Investing more in universal social protection: Filling the financing gap through domestic resource mobilization and international support and coordination

Bierbaum, Mira; Schmitt, Valérie Working Paper Investing more in universal social protection: Filling the financing gap through domestic resource mobilization and international support and coordination ILO Working Paper, No. 44 Provided in Cooperation with: International Labour Organization (ILO), Geneva Suggested Citation: Bierbaum, Mira; Schmitt, Valérie (2022) : Investing more in universal social protection: Filling the financing gap through domestic resource mobilization and international support and coordination, ILO Working Paper, No. 44, ISBN 978-92-2-036258-7, International Labour Organization (ILO), Geneva This Version is available at: https://hdl.handle.net/10419/263110 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/3.0/igo/ XInvesting more in universal social protection Filling the financing gap through domestic resource mobilization and international support and coordination Authors / Mira Bierbaum, Valérie Schmitt January / 2022 ILO Working Paper 44 Copyright © International Labour Organization 2022 This is an open access work distributed under the Creative Commons Attribution 3.0 IGO License (http:// creativecommons.org/licenses/by/3.0/igo). Users can reuse, share, adapt and build upon the original work, even for commercial purposes, as detailed in the License. The ILO must be clearly credited as the owner of the original work. The use of the emblem of the ILO is not permitted in connection with users’ work. Translations – In case of a translation of this work, the following disclaimer must be added along with the attribution: This translation was not created by the International Labour Office (ILO) and should not be considered an official ILO translation. The ILO is not responsible for the content or accuracy of this translation. Adaptations – In case of an adaptation of this work, the following disclaimer must be added along with the attribution: This is an adaptation of an original work by the International Labour Office (ILO). Responsibility for the views and opinions expressed in the adaptation rests solely with the author or authors of the adaptation and are not endorsed by the ILO. All queries on rights and licensing should be addressed to ILO Publications (Rights and Licensing), CH-1211 Geneva 22, Switzerland, or by email to [email protected]g. ISBN: 9789220362570 (print) ISBN: 9789220362587 (web-pdf) ISBN: 9789220362594 (epub) ISBN: 9789220362600 (mobi) ISSN: 2708-3446 The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the International Labour Office of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. ILO Working Papers summarize the results of ILO research in progress, and seek to stimulate discussion of a range of issues related to the world of work. Comments on this ILO Working Paper are welcome and can be sent to socpr[email protected]. Authorization for publication: Shahra Razavi, Director, Social Protection Department ILO Working Papers can be found at: www.ilo.org/global/publications/working-papers Suggested citation: Bierbaum, M., Schmitt, V. 2022. Investing more in universal social protection: Filling the financing gap through domestic resource mobilization and international support and coordination, ILO Working Paper 44 (Geneva, ILO). 01 ILO Working Paper 44 Abstract Large and persistent gaps in social protection coverage, comprehensiveness and adequacy are linked to many barriers, including high levels of informality, institutional fragmentation of the social protection system and significant financing gaps for social protection in a context of limited fiscal space. The latter have been further exacerbated by the impact of the COVID-19. Against this background, this paper discusses the magnitude and urgency of the challenge of filling social protection financing gaps and the options for achieving this. Options exist even in low-income countries, including by broadening the tax base; tackling tax evasion and building fair and progressive tax systems together with a sustainable macroeconomic framework; duly collecting social security contributions and tackling non-payment or the avoidance of social security contributions; reprioritizing and reallocating public expenditure; and eliminating corruption and illicit financial flows. National social protection systems should be primarily financed from domestic resources; however, for countries with limited domestic fiscal capacities or countries facing increased needs due to crises, natural disasters or climate change, international financial resources, in combination with technical assistance, could complement and support domestic resource mobilization for social protection. Furthermore, more dialogue and coherence need to be achieved between international financial and development institutions to avoid contradictory policy advice on the level and nature of investment in social protection. Finally, international cooperation, such as on tax matters or debt restructuring, is needed to create an environment that facilitates domestic resource mobilization. JEL classification: I3, H3, H53, H55 Key words: social protection, social security systems, social protection floors, social security contributions, public expenditure, fiscal space, social protection financing, solidarity, domestic resource mobilization, official development assistance (ODA), developing countries, Sustainable Development Goals (SDGs). About the authors Mira Bierbaum is a Technical Officer in the International Labour Organization’s (ILO) Social Protection Department. She holds a Master’s degree in Public Policy and Human Development with a specialization in Social Policy Design and Financing and a PhD in Economics from Maastricht University. Before joining the ILO, she worked as a consultant for the Friedrich-Ebert-Stiftung, the International Training Centre of the ILO, UN Women, and the World Bank. Valérie Schmitt is the Deputy Director of the ILO’s Social Protection Department. She is also leading the ILO’s Flagship programme on building social protection floors for all. She holds a Master of Advanced Studies (first year of doctoral studies programme) in quantitative economics from Paris Sciences Economiques (Laboratoire du Delta) and a Master of Business Administration with honours from HEC Paris. She also holds a bachelor’s degree in Philosophy from the University of Paris IV – La Sorbonne. Ms. Schmitt joined the ILO in 2003. She has 25 years of progressively responsible professional experience in the field of social protection, combining both headquarters and field experience in various types of organizations: ILO headquarters, ILO in Africa and Asia, consulting groups in France, and an NGO in West Africa. 02 ILO Working Paper 44 Abstract 01 About the authors 01 Acronyms 06 Key points 07 X1 Introduction 08 X2 Financing gaps to achieve SDG targets 1.3 and 3.8 during COVID-19 and beyond 13 2.1 Global estimates of financing gaps to achieve SDG targets 1.3 and 3.8 in 2020 13 2.2 Developing and costing a shared national vision of social protection 15 X3 Enhancing domestic resource mobilization for social protection 19 3.1 Increasing tax revenues and expanding coverage and revenues of contributory social security 20 3.2 Reallocating public expenditure and increasing the effectiveness and efficiency of social protection systems 22 3.3 Managing debt through borrowing or restructuring debt 23 X4 The role of international technical and financial support and coordination 24 4.1 Technical support 25 4.2 Financial support 25 Joint financing arrangements at the national level 26 Prerequisites for international financial support and prioritization 28 International resources to meet countries’ financing needs 29 4.3 International coordination to increase domestic resources for social protection 31 X5 Conclusion 32 Annex 33 References 34 Acknowledgements 40 Table of contents 03 ILO Working Paper 44 List of Figures Figure 1: Incremental financing needs for progressively achieving SDG targets 1.3 and 3.8 in low-income countries, 2020–2030 (billions of US$ and percentage of GDP) 15 Figure 2: Spending on INAS social protection programme of Mozambique, share of GDP and total state budget, 2011–2020 18 Figure 3: Number of beneficiary households in INAS, in thousands, 2011–2020 18 Figure 4: Share of external and domestic financing for non-contributory social protection schemes, Kenya, 2007–2018 28 Figure 5: Stylized graph on incremental financing needs for progressive extension of social protection in low-income countries, by financing source, 2020-2030 30 04 ILO Working Paper 44 List of Tables Table 1: Annual financing gap in achieving SDG targets 1.3 and 3.8, by subregion and income classification, 2020 (billions of US$ and percentage of GDP) 14 Table A.1: Incremental financing needs for progressively closing the social protection floor coverage gap in low-income countries, 2020–2030 (billions of US$ and percentage of GDP) 33 05 ILO Working Paper 44 List of Boxes Box 1: Making the economic case for social protection: Returns on investment in social protection 09 Box 2: Global Accelerator for Jobs and Social Protection 11 Box 3: Resolution and conclusions concerning the second recurrent discussion on social protection (social security) adopted by the International Labour Conference at its 109th Session in 2021 12 Box 4: The steps of an assessment-based national dialogue: Defining priorities and identifying financial needs in Timor-Leste 16 Box 5: Monitoring fiscal space in Mozambique 17 Box 6: Monotax in Brazil: Extending social protection to microenterprises and the self-employed 21 Box 7: Rationale for international support 24 Box 8: Linking financial to technical support in an ILO-BMZ project 26 Box 9: Creating fiscal space in Jordan during the COVID-19 pandemic and beyond 27 06 ILO Working Paper 44 Acronyms ABND assessment-based national dialogue BEPS base erosion and profit shifting BMZ Federal Ministry for Economic Cooperation and Development (Germany) DAC Development Assistance Committee DSSI Debt Service Suspension Initiative ECLAC Economic Commission for Latin America and the Caribbean ENSSB National Basic Social Security Strategy (Mozambique) EU European Union GDP gross domestic product GNI gross