Essay 1: Where Does Targeting Fit Conceptually within Universal Social Protection?

Targeting within Universal Social Protection | 39

defining priority groups. The discussion of metrics is embedded throughout the book, with the most in-depth discussion in chapter 7. This chapter is constructed as a series of essays. The first two take up the issue of how selectivity fits conceptually and practically within universal social protection; the next essays take up the principles of targeting and extensions around them; then issues of tax, political economy, and human rights are treated.

Essay 1: Where Does Targeting Fit Conceptually within Universal Social Protection?

International Labour Organization recommendation 202,2 one of the iconic statements on universal social protection adopted by 185 countries in 2012, acknowledges the many different objectives of social protection, inter alia, as an important tool for preventing and reducing poverty, inequality, and social exclusion; promoting equal opportunity and gender and racial equality; managing risks; and realizing social and economic rights. These ideas carry through in the social protection strategies and definitions of many international agencies that are influential in the field, including the World Bank (see Jorgensen and Siegel [2019] for a short comparison).

The World Bank’s Social Protection and Labor Strategy is shaped around resilience, opportunity, and equity. The strategy paper says the following:

Social Protection and Labor programs directly improve resilience by helping people insure against drops in well-being from different types of shocks and equity by reducing poverty and destitution and promoting equality of opportunity by building human capital, assets and access to jobs and by freeing families to make productive investments because of their greater sense of security. At a macroeconomic level, well-functioning social protection programs are central to growth-promoting reforms. (World Bank 2012, i)

Differentiation of benefits is engrained in the contributory social insurance that is the classic social protection pillar associated with resilience. The benefits of old-age and survivors’ pensions, disability insurance, and unemployment insurance commonly have an element of “replacement wage” or “share of earnings” in their formulae.3 The differentiation of benefits is part of the guarantee, and it is relatively easy to accomplish since wages are observed as part of the payroll tax that finances the insurance. Health insurance differentiates benefits on the basis of the severity of illness. And so on with insurance in allied fields. In crop or weather insurance, which can provide protection to incomes, or property insurance that protects assets, the payout depends on the degree of measured or approximated loss.

40 | Revisiting Targeting in Social Assistance

Differentiation of eligibility and/or benefits happens in some but not all the aspects of the labor programming and regulation that are part of the opportunity pillar. Efforts to improve the employment prospects of youth or the unemployed may conduct profiling to assess employment prospects and then give greater attention to those assessed as having the most barriers to overcome, for example, in terms of education, training, experience, work habits, health, or the logistics and costs of dependent care or transportation. Legislated labor protections are usually the same for workers of equivalent contractual status, perhaps differentiated by tenure, but different contractual statuses (“contract” or “short-term” employees, part-time workers, and so forth) may have different protections.

Differentiation of at least net and often gross benefits is integral to social assistance and the equity pillar. To reduce poverty or inequality, the net benefit of transfers and the taxes that support them must be positive for at least the poor, and sometimes the thresholds for net transfers rise markedly up the income distribution. This can be achieved through various designs—from flat and universal benefits supported by imposing taxes more on the nonpoor than the poor, or from transfers that are differentiated by welfare in eligibility and/or benefit level, highest for the poorest.

Many social protection programs blend elements of assistance and insurance, and these often involve targeting. Families suffer many risks for which they do not hold insurance or make ex ante payments (through a variety of failures of insurance markets, myopia, or poverty). Public action may help cushion the losses ex post with funding from noncontributory sources, usually general revenues. The payments are often calibrated to losses or poverty prevention or a mix of the two.

Blending of the assistance and insurance functions may be an increasing trend. Indeed, it is a central recommendation of World Bank thinking about how to improve risk management in a world with significant informality (Packard et al. 2019; World Bank 2019). Blending can be done in various ways: providing subsidies for insurance premia for the poor or vulnerable, providing social protection irrespective of the form of employment, increasing the coverage of social assistance, or providing general revenue–based rather than payroll tax–based financing for benefits. Blending assistance and insurance poses some questions on how to measure coverage on the way to universal social protection since the two subsectors have traditionally been measured in different ways (see box 1.1).