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Economic Crisis and Creating Fiscal

Space for Social Protection


Michel Rovers, Executive Organization of Employees Social
Insurance Schemes, The Netherlands
michel.rovers@uwv.nl

Session 4: Facing the challenges - Economic Crisis and Creating Fiscal Space for
Social Protection, Asia-Pacific Social Protection Week, Asian Development Bank
Headquarters, Manila, Philippines
DISCLAIMER: This presentation does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot
be held liable for its contents.

Impact of increasing social protection


expenditures on the economy
1. Social protection stimulates economic growth
2. Social protection prevents a deterioration of the crisis
but of course

3. Social protection increases the government deficit


4. Social protection affects labor market mechanisms
It all comes down to the fine print in the design of the welfare
state; it is not the welfare states size but its internal structure
that is important.

Government fiscal balance 2007 - 2014


2.0

0.0
2007

2008

2009

2010

France

The Netherlands

2011

2012

2013

2014

-2.0
-4.0
-6.0

-8.0
-10.0
-12.0
-14.0

Germany

United Kingdom

United States

Overall policies
1. Most Western-European countries chose for long-term
sustainable economic growth: budget cut backs and
structural reforms
2. Taken into account all the economic mechanisms of
government expenditures, social protection and
income redistribution
3. Balanced packages, featuring:
- budget balance (or small deficit)
- extension of labour market flexibility
- sustainable pension schemes
4. Additional measures to reduce unemployment

Short term measures


1.
2.
3.
4.
5.

Part time unemployment benefits


Social contributions reductions
Tax reductions for low paid salary jobs
Placement fees for employment agency
Vocational training programs for unemployed

Ergo: all relatively small policy programs with little


effect on deficit and few long term disadvantages

Unemployment rates 2007 - 2014


9.0
8.0
7.0

6.0
5.0
4.0
3.0

2007

2008

2009
United Kingdom

2010

2011

The Netherlands

2012
Germany

2013

2014

Lessons learned from West EU


1. Flexibility in social protection schemes is
essential: a welfare state is a blessing, a rigid
welfare state can become a burden
2. Apparently, a crisis is needed for structural
reforms
3. Solid financing systems and executable
programs are more important than
comprehensive policy plans: one way or the
other, long term fundability is the main issue

Jamaica

The Program:
1. Goal: Social Protection Strategy 2030
2. Comprehensive program, including income security, basic
services, health services and education
Findings of the program:
1. Funding and financing principles and institutions were not
addressed
2. Execution was not addressed
3. Existing structures were not explored
Recommendations:
1. Training in financing principles
2. Make existing structures, financing and execution a mandatory
part of policy programs

Zanzibar
The program:
1. Implementation of a universal pension scheme
Findings of the program:
1. Execution and its financing was the main issue and not
addressed well
2. Modern payment solutions were not considered
3. IT-solutions were not part of the policy
Recommendations:
1. Address execution costs politically
2. Make use of modern technology in payment methods (mobile
transfers, no cash transfers)
3. Explore existing IT