national income IMF International Monetary Fund ILO International Labour Organization INAS National Social Action Institute (Mozambique) ODA official development assistance OECD Organisation for Economic Cooperation and Development PPP purchasing power parity RAP Rapid Assessment Protocol SDG Sustainable Development Goals UNDP United Nations Development Programme UNICEF United Nations Children’s Fund UNRISD United Nations Research Institute for Social Development 13 ILO Working Paper 44 X2 Financing gaps to achieve SDG targets 1.3 and 3.8 during COVID-19 and beyond Social security, an adequate standard of living and health are human rights, but a reality for far too few people. The COVID-19 pandemic has once again demonstrated the dramatic consequences of these unacceptably high coverage gaps, which lead to suffering, destitution and even death, exacerbate economic and social inequalities, and undermine social cohesion in many countries. At the start of the pandemic, only 46.9 per cent of the global population were effectively covered by at least one social protection benefit (such as child or family benefits, maternity benefits, unemployment benefits, employment injury benefits, disability benefits, old-age pensions, survivors’ pensions or social assistance), while the remaining population, as many as 4.1 billion people, were completely unprotected when the crisis hit. These average global coverage rates mask extensive regional disparities, ranging from only 17.4 per cent of people in Africa having access to some form of social protection to 83.9 per cent of people in the Europe and Central Asia region (ILO 2021i; 2021j). Access to social protection benefits varies also systematically across population groups. Worldwide, nearly eight in ten older persons have a pension, while on average only every third child and one in three persons with disabilities are protected by child and disability benefits, respectively. Closing gender gaps and extending coverage to workers in all forms of employment, including in the informal economy, also deserve increased attention. Finally, more than half or the world’s population are protected by social health protection schemes, yet this coverage rate also hides stark inequalities across population groups within both regions and countries (ILO 2021j). These coverage gaps are linked to significant financing gaps that have been further exacerbated by the impact of the COVID-19 pandemic. In order to provide an overview of the additional resources needed in low- and middle-income countries for achieving SDG targets 1.3 and 3.8, Durán Valverde et al. (2020) estimated (1) the costs of a universal package comprising four areas of social protection (children, maternity, disability and old-age benefits), including administrative costs (but not initial start-up costs such as IT systems or capacity-building), as well as access to essential health care; (2) the financing gap, defined as the difference between costs and baseline expenditure on social assistance; and (3) the incremental financing needs, calculated over the 10-year period 2020–2030, assuming a progressive increase of coverage in a linear fashion that starts from 2020 levels and reaches universal coverage by 2030.3 The amount required to close the financing gap in social protection has increased by approximately 30 per cent since the onset of the COVID-19 crisis. This is the result of (a) the increased need for health care services and income security for workers who have lost their jobs because of lockdowns and other measures; and (b) the contraction of GDP caused by the crisis. These estimates provide an important overview of approximate resource needs. Nonetheless, they cannot replace detailed costing studies of social protection floors that are nationally defined through effective tripartite social dialogue (see below). 2.1 Global estimates of financing gaps to achieve SDG targets 1.3 and 3.8 in 2020 Table 1 presents the annual financing gap to achieve SDG targets 1.3 and 3.8 in 2020 in low-, lower-mid- dle- and upper-middle-income countries, as well as for different regional groupings. In total, an additional US$77.9 billion would have been needed in 2020 to close the social protection financing gap in low-income 3The costs of providing access to essential health care are calculated based on World Health Organization (WHO) estimates (Stenberg et al. 2017). A summary of the results is provided in an accompanying policy brief (ILO 2020), while further details can be found in the working paper (Durán Valverde et al. 2020). 14 ILO Working Paper 44 countries, representing 15.9 per cent of these countries’ GDP. The absolute gap is much larger when including lower-middle-income und upper-middle-income countries in these estimates (US$362.9 billion and US$750.8 billion respectively), yet these gaps are nonetheless less daunting when seen in relation to the economic capacity of these countries (5.1 and 3.1 per cent of GDP respectively). Regionally, the relative burden is particularly high in Central and Western Asia, Northern Africa and sub-Saharan Africa (9.3, 8.3 and 8.2 per cent of GDP, respectively). XTable 1: Annual financing gap in achieving SDG targets 1.3 and 3.8, by subregion and income classification, 2020 (billions of US$ and percentage of GDP) Population (millions) Gap in achieving SDG target 1.3 (billions of US$) Gap in achieving SDG target 1.3 (percentage of GDP) Gap in achieving SDG target 3.8 (billions of US$) Gap in achieving SDG target 3.8 (percentage of GDP) Total gap (billions of US$) Total gap (percentage of GDP) Income groups All low- and middle-in- come countries 6 522.7 707.4 2.2 484.2 1.5 1 191.6 3.8 Low-income countries 711.2 36.2 7.4 41.8 8.5 77.9 15.9 Lower-middle-income countries 3 105.3 173.8 2.4 189.1 2.6 362.9 5.1 Upper-middle-income countries 2 706.2 497.4 2.1 253.4 1.1 750.8 3.1 Regions Arab States 110.3 15.1 4.5 10.2 3.0 25.2 7.5 Central and Western Asia 212.6 86.6 7.9 15.2 1.4 101.8 9.3 Eastern Asia 1 427.8 58.1 0.4 132.9 0.9 190.9 1.3 Eastern Europe 227.1 32.8 1.6 21.8 1.1 54.6 2.7 Latin America and the Caribbean 619.1 272.1 6.1 61.1 1.4 333.2 7.5 Northern Africa 245.5 31.5 4.7 24.1 3.6 55.6 8.3 Northern, Southern and Western Europe 19.7 5.0 5.7 1.9 2.1 6.9 7.8 Oceania 11.2 1.5 4.5 0.9 2.7 2.4 7.2 South-East Asia 662.6 48.2 1.8 46.3 1.7 94.5 3.5 Southern Asia 1 897.6 94.8 2.3 94.8 2.3 189.6 4.6 Sub-Saharan Africa 1 089.2 61.8 3.7 75.1 4.5 136.9 8.2 Source: Durán Valverde et al. (2020, p. 31). Even if low- and middle-income countries were able to mobilize the necessary resources to cover the financing gap, SDG targets 1.3 and 3.8 could not be achieved immediately. Building social protection systems takes time, as it encompasses the development and adoption of national social protection strategies, the design of social protection schemes, the preparation and adoption of legal frameworks, the implementation of the schemes and monitoring progress, all based on tripartite social dialogue. It may also require the creation of institutions at the national and subnational levels. The study therefore assumes that financing gaps will be progressively filled over the 11-year period from 2020 to 2030, which is in line with the objectives of the 2030 Agenda for Sustainable Development to achieve SDG targets 1.3 and 3.8 by 2030. The financing needs to progressively achieve SDGs 1.3 and 3.8 by 2030 in low-income countries are illustrated in figure 1 (table A.1 in the Annex shows the estimates for low-, lower-middle- and upper-middle-income countries). Starting from an additional investment of US$48.1 billion in 2020 (9.8 per cent of GDP) that would increase the social protection coverage of children, mothers with newborns, persons with disability and older persons by 15 ILO Working Paper 44 13.3 percentage points to 36.9 per cent, financing needs would incrementally increase to reach US$100.9 billion in 2030 (equivalent to 11.5 per cent of GDP) to provide full coverage. XFigure 1: Incremental financing needs for progressively achieving SDG targets 1.3 and 3.8 in low-income countries, 2020–2030 (billions of US$ and percentage of GDP) Source: Based on Durán Valverde et al. (2020, p.33). Several other studies have assessed the (additional) costs of achieving the SDGs or different sets of goals, as well as the costs of closing social protection gaps, taking different approaches and perspectives. A detailed comparison of commonalities and differences is beyond the scope of this paper. Nonetheless, what has become clear is that all these studies show that achieving the SDGs is affordable from a global point of view, yet exceeds the present economic capacities of low-income countries. For instance, based on IMF and World Bank research and International Centre for Tax and Development data, Manuel et al. (2020) estimate that the current capacity to generate revenues for public policies in low-income countries is 16 per cent of GDP. The Social Protection Floor Index, conceptually based on Recommendation No. 202, provides an indication of the minimum resources that a country would need to invest or reallocate to close existing income and/or health protection gaps. Using the international poverty line of $1.9 in 2011 purchasing power parity (PPP) as the minimum level of income, the 25 low-income countries included in the study would have to invest on average additional 13.0 per cent of their GDP to close social protection gaps in 2018 (Bierbaum, Schildberg, and Cichon 2017; Friedrich-Ebert-Stiftung 2020). In a study of 16 Asian (mainly middle-income) countries, Cichon (2018) estimated that these countries would have to invest between 3.5 and 8.5 per cent of GDP per year to meet SDG-related social protection requirements by 2030. Taking a broader perspective and including the achievement of more SDGs, Manuel et al. (2020) estimated that low-income countries would need to invest US$ 183.3 billion in 2019 to cover the costs for education, health, social protection, and water, sanitation and hygiene, of which US$ 59.2 billion would need to be allocated to social protection (excluding health). Significantly, they noted that although all sectors were significantly underfunded, the relative funding gap for social protection was the largest. Finally, the Sustainable Development Solutions Network estimated that the average SDG financing gap per year for all 59 low-in- come developing countries was approximately US$ 400 billion over the 2019–2030 period, of which 10 per cent would have to be allocated to social protection (excluding health) (SDSN 2019). 