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Frequently Asked Questions
What is social protection?Social protection is defined as the set of policies and programs designed to reduce poverty and vulnerability by promoting efficient labor markets, diminishing people's exposure to risks, and enhancing their capacity to protect themselves against hazards and interruption/loss of income. Social protection consists of five major areas:
Social protection compliments other poverty preventions and reduction measures, like health care and education, but should not replace them. The first three components - labor markets, social insurance and social assistance are included in any social security system through out the world. However, our region faces special challenges. The Asian and Pacific region has half the world's population. Of the total 3.1 billion, 900 million are poor (30%), 1.2 billion are children and youth (40%), and about 1.8 billion (60%) live in rural areas and remain vulnerable to all types of risks, from natural catastrophes and sickness, to lack of work and exploitation. Social protection programs and policies should be built to respond to Asia's needs. Given the characteristics of the Asia Pacific population, ADB member countries unanimously approved the addition of two new components to support children and communities. Why is social protection needed?Growth is indispensable to reduce and prevent poverty. Extension of economic activities is necessary to allow people to earn their living. Think of the numbers: 40% of the Asian population are children and youth - in some countries, more than 50%. Every year there are many new entrants into the labor market. It is hard to find jobs. So the first main challenge for the region is to achieve sufficient sustainable growth to secure the inclusion of a growing population in the development process. However, growth is not sufficient to prevent and fight poverty and social exclusion. Without additional measures, the advantages of the market economy may be limited to a part of society only, namely those who are educated, own productive assets, and have participated in successful economic activities. While social protection helps to reduce poverty, it also benefits the non-poor. Everyone, poor and non-poor is exposed to risks that are hard to cope with alone, such as crop failures, illness, accidents, disability or death of the breadwinner, or simply getting old and not able to work. There are larger risks at the macro level, including natural disasters and economic downturns, of which the 1997-98 Asian crisis is the most recent example. When these happen, households slip into poverty or sink deeper into it. Unless governments seriously deal with vulnerability, in parallel to promoting economic growth, poverty will not be reduced. The role of social protection is to assist people get out of poverty and cope better with risk. What are the verifiable economic benefits of social protection?Social protection measures, especially those financed by loans, are benchmarked against their financial and economic impact. Particulary in countries with low per capita incomes, expenses that do not have a direct effect on growth are regarded as luxury undertakings. Social investments, including social protection, are regarded as being "soft" investments that cost money but give no short-term financial benefit. There are five crucial reasons that prove that social protection has direct economic benefits: 1. Social protection helps countries become more competitive by ensuring human capital development and increasing productivity. Investments in social protection reduce risks for the whole population covered, and not only for the poor. In countries without social protection, people constantly worry about the health of family members, and become indebted to cover catastrophic and life cycle events, such as bad crops, disability, and natural disasters. Social protection can reduce the impacts of those risks, and allow people to fully concentrate in their livelihood and economic activities, even taking new entrepreneurial risks, and becoming more productive. Productivity per worker is higher in those countries investing more in social protection. 2. Social protection reduces loss of human capital. Education is a major investment. However, if children are obliged to work, or if they are malnourished and develop lower intellectual capacities, then they do not benefit from education, no matter how good the educational system is. Disability and deaths caused by lack of access to timely health care and support lead to economic losses that are verifiable and measurable. The same counts for losses caused by labor market frictions. Social protection helps to safeguard the human capital of an economy. 3. Social protection generates growth by raising domestic demand. Poverty and social exclusion make domestic markets very small, limited only to upper or middle income groups. There is no sustainable economic development without a stable and growing domestic demand. Social protection contributes to a stable demand and helps to achieve stable economic growth. Money invested in social protection is an investment. It stays within the economic system and stabilizes it. 4. Social protection prevents poverty. People should not have to sell their assets to pay for health costs. People who lose their capacity to work can have access to basic resources. Families who lose their breadwinner should be able to get support, etc. Without social protection all these would fall into poverty. 