Social safety net

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The social safety net (SSN) consists of non-contributory assistance existing to improve lives of vulnerable families and individuals experiencing poverty and destitution. Examples of SSNs are previously-contributory social pensions, in-kind and food transfers, conditional and unconditional cash transfers, fee waivers, public works, and school feeding programs. [1]

Contents

Definitions

There is no exact and unified definition of the concept of SSN. The World Bank has one of the widest definitions, but multiple definitions are used by different scholars, institutions, and organizations such as the International Labor Organization (ILO) and ESCAP. This lead some scholars to go so far as to hold that there is no point in using the term SSN as it is rarely used consistently and are instead advocating that the different components of SSN are used for analysis rather than the term itself. [2]

Economic rationale

Initially, social safety nets were intended for three purposes: Institutional reform, to make the adjustment programs feasible politically, and most importantly, poverty reduction. [3]

The social safety net is a club good, which follows from it being excludable but non-rival. [4]

Critics argue that SSN decreases the incentives to work, gives no graduation encouragement, tears down communal ties, and places a financial burden potentially too heavy to carry in the longer run. Furthermore, it has shown very difficult to decrease the SSN once it has been extended. [5] Casper Hunnerup Dahl, a Danish economist, finds that there is a strong negative correlation between the generosity of OECD welfare states and the work ethic. [6] The Swedish economist Martin Ljunge finds that an increasingly generous sick leave system leads younger Swedes to stay more at home than their older peers. [7]

However, proponents argue that the case is quite the opposite, that even tiny transfers are used productively and often invested, be it in education, assets, social networks, or other income-generating activities. [8]

History

In the early 1990s the term "social safety net" surged in popularity, particularly among the Bretton Woods Institutions which used the term frequently in relation to their structural adjustment programs. [3] These programs were intended to restructure the economies of developing countries, and these countries introduced social safety nets to reduce the impact of the programs on the poorest groups.[ citation needed ]

The increased importance of SSN over the last decades is also shown in UN's Sustainable Development Goals (SDG). One of the 17 goals is to eradicate poverty [9] and among the sub-goals are implementing social protection systems and floors for everyone, and substantially reducing the potential impacts of environmental, economic and social shocks and disasters on the poor. [10]

Types of systems

The volume of spending varies vastly between countries. While wealthy countries in the OECD on average spend 2.7% of GDP on social safety nets, developing countries spend an average of 1.5%. There are also regional differences. European and Central Asian countries spend the highest share of their GDP followed in a diminishing spending manner by Sub-Saharan Africa, Latin America and Caribbean, East Asia and Pacific, Middle East and North Africa, and lastly South Asia. In addition, regions tend to favor different types of safety nets. Non-contributory pensions are widespread in East Asia, while Latin Americans often favor conditional cash transfers and South Asians public works. [1]

André Sapir creates four groups of European social models. These are the Mediterranean countries (Spain, Portugal, Italy, Greece), Continental countries (Luxembourg, Germany, France, Belgium, Austria), Anglo-Saxon countries (United Kingdom and Ireland), and Nordic countries (Sweden, Finland, Denmark + Netherlands). [11] Building on this, Boeri assesses the abilities of the different social models to reduce poverty and income inequality. [12] His findings show that the reduction in inequality through redistribution is lowest in the Mediterranean countries with 35%, while the Nordic countries have the highest redistribution with a 42% reduction. In the middle one can find the two other models with 39%. Considering the numbers after taxes and transfers, the order of the countries alters a bit. When looking at how big a portion of the population has an income under the national poverty threshold the Nordic and Continental countries come out on top with only 12% living in poverty, while the Mediterranean and Anglo-Saxon countries come out last with 20%.[ citation needed ]

In South Africa there are grants for people unable to support themselves. Many of the grants are focused on children. Social services administer these grants. [13]