2.2 Developing and costing a shared national vision of social protection The global and regional ILO estimates presented above are based on calculating the costs and remaining gaps of introducing a set of universal benefits that cover childhood, maternity, disability, old age and health – that is, all the components of social protection floors except for unemployment and sickness benefits. 16 ILO Working Paper 44 This benefit package was used to ensure comparability across countries and provides an overview of the approximate resource needs to achieve SDG targets 1.3 and 3.8. However, countries may choose other ways of achieving their nationally defined social protection floor. In response to the COVID-19 pandemic, for example, many countries have indeed prioritized access to health care (182 measures were reported in 84 countries as of 10 May 2021; see ILO (2021f)) or scaled up cash transfers for families with children (120 measures in 70 countries). Others have introduced measures to protect jobs, such as wage subsidies or part-time employment (more than 253 measures in 110 countries) or have adapted, established or plan to establish unemployment benefit schemes to mitigate income losses of workers (188 measures in 95 countries) in cases of full- or part-time unemployment. For instance, to mitigate the socio-economic impacts of the COVID-19 crisis, the State of Mexico introduced an unemployment benefit that is planned to be sustained after the crisis. Ecuador plans to extend the unemployment protection scheme to workers in the informal economy. Hence, these global and regional estimates cannot replace detailed costing studies of national social protection floors that are in line with a shared national vision of social protection, based on an in-depth assessment of the current state in a country and defined through effective tripartite social dialogue. This can be achieved through a so-called assessment-based national dialogue (ABND) (see box 4). Between 2012 and 2020, ABNDs have been carried out in 26 countries,4 leading in many cases to the development and adoption of national social protection strategies. Some of the recommendations of ABNDs have led to policy reforms in several countries, such as the establishment of an unemployment insurance scheme in Indonesia and a universal child benefit in Thailand. Such a dialogue is not only essential to identify policy gaps, reach agreement on priority policy options and cost them, but is also essential to devise and discuss possible financing options (see next section). Furthermore, it is essential that the results of national dialogues on social protection (and, if applicable, national social protection policies and strategies) are reflected in countries’ national development plans, integrated national financing frameworks (UN and EU 2021) and medium-term fiscal frameworks. This allows for a better alignment between financing strategies and policy priorities, exploring synergies and managing possible trade-offs across different development objectives. XBox 4: The steps of an assessment-based national dialogue: Defining priorities and identifying financial needs in Timor-Leste Based on the experience of conducting ABNDs in 14 countries in Africa and Asia, the ILO prepared a global guide (ILO 2016d) that has informed ABND exercises in many more countries in the framework of the ILO Global Flagship Programme on Building Social Protection Floors for All (ILO 2021k). An ABND provides a sound basis for identifying and costing policy scenarios based on national dialogue, as well as for discussing the creation of fiscal space by bringing all stakeholders to the table. Its success hinges on the participation of all stakeholders from the outset, including line ministries (finance and planning, health, labour, social affairs and so on), social security institutions and social protection programmes, local government bodies, employers’ and workers’ organizations, civil society organizations, academics, development partners or IFIs. Timor-Leste, for instance, conducted such an ABND between 2016 and 2018. Its explicit goal was to inform its national social protection strategy. Throughout the process, representatives of the institutions listed above and many more were involved. Such an ABND comprises three steps, as described below. 4Albania, Cambodia, Cameroon, Egypt, Georgia, Ghana, Indonesia, Kyrgyzstan, the Lao People’s Democratic Republic, Liberia, Malawi, Mongolia, Mozambique, Myanmar, the Niger, Pakistan, the Philippines, Senegal, Solomon Islands, Tajikistan, Thailand, Timor-Leste, Togo, Vanuatu, Viet Nam and Zambia. In Senegal and Togo, the methodology used was that of the Social Protection Policy Options Tool, which was devised as part of the Inter-Agency Social Protection Assessments process. 17 ILO Working Paper 44 (1) Building the assessment matrix and developing policy options. The assessment matrix lists and describes the existing social security schemes and programmes that guarantee access to essential health care and income security over the life cycle. It identifies policy gaps and implementation issues and provides policy recommendations to further design and implement social protection provisions with the aim of guaranteeing, at a minimum, a social protection floor for all residents and children. In Timor-Leste, one of the results of the assessment matrix was that the broad range of existing programmes and policies lacked coordination, leading to inefficiencies as well as coverage and adequacy gaps. Furthermore, many programmes were not anchored in national law. This assessment provided the basis for formulating five objectives and related recommendations for the national social protection strategy. (2) Costing policy options, assessing their potential impact, and exploring financing options. Based on social dialogue, policy recommendations are then translated into concrete policy options. For each guarantee, several less and more ambitious scenarios in terms of population coverage and benefit levels should be identified, costed and projected over a ten-year period, for instance using the ILO Rapid Assessment Protocol (RAP) model. The costing serves as a basis for discussions on the fiscal space and government budget reallocations and can help prioritize among different policy options. Importantly, this also requires a detailed understanding of the size and composition of the current social protection budget. Timor-Leste also used the ILO RAP model to cost a set of policies that could build a national social protection floor. Depending on whether a low- or high-cost scenario is chosen, the costs of a national social protection floor ranged between approximately 4 and 12 per cent of GDP in 2018. The costing was complemented by a microsimulation exercise to assess the potential impact of the different scenarios on poverty reduction. Finally, the ABND discussed ways to create fiscal space for social protection in Timor-Leste, for instance through the reprioritization of budget allocations. (3) Finalization and endorsement. The final recommendations must be technically validated and politically endorsed. Usually, an ABND leads to the recommendation and ideally the adoption of a new national social protection policy or the evaluation of an existing one. In Timor-Leste, the recommendations were validated and the report was published. On 11 November 2021, the national social protection strategy was approved by the Council of Ministers. Sources: ILO (2016); United Nations, ILO, and Ministry of Social Solidarity of Timor-Leste (2018). Finally, it is necessary to follow up the implementation of the national social protection strategy and progress made in domestic resource mobilization for social protection. Mozambique, for instance, has been monitoring fiscal space for social protection for several years now and has demonstrated steady progress (see box 5). Such monitoring also provides evidence and supports dialogue and advocacy work with, for example, representatives of ministries of finance, parliamentarians, representatives of employers’ and workers’ organizations or representatives of the media. XBox 5: Monitoring fiscal space in Mozambique The Social Action Budget Brief in Mozambique is a joint initiative by the United Nations Children’s Fund (UNICEF) and ILO that aims to promote national debate around domestic fiscal space dedicated to basic (non-contributory) social protection in Mozambique. Since its first edition in 2013, it has been launched every year at a dedicated event during a Social Protection Week attended by representatives of the Ministries of Gender, Children and Social Action, Health, Education and Human Development, Economy and Finance, as well as by representatives of the Parliament, workers’ organizations, political parties, academia, journalists and international development partners. It is disseminated nationwide with the support of civil society organizations. The Social Action Budget Brief monitors the budget allocation to social protection and financing sources, points out trends, reviews them in relation to the strategic objectives defined in the country’s 18 ILO Working Paper 44 National Basic Social Security Strategy (ENSSB) and provides key recommendations. In 2020, for example, 0.5 per cent of GDP or 1.6 per cent of the total state budget was allocated to social protection programmes, showing a positive trend over the past ten years (see figure 2, which shows the allocation to the National Social Action Institute (INAS) social protection programme). Between 2011 and 2020, the coverage of INAS programmes increased from 287,000 households to 608,724 households (see figure 3). Currently, 22 per cent of individuals living below the national poverty line are covered. However, benefit amounts have not been adjusted since 2018 and fall short of reaching the target of two thirds of the poverty line defined by the ENSSB. The Social Action Budget Brief has been an effective tool to promote debate around the fiscal envelope dedicated to social protection, monitor progress and advocate for an expanded fiscal space for the sector. It also provides the basis for an evidence-based discussion with representatives of the Ministry of Finance and is an effective way to promote active engagement of employers’ and workers’ as well as civil society organizations during the preparation of the National Budget Law, as well as to track political commitments on social protection. Source: UNICEF and ILO (2019; 2020). XFigure 2: Spending on INAS social protection programme of Mozambique, share of GDP and total state budget, 2011–2020 XFigure 3: Number of beneficiary households in INAS, in thousands, 2011–2020 Source: UNICEF and ILO (2020, p.11). 