a legal obligation to guarantee universal social protection as defined in internationally agreed standards and instruments.
The 2030 Agenda and human rights standards offer a powerful, universal and comprehensive normative framework in which to ground claims for inclusive social protection systems and their sustainable and assured public financing as well as coherent international social governance.
Using human rights standards to shape the governance of social protection systems will orientate them towards the realization of economic, social and cultural human rights, the empowerment of rights holders, and the creation of equal opportunities for economic, social and political participation. These elements –rights, empowerment, participation and the reduction of extreme inequality - are critical for breaking the cycle of poverty and exclusion.
Adherence to human rights will start to address the structural flaws and institutional gaps of governance at national and at international level and will both unleash the transformative potential of social protection and contribute effectively towards a world free of poverty.
Sylvia Beales is an independent inclusive social development consultant and strategic advisor to the Africa Platform for Social Protection. Nicola Wiebe is Social Protection Advisor for Bread for the World, Germany. The Global Coalition for Social Protection Floors (GCSPF) (https://www.socialprotectionfloorscoalition.org) is a network of over 100 NGOs, Trade Unions and Think Tanks promoting the right of all people residing in a country to social protection, regardless of documentation. It promotes social protection floors as key instruments to achieve the overarching social goal of the global development agenda.
Literature
Adams, Barbara/Judd, Karen (2019): Social Protection: Hot Topic but Contested Agenda. New York: Global Policy Watch (Briefing #28).
www.globalpolicywatch.org/blog/2019/02/26/social-protection/
Deacon, Bob (2007): Global Social Policy and Governance, London: Sage Publishing.
Kidd, Stephen/Gelders, Bjorn/Bailey-Athias, Diloá (2017): Exclusion by design: An assessment of the effectiveness of the proxy means test poverty targeting mechanism. Geneva: International Labour Office, Social Protection Department.
www.developmentpathways.co.uk/publications/exclusion-by-design-the-effectiveness-of-the-proxy-means-test/
De Schutter, Olivier/Sepúlveda, Magdalena (2012): A Global Fund for Social Protection (GFSP), Executive Summary. Geneva: United Nations.
www.ohchr.org/Documents/Issues/Food/20121009_GFSP_execsummary_en.pdf
Goldblatt, Beth (2016): Developing the Right to Social Security - A Gender Perspective. London: Routledge.
Herman, Barry (2018): Sustainably Financing Social Protection Floors: Toward a Permanent Role in National Development Planning and Taxation. Berlin: Bread for the World (Analysis 81).
https://shop.brot-fuer-die-welt.de/images/Analyse81-en-v07-Web.pdf
ILO (2017): World Social Protection Report 2017-2019. Universal social protection to achieve the Sustainable Development Goals. Geneva.
www.ilo.org/global/publications/books/WCMS_604882/lang--en/index.htm
Lustig, Nora et al. (2018): Commitment to Equity Handbook. Estimating the Impact of Fiscal Policy on Inequality and Poverty. Washington, D.C.: Brookings Institution Press.
Ortiz, Isabel et al. (2017): Universal Social Protection Floors Costing Estimates and Affordability in 57 Lower Income Countries. Geneva: ILO.
www.ilo.org/wcmsp5/groups/public/---ed_protect/---soc_sec/documents/publication/wcms_614407.pdf
Ortiz, Isabel/Cummins, Matthew/Karunanethy, Kalaivani (2017): Fiscal Space for Social Protection and the SDGs: Options to expand social investments in 187 countries. Geneva/New York: ILO, UNICEF and UN Women.
www.social-protection.org/gimi/RessourcePDF.action?ressource.ressourceId=51537
Staab, Silke (2015): Protecting women’s income security in old age. New York: UN Women.
www.unwomen.org/en/digital-library/publications/2015/12/women-income-security-in-old-age
Notes:
2 Staab (2015).
3 See Articles 22 and 25 paras 1 and 2 of the Universal Declaration of Human Rights 1948 and Article 9 of the International Covenant on Economic Social and Cultural Rights 1966 (https://www.ohchr.org/EN/Issues/Business/Pages/InternationalStandards.aspx).
4 See International Transparency Initiative https://www.iatistandard.org/en/.
6 See GANHRI (Global Alliance of Human Rights Institutions), and https://www.humanrights.dk/news/role-national-human-rights-institutions-realising-sdgs.
