The World Bank’s Global Director for Social Protection and Jobs has called for fundamental reform of our social protection systems to cover the “missing middle” of workers in the informal economy who are most vulnerable to the unprecedented job impacts of the COVID-19 crisis.
In a recent post for the World Bank’s “Jobs and Development” blog series, Michal Rutkowski states that “COVID-19 highlights the importance of creating universal entitlements to health care and income support”. He underlines that the crisis is especially challenging for those working informally who are not typically covered by social insurance systems. He also suggests that it is no longer acceptable for low- and middle-income governments to have “fractured social protection systems where most people fall through the cracks”.
A shift in ideology?
This comes as quite a dramatic shift in ideology for the World Bank, which has been a long-time advocate of poverty-targeted social protection programming. For years, the World Bank has argued that low-cost programmes targeted at “the poor” offer the greatest benefits to those living in poverty and that high-cost, inclusive lifecycle schemes are not feasible for low- and middle-income countries. Yet, evidence shows that inclusive schemes have high coverage and minimal exclusion errors and are very effective in reaching those living in poverty. Furthermore, as they can be accessed by the majority of a population, universal social security programmes tend to receive greater public support and more funding and are, therefore, more politically sustainable.
The World Bank has observed that this pandemic demands an immediate, concrete response that injects resources directly into economies, and that government-funded cash transfer programmes tick all the boxes. Yet, it still maintains that long-term universal transfers would be a different matter. The Bank argues that, especially in low- and middle-income countries, such schemes would need to “recalibrate their objectives away from temporary support and address fiscal and other trade-offs before being embedded in social protection systems”. However, evidence shows that targeted social security schemes are much more challenging and expensive to implement than universal schemes. Furthermore, long-term universal social security programmes have proven to be financially feasible for many low- and middle-income countries.
Echoing the approach presented in the highly controversial White Paper “Protecting All”, Rutkowski calls for a decisive move towards financing models based on general taxation instead of contributory systems based on payroll retentions that are largely limited to formal sector workers. However, their proposed model would eliminate the redistributive mechanisms embedded in social insurance arrangements and replace them with mandatory private savings, doubling down on arguments they have been making for years about the promises and virtues of pension privatisation, almost none of which have come to pass.
Furthermore, in order to reach the “missing middle” of informal workers who are not typically covered by cash transfer systems, Rutkowski calls for the use of “population registers” (code word for social registries) for social assistance. On the face of it, and in the eyes of the World Bank, a social registry serves as a useful tool to “accurately select” (code word for target) beneficiaries for social programmes. In reality, the logic behind the social registry is based on impossible assumptions. Evidence shows that social registries systematically deprive some of the world’s poorest, not only of social protection but also of access to vital services.
What does this mean for social protection policy?
In the wake of the COVID-19 crisis, is this blog an indication that the World Bank has demonstrated a significant shift in its ideology away from poverty-targeting? On some level, yes, but some old ideas about fiscal space, social registries and privatising public social insurance systems remain embedded in its arguments. Nevertheless, given its influential role in shaping social policy, these baby steps by the World Bank could help challenge the status quo and encourage governments to move towards a more sustainable, universal approach to social protection.