19 ILO Working Paper 44 X3 Enhancing domestic resource mobilization for social protection This section discusses options to meet the financing needs identified at country level through domestic resource mobilization, with a view to securing “with due regard for the objectives of social justice and equity, a solid and sustainable economic, fiscal and financial base for the extension and operation of universal social protection systems over the medium to long term, without compromising the adequacy and coverage of benefits” (ILO 2021g, para. 15 (a)). Over the past 10 years, many countries, such as Cabo Verde, China, Indonesia, South Africa and Thailand, have increased investment in social protection, leading to significant achievements in terms of social protection coverage extension. Furthermore, in the African and the Latin American regions, average tax-to-GDP ratios increased as a result of the modernization of tax systems and administrations and tax policy reforms between 2000 and 2015, from 14.2 to 19.1 per cent and from 18.0 to 23.1 per cent, respectively (Modica, Laudage, and Harding 2018). This shows that options to increase fiscal space, which is defined by the ILO, UNICEF and UN Women as “the resources available as a result of the active exploration and utilization of all possible revenue sources by a government” (Ortiz et al. 2019, p. 9), exist in all countries regardless of their income status, provided that there is political will to discuss all possible options and find the optimal combination of diverse and innovative financing sources, both contributory and non-contributory, while paying due consideration to the national economic context, demographic challenges and the need to ensure just transitions to more environmentally sustainable economies and societies (ILO 2015). The tripartite participation of representative organizations of employers and workers, as well as consultations with other relevant and representative organizations of persons concerned, are essential to this process. Broadly, countries can consider eight different strategies for creating fiscal space for social protection (Ortiz et al. 2019): 1. expanding social security coverage and contributory revenues; 2. increasing tax revenues;5 3. reallocating public expenditures and increasing the effectiveness, efficiency and sustainability of policies; 4. eliminating illicit financial flows; 5. using fiscal and central bank foreign exchange reserves; 6. managing debt: borrowing or restructuring sovereign debt; 7. adopting a more accommodating macroeconomic framework; and 8. increasing official development assistance (ODA) and transfers. For a comprehensive description and country examples, readers may wish to refer to Ortiz et al. (2019). This section focuses on options (1), (2), (3), (6) and (7), which have been used the most and have shown great potential. The following section on the role of international technical and financial support and coordination will focus on increasing ODA and transfers. Many of these options have also been used during the COVID-19 crisis. Nonetheless, it is important to note that finding resources in an emergency context is different from securing resources in the long term for rights-based social protection systems. 5Contrary to the presentation here, the OECD defines taxes as “compulsory, unrequited payments to general government” (Modica, Laudage, and Harding 2018, 8). In that classification, taxes are classified by the base of the tax and compulsory social security contributions are one category (in addition to income and profits, payroll and workforce, property, and goods and services). 20 ILO Working Paper 44 3.1 Increasing tax revenues and expanding coverage and revenues of contributory social security Social protection systems are typically organized through a combination of tax-financed non-contributory schemes and social insurance schemes. It is estimated that contributory schemes finance more than 70 per cent of the social protection expenditure in low- and middle-income countries. Increasing tax revenues is one of the options used to increase domestic resources for social protection (see also European Commission 2015). To maximize the redistributive effect of social protection, it is important that such tax reforms maintain or reinforce the progressivity of the national tax systems in a fair way, which means that those with the greatest capacity to pay bear the largest overall tax burden. Progressive taxation can be achieved through personal income tax rates that increase with taxable income; by avoiding tax exemptions that benefit richer households the most; by taxing personal capital income at appropriate tax rates; or by taxing certain luxury items at higher rates. While the effect of individual taxes is important, it is even more important that the combined effect of the tax system, as well as any spending supported by such tax revenues, be considered when assessing the progressivity of the social protection financing option. For example, cash transfer programmes contribute to reducing poverty, but the combined tax-benefit impact on poverty and inequality may be smaller (or even negative) when financed from certain regressive consumption taxes (which are also paid by individuals living in poverty and hence reduce the net income effect of a transfer) rather than from income taxes or other progressive taxes. There are other ways to increase tax revenues. The Plurinational State of Bolivia, Botswana, Mongolia and Zambia have introduced taxes on their natural resources to finance their social protection programmes (Ortiz, Schmitt, and De 2019), while Egypt has introduced earmarked taxes to finance its universal health care system and Brazil has introduced a tax on financial transactions (ILO 2016a). Social security contributions, in turn, are usually funded by employers’ and workers’ contributions, which should be fairly divided between employers and workers. To strengthen the contribution base, countries need to increase the legal and effective coverage of existing schemes. First, countries can extent the legal coverage of existing schemes or create new schemes for previously uncovered groups with contributory capacity, such as workers in the informal economy; workers in small and medium-sized enterprises; domestic, construction or agriculture workers; or self-employed workers (ILO 2021a). It is important that compulsory affiliation be mandated by law, as voluntary affiliation usually results in very low take-up rates. Second, depending on the national context, different options to increase effective coverage through administrative, financial or institutional measures are possible (ILO 2021a). The simplification and adaption of contribution collection can cater to volatile earnings of workers in the informal economy (see box 4). Progressive social security contributions, subsidies for social security contributions or the existence of a solidarity (non-contributory) pillar can facilitate the affiliation of small and medium-sized enterprises and of self-employed workers, as well as regular payments of social security contributions. Providing incentives, such as requiring proof of social security and tax compliance as a condition for public tenders or to obtain access to government credit and business services, may contribute to boost affiliations. Furthermore, improved administrative efficiency and better compliance in terms of registering enterprises, declaring all workers and their actual earnings and paying social security contributions are important as well. For example, compliance may be improved by the development of management information systems to keep a track record of affiliations and payments and increase the transparency of the system; the simplification of registration and payment mechanisms; the reinforcement of labour and social security inspections (for example using labour inspection to enforce the social security laws as is done in China (ILO 2016c)); the development of one-stop shops (van Langenhove and Peyron Bista 2019); easily accessible complaints and appeals mechanisms; and advocacy campaigns targeted at both employers and workers. Social security contributions currently amount to 0.4 per cent of GDP in low-income countries, 2.5 per cent of GDP in lower-middle-income countries and 5.8 per cent of GDP in upper-middle-income countries, with 21 ILO Working Paper 44 an average of 5.1 per cent of GDP across all low- and middle-income countries (Durán Valverde et al. 2020). Increased social security contributions can be achieved by extending coverage or increasing contribution rates, although the latter option is often more difficult to implement. There is still considerable untapped potential for using both avenues, as a simulation exercise shows (see Durán Valverde et al. 2020, p. 35 and table 8 for more details on the method). By replacing coverage rates and contribution rates by average estimates for countries with comparable levels of old-age dependency ratios and GDP per capita (PPP terms), respectively, for countries that fall below these averages, potential social security revenues are calculated based on these upward adjustments. Low-income countries could potentially double the revenues generated from contributory schemes to 0.8 per cent of GDP over the next decade. Across all low-and middle-in- come countries, social security contributions as a percentage of GDP could potentially be increased by 1.2 percentage points to reach 6.3 per cent of GDP. Countries that do not yet have contributory social protection systems in place or whose systems provide only protection for a limited number of risks should prioritize the development of such schemes