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p. 5 of 17 BACK | NEXT I. Introduction II. Overview of Social Protection A. Social Risks and Social Protection B. Characteristics of the Asia and Pacific Region C. The Components of Social Protection D. Social Protection Systems in the Asia and Pacific E. The Experience of ADB and Other Aid Agencies III. Priorities for Social Protection IV. Operational Implications

Social Protection Strategy : II. Overview of Social Protection

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C. The Components of Social Protection

13. The policies and projects included in social protection can be thought of as involving five major kinds of activities, summarized below. Box 2 shows the target clientele for social protection.

1. labor market policies and programs designed to facilitate employment and promote the efficient operation of labor markets;
2. social insurance programs to cushion the risks associated with unemployment, health, disability, work injury, and old age;
3. social assistance and welfare service programs for the most vulnerable groups with no other means of adequate support;
4. micro and area-based schemes to address vulnerability at the community level; and
5. child protection to ensure the healthy and productive development of the future Asian workforce.

1. Labor Markets

14. The focus on labor adjustments and the efficient operation of labor markets recognizes that, as economic development proceeds, employment will become the major source of economic support for most workers and their families. Improving labor market operations is an important element of strategies to reduce poverty, facilitate human capital development, and address gender discrimination. It will also help allocate a country’s human capital resources to their most productive uses, enhancing general economic welfare and encouraging growth and development.

15. Labor market improvements to enhance social protection include the following.

1. Labor market assessments describing demographic trends, laborabsorbing sectors, unemployment, migration flows, and the size and causes of the informal sector can help identify a country’s needs and development options.

2. Active labor markets programs include (a) direct employment generation (promoting small and medium enterprises, public works); (b) labor exchanges or employment services (job brokerage, counseling) linking supply with demand for labor; and (c) skills development programs (training and retraining of labor).

3. Passive labor market policies include (a) unemployment insurance, (b) income support, and (c) an appropriate legislative framework that strikes a balance between economic efficiency and labor protection. An appropriate legislative framework will include provisions on issues such as minimum age, maximum hours and overtime, labor contracts, industrial relations, special protection appropriate for new mothers, and anti-discrimination provisions to protect women and minorities. Internationally recognized labor standards, when ratified, are also part of the legislative framework of a DMC. With regard to the Core Labor Standards, no explicit ratification is needed for them to be part of the legislative framework of a country. The Core Labor Standards consist of (a) freedom of association and the effective recognition of the right to collective bargaining, (b) the abolition of all forms of forced or compulsory labor, (c) the elimination of discrimination in respect of employment and occupation, and (d) the elimination of child labor. All Asian and Pacific DMCs,6 by virtue of being member of the International Labour Organization (ILO), are held to respect, promote, and realize the fundamental Core Labor Standards.

4. Safeguards: appropriate steps should be taken to ensure that procurement of goods and services, contractors, subcontractors, and consultants, comply with the country’s labor legislation (e.g., minimum wages, safe working conditions, social security contributions, etc.) as well as with the Core Labor Standards.

2. Social Insurance

16. Participating in labor markets exposes workers to several kinds of risks. Reducing these risks allows workers who have lost their jobs to search for a good alternative, removes barriers that might otherwise discourage workers from acquiring education and training, and helps ensure that the health and education of their children are not sacrificed in an economic downturn. Social insurance programs mitigate the risks by providing income support in the event of illness, disability, work injury, maternity, unemployment, and old age. Such programs include

1. unemployment insurance to deal with frictional (sometimes structural) unemployment;
2. work injury insurance to compensate workers for work-related injuries or diseases;⁷
3. disability and invalidity insurance, normally linked to old-age pensions, to cover for full or partial disability;
4. sickness and health insurance to protect workers from diseases;⁷
5. maternity insurance to provide benefits to mothers during pregnancy and post delivery lactating months;
6. old-age insurance to provide income support after retirement; and
7. life and survivors insurance, normally linked to old-age pension to ensure that dependents are compensated for the loss of the breadwinner.

