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The two lives of social protection: the tale of cash transfers and social security

11/01/2018

Here’s a curious tale about two very different forms of social protection: one is much loved by researchers, the media and donors, but its charms are debatable; the other is too often shunned by academia, commentators and funders despite holding greater promise and staying-power. We could call them ‘cash transfers’ and ‘social security,’ writes Rasmus Schjoedt.

Let’s look first at cash transfers targeted to ‘the poor,’ both the conditional and unconditional varieties. This form of social protection has received by far the most attention in recent years, as measured by column inches and mentions in the literature referring to their impacts on beneficiaries.

Poverty-targeted household cash transfers programmes – often with conditions and sanctions attached – have spread across the world, usually funded by donors while using highly problematic targeting tools, such as the proxy means test, to identify beneficiaries. Despite the hype, in many ways these programmes look like very traditional development interventions: they focus narrowly on poverty reduction and function as a form of charity. This is even more the case for small-scale NGO-run cash transfer programmes. It is likely that these programmes will eventually suffer the same loss of credibility as previous development fads, such as microfinance.

The likelihood of failure of cash transfers is particularly strong because these programmes – since they are development interventions focused on eradicating poverty – are often expected to ‘graduate’ their beneficiaries out of poverty. This is an unrealistic expectation, for several reasons. First of all, this approach focuses on individuals as the key actors, responsible for ‘lifting’ themselves out of poverty, with a little help from a generous donor. However, we know that reducing poverty and inequality requires structural transformation of economies and societies: it can never be an individual responsibility.

Second, cash transfers perceives ‘the poor’ as a particular group of people who need to be lifted out of poverty. Presumably, according to this perception, once all the poor have ‘graduated’ there will be no more poverty left in the world.

However, this misses the fact that ‘the poor’ do not really exist as a fixed group. Rather, poverty is a state that many people find themselves in for shorter or longer periods of time. It is highly dynamic, with people frequently moving in and out of poverty; often the same person will experience poverty at some points in their life, but be well off at others. It is therefore not possible to eradicate poverty by focusing on ‘the poor’. As an example, Figure 1 shows the movements between income groups in Rwanda between 2010/11 and 2013/14.

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However, there is another form of social protection which is far more likely to become a permanent focus of social policy in developing countries: This is the building of sustainable national social security systems – a core public service, alongside others such as health and education – with an initial focus on lifecycle benefits such as old age pensions, child benefits and disability benefits. In contrast to the cash transfer fad, this approach is rights based, since these programmes provide a right to income support for everybody who fulfil the eligibility criteria. And, as a core public service, a national social security system is no more a fad than a national health system or a national education system.

Nobody can dispute that life cycle social protection programmes comprise a core component of countries’ broader labour market and social policy. In high-income countries, these programmes often constitute the largest portion of government budgets.

In European Union member states, for example, Governments dedicate an average of 12% of GDP to social security (source, OECD Social Expenditure Database). These programmes are essential for reducing poverty and inequality and promoting economic growth, not by focusing on ‘the poor’ but by creating societies with income security for all across the life cycle. As Figure 2 shows, without taxes and transfers, poverty rates would be much higher in most OECD countries.Screen Shot 2017-12-21 at 15.48.37

Several developing countries have extensive life cycle social protection systems, including for example Mauritius, South Africa, Uzbekistan, Mongolia, Georgia, Namibia and Nepal. In Brazil, the national old age, disability and unemployment benefits, although not fully universal, are much more significant than the much hyped Bolsa Familia programme, a poverty-targeted household benefit. Mauritius has had a universal pension since the 1950s, which now co-exists with a universal disability benefit and a range of other social security schemes while Nepal has been quietly building an impressive inclusive social protection system since the mid-1990s (going well beyond its richer neighbours of India, Pakistan and Bangladesh. In 2017 Kenya launched a tax-financed universal pension for everybody aged 70 years and above; Uganda is expanding a pension that is universal in some parts of the country, while Zanzibar introduced a universal pension in 2016. In some cases, international donors have played a key role in introducing these programmes, but most often they are home grown. In fact, often governments have actually had to fight off international institutions to avoid introducing poverty-targeting – as in Mongolia.