to cover workers in formal sector enterprises; countries that have developed comprehensive contributory schemes for the formal sector should prioritize both their implementation through greater compliance with the social security law and their progressive extension to workers in all forms of employment (such as part-time workers, self-employed workers, domestic workers, informal economy workers and enterprises). Contributory schemes are usually self-financed from workers and employers’ contributions and as such do not put any strain on governments’ budgets. Both options – increasing tax revenues and increasing social security contributions – require strong governance, administration, accountability and compliance mechanisms that work effectively and efficiently and are transparent. This ensures sound financial management, enforces compliance and prevents corruption and fraud, while also ensuring that the distribution of benefits is fair and efficient. In addition, extending the tax and contribution base also necessitates an integrated approach of social, economic and employment policies that work together to facilitate the transition of workers and enterprises to the formal economy, in line with the Transition from the Informal to the Formal Economy Recommendation, 2015 (No. 204) (ILO 2021c). This includes for instance measures to facilitate business registration and licensing; adapted and simplified taxation and payment mechanisms; simplified accounting standards; access to financial services; and skills development. The formalization of businesses and workers broadens both the tax and contribution base, supporting a better financing mix for social protection and other public services. Furthermore, minimum wage policies and measures to boost productivity can help to ensure that salaried workers and the self-employed have adequate resources to live on and can contribute their share of contributions to social security. A “race to the bottom” may otherwise lead to a situation in which workers and employers resist the creation or further development of the national social protection system because they cannot afford paying their shares of social security contributions. Similarly, governments may be hesitant to expand social protection coverage for fear that it may disincentivize foreign investors. Trade agreements between countries and contractual agreements between buyers and suppliers in global and national supply chains can contribute to increasing both the political will, tripartite support and financial feasibility of introducing new social protection schemes. XBox 6: Monotax in Brazil: Extending social protection to microenterprises and the self-employed The Simples scheme is a Monotax (simplified tax collection/payment) mechanism for small contributors in Brazil, which unifies several taxes and contributions in a unique payment. Micro-entrepreneurs who join the scheme, as well as their employees, are automatically entitled to the benefits of the contributory social security system. It has proven to be an effective tool to formalize micro and small enterprises and to extend social security coverage to self-employed workers. Between 2008, when individual company owners were included, and 2016, the number of total registered firms covered by the scheme increased from about 3 million to about 12 million. The process works in a simple way. The Simples scheme divides companies into three levels according to their size. Individual micro company owners (smallest category, with one employee) pay a fixed monthly contribution. Micro 22 ILO Working Paper 44 companies (intermediate category) and small companies (larger category) pay progressive contribution percentages based on their classification. Simples contributions are collected by the central fiscal administration and the share corresponding to social security payments is transferred to the Social Security Institute to finance social security. Other countries in Latin America such as Argentina, Ecuador and Uruguay have already successfully implemented similar schemes. Sources: Based on Ortiz et al. (2019, 70); see also ILO (2019a; 2019b). More country examples can be found in Ortiz, Schmitt, and De (2019) and ILO (2019c; 2019d). 3.2 Reallocating public expenditure and increasing the effectiveness and efficiency of social protection systems The reallocation of public expenditure is another option that is commonly used in many countries. In response to the COVID-19 crisis, for example, Albania reallocated 2 billion leks (about US$19 million) of defence spending towards humanitarian relief for the most vulnerable. Similar examples of reallocating public expenditures to social protection can be found in Belize, Cabo Verde, the Dominican Republic, Eswatini, Hungary, Saudi Arabia and Ukraine. In “normal times”, public expenditure reviews, social budgeting and other types of budget analysis can be used to assess the current spending structure and, when politically feasible, provide advice to replace highcost, low-impact investments with investments that result in more substantial socio-economic impacts and redistribution. Egypt, for instance, removed its energy subsidies and planned to reallocate 1 per cent of GDP to social protection expenditure (even though this target was not achieved by 2019) in the form of additional food subsidies, cash transfers to older persons and low-income families and other targeted social programmes, including more free school meals (IMF 2016). The Sudan is currently implementing a similar reform and launching a quasi-universal, non-contributory social protection programme. Nonetheless, in both countries, only a small part of the savings on the removal of fuel subsidies was reallocated to social protection measures. More broadly, it could be beneficial to explore more to what extent government support for fossil fuels has already been redirected to social protection and the potential to reallocate more (IISD, ODI, and OCI 2020). Significantly, social protection spending should not be seen as competing with other important social and structural spending, such as spending on health, education and basic infrastructures. Through synergies between social protection and other sectors such as health and education, parts of the fiscal space created for social protection can also benefit those other sectors, thereby enhancing spending effectiveness (for example higher enrolments in schools thanks to family allowances or school feeding programmes). Social health insurance contributes to the sustainable financing of the health sector by creating a solvent demand for quality health care services. These synergies need to be reflected in countries’ national development plans, integrated national financing frameworks and medium-term fiscal frameworks, as outlined in section 2.2 above. Enhancing spending effectiveness also refers to making improvements in the design and performance of social protection schemes and programmes to achieve intended development outcomes, such as poverty reduction, redistribution or lower maternal and child mortality rates. For example, Costa Rica introduced a new health care model that strengthened prevention and health promotion, leading to substantial improvements in spending effectiveness in terms of health outcomes. The introduction of categorical social protection schemes (that is, identifying beneficiaries based on simple criteria such as age) instead of (proxy-)means-tested programmes increases efficiency since such schemes typically have lower administration costs and can be implemented more rapidly. They also entail fewer of the targeting errors that can be detrimental to creating trust in the system. 29 ILO Working Paper 44 These standards not only define a tangible goal – setting up national social protection floors – but also define principles for guiding countries towards achieving these objectives (Bierbaum and Schmitt 2022). These include, for instance, the principles to develop transparent, accountable, and sound financial management and administration; enhance tripartite participation with representative organizations of employers and workers; and engage in consultation with other relevant and representative organizations of persons concerned. The application of these principles (or a strong commitment to apply them) could be both a precondition for international financial and technical support and serve as indicators to monitor and evaluate the impact of the technical and financial support provided. Additional prerequisites for financial support may include having at least one national social protection programme or scheme in place that would be available to absorb additional resources and distribute the benefits and could be scaled up, or the political will to establish a new national social protection scheme and progressively increase domestic resources for social protection. For all countries requesting financial support, it would also be necessary to have adopted and costed a strategy for the development of a national social protection floor and conducted a fiscal space analysis that establishes that the economic and fiscal capacities to guarantee the national social protection floor are insufficient and that national efforts need to be complemented with international resources, at least temporarily. Moreover, countries and financial and technical support institutions should agree on a credible, feasible and sustainable medium-term exit strategy from such financial support that is in line with medium-term revenue and expenditure frameworks and/or embedded in integrated national financing frameworks. The prioritization of countries for financial support (and technical assistance) could take into account existing coverage gaps and financing needs as well as the current income classification, with a focus on low-in- come or lower-middle-income countries for the financial support component. International resources to meet countries’ financing needs These considerations at the country level – combining progressively increasing total resource needs as social protection systems are established and decreasing international resource needs as domestic resource mobilization is strengthened simultaneously – are the basis for providing the estimate of resource needs from international sources between 2020 