17. As countries develop, some form of government intervention is needed to deal effectively with these risks. Family resources, even those of an extended family, are no longer sufficient to deal with the individual risks. A wide variety of approaches are available for structuring and operating social insurance programs. They may be contributory, in that eligibility is based on the payment of premiums each year, or noncontributory; and handled either by public sector or private sector institutions. Where such programs are managed by the private sector, however, government retains a major role in overseeing and regulating their operation. Traditionally, private insurance companies have had difficulty providing products affordable to low-income groups because of problems associated with high transaction costs, adverse selection, and moral hazard.

18. Most countries have evolved toward a multipillar mixed public-private system that contains two basic elements: (i) public programs to assure minimum income to the aged, unemployed, and other vulnerable groups; and (ii) private programs that encourage voluntary supplementation by individuals. In the case of old-age pensions, a second intermediate pillar is added: public or private programs that provide retirement benefits scaled to individual contributions. The design of a particular social insurance intervention involves selecting the approach that seems most appropriate, considering the country’s stage of development and its social traditions. A proper balance must be maintained between the social gains from improved protection and the economic losses that can occur if a system becomes too generous.

3. Social Assistance

19. Social assistance and welfare services provide protection to those who cannot qualify for insurance payments or would otherwise receive inadequate benefits. Social assistance programs are designed primarily to enhance social welfare by reducing poverty directly. Programs targeted to younger people can also promote longer term growth and development by encouraging greater investment in human capital.

20. Social assistance interventions may include

1. welfare and social services, institutionalized or community-based, to highly vulnerable sections of the population, such as the physically or mentally disabled, orphans, and substance abusers;
2. cash or in-kind transfers such as food stamps and family allowances to vulnerable groups;
3. temporary subsidies, such as energy life-line tariffs, housing subsidies, or support of lower prices of staple food in times of crisis; and
4. safeguards: attention should be paid to possible short-term negative impacts of policy reforms: in cases of a rise in prices and/or loss of entitlements to the poor, adequate mitigation measures are needed to prevent any adverse effect on the poor and the vulnerable; in the case of infrastructure, it should be designed to allow disabled populations to benefit from public investments.

4. Protecting the Informal Sector: Micro and Area-Based Schemes

21. Micro and area-based schemes provide the same sort of social protection to small-scale agriculture and the urban informal sector that the more traditional social insurance programs supply to the labor force. Microinsurance offers the option to insure the poor against their main risks at affordable prices. Crop insurance programs can provide the protection necessary to encourage the adoption of new and innovative farming techniques, thereby removing an important barrier to economic development in rural areas. Together with well-designed risk reduction initiatives such as disaster management, and community-based support programs such as social funds, these programs can reduce vulnerability at the community level and promote more sustainable rural livelihoods.

22. Microinsurance. Microinsurance involves voluntary and contributory schemes for the community, handling small-scale cash flows to address major community risks. Often such schemes are of a local character and have a very small membership. The primary aim of many of these schemes (Box 4) is to help their members meet the unpredictable burden of out-ofpocket expenses, such as a hospital emergency, death, or funeral expenses. In recent years, groups of workers in the informal economy have set up their own microinsurance schemes, normally assisted by grants or government subsidies. Such schemes may operate within the context of a microfinance scheme, which has already had experience collecting contributions and administering payments. Microinsurance is an emerging topic with high potential. Microinsurance can provide social insurance at affordable prices, expanding coverage by having a realistic understanding of the problems that communities face, and promoting community involvement. There are good historical examples of microinsurance, for instance, mutual societies played an important developmental role in early 20th century in Europe. Options for the future include pooling existing organizations, promoting reinsurance, and providing private-public partnerships. More effort needs to be placed in marketing microinsurance, as a large percentage of the target population is not well informed of the benefits of being insured, and the credibility of microinsurance needs strengthening.