7 Kidd et al. (2017); see also Adams and Judd (2019), which details the current struggle over targeting.
8 See Lustig (2018).
9 See Deacon (2007).
10 Ortiz et al. (2017).
11 Herman (2018).
12 Ortiz/Cummins/Karunanethy (2017).
13 For more information see De Schutter/Sepúlveda (2012).
14 Goldblatt (2016).
The article “SDG 1 – Applying human rights standards for the governance of social protection will unleash its transformative potential”, by the Global Coalition for Social Protection Floors is published on the Spotlight on Sustainable Development 2019: Reshaping governance for sustainability. Global Civil Society Report on the 2030 Agenda and the SDGs.
Download this chapter in pdf format here.
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The Sustainable Development Goals (SDGs) place a key focus on the pivotal role that the reduction of inequalities plays for ending poverty. SDG 10 explicitly aims to Reduce Inequality within and among Countries, recognizing that development requires sharing progress more widely with everyone, including the most disadvantaged groups in society. However, inequality has been rising in many countries, a trend that has benefitted especially those at the very top. And even where it has not risen in recent years – such as in many Latin American countries that strengthened their social protection systems – disparities remain vast. In some of the most unequal countries, the richest 1 percent hold more than 15 percent of national income. In South Africa for example, the income share of the top 1 percent has almost doubled since 1990 and currently lies just under 20 percent (World Bank, 2016). Excessive concentration of income and wealth at the top – which is even underestimated since much of it is not observed in official accounts or surveys – lies at the root cause of high inequality. Income and wealth inequality often go hand-in-hand with inequalities along other dimensions such as opportunities, access to services and resources, and political representation.
Reducing inequalities is important for development because the adverse impacts of high inequality undermine efforts to overcome poverty. Inequality endangers social cohesion and peace, it negatively affects economic, social and political participation and undermines trust in institutions. High levels of inequality also have adverse socioeconomic effects such as lowering social mobility and undermining progress in health and education outcomes (OECD, 2018; Easterly, 2007; Wilkinson & Pickett, 2010). As such, reducing inequality also contributes to the achievement of other SDGs such as SDG 1 (No Poverty), 3 (Good Health and Well-Being), 5 (Gender Equality) and 8 (Decent Work and Economic Growth). Similarly, global inequality remains intolerably high and exacerbates stubbornly high rates of extreme poverty (World Bank, 2018).
Reducing inequality requires redistribution
Strong social protection systems – alongside fair taxation and labour market policies that strengthen rights of workers for example through minimum wages and collective bargaining – are key instruments to address rising inequalities. In countries such as Sweden, Denmark and Brazil, the tax and transfer system reduces income inequality by up to 15 Gini points. This represents a reduction of 40 percent in Scandinavia and 25 percent in Brazil (Lustig, 2016; OECD, 2015.). The provision of public services further reduces inequalities for example in health and education. Upholding the right to social protection is all the more relevant in low- and middle-income countries (LMICs) and fragile settings where shocks occur more frequently and poor households are hit hardest by it. The objective, thereby, is to promote a shared idea of social justice: Article 22 of the Universal Declaration of Human Rights establishes the right to social security for everyone as “indispensable for his dignity and the free development of his personality” (UN General Assembly, 1948).
Social protection and inequality have a reciprocal relationship. While redistribution through social protection has the potential to reduce inequality in income, opportunities and access to public services, a high level of inequality can at the same time erode public support for it because inequality divides societies. When comparing systems of social protection across countries, it becomes evident that they differ strongly in the degree of redistribution they achieve. Equally important as the level of public spending is the specific design of fiscal policy including social protection. As such, two countries with the same level of government revenues and social expenditure can achieve vastly different degrees of redistribution. The degree to which benefits reach the poor and excluded people in society, the mode of financing and the design of tax systems all play a central role. Surely, redistributing resources from the top of the distribution to the bottom is not the only objective of social protection systems. They also serve to smooth consumption over the life cycle and in times of income loss due to risks such as unemployment or sickness. Vertical redistribution deserves, however, particular emphasis when it comes to achieving SDG 10.
Social protection reduces risk and vulnerability
Broadly speaking, social protection schemes can be classified into three different types. As a risk pooling mechanism, social insurance is typically confined to members who pay contribution to a common fund and thus gain entitlement to contingent benefits. The primary objective of social insurance is to smooth consumption over the life course and in times of risk through income replacement. The most common schemes include pension, health and unemployment insurance. Often, the benefits an individual receives are linked to his or her previous contributions. For this reason and due to the confined membership, the degree of redistribution social insurance achieves is limited but, depending on the design, can be considerable. As such, even though high income earners may receive higher benefits upon retirement for example, contributions are often still levied progressively and function like an income tax. In health insurance, benefits respond to specific health needs, facilitating redistribution between the healthy and the sick. Similarly, in the absence of insurance, individuals may be thrown into poverty when a shock hits them so that the presence of insurance prevents inequality from widening. Further, many schemes require employers to contribute, thereby increasing fiscal space for redistribution.
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Types of social protection schemes Social insurance: is a mechanism to smooth consumption and protect members from risks such as unemployment, sickness or retirement. Typically, individual members receive benefits on the basis of previous contributions in the event that a risk occurs. Membership is often mandatory for a specified group such as formal sector employees. Social assistance: are benefits that are granted to individuals or households without the need of prior contribution. Usually, eligibility is based on means-testing of need and funding comes from the general government budget. They are typically designed to cover a basic minimum and withdrawn as income rises. Universal transfers: are given to anyone that fits certain criteria (such as citizenship, having children, a certain age or a disability) regardless of income or wealth. They are usually also paid out of general government revenue. |
A challenge in the Global South is that social insurance schemes tend to be tied to participation in formal employment. This is why their scope and coverage are often limited – particularly for workers in non-standard and precarious forms of employment and workers in the informal economy. Social insurance schemes in LMICs thus tend to support the middle class. Increasing their redistributive capacities requires broadening their reach to include poorer people either through subsidizing them for those who are unable to contribute, providing higher replacement rates for low income earners and linking them more strongly with non-contributory schemes.
In contrast to insurance, receipt of social assistance is not tied to membership but is rather aimed at those in need because they fall under some income or poverty threshold. As such, their objective is to secure a minimum income and/or access to services rather than to maintain consumption close to previous levels as in the case of social insurance. They are typically financed out of the general budget. This is why social assistance tends to have a greater redistributive impact than insurance: it relies to a greater extent on the principle of solidarity, which states that everyone in society should pay according to their ability while receiving benefits according to their need.
The receipt of social assistance is sometimes tied to certain behavioural conditions such as sending one’s child to school and making use of primary health care services as in the case of conditional cash transfers (CCTs) or proving one’s job-seeking efforts as in the case of many unemployment assistance schemes. These conditionalities and the implications of means-testing bear the risk of excluding some of the most marginalized people, often women, who find it difficult to comply with conditionalities and administrative requirements – thereby undermining the very idea of providing a basic minimum. Targeting happens with exclusion and inclusion errors, administrative costs and may create stigma while furthermore promoting dependency if efforts to exit poverty are undermined by prospects of losing the transfer.
Universal schemes do not encounter such difficulties since they are not confined to narrow target groups but rather granted to all individuals that meet certain criteria regardless of own means, such as having children or being disabled. In principle, universal benefits are rights-based and reduce inequality by design: if everyone in an unequal society gets the same transfer, the spread in incomes will be reduced. In practice, their impact depends on the size of the transfer and will likely be smaller than that of targeted assistance since the latter ideally facilitates redistribution from the top to the bottom and, given the same budget, can be larger in size. For this reason, proponents of targeting argue that fiscal space – especially in countries with a tight budget constraint where high income earners often do not pay a fair share of taxes – is limited. In this sense, targeting provides means of channeling resources to those most in need and maximizing redistributive impact at lower costs. However, according to political economy arguments, universal transfers should receive higher budget allocations and be sustained by social consensus in the long run, thereby potentially yielding stronger redistributive results. Where poverty is widespread, universal transfers may further be more effective since the costs of targeting become disproportional. Which effect ultimately prevails is a country-specific empirical question.
Of course, social protection integrates a much wider set of policies than cash transfers and subsidies. Public services particularly in the field of health and education have huge redistributive impacts and allow disadvantaged people to improve their own starting position and break cycles of poverty that often persist across generations. Investing in social services that benefit the lower part of the distribution not only contributes to reducing inequalities in income but also those that run along other dimensions, such as gender, age and disability. Women and girls are not only at higher risk of being poor, in many countries they also suffer from lower access to education, receive less health care and are more likely to be found in unpaid care or low-paid precarious work environments. Social cash and in-kind benefits hence carry great potential for reducing gender inequality.
Social protection and domestic resource mobilization are inextricably linked
A key factor that determines the redistributive impact of a government’s fiscal policy is the way in which revenues are generated to finance social protection and the provision of public services. Raising revenues is often treated separately from expenditure policies although when it comes to reducing inequality, the two are inextricably linked. Tax-to-GDP ratios are much lower in LMICs than in the Organization for Economic Cooperation and Development (OECD) region for example, which illustrates the overall lesser role of the state. Thus, apart from re-allocating public expenditures and restructuring debt, increasing fiscal space for social protection requires raising more revenues. This must entail a range of strategies including raising tax rates, reducing tax evasion and illicit financial flows and increasing foreign aid.
