Social security for developing countries: no longer a myth

Too often, social security is thought of as a luxury that developing countries cannot afford. Yet there have been successful measures to protect vulnerable groups in developing countries. The question is not whether social security is necessary in developing economies, but how it can be put into place.

Poor people are more vulnerable to socio-economic setbacks, nowhere more than in developing countries. Social security can be defined as the implementation of public measures such as compensation for reduction of earnings, provision of medical care, or support for families with children. Many believe however that developing countries with large agricultural and informal sectors, low taxation and fragile financial systems cannot implement social security programmes, and should focus on economic growth to raise standards of living for all groups.

An article from the Institute of Development Studies, UK, discusses the impact of social security polices in developing countries. The author believes that economic growth in itself cannot bring about social development and equality, and cites the examples of countries such as China and Sri Lanka where social security has helped the most vulnerable groups maintain their living standards.

The author uses India as a case study to examine whether social security policies have benefited the most vulnerable social groups across 14 states between 1973 and 1999. Until the early 1990s India only had limited social security legislation, covering mostly civil servants. In 1995, the Government of India introduced the National Social Assistance Programme (NSAP), and the 2000-2001 budget included funds for the poorest sections of society.

Key findings on the impact of such polices between 1973 and 1999 include:

• Spending on social protection has contributed to the decrease of urban and rural poverty, and economic growth of 8.3 percent in India.
• Public consumption expenditure has increased, both in the short term and long term.
• State incomes dipped in the short term (because of spending on education) but increased in the long term.
• Possibly because of the payment of unemployment benefits, even higher unemployment has an effect on the reduction of rural and urban poverty.

Therefore, far from being an unsustainable financial burden, additional investment in social security policies may have further benefits for the Indian economy.

The author notes that while higher levels of economic openness have had positive impacts on both income and consumption expenditure, they may also have increased levels of rural poverty. This suggests the existence of inequalities in the distribution of economic benefits, and provides a further justification for social protection for the poorest people.

The author concludes that the true challenge in implementing effective social security in developing countries lies not in its feasibility, but in:

• establishing clearer priorities while designing policy
• achieving better coordination among existing social security policies and programmes
• increasing efficiency in the use of public resources.

Social protection policies in developing countries should cover more than the ‘safety nets’ approach adopted in industrialised countries: they should work to prevent increased deprivation and improve chances for individual betterment.

Source(s):
‘Social security in developing countries: myth or necessity? Evidence from India’, Journal of International Development (in press), by Patricia Justino, 2006

id21 Research Highlight: 24 January 2007

Further Information:
Patricia Justino
Institute of Development Studies
University of Sussex
Brighton BN1 9RE
UK

Tel: + 44 (0)1273 877231
Fax: + 44 (0)1273 621202
Contact the contributor: P.justino@ids.ac.uk

Institute of Development Studies

Other related links:
'Social protection index to help improve poverty reduction programmes'

'Being prepared for unexpected events can help prevent poverty'

Lessons learned from the horticulture and garment industries on social protection of informal workers

With assistance, low-income countries in sub-Saharan Africa can afford to provide basic social protection

Social Security and the Poor: Choices for Developing Countries

ILO Social protection Unit