Work in in Africa Zainab Usman, PhD (World Bank) Presentation at - - PowerPoint PPT Presentation

Social Protection Poli licy Responses in in the Future of Work in in Africa

Zainab Usman, PhD (World Bank)

Presentation at the “Transforming economies – for better jobs” UNU-WIDER Development Conference in partnership with UNESCAP

11-13 September 2019 Bangkok, Thailand

• 1. Introduction: Questions, Methods & Findings
• 2. What is Social Protection?
• 3. Systemic Risks and Fiscals Constraints Limit Social Protection

Coverage in SSA

• 4. Social Protection Policies in the Changing World of Work in

Africa

• 5. Conclusions

Outline

• 1. Introduction

Questions & Methods

Questions: 1. In the changing world of work, what are the risks to labor markets and policy constraints that SSA economies face? 2. What social protection policies should African governments consider in preparing for the future

• f work, and how can they be

financed? Methods:

• Review and synthesis of academic and

policy literature

• Analysis of revenue, expenditure and

tax data

• Select examples of innovations in

social protection policies

Summary of Findings

Social Protection & Labor Systems in a Changing World of Work Should Manage Risks to African Labor Markets Strengthen traditional social protection and labor programs for the poor & vulnerable Turn risks into opportunities to provide innovative SPL solutions Optimize potential and existing resources to address fiscal & policy constraints

• 2. What is Social Protection?

What is Social Protection?

“Social Protection and Labor (SPL) systems, policies, and instruments help individuals manage risk and volatility and protect them from poverty and destitution through instruments by improving equity, resilience and opportunity”

Source: World Bank. (2012). Resilience, Equity, and Opportunity : the World Bank's Social Protection and Labor Strategy 2012-2022. Washington D.C.: World Bank.

Rethinking Social Protection and Labor Systems

Expand social protection coverage in the changing world of work through the guiding principle of “progressive universalism”, while giving priority to the poorest people”

32,5% 40,2% 39,9% 39,2% 24,0% 80,0% 19,1% 30,6% 30,4% 42,4% 61,2% 15,5% 21,2% 19,8% 16,0% 3,9% 1,4% 3,3% 27,1% 9,4% 13,7% 14,6% 13,3% 1,2% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% 90,0% 100,0% Europe & Central Asia (ECA) Latin America & Caribbean (LAC) East Asia & Pacific (EAP) Middle East & North Africa (MENA) South Asia (SAR) Sub-Saharan Africa (SSA) No transfer Only social assistance programs Only social insurance programs More than one SPL benefit

Most of SSA population is not covered by any Social Protection and Labor program

Source: World Bank Atlas of Social Protection (ASPIRE) database

Source: World Bank. (2019). World Development Report 2019 : The Changing Nature of Work. Washington D.C.: World Bank

Rethinking Social Protection and Labor Systems in Africa

In the Changing Nature of Work: ✓ Social protection policies will need to effectively manage a large compendium of risks in Africa’s labor markets. ✓ Given the low baseline of social protection coverage in most SSA countries, there are fiscal implications to expanding coverage. ✓ Given the low-income level of most SSA countries, it will be important to balance competing policy priorities such as education and health, infrastructure and security, and

• ptimize public investments.

• 3. Systemic Risks and Fiscal

Constraints Limit Social Protection Coverage in SSA

(i). Digital technologies are disrupting labor markets Global Trends Pose Systemic Risks to Africa’s Labor Markets

Automation and globalization affect industrial employment

Source: World Bank. (2019). World Development Report 2019 : The Changing Nature of Work. Washington D.C.: World Bank

Socio-behavioral skills are becoming more important to recruiters

(ii). Greater economic integration (i.e.AfCFTA) will create New Economic Opportunities and Result in Adjustment Costs Global Trends Pose Systemic Risks to Africa’s Labor Markets

Africa has one of the lowest levels of intra-regional trade, as a percentage of total exports, 2017 Adjustment Paths Following Trade Liberalization

Source: Francois, J., Jansen, M., & Peters, R. (2011). Trade Adjustment Costs and Assistance: the Labour Market Dynamics. In M. Jansen, Trade and Employment: from Myths to Facts (pp. 213-252). Geneva: ILO-EU.

