Establishing a Global Social Floor for Social Justice and Economic Growth

1. UN Department of Economic and Social Affairs Establishing a Social Floor for the Global Economy Isabel Ortiz Senior Interregional Advisor United Nations DESA UN Commission for Social Development Side Event by ILO-HelpAge-UNDESA New York, 7 February 2008

2. Distribution of World IncomeGlobalization for whom? Distribution of world GDP, 2000 (by quintiles, richest 20% top, poorest 20% bottom) Source: UNDP Development Report 2005

3. Historical Trend: Inequality Keeps Rising Ratio of the Income of the Richest 20% to the Poorest 20% Source: UNDP Human Development Reports 1999 and 2005, New York

4. Apartheid at a Global Scale? Need of a Global Social Floor Source: Sutcliffe, 2005. Department of Economic and Social Affairs. WP 2. United Nations

5. A Global Social Floor • Defined as a basic and modest set of social security benefits for all citizens • Financing universal access to essential health care • Income security for all children through child benefits • Some modest conditional support for the poor in active age (employment programmes, benefits), and • Income security through basic, tax-financed, universal non-contributory pensions for older persons, persons with disabilities and those who lost the main breadwinner in a family • All countries have some form of social security but few provide a basic social floor for all

6. The case for a Global Social Floor: Social Justice Arguments • Unacceptable levels of poverty and inequality • Half of the world lives below the $2-a-day poverty line • The poorest 50% of the world’s adult population receives 1% of global wealth (UN WIDER, 2006) • Social security is a human right: • Article 22 of the Universal Declaration of Human Rights states: “Everyone, as a member of society, has the right to social security” • But 80% of global population remains without access

7. But Also Strong Economic Arguments • Inequality is economically inefficient / dysfunctional • World problem of overproduction and global excess capacity in the context of weak effective demand • Consumption concentrated in top income deciles • Raising the incomes of the poor increases domestic demand and, in turn, encourages growth by expanding domestic markets • A Global Social Floor can be an effective instrument to: • Boost economic growth by raising domestic demand / internal markets • Enhance human capital and productive employment - a better educated, healthy and well nourished workforce.

8. … and Political Arguments • A Global Social Floor can be effective to prevent conflict and create politically stable societies • Poverty and gross inequities tend to generate intense social tensions and violent conflict • The huge disparities in income inequality encourage uncontrolled migration • At the international level, globalization will find further resistance unless it deals with its social aspects => Need of a global social contract

9. Transfers Reduce Poverty more than 50% in OECD countries Source: OECD

10. South Africa Social Transfers Effective to Reduce Poverty and Destitution – Cost 3% GDP Source: Sampson, M. 2006, EFPRI South Africa => However social transfers are rarely considered in National Development Strategies/Poverty Reduction Strategies in Developing Countries=> Social Transfers can make the difference between achieving MDG1 of halving poverty by 2015 or not

11. Redressing Income Assymmetries and Reducing Poverty Requires: HOUSEHOLD INCOME = Earnings + Rents/Private Transfers + Social Transfers – Taxes National Development Strategies that include 1.Employment-generating macroeconomic and sector policies 2. Adequate labour regulations and standards 3. Social Transfers – A Social Floor 4. Progressive fiscal policies

12. A Social Floor is Affordable even in Low Income Countries Affordability in African and Asian countries (old-age /disability pension and child benefit) (% of GDP) Source: ILO, 2007. Social Security Department, Geneva

13. Social Pensions Cost less than 1% GDP in Most Countries Source: UN DESA, 2007: World Economic and Social Survey 2007, United Nations

14. Is there an Old-Age Crisis? Future contingent liabilities not a problem because of changes dependency ratios Source: UN DESA 2007

15. Financing a Global Social Floor • National Sources: • A Social Floor is affordable, estimated at an average 2-4% GDP in developing countries • Several countries have started building a social floor: Namibia, South Africa, Botswana, Mauritius, Bolivia, Brazil, Argentina, Thailand… • Social transfers have to grow with the fiscal space made available by increasing GDP or Aid • Domestic resources exist: • Budget reallocation • Billions lost through tax evasion and inadequate tax systems • Currently South-North flow of funds that needs to be reversed

16. Financing a Global Social Floor • International Sources: • Strong argument given world inequalities, 70% explained by differences in income between countries • ILO estimates that Global Social Floor would cost between 2%-6% of global GDP • Mechanisms: • Increased Official Development Aid • Multilateral and bilateral ODA to governments • New instruments like SWAps and Budget Support ideal • A Global Welfare Fund? (Milanovic, to citizens) • Global tax justice • Collecting a minimum tax on corporate profits and strengthening tax cooperation • An International Tax Agency? • Voluntary donations: Global Trust (ILO)

17. It Can Be Done: Remember that Not Long Ago There were children working in England’s mines and factories… …Spanish low class emigrants going to Latin America in search of any job… … poverty was widespread in the US or South Korea… …and in South Africa’s apartheid

18. Thank you United Nations Department of Economic and Social Affairs http://www.un.org/esa/ Email: ortizi@un.org