Social Policy and Employment: Rebuilding the ... - Inclusive Cities

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Social Policy and Employment: Rebuilding the ... - Inclusive Cities

Key Messagesè Employment should be placed at the centreof economic policy.è Palliative safety net approaches offer inadequateprotection in the face of economic risks.è Citizenship-based social provisions are importantcomplements to, but not replacements for,robust employment policies.è Labour standards and protections are vital forreducing conflicts between paid and unpaidlabour, and should not be undermined.è Social provisions serve as cross-cutting supportin employment and social policy arenas.and individuals in protecting and enhancing socialwelfare.But across various approaches, the allocation of rightsand responsibilities has typically been linked to an individual’sstatus as a citizen and/or active participantin the labour market.Historically, an important part of social protection programmeswas tied to employment status (of typicallymale “breadwinners”) through unemployment insurance,public pension schemes and labour regulations,broadly referred to as social insurance.Employment regulation and formalizationfacilitated the extension of social protection.The establishment of these social protections was, inpart, a response to demands from organized labourand collective action among other social groups,such as peasants. There were also varying degreesof support from the state and employers in differentcontexts. In many cases, the extension of social protectionsto larger sections of the population was facilitatedor accompanied by greater formalization of employmentand labour regulations.Macroeconomic instruments were used topromote employment.There was also an implicit policy assumption that inorder to finance and sustain a comprehensive socialwelfare system, something close to sustained fullemployment would be necessary, and should thereforebe promoted by the state. This required the useof all policy instruments, including macroeconomicones.The Gradual Decoupling ofSocial Policy from EmploymentPolicy formulation and actual outcomes nowreflect the distance between employment andsocial policy.Since the early 1980s policy assumptions about thelinks between social policy and employment havebeen changing for a variety of reasons. These includechanges in labour markets (growing labour marketinformality), limited reach of social insurance programmes,and changing ideas about the nature ofwelfare/social policy.One illustration of a disconnect between employmentand social policy on the one hand, and betweeneconomic policy and employment goals on the other,comes from poverty reduction and national developmentstrategies, such as Poverty Reduction StrategyPapers (PRSPs), where employment was often treatedas an automatic by-product of growth. Furthermore,while PRSPs often included a component on socialpolicies, these operated within the environment setby economic policies which primarily emphasizedeconomic growth. The idea was that after the conditionsfor growth had been secured, social policy coulduse a portion of the resources generated to providesocial services (such as education and health care)and assistance to vulnerable populations excludedfrom the benefits of growth.The distance between employment and social policycan also be seen, for example, in emerging forms ofsocial assistance and social protection in developingcountries, such as conditional cash transfer programmesnot directly linked to job status.The linkages between social policy and employmenthave also been weakened by emerging trends in labourmarkets. Growth of nonstandard employment arrangementshas meant a rollback of employment-basedsocial protections premised on full-time, permanentjobs in high-income countries. In developing countrieswith high levels of informal employment, many peoplecontinue to be excluded from social protection programmes.Yet both historical and current experience suggest thatsocial policy instruments, such as conditional cashtransfer (CCT) programmes, work most effectively whencomplemented by a broader set of policies, includingemployment and industrial policies that facilitate investmentin sectors that create jobs and provide a foundationfor sustainable improvements in earnings and thequality of employment.2 I WIEGO Policy Brief N o 12