(iii). Climate and conflict drivers create shocks that disrupt labor markets Global Trends Pose Systemic Risks to Africa’s Labor Markets

African countries are highly vulnerable to climate shocks Conflict Events Worldwide, by Type of Conflict and Region, 1989–2016

Source: United Nations; World Bank. (2018). Pathways for Peace : Inclusive Approaches to Preventing Violent Conflict. Washington D.C.: World Bank Source: IMF. (October 2018). Regional Economic Outlook Sub-Saharan Africa: Capital Flows and the Future of

• Work. Washington D.C.: International Monetary Fund

(iv). SSA’s demographic transition is characterized by a youth bulge, urbanization and migration flows Global Trends Pose Systemic Risks to Africa’s Labor Markets

• 500 000 000

1 000 000 000 1 500 000 000 2 000 000 000 2 500 000 000 3 000 000 000 2001 2011 2021 2031 2041

Global Population Projection to 2050 (billions)

SSA MENA EAP ECA SAR LAC N.America EU $1 860 $1 806 $3 617 $1 018 $- $500 $1 000 $1 500 $2 000 $2 500 $3 000 $3 500 $4 000 LAC (1950) MENA (1968) EAP (1994) SSA (2013)

Income Per Capita at 40% Urbanization (Constant 2005 US$)

Africa is projected to experience rapid population growth over the next decades SSA is urbanizing at lower per capita GDP than other regions

Source: Calculations from World Bank’s World Development Indicators Source: Hommann, K., & Lall, S. (2019). Which Way to Liveable and Productive Cities? A Road Map for Sub- Saharan Africa. Washington D.C.: World Bank.

(i). Insufficient resources are devoted to social protection in SSA due to low- levels of social spending, donor dependence, misallocation, and inefficiencies

Fiscal Constraints Limit Social Protection Coverage in Africa

$253 $158 $93 $43 $29 $16 $80 $253 $139 $69 $40 $29 $15 $66 $- $50 $100 $150 $200 $250 $300 ECA LAC MENA EAP SAR SSA World Median SSN spending (total) per capita Median SSN spending (without health fee waivers) per capita 0 % 20 % 40 % 60 % 80 % 100 % Tanzania Cameroon Cote d'Ivoire Social Assistance Pensions Employment/Labor Market General Subsidies

SPL expenditures are heavily concentrated in pensions

Regional Median Annual Social Safety Net Spending per Capita (US$ PPP)

Source: Authors’ calculations from World Bank public expenditure reviews

(ii). SSA countries have limited social protection coverage and spend less per capita in part due to low levels of domestic revenue mobilization (DRM).

Fiscal Constraints Limit Social Protection Coverage in Africa

2 4 6 1990 1995 2000 2005 2010 2015 Year PIT CIT Property Tax VAT Excises Trade Taxes Other Taxes Performance of Different Tax Types (Africa)

Source: Authors’ calculations from World Bank, IMF and UNU-WIDER databases

(iii). Due to competing policy priorities, SPL expenditures in Africa are lower than other public investments Fiscal Constraints Limit Social Protection Coverage in Africa

12,0 6,6 6,3 17,3 15,5 18,6 9,5 3,0 4,9 5,8 6,5 5,1 8,0 36,3 27,7 24,7 27,3 30,3 22,6 4,9 7,0 0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0 90,0 100,0 Tanzania Cameroon Cote d'Ivoire

Share of T

• tal Goverment Expenditure (%)

Social Protection Education Health Military Capital Expenditure Employee Compensation Others

Source: Authors’ calculations from World Bank public expenditure reviews

• 4. Social Protection Policies in the

Changing World of Work in Africa

Mitigate Risks, Leverage Opportunities and Optimize Existing and Potential Resources

Social protection policy options to mitigate risks & leverage opportunities

Digitization and Trade Integration Risks Climate Change and Fragility Risks Population Transition Risks Social Assistance

• Public Works Programs (PWPs) to manage

transitions and generate income for displaced workers.

