The Effects of the Crisis in Social Security Systems

ACTRAV – ETUITorino 03/09/2009

Fabio Durán ValverdeJesús García Jiménez

A FULL HEALTH CARE FOR THE WHOLE FAMILY, And right to economic benefits in illness situations.

C. 102 – 130 – R134 Y 69

RIGHT FOR SOCIAL SECURITY BENEFITS OF PROTECTION TO FAMILY AND CHILDREN. C. 102

SOCIAL CONTROL OF THE MANAGEMENT TRIPARTISM - PARTICIPATION

C102-121-128-130-168

MATERNITY PROTECTION C. 183 R191

BENEFICTS BASED ON THE FAMILY

RIGHT FOR SUFFICIENT PENSIONS

(Retirement - Disability - Widowhood) C. 102 -128 – R131

PROMOTION OF PRODUCTIVE EMPLOYMENT AND RIGHT FOR UNEMPLOYMENT BENEFITS

C. 102 -168 – R176

SOCIAL CONTROL OF THE MANAGEMENT TRIPARTISM - PARTICIPATION

C102-121-128-130-168

RIGHT FOR HEALTH AND ECONOMIC BENEFITS   FOR WORK ACCIDENTS AND OCCUPATIONAL DISEASES

C. 102 – 121 - R121

BENEFICTS BASED ON THE JOB

COMPLEMENTARY AND FREE LEVELPRIVATE (Or by collective bargaining)INDIVIDUALLY FUNDED SYSTEMS

SOCIAL FLOORNON CONTRIBUTORY BENEFICTS FUNDED BY TAXES (f.e: HEALTH CARE – NON CONTRIBUTORY PENSIONS)

CONTRIBUTORY LEVEL

Funded by the quotations from workers and Employers PAYGO SYSTEMS

COMPONENTS/PILLARS OF THEORETICAL SOCIAL SECURITY SYSTEM

(Spanish model)

Implications of the crisis (diferent way ♀ y ♂)

1. Lower rates of economic growth

2. Recession in various countries

3. Increase in unemployment and underemployment rates (it is estimated 50 millions )

4. Less employment opportunities

5. Probable increases in situations of precarious work

6. Impact on social security systems

7. Other impacts: poverty, inequality, social conflict, etc.

Impact on social security systems (diferent way ♀ y ♂)

1. Reduction in the level of funds of systems that work under collective and individual capitalization – financial crisis

2. Increase in contributory evasion and delinquency – easy escape valve for enterprises – financial and economic crisis

3. Contraction of affiliation to social security in the formal and informal economy – employ crisis

4. Contraction of collection – economic and employ crisis

5. Reduction of substitution rates systems of individual accounts – between 10% and 30%, depending on the type of fund – financial crisis

6. Increase beneficts by unemployment, increase spending. Employ crisis

7. Reduction of the real cost of health – social security institutions – effects of quality and quantity of attention given

Elements for discussion and analysis – an ILO position

1. Paygo Systems vs individually funded Systems: demographic risk versus financial risk

2. The sustainability of the system: aging and coverage

3. Individually funded Systems, of public or private administration, depends more on capitalization to guarantee certain levels of benefits. The crisis affects those systems that are most capitalized.

4. Social Security as a human right: Universal Declaration of Human Rights. Philadelphia Declaration. Nature and object of an instrument for protection. It is not about conventional financial instruments. They are not savings accounts.

1. Public nature of social security systems, independently from how they are financed and managed.

2. The system’s mission: provide protection. ILO’s position: “benefits must be secure and non-discriminatory”. The instruments must guarantee not only solidarity but SECURITY as well.

3. If individuals are obliged to forecast through contributions, the State must ensure the security of funds. The position of the ILO: ILC 2001. The State is the ultimate financial guarantor.

