ILO basic social protection costing models and policy implications

ODI International Conference on Financing Social Protection in LICs: Finding the Common GroundLondon, 26-27 May 2011

Christina Behrendt, ILO Social Security Department

How it all began...Results of the first ILO costing model (2005-06)

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Old-age pensions

Child benefits

Health care

Social assistance/ employment scheme

Administrative costs

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

Assumptions: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 modelling results and policy context: Some examples

Full references: see last slide.

The emergence and context of ILO basic social protection costing models

Rapid Assessment Protocol

(RAP)

Joint ILO/UNICEF

costing tool

First ILO costing model

(2005)• 7 African and

5 Asian low income countries

• Developed in cooperation with DfID

* SPER = Social Protection Expenditure and Performance Review

GENERIC

COUNTRY-SPECIFIC

Social Protection Floor Quantitative Tools

COSTING TOOL

1. Fixed and pre-defined format

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 .

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RAPID ASSESSMENT PROTOCOL

1. Flexible format2. Time demanding3. 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.

SPF Quantitative Tools:Model uses and trade-offs

More robust results

Quantitative technical background

not absolutely necessary

Quantitative technical background indispensable

Rapid results

Useful for (a) testing different benefit

designs (tailor made) and policy options in national dialogue

process(b) Fiscal space analysis

Early stages, prior to detailed consultations

Early and intermediate stages of the discussion

COSTING TOOL

RAPID ASSESSMENT PROTOCOL

WHO?

WHEN?

Useful for testing standard predefined benefit designs

WHAT FOR?

RESULTS

GGO (BS)GENERALGOVMNT.OPS. BS

EAPECON.ACTIVEPOPULATION

ECOMACRO- ECONOMIC FRAMEWORK

GGO (SQ)GENERALGOVMNT.OPS. SQ

POPPOPULATION BY AGE AND SEX

ARACTIVITY RATES BY AGE AND SEX

READMEINFORMATION INSTRUCTIONS

BEN (n)BENEFIT – MODELING EXERCISE

BEN (...)BENEFIT – MODELING EXERCISE

BEN (2)BENEFIT – MODELING EXERCISE

BEN (1)BENEFIT – MODELING EXERCISE

Rapid Assessment Protocol

Example: Analysis of cost to close the SPF Gap in Viet Nam

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The impact of filling the SPF gap on the General Government deficit

as a percentage of GDP

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020As

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3. Working age income security2.b Child benefit (targeted for ALL poor children | cash and kind )1b. Old age universal pension (65+)General government fiscal balance (IMF) - STATUS QUO

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f GDP

Total additional costs to fill the gaps toward the SPF components as a percentage of GDP

3. Working age income security (scenario 1 - high cost )

2.b Child benefit (scenario 2b-Targeted for ALL poor children cash and kind )

1b. Old age universal pension (65+)

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.

Example: Assessing potential poverty impacts (poverty gap in % of GDP) in Viet Nam

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Initial situation | Poverty rate

BEFORE benefit

ELD2 | Poverty post universal pension to

all (Same as scenario 1 + 50 % poverty line

for contributory scheme pensionners)

CHILD 1 | Poverty post means-tested

children (all children in poor HH)

CHILD2 | Poverty post means-tested

children (limited to 2 per poor HH)

WA1 | Poverty post 100 days

employment guaranteed and disability benefit

Poverty post ALL three benefits (ALL Elderly ELD2 + ALL children per poor HH

CHILD1 + WA)

Poverty post ALL three benefits (ALL Elderly poverty line ELD2 + limited to 2

children per poor HH CHILD2 + WA)

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)

Total poverty gap (Millions VND) and composition

Working age

Elderly

Children 11-15

Children 6-10

Children <5

Total poverty gap as a percentage of GDP

9 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.

Where do we stand today?

Important features●Nationally dialogue process ensuring national ownership

●Detailed and comprehensive assessment including existing schemes

●Priority-setting and sequencing for gradual implementation

●Strengthening national institutional capacities

●Fiscal space: detailed assessment of status quo and options for extension as necessary

●Collaboration with IMF, UNICEF and other partners

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Ongoing Social Protection Floor costing assessments and national dialogue processes:●Benin

●El Salvador

●Haiti

●Mozambique

●Nepal

●Togo

●Viet Nam

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

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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

● 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

● 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

● 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

● 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

● 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: behrendt@ilo.org