Strangely, these lifecycle programmes – which tend to be much larger than poverty-targeted household transfer schemes – usually do not attract the same media attention. Researchers also seem to prefer poverty-targeted cash transfer programmes. The latest large review of cash transfers by the ODI included a review of research on 56 different programmes. Out of these, 45 were CCTs/UCTs and only 4 were social pensions. This choice was made despite the fact that no less than 67 low- and middle-income countries now have social pensions.

Perhaps this lack of interest from researchers is a result of what Lant Pritchet calls ‘X-centric research interests’ – his term for research that looks at effects of some controllable variable, rather than looking for causes of already known effects. It may also be because most of the poverty targeted cash transfer programmes are funded by donors, who have funding for research and need to provide evidence on the results of their investment.

Perhaps it is inevitable that Western media will always be more interested in the narrative of Westerners arriving with a bag of money – or chickens – to ‘fix’ poverty in Africa, than in the story of countries gradually developing better social security systems. But we should expect more from development researchers and practitioners, who ought to know that poverty is not something that can be ‘fixed’ through technical solutions or charity. Eradicating poverty requires the creation of more equitable societies, which is inherently a political undertaking. And the large life cycle social security schemes are inherently political solutions, because they link into the politics of their countries. But of course, that story is harder to sell to the media.
Rasmus Schjoedt is a Social Policy Specialist with Development Pathways, currently based in Kampala and managing Development Pathways' programmes in Uganda. He is interested in the political economy of social protection programmes, especially how local power relations influence implementation.
Rasmus Schjoedt is a Social Policy Specialist with Development Pathways, currently based in Kampala and managing Development Pathways’ programmes in Uganda. He is interested in the political economy of social protection programmes, especially how local power relations influence implementation.

So, what does this mean for those of us working in the area of social protection? Well, a rights-based approach to development would mean helping to build comprehensive national social security systems, by providing funding and technical support to governments to expand rights-based programmes. And by supporting local civil society organisations and citizens to advocate for improved access to income support across the lifecycle. This is the only way to create sustainable change and this is where development researchers, donors and NGOs should focus their attention. Anything else is just a distraction.

 

COMMENTS 9

  • I recognize as valid the Rasmus’ argument in considering social security-based approach over the cash transfers-based approach, it is important that focus be rather on widening the access to income opportunities and essential services along life-cycle than focusing on the poor. But I have some reservations on the practicability and sustainability sides of the social security-based approach in the majority of low-income countries(Mozambique included, my country) given that among other reasons : The the economy, in poor countries, is largely informal making it nearly impossible to ensure public-based revenue to sustain a wide-based social security and the lower-income countries are struggling to commit up to 2% of their GDP for development of social protection programs, so committing 12,5% (as is the case of developed countries) of their GDP is nearly impossible given also the competing priorities in such as social areas as Education and Health.




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    • Hi Alvaro, thank you for your comment. The cost of universal programmes is absolutely something to be taken seriously. It is also clear that the poorest countries need external support with financing. However, in most countries fiscal space do exist to start putting in place universal life cycle benefits. Programmes can be made more affordable by starting with low benefit levels and restricted to specific age groups, such as young children below the age of 2, or older people above 70 or 80. From that starting point benefit levels can then be gradually increased and coverage expanded to cover broader age groups, as fiscal space becomes available. In most countries there is scope for re-allocating funding from other sectors to social protection. In addition, in countries where the economy is growing, significant fiscal space becomes available every year as a result of economic growth, and social protection can and should be prioritised when allocating this additional budget among sectors, given that most countries currently under-invest in social protection. The ILO has provided more options for finding fiscal space for social protection in this paper: https://www.social-protection.org/gimi/RessourcePDF.action?ressource.ressourceId=51537

      Best,
      Rasmus




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