• To strengthen social assistance, mineral-rich

economies can directly distribute resource revenues to host communities, that could be affected by automation of mining jobs, through resource-dividend schemes. The sub-national, resource-dividend schemes in Alaska and Canada are interesting examples.

• Flexible and scalable SSNs can help households mitigate

and respond to shocks. DT-supported social registries can help in identifying and targeting individuals and households at risk. “Productive-inclusion” elements can help enhance productivity.

• PWPs can increase household and climate resilience e.g.

soil and water conservation, development of irrigation channels, food storage facilities, and rainwater capture, and emergency cash for work programs.

• Private transfers can be leveraged to complement weak

formal social protection systems in fragile situations. These include Islamic Zakat, Church tithings and revolving village savings and credit associations. They could be strengthened with formal risk-pooling and reinsurance solutions

• SSNs that are targeted at the urban poor can help

working age populations in transition.

• “Safety Nets Plus” delivers complements to cash

transfers to the urban poor with ALMPs such as links to financial services, access to capital or training in a range of skills including microenterprise development, technical and life skills. Social Insurance

• Social insurance reforms should expand insurance

coverage beyond formal employer-employee contracts, especially to the informal sector

• Governments can facilitate and strengthen private sector

solutions to insurance and risk-sharing Labor Market Policies

• ALMPs can facilitate the transitions of workers to

new jobs displaced by trade liberalization or automation and minimize the costs of trade

• adjustment. These include training and job search

programs, formal and vocational education, and skills-job matching programs

• ALMPs, remedial training programs and employment,

entrepreneurial and business support in collaboration with the private sector especially in the digital economy. Other

• Investments in regional public goods, including early warning systems for natural disasters and epidemics, regional centers of excellence on research and training, enabling private

markets for risk-sharing, and a regional approach to reduce remittance costs.

Sustainable Resource Mobilization to Extend Social Protection Coverage

The fiscal space of SSA economies can be broadened by: ✓ Reallocating public expenditure towards social investments ✓ Tax reforms to generate additional revenue for social investments ✓ Floating diaspora bonds to enable direct use of remittances ✓ Collaborating with the private sector: CSR, Trust Funds etc

RoW SSA 0.0 0.5 1.0 1.5 2.0 2.5 1990 1995 2000 2005 2010 2015 Year

Property Taxes in SSA vs RoW

Oil & Gas Poor Oil & Gas Rich 0.0 0.5 1.0 1.5 2.0 2.5 1990 1995 2000 2005 2010 2015 Year

Property Taxes trends in SSA, Oil & Gas rich vs. poor

Excise tax revenue is lower in SSA compared to the rest of the world Property tax collections is lower in (a) SSA compared to the Rest of the World, (b.) in hydrocarbon exporters compared to non-exporters

Source: Authors’ calculations from World Bank, IMF and UNU-WIDER databases

OECD-DAC bilateral aid to Africa is more supportive of SPL compared to Chinese Loans, 2016

Efficient Use of Social Protection Expenditures

6,6% 39,1% 53,6% 21,9% 33,6% 9,1% 3,3% 4,8% 2,1% 9,3% 0,0% 13,3% 0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 % Chinese Loans OECD-DAC Aid Social Economic Production General Programme Debt Multisector Humanitarian Other

Digital tech can help increase efficiency of social registries and SPL systems Rebalancing SPL spending among instruments and population groups Improving coordination of development assistance for social protection

Managing Policy tra radeoffs ffs

Integrate SPL into national and regional economic strategies Labor market reforms can be linked to broader public sector reforms A regional approach to SPL, as public goods Renewing social contract on how to allocate public resources for the largest welfare impacts

• 5. Conclusions

Conclusions: Areas for further research

✓ Identifying and examining the effectiveness of emerging SPL interventions that aim to extend social protection to the informal sector. ✓ Understanding ways to collaborate with the private sector esp. on labor market policies. ✓ How to better leverage informal private transfers to serve a more effective risk-sharing and co-insurance function especially in fragile settings.

Visit: “The Future of Work in Africa: Harnessing the Potential of Digital Technologies for all” web page: https://openknowledge.worldbank.org/h andle/10986/32124 Contact: zusman@worldbank.org

Thank you