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IMF highlights call for a new social contract underpinned by social protection

6th December: The latest issue of the IMF’s quarterly publication Finance and Development leads with an article calling for a new social contract underpinned by inclusive social protection.
“Profound changes sweeping labour markets” and economic insecurity feeding populism and nationalism have “prompted many to rethink social protection,” according to the issue’s editorial. “In this age of insecurity, we should act now to strengthen the bonds that unite us,” writes the editor-in-chief, Camilla Lund Andersen.
LSE Director Nemat Shafik’s A New Social Contract argues that welfare cuts have unleashed social grievances and attacks the “toxic perception” that there are “welfare scroungers” when, in the U.K, for example, “the vast majority take out broadly as much as they put in”. She points to evidence that separate programmes for the poor “have always tended to be poor quality” and backs income floors “so low-earners can enjoy a reasonable standard of living”.
Shafik (also known as Minouche Shafik) recently made this argument at an IMF-LSE workshop, as Development Pathways representative Matthew Greenslade reported. Matthew Greenslade said in a blog on the event that he had expected to have to argue the case for inclusive as opposed to targeted social protection, so was surprised by “the support for universalism in the workshop”. This “felt significant, indeed a progressive moment… [The overall message was] we have to think about the social contract, about the value of designing systems that will attract support and resources from the whole population and deliver benefits way off into the future”.

However, the IMF publication that also features an article that, while conceding that “when income inequality is extremely high… a universal transfer may look more attractive,” broadly backs the targeting of social protection.  Rema Hanna, Adnan Khan and Benjamin Olken argue that while “proxy means testing has its flaws, we find it yields higher overall welfare than the universal transfer”.

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