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Increased social security will enhance economic growth, social stability

A new survey by the International Labour Organisation (ILO) highlights the fact that individual economic security promotes well-being and tolerance, whilst also contributing to the growth and development of a nation

The findings of a new International Labour Organisation (ILO) survey confirm what many have long known to be true -- that economic security, coupled with democracy and government spending on social security, not only benefits growth but also promotes social stability. The report, 'Economic Security for a Better World', marks the first attempt to measure global economic security as perceived by ordinary people. It is based on detailed household and workplace surveys covering over 48,000 workers and more than 10,000 workplaces worldwide.

However the report, which includes estimates of 90 countries representing more than 85% of the world's population, cautions that economic security remains out of reach for the vast majority of the world's workers, about three-quarters of whom live in circumstances of economic insecurity that foster what the report calls "a world full of anxiety and anger".

The survey, produced by the ILO's Socio-Economic Security Programme, claims that o nly 8% of people -- fewer than one in 10 -- live in countries that provide favourable economic security.

Besides drawing on a global databank of national policies, the report uses statistics from a series of people's security surveys carried out in 15 countries, in which over 48,000 working people were interviewed about their work, the insecurities they experience and their attitudes towards inequality and related aspects of social and economic policy.

A majority of respondents everywhere favoured more support for the economically vulnerable and a desire to reduce inequality. The report says survey data shows that economic insecurity fosters intolerance and stress, which contribute to social illness and ultimately may lead to social violence.

Economic security is measured on the basis of seven forms of work-related security factors including income, labour markets, employment, skills, work, jobs, and representation.

In looking at national levels of economic security, countries are divided into four groups -- Pacesetters (with good policies, good institutions and good outcomes), Pragmatists (good outcomes in spite of less impressive policies or institutions), Conventionals (seemingly good policies and institutions but with less impressive outcomes) and Much-to-be-Done countries (weak or non-existent policies and institutions, and poor outcomes).

Tellingly, m any wealthy countries could easily achieve greater economic security for their citizens. The report shows that some lower-income countries achieve higher levels than certain rich countries. Indeed, the ILO analysis finds that the global distribution of economic security does not correspond with the global distribution of income, and that countries in South and South-East Asia have a greater share of global economic security than their share of the world's income.

Whereas South Asia has about 7% of the world's income, it has about 14% of the world's economic security. In contrast, Latin American countries provide their citizens with less economic security than is expected from their relative income levels, the report notes.

The findings reveal that only countries that provide a coherent set of policies that strengthen all seven forms of labour security have a high score on overall economic security. Countries with very strong attainment in some spheres but with weak attainment in one or more others do not do well overall.

"Coming shortly after the report of the World Commission on the social dimension of globalisation, this book should enrich the debate on how we can build a fair globalisation," says the ILO's director-general Juan Somavia. "Unless we can make our societies more equal and the global economy more inclusive, very few will achieve economic security or decent work."

Other findings of the report include:

People in countries that provide their citizens with a high level of economic security have a higher level of happiness on average, as measured by surveys on national levels of life satisfaction and happiness. The most important determinant of national happiness is not income level -- there is a positive association, but rising income seems to have little effect, as wealthy countries grow wealthier. Rather, the key factor is the extent of income security, measured in terms of income protection and a low degree of income inequality.

In addition, the report finds that a high level of skills security, measured by an index incorporating indicators of schooling and training, is actually inversely related to well-being when jobs are poorly attuned to the needs and aspirations of people, especially as they become more educated and acquire more competencies. At present, too many people are finding that their skills and qualifications do not correspond to the jobs that they have to perform, resulting in what the report calls a "status frustration" effect.

The report shows that political democracy and the trend towards civil liberties significantly increase economic security, and that government spending on social security policies also has a positive effect. But there is only a negligible impact of economic growth on security, measured over the longer term. In other words, rapid growth does not necessarily create better economic security, although it sometimes can do so if accompanied by appropriate social policies.

Indeed, being insecure has resonance in people's attitudes, which at times can be detrimental to their ideas of a decent society. In a recent survey undertaken in Latin American countries, 76% of the people surveyed were concerned about not having a job the following year, and a majority said that they would not mind a non-democratic government if it could solve their unemployment problems.

The report also finds that "income security is a major determinant of other forms of labour-related security," and that income inequality worsens economic security in several ways. "The message is," the report concludes, "that highly unequal societies are unlikely to achieve much by way of economic security or decent work."

Impact of globalisation and economic liberalisation

The analysis shows that there has been an upward trend in the frequency and severity of economic shocks during the recent period of globalisation (since 1980), as well as coincidental growth in the number of natural disasters affecting very large numbers of people. It also shows that excepting the two most populous nations (China and India), globally, and particularly among developing countries, economic growth rates in per capita terms have declined while the variability of annual economic growth rates has increased, implying more national economic insecurity. This is contrary to predictions often made by those pushing for rapid economic liberalisation.

The ILO report notes that these trends are important because they show that more people are being exposed to systemic risks, rather than to contingency risks. The latter are due to individual lifecycle events, such as individual unemployment or illness, which are covered by standard social security systems. People are far less able to prepare for shocks that affect whole communities and regions.

The report also reveals that for developing countries, the national level of economic security is inversely related to capital account openness, implying that it would be sensible for developing countries to delay opening their capital accounts until institutional development and social policies are in place to enable their societies to withstand external shocks. In other words, countries should postpone opening up their financial markets until they have the institutional capacities to handle fluctuations in confidence and the impact of external economic developments.

More findings

  • Most workers in developing countries are unaware of trade unions, which in most countries represent less than 10% of workers.
  • Women usually experience more insecurity on average than men do; also more forms of insecurity.
  • Employment security is diminishing almost everywhere due to the 'informalisation' of economic activities, outsourcing and regulatory reforms.
  • A large number of people possess skills that they do not use at work.
  • Job security (defined as the possession of a position with good prospects of satisfying work and a career) is weak in most countries, and data from people's security surveys highlights widespread job dissatisfaction.

Recommendations

Finally, the analysis considers a wide range of policies to determine which offer the best prospects for providing greater levels of economic security, particularly in developing countries. To evaluate such policies, it proposes a novel approach -- evaluating them on the basis that they should offer the strong prospect of reducing the economic insecurity of the most insecure groups in society and of not imposing controls and 'unfreedom' on intended beneficiaries.

The ILO report concludes that conventional social security systems are inappropriate for responding to new forms of systemic risks and uncertainties that characterise the emerging global economic system. Accordingly, governments and international agencies should promote universal, rights-based schemes that provide people with basic economic security, rather than resort to selective, means-tested schemes.

InfoChange News & Features, October 2004