Strengthening capacities for domestic resource mobilization carries potential to foster sustainability and accountability of the government towards its own citizens. Tax systems differ widely in their redistributive capacity due to differences in tax composition and their individual design. Personal income taxes (PIT) have the largest redistributive capacity when rates rise progressively with income so that high earners shoulder a larger part of the burden. Social security contributions can be tied to PIT so that they, too, adhere to the principle of solidarity financing. Taxes on capital incomes, wealth or financial transactions could in principle have a highly progressive impact. In practice, however, rates are far lower than PIT in many countries which undermines principles of social justice.
As in the case of social insurance, the difficulty in LMICs is that economic structures tend to be highly informal. This is one reason for why tax systems in the Global South often depend to a much larger extent on indirect taxes such as Value Added Tax (VAT) that cannot take due account of the equity principle whereby richer individuals should not only pay larger absolute amounts into the common pool but also higher relative shares of their income and wealth. VAT taxes consumption and since the poor consume a much larger share of their income, it hurts them most – even if these resources are then used to finance progressive benefits.
Overall, the challenge of designing more progressive tax systems that align with social protection schemes in a common effort to reduce inequality and eliminate poverty is hence threefold. In the first place, more resources are needed to put in place comprehensive social protection systems. This means taxing corporations and high wealth individuals sufficiently. In the past decades, the tax burden on so-called high-net-worth individuals – and the corporations they own – has diminished continuously, not only because top marginal tax rates have decreased but also because the relevance of taxes on wealth, capital incomes and business profits are dwindling down. Secondly, there must be an end to elaborate schemes for shifting profits between jurisdictions that enable companies to avoid paying their fair share and instead shift the tax burden on labour. This global trend is one reason for why the rise in inequality has been accompanied by a decreasing share of labour in national income over the last decade – alongside declining levels of unionization and collective bargaining as well as stagnating wage levels. Thirdly, there should be recognition that it is an international responsibility to regulate international taxation and support countries to collect their fair share of taxes. Tax systems need to be more progressive in nature so that raising these extra resources contributes to reducing inequality rather than worsening it. Lastly, enforcement and compliance need to be strengthened to ensure a fair sharing of burden.
The need to strengthen tax systems in LMICs should also not divert attention away from the responsibility of the international community, where new financing mechanisms may be needed to ensure the realization of the global responsibility for social protection floors worldwide, especially in times of crises and disasters, and in countries that cannot yet finance social protection floors by their own means.
The way forward
Social protection and its progressive financing are essential pillars for achieving the SDGs, and in particular SDG 10 that aims to reduce inequality within and between countries. Building them requires concerted efforts. Certainly, there is no ‘right’ system that any one country should adopt. Nonetheless, the objective is clear: establishing social protection floors through equitable financing strategies is a priority in countries where these are not yet in place. Social protection needs to follow a rights-based approach. Countries that already have appropriate floors in place should aim for extending these towards building comprehensive social protection systems that not only alleviate poverty but protect against risks across the life course and provide equitable access to high quality public services.
Strategies for building such systems need to broaden contributory schemes to include people that cannot contribute (sufficiently) through own means, and integrate these with non-contributory schemes. Ideally, non-contributory schemes should aim for universality. In the light of constrained budgets and the pressing need to reduce inequality, however, targeted assistance to those in need may be an important step on the road towards achieving universality. Ultimately, social protection needs to be recognized as a human right for all not only in principle, but in implementation. In order to increase the redistributive capacity of social protection systems, financing strategies need to build and promote progressive taxation and equitable resource mobilization. This entails taxing the upper part of the distribution more both in relative and absolute terms. This especially holds for those at the very top and for ensuring that corporations pay their fair share of the burden.
Exploring international financing mechanisms beyond aid can greatly contribute to the common goal of reducing inequality within and between countries. Reducing tax evasion and avoiding excessive tax competition should be top priority on the global agenda since it requires international cooperation. Social protection budgets need to be protected in times of crises and disasters, which means that social protection spending must be adequate even during austerity periods. Further dialogue and cooperation are needed to develop global solidarity mechanisms.
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Universal Declaration of human rights, Paris, 1948.
Over 200 civil society organizations and trade unions unite to call for a Global Fund for Social Protection to protect the most vulnerable during COVID-19 and beyond.
The programme Improving Synergies Between Social Protection and Public Finance Management provides medium-term support to multiple countries aiming to strengthen their social protection systems at a national level and ensure sustainable financing. The programme aims to support countries in their efforts towards achieving universal social protection coverage.
