World labour agency counters trade claims

Business Day, Thursday 22 June 2000

OPPOSITION to increasing globalisation and trade liberalisation is rooted in the greater insecurity they have caused for many income earners.

This is according to the International Labour Organisation's (ILO's) World Labour Report Income Security and Social Protection in a Changing World, which was released yesterday.

In many countries, global competition has led to job losses or flexible job arrangements that are often less secure and provide fewer social benefits than regular jobs, the report says.

Economies have become more volatile because of shortterm capital movements, resulting in more severe financial and economic crises that have led to a sharp rise in unemployment and poverty.

These developments have created a sense of insecurity among workers, and also explain the resistance to globalisation from various quarters.

Drawing on worldwide data, the World Labour Report 2000 examines “the vital role played by social protection in supporting, supplementing and replacing market incomes in the event of old age, incapacity for work, bearing and raising children, and unemployment”.

Highlighted in the report are the effects of unemployment, underemployment and labour market developments which have exposed an increasing number of workers to low pay and precarious conditions.

According to the report, “social security expenditure as a percentage of gross domestic product has risen in most countries during recent decades. People's preferences rather than economics have been the driving force behind much of the growth as citizens of prosperous societies become more willing to accept that a larger part of income be redistributed to cover social contingencies.”

High levels of social protection and high levels of productivity and prosperity appear to be mutually reinforcing.

The report finds that “welldesigned systems of social protection are critical for long-term growth prospects in an open economy”.

The extent of social protection remains low in Africa, Asia and Latin America, but these are exceptions to the trend of broader social coverage.

The report examines the wide gaps in social expenditure between countries with a view to discovering what, if any, relationship exists between social spending and economic performance, and what implications this might have for efforts to reform social spending.

Acknowledging that there are “positive and negative links between social protection and economic performance”, the report also says that “contrary to widespread beliefs, there is no systematic relationship between social protection expenditure and measures of economic performance such as unemployment and labour productivity”.

It cites research that shows that social security contributions or payroll taxes do not have any long-term effect on unemployment. It notes that countries with the best social protection systems are also countries with extremely high levels of productivity. The key point for reform of social protection measures should be “to soften those features that cause disincentives and to develop those that have a positive impact on economic performance”.

In terms of social protection during physical incapacity, the report says that “increasingly precarious and fragmented employment relationships are leading to more and more workers not being covered by cash sickness benefits”.

“Making employers responsible for providing sick pay for the initial period of sickness can be a useful way to encourage them to improve working conditions and to monitor short absences,” the report says.

Regarding health care, the report says that despite major advances in the fields of medicine and health care services, a significant gap remains between rich and poor.

“What matters most to people is affordable health services that protect their health without ruining them financially.”

The report suggests an approach to financing health care services that combines various schemes. “These must respond to different levels of need and availability of resources, and must take into consideration the broader cultural, economic, political and historical context of each country.

Saying that in all countries there is a need for comprehensive social protection policies that aim at coverage for the working population excluded from protection under statutory social insurance schemes, the report suggests that such a policy might be encouraged by the “adoption of new international labour standards on the extension of social protection”.

These standards would, among others, affirm the right to social security as embodied in the United Nations International Covenant on Economic, Social and Cultural Rights and seek a commitment from governments and their social partners to strategies for extending basic social protection.