Macroeconomic PoliciesRemain Detached from SocialMooringsEmployment growth has often lagged behindGDP growth.In many developing countries as agricultural labourersand smallholders have exited agriculture, the absorptivecapacity of the formal manufacturing and servicessectors has not been enough to keep them fullyemployed and to offer a living wage. Instead of a transitionout of agriculture into industrial activities, workersincreasingly move from agriculture to informal serviceand industrial work, often in urban areas.Employment growth has often lagged behind GDPgrowth, a phenomenon sometimes called “job-poorgrowth” or, in its most acute form, jobless growth. Evenin countries with very high rates of economic growth,such as India, growth has been virtually jobless, particularlyin important sectors such as manufacturing.The “post-Washington Consensus” agenda that becamedominant by the mid-1990s recognized some of theadverse employment and social effects of unbridledliberalization policies. There has since been increasingemphasis on restoring the social sectors, on povertyreduction, and on meeting various development goals,such as those elaborated in the MDGs.But at the same time, macroeconomic policy has remaineddetached from its social moorings. As in the 1980s,economic policies and the instruments chosen to implementthem remain unconstrained by social objectives,such as protecting people’s incomes, creating sufficientemployment, or eradicating poverty. Instead they continueto be almost exclusively used to contain public debt andinflation, open product and factor markets, and liberalizeexternal trade and capital flows. Social policy, therefore,remains solely a palliative after-thought to address someof the worst social fallouts of economic policies.Workers with employment security andsocial benefits are shrinking in number inmost countries.Job-poor or jobless growth is not simply the result of technologicalchange, as is sometimes argued. Advances intechnology and communications have dispersed activitiesalong global value chains, which has been good for productivityand profit levels. But global integration has unleashedcompetitive pressures to reduce labour costs, by producingmore while either limiting the number of new workers hired orhiring workers on a seasonal or sub-contracted basis.The result is slower growth in industrial employment.In addition, workers have not always been able to reapthe benefits from higher productivity through improvedwages and/or more robust social provisions. Those withemployment security and social benefits constitute ashrinking share of the total work force in many countries.Neoliberal macroeconomic policies haveplayeda significant role in slowing the rate offormal employment generation.Neoliberal macroeconomic policies have focused on anarrow set of goals, such as lowering inflation to very lowlevels, while failing to address other sources of economicvolatility, such as unstable financial flows. By dampeningproductive investments, neoliberal macroeconomicpolicies have had a significant part to play in slowingthe rate of formal employment generation. Financial andtrade liberalization, by intensifying competitive pressuresand making it difficult to strike bargains with capital, haveDefining employmentEmployment is the most visible component of work capturedthrough labour market statistics and used for policymaking.Employment is defined with respect to labour that producesgoods and services that are valued and included as part ofan economy’s gross domestic product (GDP).These mainly market-based exchanges can take many differentforms and are not confined to situations where individualsexchange their labour directly for a salary or a wage,as in the classic employer-employee relationship. For manywho are self-employed—whether farming their own land,engaged on a family-run enterprise, or working alone—labour represents the productive resource they commandin relative abundance and they engage in various forms ofmarket transactions to realize the value of this labour.Unpaid workIt is important to note that labour used to produce servicesfor use in the household, including unpaid care work, isexcluded from standard definitions of employment. Therefore,labour contributes to social welfare through multiplechannels, not simply employment.Quality mattersThe quality of employment matters, not simply the quantityof jobs, which introduces another distinction into the analysisof employment. The difference between formal, regular employmentand informal, non-standard employment representsone of the principal cleavages in the overall structure ofemployment today, particularly in developing countries, butincreasingly in high-income industrialized countries as well.The working poorAccess to employment is not a guaranteed path out ofincome poverty or towards improved welfare. A large proportionof employed individuals worldwide do not earnenough to lift themselves and their dependents above thepoverty threshold.WIEGO Policy Brief N o 12 I 3


put further pressure on wages and working conditions.The role of the state in the economy has weakened inmany, but not all, countries. Around the world, publicemployment has fallen. This has altered approaches tosocial policy in which the state has a role to play.The dominance of neoliberal policies favouring market liberalizationhas also reshaped the social policy terrain. Policieshave been based on neo-classical economic theories, inwhich free markets are assumed to yield optimal outcomes.Social policies which interfere with market mechanisms,such as labour regulations, are seen to introduce distortionsthat lower social welfare. In this view social policy, deliveredthrough the state, is seen as welfare-reducing.As the demand for labour has grown at a slower raterelative to its supply, bargaining power has also beenshifting in favour of employers and the owners of firms,while labour organizations and trade unions have lostground. This has made it difficult to sustain collectiveaction in support of social policies. With internationalsourcing of production, capital has an exit strategy if thecosts of social policy are considered too burdensome.Arguments for DecouplingArguments for decoupling social policy from employmentstem not just from the mainstream, where there isa perceived need to avoid distorting labour markets, butcan also be found in “alternative” approaches to socialpolicy and development.Decoupling to Limit Labour MarketDistortionsIn mainstream approaches, social policies are pursuedin ways which attempt to minimize interference withmarket mechanisms. Social protections are separatedfrom labour market status and employment outcomes.Targeted assistance is provided only to those marginalizedfrom the global economy.In such approaches, the issue of “targeting” socialpolicies frequently becomes a central consideration.In the drive to improve efficiency when state resourcesare scarce (“scarcity” itself being the result of macroeconomicpolicy choices), there has been a growingemphasis on targeted policies. Social policy shouldfocus on certain categories of people who are “needy.”Those who are stationed well above the minimum flooror who are assumed to be not in need are able to thrivein a market-based economy and do not require suchprotections. With regard to decoupling, targeted socialpolicies usually identify the vulnerable to be those whoare assumed not to participate in paid employment –children, the disabled and the elderly. The presumptionis that labour markets provide sufficient support forthose able to work.Decoupling to Decommodify LabourAlternative approaches also reach the conclusion thatdecoupling social policy and employment is desirable,but arrive there through very different reasoning. In onesuch approach, social policy is decoupled from employmentin order to reduce and eliminate the coerciveforces that propel individuals into the labour market, andallow more flexible and creative ways of combining differenttypes of work, leisure and capability development.Proponents argue for the provision of generous anduniversal social benefits so that individuals become freeto choose whether to sell their labour or not. A basicincome grant, which in this formulation would be “thebase of a social protection system that could be supplementedby insurance benefits and collaboratively occupationalbenefits” (Standing 2009), would provide resourcesto maintain an adequate standard of living andwould eliminate any “coercive” aspect of having to work.In this framework, social policy and non-wage entitlements,including the basic income grant, are separatedfrom the need to participate in the labour market. Thereis no perceived need for employment policies that focuson job creation, if the jobs created are not those thatindividuals would freely choose. In this sense, employmentand social policy are decoupled.Not all proponents of basic income grants share the sameviews when it comes to policy design. There is a broadspectrum of approaches, which range from low-level conditionaltransfers to much more generous grants whichembrace the kind of de-commodification discussed above.However, in all cases, there is separation of the basicincome grant from an individual’s employment status.The Centrality of Employmentto DevelopmentThe global crisis has recentred attention onemployment, but social policy continues to beregarded solely as a risk management tool.Despite the arguments for decoupling, concerns over thecentrality of employment have intensified following the 2008global financial crisis. For example, the World Bank’s 2012social protection and labour strategy, “Resilience, Equity,and Opportunity,” suggests that improving employmentopportunities is to be achieved primarily through investmentsin skills, education and human capital. Ensuring thefuture availability of jobs is not addressed directly. Instead,the focus is on improving the climate for “doing business”in order to create employment opportunities.In this sense, the interaction between social policy andjob creation remains limited to ensuring that socialpolicies do not create disincentives for employmentgeneration. The overarching approach in the World4 I WIEGO Policy Brief N o 12