23. Agricultural Insurance. This form of protection could be available for farming communities. It is a financial mechanism in which the uncertainty of loss in the farms is minimized by pooling a large number of uncertainties that impact on agriculture so that the burden of loss can be distributed. The loss may be due to a number of natural perils like storms, floods, droughts, hail, frost, earthquakes, volcanic eruptions, plant pests, diseases, etc. The risks of loss can be spread temporally or spatially. With reinsurance, the risks can be further spread across national boundaries. For instance, during natural disasters of widespread proportion when a nation’s finances are at a low ebb, other countries share the burden. Agricultural insurance can be reexamined as an effective tool for the development of the rural economy when implemented as part of a package of support services in the rural areas, cautiously accompanied by adequate reinsurance mechanisms.

24. Social Funds. Such funds have evolved recently outside the Asia and Pacific region as mechanisms to channel public resources to meet particularly pressing social needs. Community-based social funds are agencies, typically managed at the local level, empowering communities, NGOs, and local governments that provide finance for small-scale projects, such as infrastructure schemes and livelihood programs to community groups. They provide direct poverty relief and encourage skills development while contributing to a community’s social capital. The 1977 financial crisis and the growth in the number of countries undergoing economic transition have led to an increase in social funds projects in Asia (Box 6). Social fund methodology is now used by local governments to promote good local governance and pilot test decentralized management and financing of smallscale infrastructure in some Asian countries.

25. Disaster Preparedness and Management. This is essential to assist communities in risk coping and mitigation. As shown in Figure 6, the Asia and Pacific region is where most people are injured, affected, and homeless as a result of disasters. Victims of catastrophes are usually assisted by public relief programs;⁸ however, given the important economic and human loss caused by disasters, the critical issue is to invest in disaster preparedness. Several countries in the Asia and Pacific region have established disaster management centers for assessing hazards, planning risk reduction and monitoring programs, providing emergency assistance, and strengthening local-level risk reduction capacity. Two principal trends have developed over the past decade in disaster management: (i) improved hazard forecasting through computer models on climatic behavior; and (ii) an increased focus on local vulnerabilities given that community-based preparedness is the best mechanism to reduce loss of human life and the scale of damage.

5. Child protection

26. Given that children and youth constitute 40% of DMC populations, investing in child protection is of profound significance to the development of the region. The realities of child deprivation are alarming in Asia and the Pacific, which holds three quarters of the world’s stunted, underweight children. Lack of adequate protection can result in undernourishment, poor health, and intellectual underdevelopment which can lead to being less productive adults. Educating children and youth is essential to allow social mobility and better job prospects, and an indispensable instrument to help DMCs maintain their international competitive advantage, raise productivity, and continue economic growth. Additionally, as defined in the United Nations Convention on the Rights of the Child, society through good governance must provide measures to ensure that the child is protected from all forms of abuse and exploitation, such as child labor, child prostitution, or the adversities faced by the girl child, streetchildren, children with disabilities, and children under armed conflict. Investment in children is a key factor in poverty reduction and economic growth but it is usually a small proportion of national budgets, despite ample evidence that the small investments currently made bring considerable future benefits to society as a whole.

27. High child/adult dependency ratios indicate the need to provide social protection for the young, such as

1. early child development to ensure the balanced psychomotive development of the child through basic nutrition, preventive health, and educational programs;
2. school feeding programs, scholarships, or school fee waivers;
3. waiving of fees for mothers and children in health services;
4. streetchildren initiatives;
5. child rights advocacy/awareness programs against child abuse, child labor etc;
6. youth programs to avoid social anomia in teenagers, criminality, sexually transmitted diseases such as HIV/AIDS, early pregnancies, and drug addiction; and
7. family allowances, either means-tested cash transfers or coupons/ stamps for basic goods and services (i.e., food, clothing) to assist families with young children to meet part of their basic needs.

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