Effects

The World Bank has estimated that SSNs have helped around 36% of the poorest in the world escape extreme poverty, the number being 8% for relative poverty The contribution to narrowing the inequality gap has been even bigger. Here the SSN has helped reducing the absolute poverty gap with 45% whereas the relative poverty gap is reduced by 16%. Despite these numbers, the World Bank claim that the real numbers are probably even higher. [1]

Still, the biggest challenge prevails in the poorest countries. Only 20% of the poorest inhabitants in low-income countries are included in SSNs. Consequently, the smallest decreases in poverty and inequality are found in these countries. There are a couple of probable reasons for this. First, a lot of surveys from low-income countries do not include specific SSN programs nor all the different programs that they have. Second, there is a lack of recent data regarding these issues compared to other country groups. [1]

See also

Related Research Articles

<span class="mw-page-title-main">Extreme poverty</span> Condition characterized by severe deprivation of basic human needs

Extreme poverty is the most severe type of poverty, defined by the United Nations (UN) as "a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services". Historically, other definitions have been proposed within the United Nations.

<span class="mw-page-title-main">Poverty</span> Lack of financial assets or possessions

Poverty is a state or condition in which an individual lacks the financial resources and essentials for a basic standard of living. Poverty can have diverse environmental, legal, social, economic, and political causes and effects. When evaluating poverty in statistics or economics there are two main measures: absolute poverty which compares income against the amount needed to meet basic personal needs, such as food, clothing, and shelter; secondly, relative poverty measures when a person cannot meet a minimum level of living standards, compared to others in the same time and place. The definition of relative poverty varies from one country to another, or from one society to another.

<span class="mw-page-title-main">Welfare spending</span> Means-oriented social benefit

Welfare spending is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifically to social insurance programs which provide support only to those who have previously contributed, as opposed to social assistance programs which provide support on the basis of need alone. The International Labour Organization defines social security as covering support for those in old age, support for the maintenance of children, medical treatment, parental and sick leave, unemployment and disability benefits, and support for sufferers of occupational injury.

<span class="mw-page-title-main">Economic inequality</span> Distribution of income or wealth between different groups

Economic inequality is an umbrella term for a) income inequality or distribution of income, b) wealth inequality or distribution of wealth, and c) consumption inequality. Each of these can be measured between two or more nations, within a single nation, or between and within sub-populations.

Welfare reforms are changes in the operation of a given welfare system aimed at improving the efficiency, equity and administration of government assistance programs. Reform programs may have a various aims, sometimes the focus is on reducing the number of individuals receiving government assistance and welfare system expenditure, at other times reforms may aim to ensure greater fairness, effectiveness and allocation of welfare for those in need. Classical liberals, libertarians, and conservatives generally argue that welfare and other tax-funded services reduce incentives to work, exacerbate the free-rider problem, and intensify poverty. On the other hand social democrats and socialists generally criticize welfare reforms that minimize the public safety net and strengthens the capitalist economic system. Welfare reform is constantly debated because of the varying opinions on a government's need to balance providing guaranteed welfare benefits and promoting self-sufficiency.

<span class="mw-page-title-main">Income distribution</span> How a countrys total GDP is distributed amongst its population

In economics, income distribution covers how a country's total GDP is distributed amongst its population. Economic theory and economic policy have long seen income and its distribution as a central concern. Unequal distribution of income causes economic inequality which is a concern in almost all countries around the world.

<span class="mw-page-title-main">Poverty reduction</span> Measures to reduce poverty permanently

Poverty reduction, poverty relief, or poverty alleviation is a set of measures, both economic and humanitarian, that are intended to permanently lift people out of poverty. Measures, like those promoted by Henry George in his economics classic Progress and Poverty, are those that raise, or are intended to raise, ways of enabling the poor to create wealth for themselves as a conduit of ending poverty forever. In modern times, various economists within the Georgism movement propose measures like the land value tax to enhance access to the natural world for all. Poverty occurs in both developing countries and developed countries. While poverty is much more widespread in developing countries, both types of countries undertake poverty reduction measures.