and 2030 based on the estimated financing needs presented in figure 1. Figure 5 shows the incremental needs for the progressive extension of social protection in low-in- come countries in a highly stylized way. They are only indicative for several reasons, including that national social protection floors might differ from the generic set of benefits used for the global calculations, as well as that the speed of extending coverage, comprehensiveness and adequacy and increasing fiscal space depend on the specific national context. Nonetheless, it provides a rough indication of the magnitude of the challenge and the type of monitoring that will be carried out in the context of the implementation of the Global Accelerator for Jobs and Social Protection outlined in box 2. The blue bars indicate the annual incremental domestic financing needs for building social protection floors in low-income countries. The green bars show the corresponding amounts that would need to be financed from international resources, such as Special Drawing Rights or ODA. This assumes that given the strain of the current COVID-19 pandemic, financing needs would need to be covered fully from international resources in 2020 and 2021. From 2022 onwards, it is assumed that the share financed from domestic resources progressively increases by 10 percentage points each year and international partners’ co-financing is continuously phased out accordingly. This means that in 2026 only half of low-income countries’ financing needs would need to be financed from international sources and in 2030 only 10 per cent would need to be financed. Subsequently, international financial support would aim merely at safeguarding investments in the case of covariate shocks. 30 ILO Working Paper 44 XFigure 5: Stylized graph on incremental financing needs for progressive extension of social protection in low-income countries, by financing source, 2020-2030 Source: Authors’ illustration based on Durán Valverde et al. (2020). To ensure progressive implementation, avoid retrogression and increase credibility and trust in the social protection system, it is crucial that recipient countries can rely on international financial support over a clearly defined and sufficiently long time period that allows for strategic planning and undisrupted support. This follows from the principles that social protection schemes and programmes should be anchored in national legal frameworks and benefits should be predictable. The inability to fulfil legal commitments could lead to legal claims from beneficiaries, lack of trust in the system and social unrest. While international resource mobilization and debt relief have provided important short-term financial assistance in the context of the COVID-19 crisis, they represent only a small proportion of what is needed to sustainably close the social protection financing gap in low- and middle-income countries. Previous commitments exist as well, yet despite the Addis Ababa Action Agenda’s call for enhanced ODA to support financing for sustainable development (United Nations 2015), many countries in the Organisation for Economic Cooperation and Development (OECD)/Development Assistance Committee (DAC) fall woefully short of meeting the agreed target of 0.7 per cent of gross national income (GNI); preliminary figures for 2019 show an average value of 0.3 per cent of the combined GNI of all OECD/DAC countries (OECD 2021). Encouraging and supporting the mobilization of international resources for social protection, including through increased ODA, is therefore needed. In reality, the share of disbursed ODA allocated to social protection represented a mere 1 per cent of total bilateral ODA in 2018 (OECD 2020b), leading to questions of how ODA can be better oriented towards social protection and how its centrality for countries’ social and economic development can be recognized beyond the current emergency situation. Whereas this would require a substantial share of total ODA channelled towards social protection in the initial years (for example, the financing needs of low-income countries in 2020 correspond to more than one third of total OECD/ DAC commitments in 2019), the financing needs to be covered from international resources would continuously decline as domestic resource mobilization is enhanced. To complement regular sources of financing and fill remaining gaps, donor (but also recipient) countries could consider a range of innovative sources of financing, some of which have already been implemented. These include earmarked taxes (financial transaction taxes, taxes on airline tickets, dedicated funds from extractive industries, sin tax on tobacco, alcohol and fast food, billionaires’ tax, inheritance tax, arm trade taxes, levies on mobile phone calls and so on); debt-based borrowing mechanisms (debt conversion linked to social protection, diaspora bonds and so on). Overall, these sources of financing vary in terms of several criteria that should be taken into account for policy considerations, including the objectives of the financing 31 ILO Working Paper 44 sources, their time frame, whether they are earmarked, the level at which they would be raised, their overall sustainability and the political will to implement them (Durán Valverde et al. 2020, table 9). 4.3 International coordination to increase domestic resources for social protection Finally, it will be essential that the strategic objective of establishing basic social security guarantees to all and building universal social protection systems is supported by the multilateral system through enhancing the coherence of national and international policies and creating an environment that is conducive to increasing fiscal space at the domestic level. This will require strong political will and the active mobilization of IFIs and development partners. This is also in line with the proposed pillars of the Global Accelerator for Jobs and Social Protection (see box 2). Such coordination efforts include meaningful international tax reform, which seemed unrealistic (for example Ghosh 2020; ICRICT 2018) until the recent approval by G20 finance ministers of a global corporate tax rate of at least 15 per cent, which aims to put an end to tax optimization and ensure that giant digital corporations pay their fair share of taxes. Combating corporate tax evasion and avoidance, including the “base erosion and profit-shifting” strategies employed by companies to shift operations from high- to low-tax regimes, would also increase tax revenue significantly. It is estimated that domestic tax base erosion and profit-shifting by multinational companies cost countries US$100–240 billion in lost revenue each year (OECD 2020a), not including the costs to countries of regulatory competition in the taxation area. More than 135 countries collaborate within the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to put an end to tax avoidance strategies that exploit gaps and mismatches in tax rules to avoid payment of tax. Furthermore, the joint OECD/United Nations Development Programme (UNDP) Tax Inspectors Without Borders initiative helps developing countries to collect the taxes due from multinational enterprises and assist each other in building tax audit capacity. Furthermore, in the context of the COVID-19 pandemic, the argument in favour of a debt moratorium (delaying the payment of debts or obligations) and debt cancellation is gaining strength. In this regard, G20 finance ministers agreed on a debt “standstill” in 2020, which allowed for the postponement of debt repayments from 73 eligible low-income countries. The debt standstill was extended until end-2021 to reduce strain and provide some support to the poorest countries. This measure corresponds to the first phase of a three-pronged approach to debt, as outlined in a report of the UN Secretary-General issued in May 2020 (UN 2020).9 Finally, private sector enterprises equally have a role to play. In addition to honouring tax and social security legal obligations in all countries of operation and as part of their environmental, social and corporate governance commitments, private sector enterprises may support, in full respect of country ownership and through national employers’ organizations, the expansion of national social protection systems in countries of operation, notably to guarantee decent work conditions to the workers of their supply chains and increase market stability. For example, in 2020, brands, manufacturers, employers’ and workers’ organizations and civil society groups committed to a global Call to Action on the COVID-19 pandemic response in the global garment industry. This Call to Action included the commitment to “take action to protect garment workers’ income, health and employment and support employers to survive during the COVID-19 crisis, and to work together to establish sustainable systems of social protection for a more just and resilient garment industry”. The 130 endorsing organizations further committed to “support the development of social protection floors and to extending social protection for workers and employers in the garment industry, consistent with ILO Recommendation No. 202 with a view to establishing over time the responsibilities of all parties to contribute for sustainable systems”. Another example is the partnership of the ILO and Fast Retailing, the parent company of the UNIQLO clothing brand, which aims to strengthen the social protection and employment services available to workers in Indonesia. 9The second phase aims at providing additional, targeted debt relief for countries that require support beyond a temporary suspension of debt service, while the third phase consists of addressing structural issues in the international debt architecture in order to prevent defaults leading to prolonged financial and economic crises in future. 