How COVID-19 will hasten innovation in social protection

By Paul von Chamier, Research Officer

People wait in line to receive government assistance in Apucarana, Brazil (April 28, 2020) (Ferreira Belafacce/ Shutterstock.com)

On July 7 2020, a group of members and allies of the Pathfinders convened to participate in a UN HLPF 2020 side event on innovative social protection, organized in collaboration with the Permanent Mission of Ethiopia to the United Nations. Organizations in attendance included: Government of Indonesia, Permanent Mission of Uruguay to the United Nations, OECD Inclusive Growth Unit, UN ECLAC, UN ESCWA, and The World Bank Social Development Global Practice.

The robust panel drew 160 virtual attendees and offered a deep-dive on an array of recent policy innovations:

• The ongoing pandemic has revealed the urgent need for nimble and broad-based social protection. From service workers, to struggling renters, and young graduates, the list of hard hit groups is long and diverse. That same urgency we are experiencing right now has also exposed the futility of traditional political discourse on the subject of social protection. Some creative ideas like universal payout schemes or country-wide rent and mortgage vacation opt-ins were proposed years ago as an effective way to respond to economic shocks. Alas, doubts about the technical feasibility of such solutions stalled any significant rollouts until the novel coronavirus hit. The new reality has thrown into sharp relief some of those years-long conversations, with national parliaments signing off on experimental programs in a matter of days. This situation has forcefully demonstrated that when it comes to innovative policies, especially those amounting to financial redistribution from one social group to another, it is political feasibility rather than technical ability that is the main constraint of progress. Drawing on this insight, panelists have proposed innovative reforms in terms of substance, modality, as well as financing of social protection.
• The introduction of an electronic payment option in place of physical disbursement of benefits in Tunisia illustrates how governments are willing to innovate with existing social protection policies. They are also seizing the opportunity to initiate new programs. Some major areas of development have been inclusive healthcare coverage, social security benefits, and government guarantees for small employers. Their resilience-enhancing and redistributive nature reduces the impact of shocks, both economic and health-related. For this reason, many countries took decisions to expand existing insurance programs or ensure the continued coverage of as many people as possible. For example, the Indonesian government has committed $5.3 billion to its national healthcare system expansion and Uruguay has postponed the collection of some social security taxes to ensure continued coverage for the most vulnerable. Uruguay also used established mechanisms for tax transfers in reverse, in order to subsidize companies hiring new people. Both Uruguay and Ethiopia introduced advance payments for participants of some social protection programs to accelerate the disbursement process.
• Certain private markets were more disrupted than others, so countries also deployed targeted policy packages aimed at specific industries. Indonesia injected $11 billion into market-strengthening reforms in form of subsidies to medium and small enterprises, as well as cancelled taxes for the hardest hit sectors in exchange for maintaining employment. For people who are unemployed or those who are employed but not earning enough to escape poverty, UN ECLAC is proposing a fixed basic income for 6 months equal to the line of poverty. The idea is inspired by the concept of a universal basic income, albeit modifying the “universal” element, as it would only be disbursed to those below the poverty level. Such a solution would cost 1.9% of GDP in all of Latin America and would foster financial inclusion, which is one of the main constraints of equitable economic growth in the region.
• In terms of modality, community-driven social development schemes have proven to be among the most nimble disbursement mechanisms. As pointed out by the World Bank, this was the quickest way of reaching remote communities following tsunamis and other natural disasters in South-East Asia. Right now, COVID-19-affected communities can help disburse resources too, especially in countries and regions where the informal economy is prevalent and conventional social protection schemes are not available. Initial evidence also shows that communities in fragile, conflict, and violence (FCV) settings actually have strong communal mechanisms of coping with external shocks such as the pandemic. Their experience can help build COVID-19 response programs that will be able to reach the most vulnerable individuals. For example, including social partners while designing and disbursing social protection packages can facilitate effective and equitable disbursement.
• The idea of a COVID-19-specific solidarity tax has been implemented in Uruguay and is currently under discussion elsewhere. The political feasibility of the project was boosted by its clearly defined purpose and time-bound nature. Taxes are directed toward the Coronavirus Fund and consist mostly of a social security surcharge for the richest pensioners and the temporary reduction of the salaries of top government officials. A solidarity fund with a sunset clause and a specific set of target policies was deployed by Germany following its reunification, and is now being considered in other parts of the world. According to UN ESCWA, a 2% solidarity fund tax levied on the top 10% wealthiest individuals in West Asia would be enough to uplift the poor and address the impacts of COVID-19. It would also allow states to go beyond consumption-stimulating cash transfers and improve mechanisms of social mobility such as education.
• All these ideas point to a more activist government approach. In fact, preliminary research by the OECD suggests that only 10% of people in developed countries wish for their governments to be doing less in face of the economic impact of the pandemic. Social momentum is now building in favor of more government action, including experimentation with new policy tools, especially in the areas of health, education, housing, and poverty alleviation. As governments around the world test various policy ideas, the Pathfinders remain committed to distilling and promoting innovative ideas with the strongest potential to improve social protection delivery for the most vulnerable, and to ensure that we build back better.

Watch a recording of the event in its entirety, here: