The increase in social protection programs during COVID-19
Chicago, Illinois – In an attempt to shield themselves from economic disaster in the wake of the COVID-19 pandemic, governments have enacted an unprecedented number of social protection programs. According to the World Bank, social protection “traditionally consists of labor markets, pensions, social funds and ‘safety nets’. Although developing countries have introduced more than 1,300 social protection and employment programs related to COVID-19, the International Labor Organization (ILO) “estimates 255 million full-time equivalents” in job losses. jobs in 2020. From 90 to 130 million additional losses are estimated in 2021.
Liquidity assistance and labor regulations
The World Bank said providing liquidity to businesses and adjustments to labor regulations are the most popular policies. Liquidity assistance included tax relief, utility assistance, credit and payment facilities, and the deferral of social security contributions. At least 91% of countries provided this type of business support. In addition, 71% have adjusted labor regulations. Changes to labor regulations included flexible working conditions, severance pay, leave policies, labor inspections, compensation, dismissal procedure, flexible hiring, and other regulations . Similarly, a third of countries supported workers directly through wage subsidies, unemployment benefits and/or income tax relief. About 35% of countries “have adopted wage subsidies”, 33% have granted unemployment benefits and “29% have reduced or deferred income taxes”.
Labor market policy changes
More than before, governments were “directly targeting the self-employed and informal wage workers with cash transfers”. Governments have targeted more than 38% of cash transfer programs to workers, some of whom are in informal settings. The World Bank has found that cash transfers increase labor market programs by 55-60%. Similarly, the World Bank explained that public works, which has also adapted to the crisis, can help informal workers who may not have income protection. As a result, low-income countries typically prioritize public works in their policy response.
Labor market policies, in which the government actively intervened in the labor market, were the most common type of social assistance during COVID-19. In fact, 55% of the policies were labor market policies. Social assistance policies accounted for 38% of social protection policies. Social insurance policies were 7%. Cash transfer programs have become more popular during COVID-19 and shifted from targeting households to targeting workers. Governments have allocated an average of $686 million to policies that directly benefit workers. Additionally, $1.2 billion was the average budget for corporate credit guarantees.
Work income support
Work income support was less common than labor market policies. Less than 40% of countries had policies aimed at increasing the disposable income of workers and the unemployed. These policies include wage subsidies, income tax reduction, unemployment benefits and public works. Low-income countries prioritized public works programs and income tax reduction. Lower-middle-income countries have more unemployment benefit programs in place. Upper-middle-income countries “have prioritized wage subsidies, accompanied by either unemployment or income tax cuts.”
Although the percentage of countries adopting social protection programs has declined steadily since the WHO declared the pandemic, labor market policies have remained the most widely used social protection programs. Some countries, however, continue to introduce new programs.
Opposing Views: Nigeria and Uganda as Case Studies
Although governments wanted social protection programs to be put in place during COVID-19 to ease the financial stress of the most vulnerable. Some argue that the implementation of the policies has allowed existing inequalities to persist and even worsen.
In its analysis of Nigerian and Ugandan COVID-19 policies, the Center for the Study of African Economies (CSEA) states: “Cash has been provided to affected businesses and sectors such as tourism, hospitality and aviation in 92% of African countries. Yet the design and implementation of such macroeconomic policies [has allowed]existing forms of inequality worsen. The focus on labor market policies and market-oriented interventions left out specific groups. This specifically includes women, young people, the informally employed and the new poor.
It has also had a negative impact on agricultural and manufacturing businesses and small and medium enterprises. Although Uganda and Nigeria have expanded cash transfer programming, CSEA found these programs insufficient. They were ineffective in targeting the most vulnerable. Similarly, the CSEA said the percentages remained “at 0.002% and 0.00017% respectively”.
It determined that Ugandan and Nigerian spending on cash transfer programs was meager as a percentage of gross domestic product (GDP). Therefore, coverage is insufficient. Furthermore, it showed that Nigeria had excluded 81% of the poor from the national social register. Meanwhile, Uganda has around 10 million people living in poverty. Uganda’s Urban Cash for Work program only benefited 1.5 million people.
Women and agricultural workers are disproportionately employed in the informal sector. Most policies – interest rate cuts, tax breaks, loan restructuring and debt moratoriums – do not affect the informal sector. This leaves employees out in the cold. This is all the more troubling given that the informal sector accounts for 65% of Nigeria’s economy and 50% of Uganda’s.
Although the central banks of Nigeria and Uganda have lowered their interest rates, this has not been reflected in commercial banks. There, banks affect most low-income borrowers. Similarly, fuel and electricity subsidies mainly benefited the wealthy. Fiscal restructuring and allocations in Nigeria and Uganda mainly benefit already privileged people. Countries are doing little to help the most vulnerable during the COVID-19 crisis.
Evidence of benefits from social protection programs
On the other hand, some have found that social protection programs limit the negative economic impact of COVID-19. They argue that it would have been far more disastrous if the measures had not been put in place. Critics have argued that people are less likely to work when populations have social protection. There is no evidence to support these criticisms. Evidence in fact shows that social protection programs help families escape poverty.
People say that even before adopting these protections, countries carefully considered who was most vulnerable and what programs would help the most vulnerable. They also assessed the extent of the intervention, its duration, its cost-effectiveness, how to ensure accountability for these programs, and the indications for these long-term interventions. This has led to adaptable and scalable social protection programs. In fact, 40% of COVID-19 social protection programs are adaptations of already existing policies.
Where to go from here?
COVID-19 has provided an opportunity to examine the effectiveness of social programs. People have become more open to programs that help vulnerable people now that they have seen how these programs can help.
Ashok Khosla and Arun Sahni of the Indian Express argue that if people are to recover effectively from COVID-19 and protect themselves from future COVID-19-like economic shocks, they must “build a new global economy that ensuring an equitable and environmentally sustainable future for all nations, large or small, will need to pay much greater attention to facilitating systemic change by building strong civil societies, with research capacities for tailored innovative solutions. People then outline the steps to building this global economy, including creating and using international networks and meeting international obligations.
– Hilary Brown