<span class="mw-page-title-main">Measuring poverty</span>

Poverty is measured in different ways by different bodies, both governmental and nongovernmental. Measurements can be absolute, which references a single standard, or relative, which is dependent on context. Poverty is widely understood to be multidimensional, comprising social, natural and economic factors situated within wider socio-political processes.

<span class="mw-page-title-main">Poverty in China</span>

In China today, poverty refers mainly to the rural poor. Decades of economic development has reduced urban extreme poverty. According to the World Bank, more than 850 million Chinese people have been lifted out of extreme poverty; China's poverty rate fell from 88 percent in 1981 to 0.7 percent in 2015, as measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms, which still stands in 2022.

Poverty in South America is prevalent in most of its countries. Those that have the highest rates of poverty per population are Suriname, Bolivia and Venezuela. Recent political shifts in the region have led to improvements in some of these countries. In general, most South American economies have attempted to tackle poverty with stronger economic regulations, foreign direct investments and implementation of microeconomic policies to reduce poverty.

The European social model is a concept that emerged in the discussion of economic globalization and typically contrasts the degree of employment regulation and social protection in European countries to conditions in the United States. It is commonly cited in policy debates in the European Union, including by representatives of both labour unions and employers, to connote broadly "the conviction that economic progress and social progress are inseparable" and that "[c]ompetitiveness and solidarity have both been taken into account in building a successful Europe for the future".

<span class="mw-page-title-main">Social protection</span> Anti-poverty policies and programs

Social protection, as defined by the United Nations Research Institute for Social Development, is concerned with preventing, managing, and overcoming situations that adversely affect people's well-being. Social protection consists of policies and programs designed to reduce poverty and vulnerability by promoting efficient labour markets, diminishing people's exposure to risks, and enhancing their capacity to manage economic and social risks, such as unemployment, exclusion, sickness, disability, old age., and enhancing their capacity to manage economic and social risks, such as unemployment, exclusion, sickness, disability, and old age. An emerging approach within social protection frameworks is Adaptive Social Protection, which integrates disaster risk management and climate change adaptation to strengthen resilience against shocks.It is one of the targets of the United Nations Sustainable Development Goal 10 aimed at promoting greater equality.

<span class="mw-page-title-main">Welfare's effect on poverty</span>

The effects of social welfare on poverty have been the subject of various studies.

Social protection in sub-Saharan Africa tends not to be very developed and yet the growth of some of the region's economies and concerted attempts to tackle poverty mean that this situation may change considerably in the future.

According to the International Labour Organization, social security is a human right that aims at reducing and preventing poverty and vulnerability throughout the life cycle of individuals. Social security includes different kinds of benefits A social pension is a stream of payments from the state to an individual that starts when someone retires and continues to be paid until death. This type of pension represents the non-contributory part of the pension system, the other being the contributory pension, as per the most common form of composition of these systems in most developed countries.

Income inequality in the Philippines is the extent to which income, most commonly measured by household or individual, is distributed in an uneven manner in the Philippines.

<span class="mw-page-title-main">Poverty in the Philippines</span>

In 2023, official government statistics reported that the Philippines had a poverty rate of 15.5%,, significantly lower than the 49.2 percent recorded in 1985 through years of government poverty reduction efforts. From 2018 to 2021, an estimated 2.3 million Filipinos fell into poverty amid the economic recession caused by the COVID-19 pandemic.

The Pension Program for the Elderly (PPE) is a safety net, noncontributory pension program administered by the federal Secretariat of Social Development (SEDESOL) in Mexico. The program aims to expand the schemes of universal social security, by providing financial support and social protection to people 65 or older who a) do not benefit from retirement or contributory pension plans or b) receive income from retirement plans or contributory pension programs that does not exceed a certain amount determined by SEDESOL.