Elements for discussion and analysis – an ILO position (continuation)

Some data

Nominal rentability to date of reserve funds selected OECD countries. Source ISSA

• Nominal rentability to date in pension funds selected by the OECD. Source: ISSA

The most important social security problem in Latin America is low coverage…the crisis can decrease

contributory coverage (%)

Cobertura por sexo (países seleccionados)

0% 10% 20% 30% 40% 50% 60% 70%

Chile

Costa Rica

Uruguay

Panamá

Brasil

Colombia

Argentina

México

Ecuador

Peru

Bolivia

< 24 años

Mujeres

Hombres

PEA total

Conclusion 13, International Labour Conference of the ILO, 2001

"In the pension system with defined benefits based on the “paygo system”, the risk is assumed collectively. In systems of individual savings accounts, by contrast, are those people who take the risk. While this is an alternative that exists, this should not weaken solidarity, in which the risk is shared between all members of the scheme.”

In facing the crisis, the state must play an important role ... and in facing with the structural problems of

social security

1. The State as the ultimate financial guarantor.

2. Responsibility of the State and of its administrators, respect to transparency in providing information to members. Prohibit misleading information: rates of return and substitution rates. Responsibility of the institutions of regulation and supervision (Superintendents). The State must assume responsibility of minimal profitability for soon-to-be retirees and those people that dealt with changes in their retirement expectation, be it in in either in pension amounts and retirement age .

3. The State should assume responsibility for minimum return for people who are close to retirement who were abruptly changed their pension expectations, either in amounts of pensions or retirement ages.

4. Implement a means of ensuring a minimum return over the long term, collective and individual: guaranteed minimum return and minimum benefits.

In facing the crisis, the State must assume an important role… (…continuation)

5. Eliminate or regulate the instruments that compromise the security of benefits: “programmed rent”, “high-risk funds”, etc.

6. Strengthen the pressure to combat tax evasion and improve coverage to pay ... or at least maintain the level of coverage during the crisis

7. Facilitate the access and duration to unemployment benefits (where they exist)

8. Minimize the impact on poverty. The crisis will greatly effect those whom do not have social protection. Basic floor for social protection - strengthen systems aimed to the poorest – creation or strengthening of assistance programmes.

NORMAS INTERNACIONALES DEL TRABAJO SOBRE SEGURIDAD SOCIAL

Definen Quién tiene derecho a qué y en qué condiciones, es decir: Campo de aplicación, Prestaciones y Condiciones de acceso, para todas y cada una de las RAMAS DE LA SEGURIDAD SOCIAL, que según las Normas Internacionales de la OIT son:

Invalidez, Vejez y Muerte (o supervivencia) - C 102 partes V, IX y X  - C128  y R 131.

Salud (Asistencia Sanitaria y Prestaciones económicas) - C. 102 p.II y III; C130, R134 y R69.

Maternidad - C102 p. VIII; C 183, R191.

Accidentes de Trabajo y EE.PP - C102 p.VI; C121 y R121

Desempleo - C102 p. IV; C168 y R176

Prestaciones Familiares C.102 p.VII

Group Work

Group work

1 - Identify and discuss the effects of the crisis on each of the pillars shown, by differentiating the size of the cause, be it financial, economic, or employment

2 – Complete the paper, developed by a group of trade unionists in March, on "possible responses to the crisis from the social security” provided from each of the pillars.

COMPLEMENTARY AND FREE LEVELPRIVATE (Or by collective bargaining)INDIVIDUALLY FUNDED SYSTEMS

SOCIAL FLOORNON CONTRIBUTORY BENEFICTS FUNDED BY TAXES (f.e: HEALTH CARE – NON CONTRIBUTORY PENSIONS)

CONTRIBUTORY LEVEL

Funded by the quotations from workers and Employers PAYGO SYSTEMS

COMPONENTS/PILLARS OF THEORETICAL SOCIAL SECURITY SYSTEM

(Spanish model)

MUCHAS GRACIAS! PREGUNTAS?