5. Social protection increases social cohesion. It contributes to social peace and thus paves the way for social and economic stability. Social protection helps to reduce criminality and social unrest. Social cohesion, peace, and security are crucial environmental factors for economic development and growth. Can we afford social protection?Social protection is needed for sustainable development in the Asia and Pacific region. In countries where poverty and social exclusion are rampant, it is argued that fighting poverty significantly through social protection is a huge and impossible task: it is too expensive, reduces the welfare of those who are better off, and therefore slows economic growth. However, the history of industrialized countries shows the opposite is true. Social protection creates demand, enhances labor market participation, stabilizes economic development, and increases social cohesion. In the long run, social protection finances itself and results in everyone being better off. The challenge is to find the right interventions that have the maximum effect on poverty reduction and social justice. Inadequate investment in social protection puts human capital at stake and makes the country vulnerable to economic shocks and social disasters. Some perceive social protection as a concern of wealthy nations that constructed sophisticated social security systems. It is conventionally accepted that welfare systems have not been a priority for most Asian policy makers; social protection has been largely neglected, or addressed with inadequate tools and insufficient funds. However, a closer look at economic history shows that the most advanced economies of the region -- Japan; Hong Kong, China; Republic of Korea; Singapore; and Taipei,China -- built development policies through active public or public-private interventions in medical care, social and housing assistance, and minimum retirement levels. Investing in social protection has been an essential part in the modernization programs of these societies at the early stages of their development. Higher levels of social security allowed high productivity gains in the workforce, expanded domestic demand, and increased economic growth. Lack of adequate social protection may actually limit future economic growth. In children, malnutrition and poverty damage health, cause death, harm reproduction, reduce intelligence, and lower productivity and opportunities for future adults. This adds up to a high tax on future economic development. Why do existing programs not work in developing Asia?The majority of Asian countries have some form of institutionalized social protection system, but often these programs are ineffective due to
After the 1997/98 Asian crisis, inadequate and underdeveloped social protection (or social security) systems in Asia exposed their working populations to excessive risk, increased the incidence of poverty, and threatened longer term human capital investment efforts. International and domestic organizations, governments, and NGOs explored the need to invest more in social security or social protection, and find out what specific investments might be needed in the Asia and Pacific region. Generally, Asia needs much more emphasis on rural and child-oriented instruments. Existing social security systems have to be reformed and made more effective. Extending protection to the majority of citizens is a critical priority in our region. Who should benefit from social protection programs?Social protection has different policies for different target groups. Labor market programs address workers and focus on employment and working conditions. The sick, elderly, widowed, disabled, pregnant, and unemployed, with sufficient economic capacity are eligible for insurance schemes. Social assistance, also known as welfare services or safety nets, target the most vulnerable. This includes the mentally and physically disabled, ethnic minorities, substance abusers, orphans, single-parent households, refugees, victims of natural disasters or civil conflicts, the sick, the elderly, the widowed, the disabled, pregnant women, and the unemployed ineligible for insurance schemes. Micro-and area-schemes are instruments to protect communities, either in rural areas or in shanty towns and poor, marginal urban areas. Child protection should serve the needs of children and youth, to avoid their exploitation and ensure that they develop healthily. Can their families or charities not support vulnerable people?Families used to help other family members when in need. However, Asia is modernizing fast. Modernization has been accompanied by a process of social mobility, migration, urbanization, and disintegration of family and community networks. Household, informal safety nets are no longer adequate. Modernization requires the provision of social protection systems for the workforce to ensure higher productivity gains, increased domestic demand, and economic growth. Vulnerable groups cannot be supported by charities alone -- their contribution is essential but not sufficient. Most of the risks that the poor and vulnerable suffer can be easily corrected or mitigated by public action, combining the efforts of government policies, development agencies, NGOs, and private sector. The 21st century has begun with profound changes. Globalization is shifting trade, capital, technology, and information flows, changing values and social structures. The increased opportunities resulting from access to new ideas, goods, services, and technology are also accompanied by increasing risks and volatility. Interdependence may lead to possible economic shocks and downturns. In the absence of social protection policies, countries may experience mounting unemployment, poverty, marginalization, and political conflict. Globalization requires the development of effective social protection systems in both developed and developing countries. The world's forward-looking development agenda gives social protection a primary role to sustain growth and well-functioning markets. What is ADB's comparative advantage in social protection?ADB is a development bank with over 35 years of experience in the region. It combines competence in many development areas with specific regional orientation. Apart from the regular business of managing funds and lending, ADB provides services that address the specific need of developing member countries. These services include:
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