32 ILO Working Paper 44 X5 Conclusion In 2008, a financial and economic crisis hit every region and country in the world. Countries that already had social protection systems in place, covering all or a large part of their populations, were the first to offer an adapted response to individuals and companies affected by the crisis. They were also the first to bounce back and find the path to economic growth. Social protection was rightly seen as an automatic stabilizer in times of crisis. On this promising basis, the UN launched the Social Protection Floor Initiative as one of nine initiatives to address the crisis and accelerate economic recovery. Since then, many countries, convinced of the role that social protection plays in economic and social development, have significantly extended coverage to their populations, whether for health care, children, persons with disabilities, older persons or persons of working age. UN agencies, joined by many development partners, also increased their support for the development of national social protection systems in order to make the right to social security a reality for all. Despite this enthusiasm and these developments, investment in social protection systems, whether through contributory or tax-financed schemes, has remained largely insufficient and partly explains why today one person in two lives without any social protection. Achieving SDG targets 1.3 and 3.8 by 2030 would require developing countries to invest between 1.9 and 2.4 per cent of GDP per year over and above what they already invest (Durán Valverde et al. 2020, figure 5). This additional investment in social protection is entirely feasible in middle-income countries, which have sufficient domestic resources to increase the fiscal space for social protection. This requires strong political will to enforce social insurance laws, extend contributory schemes to other categories of workers and enterprises that are currently excluded and develop and finance non-contributory schemes. For low-income countries, the situation is quite different. Closing financing gaps would require a much larger effort, in the range of 9.8 to 12.1 per cent of GDP. This does not seem feasible by 2030 without significant support from the international community. Such support would be financial as well as technical to enable countries not just to distribute aid but also to build robust systems with legal entitlements and strengthen the national capacity to collect more taxes and contributions in order to provide a social protection floor for all. This is where technical and financial support must be sufficiently coordinated to promote a shared, national vision of social protection development. This coordinated approach can only work if all actors, national and international, systematically apply international social security standards and demonstrate a strong commitment to building universal, comprehensive, adequate and sustainable social protection systems. Investing more in social protection would build a more stable, just and sustainable world, in which everyone has access to health care and protection of their livelihoods in the event of job loss, illness, maternity or disability and during childhood and old age. Social protection systems, including social protection floors, prevent and reduce poverty, inequalities and insecurity. Building social protection systems, including strong floors, not only changes people's lives and gives them peace of mind but also increases domestic demand for goods and services and creates an investment in worker productivity. It contributes to inclusive economic recovery and further economic development. By putting solidarity into practice, social protection recreates the social fabric that has been strained by large-scale global transformations and also recently by COVID-19 lockdown measures. 33 ILO Working Paper 44 Annex XTable A.1: Incremental financing needs for progressively closing the social protection floor coverage gap in low-income countries, 2020–2030 (billions of US$ and percentage of GDP) 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Low-income countries In billion US$ 48.1 48.6 53.9 59.9 68.7 74.1 82.8 87.4 93.4 100.3 100.9 In per cent of GDP 9.80 9.45 9.90 10.38 11.23 11.41 12.02 11.95 12.01 12.14 11.49 Lower-middle- income countries In billion US$ 203.2 209.3 219.7 240.0 268.4 296.1 326.3 351.7 379.4 406.7 413.4 In per cent of GDP 2.83 2.74 2.72 2.80 2.96 3.08 3.20 3.25 3.31 3.35 3.21 Upper-middle- income countries In billion US$ 517.6 523.2 409.4 443.3 479.1 518.0 551.1 586.2 620.9 657.9 686.3 In per cent of GDP 2.17 2.04 1.52 1.56 1.61 1.65 1.66 1.68 .1.69 1.69 1.68 Low- and middle-in- come countries In billion US$ 769.0 781.0 683.0 743.2 816.2 888.3 960.2 1025.3 1093.7 1164.9 1200.7 In per cent of GDP 2.44 2.31 1.92 1.98 2.07 2.13 2.18 2.21 2.23 2.25 2.19 Source: Durán Valverde et al. (2020, p. 33). 34 ILO Working Paper 44 References Abramo, Laís, Simone Cecchini, and Beatriz Morales. 2019. Social Programmes, Poverty Eradication and Labour Inclusion: Lessons from Latin America and the Caribbean. Santiago de Chile: Economic Commission for Latin America and the Caribbean (ECLAC). https://www.cepal.org/en/publications/44622-social-programmes-pover- ty-eradication-and-labour-inclusion-lessons-latin-america?utm_source=CiviCRM&utm_medium=email&utm_ campaign=20190710_LBC155_ingles. Bastagli, Francesca, Jessica Hagen-Zanker, Luke Harman, Valentina Barca, Georgina Sturge, and Tanja Schmidt. 2019. “The Impact of Cash Transfers: A Review of the Evidence from Low- and Middle-Income Countries.” Journal of Social Policy 48 (3): 569–94. Bierbaum, Mira, Cäcilie Schildberg, and Michael Cichon. 2017. “Social Protection Floor Index. Update and Country Studies.” Berlin: Friedrich-Ebert-Stiftung. Bierbaum, Mira, and Valérie Schmitt. 2022. “Investing Better in Universal Social Protection: Applying International Social Security Standards in Social Protection Policy and Financing.” ILO Working Paper. Cantillon, Bea. 2009. “The Poverty Effects of Social Protection in Europe: EU Enlargement and Its Lessons for Developing Countries.” In Building Decent Societies: Rethinking the Role of Social Security in State Building, edited by Peter Townsend, 220–42. London: Palgrave. Cichon, Michael. 2018. “The Social Protection Agenda of the Sustainable Development Goals and Its Fiscal Challenge.” In Asia’s Fiscal Challenge. Financing the Social Protection Agenda of the Sustainable Development Goals, edited by Sri Wening Handayani, 10–49. Manila, Philippines: Asian Development Bank. Dietrich, Stephan, Daniele Malerba, Armando Barrientos, Franziska Gassmann, Pierre Mohnen, and Nyasha Tirivayi. 2020. “Human Capital Returns to Cash Transfers in Uganda: Does It Matter in the Long Run?” Journal of Development Effectiveness 12 (1): 54–73. https://doi.org/10.1080/19439342.2019.1691626. Durán Valverde, Fabio, José Pacheco-Jiménez, Taneem Muzaffar, and Hazel Elizondo-Barboza. 2020. “Financing Gaps in Social Protection: Global Estimates and Strategies for Developing Countries in Light of COVID-19 and Beyond.” Working paper. Geneva: International Labour Office. https://www.ilo.org/wcmsp5/groups/ public/---ed_protect/---soc_sec/documents/publication/wcms_758705.pdf. European Commission. 2015. “Collect More - Spend Better. Achieving Development in an Inclusive and Sustainable Way.” Luxembourg: Publications Office of the European Union. FAO, and UNICEF. 2017. “The Economic Case for the Expansion of Social Protection Programmes.” FAO. http://www.fao.org/3/a-i7311e.pdf. Friedrich-Ebert-Stiftung. 2020. “Social Protection Floor Index 2020.” 2020. https://www.fes.de/en/shaping-a- just-world/international-community-and-civil-society/translate-to-english-social-protection-floor-index-2020. Gaspar, Vitor, David Amaglobeli, Mercedes Garcia-Escribano, Delphine Prady, and Mauricio Soto. 2019. “Fiscal Policy and Development: Human, Social, and Physical Investments for the SDGs.” 2019/3. IMF Staff Discussion Note. USA: International Monetary Fund. https://www.elibrary.imf.org/view/IMF006/25654- 9781484388914/25654-9781484388914/25654-9781484388914.xml. Ghosh, Jayati. 2020. “How to Finance Social Protection in Developing Countries in the Age of COVID-19.” Work In Progress (blog). 2020. https://iloblog.org/. 35 ILO Working Paper 44 Heidebrecht, Joachim, and Niels Kemper. 2018. “What Is ‘Policy-Based Lending’? Overview of the Principles and Possible Applications of a New Financing Instrument for Advanced Partner Countries.” KfW Development Bank. https://www.kfw-entwicklungsbank.de/PDF/Download-Center/Materialien/2018_Nr.2_Policy-Based- Landing_EN.pdf. ICRICT. 2018. “A Roadmap to Improve Rules for Taxing Multinationals. A Fairer Future for Global Taxation.” Independent Commission for the Reform of International Corporate Taxation. https://static1. squarespace.com/static/5a0c602bf43b5594845abb81/t/5a78e6909140b73efc08eab6/1517872798080/ ICRICT+Unitary+Taxation+Eng+Feb2018.pdf. IISD, ODI, and OCI. 2020. “Doubling Back and Doubling down: G20 Scorecard on Fossil Fuel Funding.” Winnipeg, Canada: International Institute for Sustainable Developmen. ILO. 2014. World Social Protection Report 2014/15: Building Economic Recovery, Inclusive Development and Social Justice. http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/ wcms_245201.pdf; http://www.social-protection.org/gimi/gess/ShowTheme.action?th.themeId=3985. ———. 2015. “Guidelines for a Just Transition towards Environmentally Sustainable Economies and Societies for All.” http://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/documents/publication/wcms_432859. pdf. ———. 2016a. “Brazil: Financing Social Protection through Financial Transaction Taxes.” Social Protection in Action Country Brief. Geneva: International Labour Organization. ———. 2016b. “Building Social Protection Floors for All. Global Flagship Programme Strategy (2016-20).” Geneva: International Labour Organization. https://www.social-protection.org/gimi/RessourcePDF.action?id=53284. ———. 2016c. “People’s Republic of China: Extending Social Protection in Qingdao through Labour and Social Security Inspection.” Social Protection in Action Country Brief. Geneva. ———. 2016d. Social Protection Assessment-Based National Dialogue: A Global Guide. Geneva: International Labour Office. https://www.ilo.org/wcmsp5/groups/public/---dgreports/---integration/documents/publication/wcms_568693.pdf. ———. 2017. World Social Protection Report 2017-19: Universal Social Protection to Achieve the Sustainable Development Goals. https://www.social-protection.org/gimi/gess/RessourcePDF.action?id=54887; http://www. social-protection.org/gimi/gess/ShowWiki.action?id=594. ———. 2019a. “Experiences from Simples National, the Monotax Regime for Own-Account Workers, Micro and Small Entrepreneurs in Brazil.” Geneva: International Labour Organization. https://www.ilo.org/empent/Publications/WCMS_715864/lang--en/index.htm. ———. 