Monetary challenges

Currently the global community has come to see social security as an investment in social cohesion and economic growth rather than expenditure. This has caused low and middle level income countries to focus their attention on how to increase their expenses in social security and where the fiscal resources necessary are to be acquired (whereas for a long time most industrialized countries concentrated their efforts on minimising social security expenditure). Therefore, at present, more emphasis is focused on the “how?” than on the “how much?”

This section of the thesis investigates on the sum of resources that are allocated for the social security worldwide and how the PR/SS mechanism is financed as a single entity. It has been shown that an average value of 20 to 30 percent of the gross domestic product (GDP) of a nation is reserved for providing social security for its citizens within the developed countries. It should be noted that this is an average value calculated by taking all national incomes to be equal. However, though this value may be true for countries with higher incomes, only a fraction of this value is allocated for social security purposes in less fortunate undeveloped countries. Therefore, this average value does not reveal the circumstances for the majority of the world’s population. Alternatively, when this value was calculated by the ILO in 2011 as a mean of the proportions of the GDP allotted for social security purposes in different countries, it was revealed that developing and undeveloped countries allocate less than 12 percent of their individual GDP for providing social security. When calculating the average value of resources allocated for social security with regard to the population of a country, it has been found that an ‘average’ citizen will be contributing 8 percent of the country’s GDP as social security benefits in the form of reimbursements according to the official website of ILO (www.ilo.org, 2014). The percentage of GDP invested in providing PR/SS vary

greatly between the regions and countries of the world, mostly depending on the national income levels. While European countries can afford to devote 20 to 30 percent of the GDP into social security investment, most African countries only devote 4 to 6 percent in this area and, of this; a major portion is spent on the more pressing matters of healthcare rather than on salary replacements to provide an income security.

As illustrated by (www.ilo.org, 2014), it can be seen that low income countries are spending on average less than 4 per cent of their GDP on health whereas countries in the intermediate levels of the income scales spend 7 to 10 percent on the said issues that pertains to more than twice of what a low income country would fund with regard to social security. On the other hand, countries at the higher end of the income scales spend about 20 percent of their GDP on social security benefits that amounts to about five times higher than that of a low income country. Therefore, in conclusion, a higher income country has the means to allocate a greater percentage of its GDP on social security than a low income country. It should be noted that this analysis is based on data collected in 2000, as they are the most recent data available on the topic. The data are based on a slightly smaller number of countries than would have been preferred and conditions have improved in most countries within the last 14 years, the majority of improvements being in the middle and higher income countries. Therefore, caution needs to be exercised when drawing conclusions from the data quantified herein.

When considering the percentage of resources allocated to providing a social security system, most countries reserve a larger quota for health securities and pensions. In low income countries (as opposed to countries with higher incomes where the major percentage is spent on pensions for senior citizens) the major quota is spent on healthcare facilities. Only the countries on the highest end of the development scale can afford security in areas such as employee benefits and family benefits.

Countries at the lower end of the income scales (where poverty and fluctuating economies are commonly prevalent) require a strong social security system, even more so than the more developed countries. Studies have made it clear that social

security in these developing countries is conductive to the development of the nation.

Though there exists a link between income levels and the resources allocated to social security, this does not conclude that social security is a ‘luxury’, though contrasts exist between how the service is financed and delivered and which branches of the many areas of social security require more priority than the others do.

Though the levels of social security offered to the citizens of a country are in a close relation to the size of the country’s overall government expenditure, each country has some level of independence when deciding their expenditure on social security for their citizens irrespective of the income level of the country. This is the reason as to why countries whose per capita GDP are on parallel levels may have vastly diverse levels of resources allocated to different areas of social security, as depicted in Figure 2.7.

As stated, different countries allocate different percentages of the national resources towards social security (even if they possess the same levels of government spending) based on historical and political influences. Therefore, the percentage spent on social security from a country’s budget (i.e., the amount of financial resources available to finance such programmes) is decided by the government, the taxpayers and the body of voters.

Thus, the organizing and financing of a social security system in a country is a mammoth task and its success greatly depends on the arrangement of the labour market (i.e., the percentage of labour employed under formal salaries in total employment and the amount of the informal labour forces). Therefore, it is important to decide to what extent these social security programmes are initiated as contributory programmes that benefit a selected sector of the community and to what extent they are initiated as noncontributory programs that may benefit all the residents of the country.

Only a limited amount of data are available on the topic of pension schemes (i.e., old age benefits). It should be noted that many governments also provide irregular non continuous funding for some schemes that may not be recorded. The available

data show that the percentages of social security privileges that are distributed amongst workers, employers and the government have vast regional variations. Coverage, fitness and the financial challenges of social security (as identified earlier) are the key global challenges in providing a lifelong social security system. Provision for a social security system, both in terms of fiscal and policy space regulations, are critically influenced by the governing parties of a country. When a country’s government is interested in the welfare of its citizens security schemes can be initiated, funded and suitability levels can be established accordingly. This nature of These Socioeconomic policies would have to be focused towards the objectives of a production based employment structure and a decent work environment supported by good industrial governance.