Interview with Dr Bazlul Haque Khondker, an expert economist from Bangladesh discussing social protection

 

What are some of the reasons that make social protection for older people so important, economically and socially?

A large number of older people are either poor or vulnerable to sudden change, and they enter into retirement without adequate savings or assets. In a competitive labour market, it becomes increasingly difficult for an older person to get work to supplement their savings or other income (including pension). Traditionally (at least in Asia), the family has been an important source of financial and material support for older people. However, a recent study by HelpAge International and UNFPA provides new evidence that there are limits to the support that older people can get from family and work. In this challenging environment, adequate social protection is very important for older people around the globe.

 

What are the current trends in South Asia on social protection?

The largest proportion of the world’s poor and vulnerable population lives in South Asia . Yet  spending on social protection there is low. From a World Bank study (2015)[1] , it can be concluded that net spending on social security as a percentage of gross domestic product (GDP) for South Asian nations between 2010 and 2014 was slightly above 1 percent, while the average for developing countries was 1.6 percent of GDP. The Asian Development Bank (ADB) constructed a ‘Social Protection Index’ (SPI) for 35 Asia-Pacific countries using 2009 data (ADB, 2013)[2]. The SPI was designed to help monitor progress on social protection as well as to facilitate cross-country comparisons. The ADB found that the overall average SPI for 35 countries for 2009 was 0.11. The SPI for South Asia (0.061) was lower than other regions (Central and West Asia =0.157; East Asia=0.24; Southeast Asia =0.095; and Pacific=0.077). Given the low and inadequate levels of social protection, South Asian countries must increase spending as well as embark on a more comprehensive, inclusive and life-cycle based social protection system.

 

How do countries respond to the issue of population ageing, particularly at policy level?

The process and state of ageing is not homogenous across nations. A country is labeled as ‘aged’ when more than 10 percent of the population is aged over 60. Almost all developed countries reached the ageing threshold long ago and have designed comprehensive support schemes (including pension) for their elderly population. Currently they are pursuing reforms using various schemes to achieve fiscal sustainability. However, in developing countries – where the average age is still young – the ageing issue has not yet attained the importance it deserves. Most developing nations will reach the ‘aged’ threshold somewhere between 2030 and 2050, depending on their fertility and mortality trends. Since most governments in developing nations usually have a short-term vision and focus on solving short-term challenges, their focus is on reducing the infrastructure gap, employment and income generation, and poverty reduction.  However, I think developing counties should consider ageing as a priority and start preparing themselves to address the ageing issue.

 

What is a ‘National Transfer Account’ and how does it relate to income security in old age?

The convention for measuring macroeconomic aggregates such as production, income (GDP), and consumption is to use the UN System of National Accounts. Macroeconomic aggregates are usually represented by sectors such as agriculture, manufacturing, and services. According to National Transfer Accounts (NTA) methodology, macroeconomic aggregates such as production, income and consumption are measured by age cohorts (i.e. 0 to 80+ ages). The aim of an NTA is to provide insight into how changes in population growth and age structure affect economic growth, gender and generational equity, and public finances. An NTA is now maintained in more than 80 countries, accounting for a population of around 6 billion (http://www.ntaccounts.org/web/nta/show/). NTAs are also shedding new light on many important areas such as the evolution of intergenerational transfer systems; public policy with respect to pensions, health care, education and reproductive health; and the economic implications of population ageing.

In a recent article, Lee and Mason (2017), assessed the cost of ageing[3]. They found that between 2015 and 2050 the support ratio (i.e. total number of workers to consumers) will drop by 0.26 percent a year in the United States, by 0.40 percent in other high-income nations, and by 0.82 percent in China. This  implies that by 2050, unless the labour supply increases, consumption will drop by 25 percent in China, 9 percent in the United States, and 13 percent in other high income countries. Thus, the age patterns of consumption and earning will have to be adjusted to accommodate new demographic realities.

Although it is generally believed that ageing is a burden to society, Lee (2015), argues that it may also be beneficial if it brings more capital per worker and rising productivity and wages. In conclusion, I would like to refer to Lee and Mason’s statement that “Whether population ageing is good or bad for the economy defies simple answers. The extent of the problem will depend on the severity of population ageing and how well public policy adjusts to new demographic realities”.

 

What will be the impact on our society if governments fail to provide a social protection scheme for their citizens?

One of the key global objectives is to have a hunger- and extreme-poverty-free world by 2030. However, currently income inequality is widening within individual economies as well as across global economies. It is quite clear that these goals will not be achieved by relying only on market-based policies such as employment and income generation. Effective, efficient and inclusive social protection strategies are needed to achieve global poverty goals  as well as to reduce  income inequality. Failing to address global poverty, hunger, deprivation and inequality will certainly heighten tension among large, underprivileged segments of society, leading to intense conflict, social unrest, and even war.

 

How can civil society or the HelpAge network play a role in advocating for the provision of social protection by governments?

Governments around the world usually like to maintain the status quo on policy issues. It is not easy to motivate them. Moreover, there is a misconception that investment in social security is one-way traffic with very little or no impact on income and employment generation. However, recent studies tend to contradict these misconceptions. There is growing evidence that an effective social protection system not only helps reduce poverty but also leads to growth in income and employment. I think the best approach for  civil society, including HelpAge International, is to push the social protection agenda strongly on the basis of evidence-based findings. They should also emphasize the high cost of doing nothing,  which may eventually lead to social unrest and conflict.

 

[1]  World Bank (2014), “The State of Social Safety Net 2015”, Washington DC, 2015.

[2] ADB (2013), “The Social Protection Index: Assessing Results for Asia and the Pacific”, Manila, 2013.

[3] Cost of Ageing – IMF Finance & Development March 2017 – March 2017 • Volume 54 • Number 1