Provision of social protection by the state has long been considered a luxury. Even rich countries like Denmark, Sweden and Germany worry about things like unemployment insurance, free social services and across the board pension schemes. For middle to low income countries, the extent of social protection is government pensions, a nominal payout scheme for private sector employees, and perhaps some form of payouts for the very poorest, who normally have to go through a complicated process to access handouts through institutions like Pakistan Baitul Maal, the Zakat committees, and to a lesser extent, BISP.
There is a serious resource crunch in the country’s finances and the government can barely make essential services available to the bulk of the population
Nevertheless, providing universal social protection is an aspiration for all civilised societies. This has now been incorporated into the UN’s Agenda 2030 which also defines the sustainable development goals. What is interesting is that social protection is no longer being peddled as something that rich countries do because they can afford it. In fact, the argument now is that all governments need to help citizens maintain a basic standard of living, if for no other reason, then because this helps keep their economies productive and their growth on track. Altruistic motives aside, it is a waste of resources to be in a situation where a good part of your population (and in countries like Pakistan, it is up to a third of households who fall below the poverty line) is not able to be fully productive. According to some estimates (notably from the ILO), it would cost about 5% of GDP to provide comprehensive social insurance cover to the entire population, particularly those who are not in the workforce for one reason or the other. This is about the same as Pakistan’s defence budget, and significantly lower than the debt servicing burden.
In a country where expenditure on health and education respectively rarely tops 2 per cent of the GDP, providing universal social protection is nowhere on the agenda. But this can change. Perhaps it is a matter of looking at the issue in a cold, hard, rational sense, and making choices accordingly. There are a number of questions that can and should be asked. What are the longer term payoffs associated with having a productive population, which is able to maintain its purchasing power? Are cash transfer schemes like BISP effective for the longer run (they are no doubt very effective in times of short term stress), or will a targeted social insurance scheme for non-working sections of the population work better? Is it worth it to continue with myriad schemes like Zakat, Baitul Maal, Workers Welfare Fund, EOBI and many others, or does it make sense to pool resources and simply fund an insurance program that covers all those households with a high dependency ratio?
Pakistan still has a long way to go before it’s a welfare state, and there are good reasons why this is the case. There is a serious resource crunch in the country’s finances and the government can barely make essential services available to the bulk of the population. Nevertheless, there is also a degree of wastage in the system and inefficiencies. There are a lot of white elephants in the welfare system, such as it exists. The Zakat committees are widely known to be largely ineffectual. Organisations such as the Workers Welfare Fund, the Employees Social Security Institutions in the provinces and Social Welfare Departments tend to be heavily overstaffed and may be spending more on office premises and other administrative costs than payouts. The government is slow to make structural changes, but reviewing such institutions is imperative at a time when people’s vulnerability is increasing but there are many demands on funds.
Perhaps the first step is to invert one’s thinking a bit and try to think of social protection as not simply something that poor countries cannot afford. It may be more cost effective than one realises, and the long term payoffs may be considerably greater than what conventional wisdom would suggest. It is time to start thinking out of the box.
The writer is an economist and policy analyst based in Islamabad
Published in Daily Times, August 5th 2017.