Sustainable financing

Ensuring the financial sustainability of social protection schemes and systems is key to realizing the right to social security. Financial sustainability is often discussed in the context of demographic trends (increased longevity, declining fertility rates and increasing mobility), yet a comprehensive assessment also needs to take into account structural changes in the labour market (labour force participation, structure of employment, levels of informality and casual work) and the changing needs of the population.

At the scheme level, sustainable financing requires transparent, accountable and sound financial management, with clear rules and regulations as well as sound record keeping in line with international accounting and actuarial standards.

Based on the principles of good governance, set out in ILO Convention No. 102 (Art. 71), the following principles have been identified by the ILO Committee of Experts on the Application of Conventions and Recommendations (2011, pp. 180-199):

Social security financing should be sustainable, based on the principle of sustainable financing, and under the general responsibility of the State.
Social security funds should be protected to the best extent possible against mismanagement, cyclical fluctuations and market failures.
The purchasing power of benefits in payment should be maintained by adjusting them to the costs of living.
Financial deficits in relation to social security should be obviated in the long term, through the establishment by the State of a funding plan to assure such solvency.

While the financial governance structures of social protection systems vary from one country to another, the application of these principles provides a yardstick for ensuring sustainable and equitable financing.

Photo credit: “Participants from Liberia and Malawi at the end of their six-month solar engineering course” by UN Women (CCBY 2.0 via Flickr).

Expert Commentaries

Human Rights in an Age of Austerity: casualty or compass?

Ten years since the global economic crisis, social and human rights protections have fallen victim to austerity measures in countries across the globe. Preventing another “lost decade” will require us to see human rights values not as merely collateral damage of economic policy, but as cogent and universal norms actively guiding tough fiscal dilemmas in […]

New Wave of Austerity Puts Gender Equality (and the SDGs) at Risk

When Agenda 2030 was adopted in September 2015, women’s rights advocates were pleased to see much of what they had been advocating reflected in the new agenda. Moving beyond the narrow goals and targets of the Millennium Development Goals, not only has the process of defining the new agenda been more inclusive, and its scope […]

Legal Instruments

Social Protection Floors Recommendation, 2012 (No. 202)

Recommendation No. 202 is the first international instrument to offer guidance to countries to close social security gaps and progressively achieve universal protection through the establishment and maintenance of comprehensive social security systems. To this aim, the Recommendation calls for (1) the implementation, as a priority, of social protection floors (SPF) as a fundamental element […]

Legal Cases

Austerity measures that contravene Conventions by reducing social protection and increasing poverty

In its general report of 2009, the Committee of Experts on the Application of Conventions and Recommendations (CEACR) observed that the global financial crisis was posing a real threat to the financial viability and sustainable development of social security systems and undermining the application of ILO social security standards. The CEACR reminded governments that, under […]

Austerity measures that contravene Conventions by reducing social protection and increasing poverty in Greece

Recalling previous recommendations, the Committee observed that the austerity measures in conjunction with the continuous contractions of the economy, employment and public finances posed a threat to the viability of the Greek national social security system, resulting in the impoverishment of the population, thus undermining the application of all accepted parts of Social Security (Minimum […]

Resources

Measuring financing gaps in social protection for achieving SDG target 1.3. Global estimates and strategies for developing countries

The paper provides regional and global estimates of the costs and financing gaps of target 1.3 of the Sustainable Development Goals (SDGs) relating to social protection and analyses a number of options for filling those financing gaps in the developing countries using domestic and external resources. The paper considers four policy areas (excluding health) of […]

Financing the end of extreme poverty

In 2015, leaders of all countries committed to “eradicate extreme poverty for all people everywhere” by 2030. In the past 25 years, the world has managed to halve the number of people living in extreme poverty. Yet despite this progress, at least 400 million people will still be living on less than $1.90 a day by […]

Assessing Fiscal Policies from a Human Rights Perspective: Methodological case study on the use of available resources to realize economic, social and cultural rights in Guatemala

In 2009 the Center for Economic and Social Rights (CESR) and the Instituto Centroamericano de Estudios Fiscales (ICEFI) produced a report titled Rights or Privileges? Fiscal commitment to the rights to health, education and food in Guatemala. A collaboration between an international human rights organization and a Central American civil society organization specializing in monitoring […]

Uganda Social Protection Financing Options Programme (Final Report)

Social protection is globally recognized as a critical component of national development strategies and key to achieving inclusive pro poor, equitable development. To realize Uganda’s social protection goals the Ministry of Gender, Labour and Social Development in partnership with the Department for International Development (DFID), Irish Aid and UNICEF, is implementing the Expanding Social Protection […]

JICA Thematic Guide to Social Protection

The Japan International Cooperation Agency (JICA) Thematic Guideline is a reference document targeting the wide ranging internal and external stakeholders in social protection. The purpose of the Guideline is to provide basic information and knowledge about social protection such as an overview of social protection around the world, trends in international assistance, effective approaches and […]

Optimal financing and self-adjusting mechanisms for sustainable retirement systems

This brief paper first recapitulates the main pension financing options and reviews the theoretical pros and cons of pension funding seeking for a logical synthesis. In the second part of the paper, a broad review of the historical experience of pension reforms since the 1980’s is presented as well as in the context of the […]

Employment and social protection in the new demographic context

The changing age structure of the population has potentially significant implications for economic development, labour markets and well-being in different development contexts. It raises issues of possible shortages in labour supply and skills, productivity and innovation and the provision of adequate social protection and other services for an increasingly ageing population. The report analyses these […]

The 2012 Ageing Report: Economic and budgetary projections for the 27 EU Member States (2010-2060)

This report analyses the economic and budgetary impact of an ageing population over the long-term. Presented to the ECOFIN council in May 2012, the report details the expenditure projections covering pensions, health care, long-term care, education and unemployment transfers for all Member States of the European Union. The report is structured in two parts. The […]

Social Budgeting

The first part of the book provides guidance for designing a social accounting system. The second part shows how the relationships between the economy and the social protection system can be translated into a quantitative model which permits projections and simulations to be carried out. Includes two concrete country applications. Link to this page

Report on austerity measures and economic and social rights

The present report, submitted pursuant to General Assembly resolution 48/141, considers the impact of austerity measures on economic, social and cultural rights, in particular on the right to work and the right to social security, with a specific focus on women, migrants and older persons. It also lays out the criteria States should apply when […]