MercoPress. South Atlantic News Agency

Warnings about impact of social security cuts to reduce public spending

Assane Diop, ILO executive director of social protection: risks of political unrest

International Labor Organization (ILO) is warning countries against social security cuts to reduce public spending which could slow down or delay recovery. The ILO says social security encourages stability, but only about a fifth of the world has access.

The global financial downturn has led to global budget cuts – wealthy countries in particular want to reduce public spending, and social security benefits are prime targets for making savings. But a new report from the International Labour Organization warns against this tactic.

Cutting social security due to fiscal consolidation aimed at coping with increased deficits and public debt “may not only directly affect social security beneficiaries and consequently the standards of living of a large portion of the population but also, through aggregate demand affects, slow down or significantly delay a full economic recovery”.

The UN body says its research proves that social security – a safety net for all – is good for both economic and political stability.

“Social security systems are the most powerful tools that our society has to combat poverty, inequality and invest in people at a very early age and make them employable,” said Michael Cichon, director of the ILO's social security department. “Social security systems or social transfers […] are the most tangible instrument to give a human face to globalization.”

Worldwide, just 20% of people have a truly comprehensive social security safety net that includes a proper pension, access to affordable medical care, and unemployment insurance.

Assane Diop, ILO executive director of social protection, warns that by pushing people into poverty, cuts in social security can lead to political unrest.

“We are already seeing such unrest,” Diop said. “In developed countries, where questions are being raised about the cost of social security, there is social unrest. We are paying particular attention to workers on low salaries. Some of them, when they retire, have such small pensions now that they have difficulty surviving.”

Nevertheless, the ILO itself admits that not everything can stay the same, and that includes raising the retirement age. Michael Cichon says that in 1950, people in Europe were retiring on average after 40 years of work, and they were spending about 10 years in retirement.

Today, he says, many people retire with a lot less than 40 years of work - around 35 years - and have about 17 years of pensions.

“Basically that means the relationship between the time spent in retirement on average and the time spent in activity has changed dramatically,” Cichon said. “Something has to give.”

This new report is the first by the ILO to address the issue of social security. It is accompanied by a second report which outlines ways in which countries can provide comprehensive benefits, even in times of economic crisis.

Ironically, the reports were published on the same day that the ILO's own staff met to decide on strike action to protest job insecurity which they claim is mainly caused by the ILO practice of issuing short term contracts.

These contracts, the staff union says, limit access to two key basics of social protection: pensions and health care.