Implications for policyEmployment should be at the centre of economic policy.è Deflationary macroeconomic policies which dampen employment generationshould be avoided.è Opportunities for employment expansion should be explored to enable previouslyexcluded social groups access to the labour market. Expanding thenumbers in formal employment will contribute to tax revenues and social insurancefunds.è New forms of labour market regulation are necessary in order to redress thestructural underpinnings of both labour market exclusion and situations of unfavourableinclusion where low earnings are coupled with highly unequal powerdynamics.è States need to develop locally appropriate revenue-harnessing systems toensure the sustainable financing of social policies. High levels of employmentare required to generate the necessary resources, through taxation and socialsecurity contributions, to create a viable welfare system. This was the premise onwhich the generous, citizenship-based social welfare system of European socialdemocracies was based.Palliative safety net approaches offer inadequate protection in the face ofeconomic risks.è A minimum safety net approach, such as a low-level grant, delinked from employment,is likely to be too thin to represent an adequate response to economic risksin today’s globalized economy. Such an approach, like some of the conditionalcash transfer (CCT) programmes promoted in recent years, cannot adequatelyreplace the income from wages, robust forms of public provision (of infrastructureand basic social services) and social benefits that have been traditionallylinked to employment (pensions).è Lessons from some of the more successful Latin American countries show thatCCTs have worked well when they complement public provision of essentialsocial services. Typically, extensive efforts were simultaneously made to expandsocial protection coverage and to regulate labour markets.è Recipients of so-called “non-contributory” grants, often women, who appear toget “something for nothing,” are often subjected to various paternalistic conditionalitieswhich restrict their rights and may even hinder their access to thelabour market.Citizenship-based social provisions cannot replace robust employmentpolicies.è A generous citizenship-based set of social provisions, which could include auniversal basic income grant, would go further than targetted approaches inmeeting needs and being free of paternalistic conditionalities.è Such provisions should complement, rather than replace, employment policies.Within this approach, there is a role for basic income to improve outcomes withregard to livelihoods. This is the approach taken in the Bachelet Report, whichsees the social protection floor as a complement to social insurance institutionswhere they exist.è A successful social protection floor is one that has strong links with employmentpolicies: first, by investing in human capital, the social protection floorcontributes to “a settled and productive work force” (ILO/Advisory GroupChaired by Bachelet/WHO 2011: 50), and second, in a macroeconomic sense,a successful floor can also act as a countercyclical stabilizer which stimulatesaggregate demand.è The long-run sustainability of a productive economy requires robust socialprovisions. Health, education and care services, affordable housing andtransport infrastructure supplement the unpaid social provisioning by familiesand households. If these social services are delivered through a publiclyregulatedsystem, then they can also generate decent employment opportunities.Labour standards and protections should not be undermined and are vitalfor reducing conflicts between paid and unpaid labour.è Key labour standards and protections – such as paid sick leave, workinghours standards, and occupational health and safety – should not be undermined,as has often happened in the case of informal and nonstandardemployment. These elements of a broader set of social protections cannotbe delinked from employment policies, since they directly affect conditions inpaid employment.è Labour standards also have important implications for unpaid care work. Accessto paid leave when a child or dependent becomes sick, for example, can beessential in resolving conflicts between paid employment and unpaid family responsibilities.WIEGO Policy Brief N o 12 I 5

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