<span class="mw-page-title-main">Pension policy in South Korea</span>

South Korea's pension scheme was introduced relatively recently, compared to other democratic nations. Half of the country's population aged 65 and over lives in relative poverty, or nearly four times the 13% average for member countries of the Organisation for Economic Co-operation and Development (OECD). This makes old age poverty an urgent social problem. Public social spending by general government is half the OECD average, and is the lowest as a percentage of GDP among OECD member countries.

<span class="mw-page-title-main">Wealth inequality in Latin America</span>

Wealth inequality in Latin America and the Caribbean refers to economic discrepancies among people of the region. A report release in 2013 by the UN Department of Economic and Social Affairs entitled Inequality Matters. Report of the World Social Situation, observed that: ‘Declines in the wage share have been attributed to the impact of labour-saving technological change and to a general weakening of labour market regulations and institutions. Such declines are likely to affect individuals in the middle and bottom of the income distribution disproportionately, since they rely mostly on labour income.’ In addition, the report noted that ‘highly-unequal land distribution has created social and political tensions and is a source of economic inefficiency, as small landholders frequently lack access to credit and other resources to increase productivity, while big owners may not have had enough incentive to do so.

References

  1. 1 2 3 4 World Bank. 2018. "The State of Social Safety Nets", 2018. Washington, DC: World Bank. © World Bank. License: CC BY 3.0 IGO.
  2. ↑ Paitoonpong, Srawooth; Abe, Shigeyuki; Puopongsakorn, Nipon (1 November 2008). "The meaning of "social safety nets"". Journal of Asian Economics. A tribute to Seiji Naya. 19 (5): 467–473. doi:10.1016/j.asieco.2008.09.011. ISSN   1049-0078.
  3. 1 2 "QUNO Briefing Paper, No.5, The United Nations World Summit for Social Development". Brill Publishers. September 1994. Archived from the original on 19 September 2023. Retrieved 18 September 2023.{{cite journal}}: Cite journal requires |journal= (help)
  4. ↑ Paitoonpong, Srawooth; Abe, Shigeyuki; Puopongsakorn, Nipon (1 November 2008). "The meaning of "social safety nets"". Journal of Asian Economics. A tribute to Seiji Naya. 19 (5): 467–473. doi:10.1016/j.asieco.2008.09.011. ISSN   1049-0078.
  5. ↑ Runde, Daniel. "Social Safety Nets and Developing Countries: A Chance to Get it Right". Forbes. Retrieved 25 April 2020.
  6. ↑ Hunnerup Dahl, Casper (9 June 2013). "Arbejdspapir 22: Velfærdsstaten svækker danskernes arbejdsmoral". CEPOS.
  7. ↑ Ljunge, Martin. "Yngre generationers högre sjukskrivningsgrad – ett mått på hur snabbt välfärdsstaten förändrar sociala normer". Ekonomisk Debatt. 41–5.
  8. ↑ Devereux, Stephen (2002). "Can Social Safety Nets Reduce Chronic Poverty?". Development Policy Review. 20 (5): 657–675. doi:10.1111/1467-7679.00194. ISSN   1467-7679.
  9. ↑ "Sustainable Development Goals: Sustainable Development Knowledge Platform". sustainabledevelopment.un.org. Retrieved 20 April 2020.
  10. ↑ "Goal 1 .:. Sustainable Development Knowledge Platform". sustainabledevelopment.un.org. Retrieved 20 April 2020.
  11. ↑ Sapir, A. (2005). Globalisation and the Reform of European Social Models. Retrieved from https://graspe.eu/SapirPaper.pdf
  12. ↑ Boeri, Tito (30 November 2017), "Let Social Europe(s) Compete!", The Political Economy of the European Constitution, Routledge, pp. 151–167, doi:10.4324/9781351145763-9, ISBN   978-1-351-14576-3
  13. ↑ The Government of South Africa – Services: Grants & Pensions
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