2019b. “Simples National: Monotax Regime for Own-Account Workers, Micro and Small Entrepreneurs: Experiences from Brazil.” Geneva: International Labour Office. https://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/documents/publication/wcms_715864.pdf. ———. 2020a. “Financing Gaps in Social Protection: Global Estimates and Strategies for Developing Countries in Light of COVID-19 and Beyond.” Social Protection Spotlight. Geneva: International Labour Organization. https://www.ilo.org/wcmsp5/groups/public/---ed_protect/---soc_sec/documents/publication/wcms_755475. pdf. 36 ILO Working Paper 44 ———. 2020b. “ILO Monitor: COVID-19 and the World of Work. Sixth Edition. Updated Estimates and Analysis.” Geneva: International Labour Organization. https://www.ilo.org/wcmsp5/groups/public/---dgreports/--- dcomm/documents/briefingnote/wcms_755910.pdf. ———. 2020c. “Social Protection Responses to the COVID-19 Crisis: Country Responses and Policy Considerations.” Social Protection Spotlight. https://www.social-protection.org/gimi/RessourcePDF.action?id=56044. ———. 2020d. “Social Protection Responses to the COVID-19 Pandemic in Developing Countries: Strengthening Resilience by Building Universal Social Protection.” Social Protection Spotlight. https://www.social-protec- tion.org/gimi/RessourcePDF.action?id=56542. ———. 2021a. “Extending Social Security Coverage to Workers in the Informal Economy: Lessons from International Experience (Good Practice Guide).” https://www.social-protection.org/gimi/RessourcePDF.action?id=55728. ———. 2021b. “Extending Social Security Coverage to Workers in the Informal Economy: Lessons from International Experience (Policy Resource Package).” 2021. https://informaleconomy.social-protection.org. ———. 2021c. “Extending Social Security to Self-Employed Workers: Lessons from International Experience.” Issue Brief. https://www.social-protection.org/gimi/gess/RessourcePDF.action?id=55726. ———. 2021d. “Extending Social Security to Workers in Micro and Small Enterprises: Lessons from International Experience.” Social Protection Spotlight. https://www.social-protection.org/gimi/RessourceDownload.action?id=55724. ———. 2021e. “Extending Social Security to Workers in the Informal Economy: Key Lessons Learned from International Experience.” Spotlight brief. Geneva: International Labour Office. https://www.social-protec- tion.org/gimi/RessourcePDF.action?id=55728. ———. 2021f. “ILO Monitor: COVID-19 and the World of Work. Eighth Edition: Updated Estimates and Analysis.” https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/briefingnote/ wcms_824092.pdf. ———. 2021g. “Resolution and Conclusions Concerning the Second Recurrent Discussion on Social Protection (Social Security). International Labour Conference. 109th Session.” https://www.ilo.org/wcmsp5/groups/ public/---ed_norm/---relconf/documents/meetingdocument/wcms_806099.pdf. ———. 2021h. “Social Protection Monitor: Social Protection Responses to the COVID-19 Crisis around the World.” 2021. https://www.social-protection.org/gimi/ShowWiki.action?id=3417. ———. 2021i. “World Social Protection Data Dashboards.” World Social Protection Data Dashboards. 2021. https://www.social-protection.org/gimi/WSPDB.action?id=32. ———. 2021j. “World Social Protection Report 2020–22: Social Protection at the Crossroads – in Pursuit of a Better Future.” Geneva. https://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/@publ/documents/publication/wcms_817572.pdf. ———. 2021k. “ILO Global Flagship Programme on Building Social Protection Floors for All: Report of the First Phase 2016-2020.” Geneva: International Labour Office. http://www.ilo.org/secsoc/information-resourc- es/publications-and-tools/TCreports/WCMS_822164/lang--en/index.htm. 37 ILO Working Paper 44 ———. 2021l. “ILO Global Flagship Programme on Building Social Protection Floors for All: Strategy for the Second Phase 2021–2025.” Geneva: International Labour Office. https://www.social-protection.org/gimi/ RessourcePDF.action?id=57506. ILO, and UNICEF. 2021. “Improving Synergies between Social Protection and Public Finance Management.” 2021. https://socialprotection-pfm.org/. IMF. 2016. “IMF Executive Board Approves US$12 Billion Extended Arrangement under the Extended Fund Facility for Egypt.” November 11, 2016. https://www.imf.org/en/News/Articles/2016/11/11/PR16501-Egypt- Executive-Board-Approves-12-billion-Extended-Arrangement. ITUC. 2021. “Investments in Social Protection and Their Impacts on Economic Growth.” Brussels: International Trade Union Confederation. https://www.ituc-csi.org/investments-in-social-protection. Joint SDG Fund. 2021. “Integrated Social Protection. Leaving No One Behind.” 2021. https://jointsdgfund. org/integrated-social-protection. Kenya. 2017. “Kenya Social Protection Sector Review Report, 2017.” Nairobi: Ministry of Labour and Social Protection, Republic of Kenya. Lambeau, Jean-Louis, and Stefan Urban. forthcoming. “Social Protection and Climate Change: The Role of Social Insurance.” Geneva: International Labour Organization. Langenhove, Thibault van, and Céline Peyron Bista. 2019. “Mongolia. One Stop Shops Covering Herder Communities.” In 100 Years of Social Protection: The Road to Universal Social Protection Systems and Floors, Vol.I: 50 Country Case Studies, edited by Isabel Ortiz, Valérie Schmitt, and Loveleen De, 337–42. ILO. Lee, Sangheon, and Nina Torm. 2017. “Social Security and Firm Performance: The Case of Vietnamese SMEs.” International Labour Review 156 (2): 185–212. https://doi.org/10.1111/j.1564-913X.2015.00054.x. Manuel, Marcus, Liam Carson, Emma Samman, and Martin Evans. 2020. “Financing the Reduction of Extreme Poverty Post-Covid-19.” Briefing Note. London: Overseas Development Institute. Mathers, Nicholas, and Rachel Slater. 2014. “Social Protection and Growth: Research Synthesis.” Barton: Department of Foreign Affairs and Trade, Commonwealth of Australia. https://www.dfat.gov.au/sites/default/files/social-protection-and-growth-research-synthesis.pdf. Merttens, Fred, Jayakrishna Upadhyay, Nupur Kukrety, Shrochis Karki, and Zara Majeed. 2017. “Evaluation of the Nepal Emergency Cash Transfer Programme through Social Assistance.” Kathmandu: UNICEF. https:// www.unicef.org/evaldatabase/files/UNICEF_ECTP_Final_Evaluation_Report_OPM_April_2017.pdf. Mideros, Andrés, Franziska Gassmann, and Pierre Mohnen. 2016. “Estimation of Rates of Return on Social Protection: Ex Ante Microsimulation of Social Transfers in Cambodia.” Journal of Development Effectiveness 8 (1): 67–86. https://doi.org/10.1080/19439342.2015.1025815. Modica, Emmanuelle, Sabine Laudage, and Michelle Harding. 2018. “Domestic Revenue Mobilisation: A New Database on Tax Levels and Structures in 80 Countries.” OECD Taxation Working Papers 36. https:// doi.org/10.1787/a87feae8-en. OECD. 2015. In It Together: Why Less Inequality Benefits All. Paris: Organisation for Economic Co-operation and Development. https://www.oecd.org/social/in-it-together-why-less-inequality-benefits-all-9789264235120- en.htm. 38 ILO Working Paper 44 ———. 2018. “A Broken Social Elevator? How to Promote Social Mobility.” Paris: Organisation for Economic Co-operation and Development. http://www.oecd.org/social/broken-elevator-how-to-promote-social-mo- bility-9789264301085-en.htm. ———. 2019. “OECD DAC Guiding Principles on Managing for Sustainable Development Results.” Paris: OECD Publishing. https://doi.org/10.1787/44a288bc-en. ———. 2020a. “International Collaboration to End Tax Avoidance.” 2020. https://www.oecd.org/tax/beps/. ———. 2020b. “Six Decades of ODA: Insights and Outlook in the COVID-19 Crisis.” OECD Development Co- Operation Profiles 2020. Paris: OECD Publishing. ———. 2021. “Official Development Assistance (ODA).” 2021. https://www.oecd.org/dac/financing-sustain- able-development/development-finance-standards/official-development-assistance.htm. Ortiz, Isabel, Anis Chowdhury, Fabio Durán-Valverde, Taneem Muzaffar, and Stefan Urban. 2019. Fiscal Space for Social Protection. A Handbook for Assessing Financing Options. Geneva: International Labour Office. Ortiz, Isabel, and Matthew Cummins. 2021. “Global Austerity Alert: Looming Budget Cuts in 2021-25 and Alternative Pathways.” Working Paper. https://policydialogue.org/files/publications/papers/Global-Austerity- Alert-Ortiz-Cummins-2021-final.pdf. Ortiz, Isabel, Matthew Cummins, Jeronim Capaldo, and Kalaivani Karunanethy. 2015. “The Decade of Adjustment: A Review of Austerity Trends 2010-2020 in 187 Countries.” ESS Paper No. 53. New York and Geneva: South Centre, Initiative for Policy Dialogue and ILO. http://www.social-protection.org/gimi/gess/ RessourcePDF.action?ressource.ressourceId=53192. Ortiz, Isabel, Valérie Schmitt, and Loveleen De. 2016. Social Protection Floors: Volume 1: Universal Schemes. Geneva: International Labour Office. http://www.social-protection.org/gimi/gess/RessourcePDF.action?ressource.ressourceId=54138. ———, eds. 2019. 100 Years of Social Protection. The Road to Universal Social Protection Systems and Floors. Vol. 1: 50 Country Cases. http://www.ilo.org/secsoc/information-resources/publications-and-tools/books-and-re- ports/WCMS_669790/lang--en/index.htm. Sanches, Marina, and Laura Carvalho. 2019. “A Contribuição Da Política Fiscal Para a Crise Brasileira Recente: Uma Análise Baseada Em Multiplicadores de Despesas Primárias Do Governo Central No Período 1997- 2018.” 2019–35. FEA-USP Working Paper Series. Sao Paolo: University of Sao Paolo. http://www.repec.eae. fea.usp.br/documentos/Sanches_Carvalho_35WP.pdf. SDSN. 2019. “SDG Costing & Financing for Low-Income Developing Countries.” Sustainable Development and Solutions Network. https://sdgfinancing.unsdsn.org/static/files/sdg-costing-and-finance-for-LIDCS.pdf. Stenberg, Karin, Odd Hanssen, Tessa Tan-Torres Edejer, Melanie Bertram, Callum Brindley, Andreia Meshreky, James E Rosen, et al. 2017. “Financing Transformative Health Systems towards Achievement of the Health Sustainable Development Goals: A Model for Projected Resource Needs in 67 Low-Income and Middle- Income Countries.” Lancet Global Health 5 (9): e875–87. https://doi.org/10.1016/S2214-109X(17)30263-2. UN. 2020. “Debt and COVID-19: A Global Response in Solidarity.” United Nations. https://doi.org/10.18356/5b- d43e89-en.