Michael Cichon

Notional defined‐contribution schemes: Old wine in new bottles?

Until recently, most pension benefit formulae in social security schemes resembled each other. They were all defined-benefit formulae that were either generous or mean, while defined-contribution formulae were exclusively used in private and occupational pension schemes and some national provident funds. Then came the mandatory retirement savings model, introduced in Chile and subsequently in other Latin American countries. It did not seem possible that such a formula could be used on any large scale in the pay-as-you-go environment of OECD pension schemes. In the early 1990s, however, Swedish social security experts devised the notional defined-contribution (NDC) system: individual social insurance pension contribution records are converted into a fictitious savings amount at retirement, whereupon the defined-contribution approach is followed. This article analyses how much of this approach is new. The conclusion is that it is a novel pension policy instrument rather than a new type of pension formula, and most of its potential financial and distributive effects could also be achieved by a classical, linear defined-benefit formula. It is the packaging that differs and, in politics, that often is what matters.

Changing the Development Policy Paradigm: Investing in Social Security Floor for All

The Paper briefly reviews social security coverage that the world has achieved and summarizes economic and social benefits of a national social security system. It then goes on to argue that social security systems are a necessary part of the institutional framework of any effective market economy, creating - among other things - societal cohesion that is needed for long-term economic development. It makes the case that the introduction of basic social protection in developing countries is both a desirable and an affordable investment in their social and economic development. It estimates the global minimum investment cost to provide basic social security and finally suggests international instruments to introduce a global social security floor.

The Social Protection Floors Recommendation, 2012 (No. 202): Can a six‐page document change the course of social history?

In June 2012, the global community made an important step to firmly establish social protection as part of national and global development strategies. The International Labour Conference unanimously adopted the Recommendation concerning national floors of social protection, 2012 (No. 202), providing concrete content to the human right to social security. This article puts the Recommendation into its historical standard setting and development policy context, reviews the emergence of the social protection floor concept, and analyses the contents of the new Recommendation and some of its political hotspots. It then explores whether the new instrument has the potential to change the social reality in the 185 ILO member States. It concludes that its adoption is an unprecedented demonstration of good will and far�?reaching global social policy consensus. However, in order to help create space for national policy change, the campaign to achieve at least a minimum of social security for all needs to continue and has to be kept on the international agenda. In closing, the article lists strategies that the global coalition behind this campaign needs to pursue for social security to remain or become an inalienable objective in national and international development strategies.

Social Security for All: Investing in Global Social and Economic Development: A Consultation

This paper seeks to explore the framework within which the International Labour Office should promote a principled, practical approach to social security policy in the new millennium. Integration has to be built around a joint coherent policy vision and building such a policy vision requires debate. This paper is a product of a joint effort of members of the ILO Social Security Department and social security specialists working in the ILO field offices.

Social Security, Social Impact and Economic Performance: a Farewell to Three Famous Myths

Social protection systems consist of the set of (a) all public transfers in a society that seeks to provide income security and prevent and alleviate poverty; (b) all measures that guarantee public access to health and social services; (c) all measures that protect workers’ income, health and well-being. Social protection thus seeks to free people from social insecurity and consequential existential fear and is thus inevitably an income redistributive system. If designed, managed and administered well, social protection systems generally achieve that objective.

Linking Community Initiatives to National Institutions: Ghana

The ILO has developed an innovative concept of global solidarity for social security — the Global Social Trust — which supports the development of national social protection systems through international financing. The concept is ready to be tested nationally and the present paper proposes a pilot project for Ghana. The paper considers the virtues and weaknesses of developing-country social security healthcare systems and community-based voluntary insurance schemes, their lack of informal sector coverage on the one hand and their financial disequilibria on the other. It outlines the socio-economic and macro-policy context of Ghana and the current health policy environment. It argues for a fusion of the social health insurance and mutual health organization concepts in Ghana, thus linking community initiatives to national institutions, enhancing coverage and the quality of services for all. The paper outlines a basic model that could apply to Ghana, its organizational structure, practical functioning, financing arrangements and expected outputs. In particular it seeks to develop a model for the cross-subsidization of insurance premiums for the poor. It describes a concept that would combine local ownership initiatives with national responsibility and financing, arguing for a truly interrelated network of social protection. The authors welcome feedback and comments from the wider social security audience.

Social security: Three lessons from the global crisis

The global financial and economic crisis has given new impetus to the debate on social security policies. Countries that had social security programmes in place strongly relied on them as automatic stabilizers in their stimulus packages. Where countries affected by the crisis did not have adequate social security mechanisms, the need to develop social security became more apparent. As a result, a number of social protection policy initiatives have begun or been stepped up at national, regional and global levels, including the UN Social Protection Floor Initiative and the Global Jobs Pact. Positive changes had begun in many developing countries well before the crisis. But a large social security coverage deficit still prevails (ILO, 2010f; UNRISD, 2010). In many countries only a minority of the population has access – both statutorily and effectively – to existing schemes. Figure 12.1 shows the scope of statutory coverage through social security schemes around the world. It can be seen that in Asia, Africa and some parts of Latin America in particular there are large gaps in the scope of social security schemes statutorily available. It is estimated that only one-fifth of the global working-age population and their families have effective access to comprehensive social protection (ILO, 2010f, p. 1). The social security deficit is one of the main obstacles to achieving the Millennium Development Goals (UN, 2010). 12

Social Budgeting in Transition Economies

The first part of this paper portrays social budgeting as a pivotal tool in national social governance. The second explains the meaning of social budgeting, which, essentially, consists of two elements: a database and a set of interdependent tools for projecting social protection revenue and expenditure. The third part discusses the particular needs of the transition economies with respect to the financial planning of social protection, and it is argued that countries need models for social budgeting as a technical, non-ideological tool in order to prudently run social protection systems which are income redistribution mechanisms of potentially vast dimensions. The fourth part broadly explains the modular structure of the model, the advantage of this structure being that modules can intelligently be used as stand-alone submodels. It also further discusses the particular advantages of social budgeting in countries in transition and includes a number of examples of technical adjustments that would have to be made to the model structure when applying it in the context of transitional economies. The two main reasons for such adjustments are identified as the fast change of their socio-economic fabric over the past decade and the (related) changes in the collection and flow of data. The fifth part briefly presents social budget modelling projects implemented in central and eastern Europe, particularly focusing on the examples of Ukraine and Poland. Scenario simulations and policy experiments are presented and discussed. The conclusions summarize the advantages of social budgeting, using the ILO Social Budget Model (or a variant of it) in national and international contexts, and indicate the conditions required for successful implementation.