Social Protection in Low and Middle-Income Countries

Context

Social protection is a critical component of a country’s development strategy, aimed at ensuring that all citizens have access to essential services and benefits that protect them from poverty, unemployment, and other life-cycle risks. Despite significant progress in expanding social protection systems globally, a substantial gap remains, particularly in low- and middle-income countries.

Overview of Social Protection Coverage

As of recent estimates, nearly 1.6 billion people in low- and middle-income countries lack adequate social protection. This figure highlights the vast disparities in social protection coverage across different regions and income groups. High-income countries have achieved high levels of coverage, with over 85% of their populations protected, while upper-middle-income countries have also made significant strides, reaching about 71% coverage.

Disparities in Coverage

• Low-Income Countries: These countries face the most significant challenges, with only about 9.7% of their populations covered by social protection benefits. The financing gap to achieve universal coverage is substantial, requiring an additional 52.3% of their GDP annually.
• Middle-Income Countries: While middle-income countries have higher coverage rates than low-income countries, they still face significant gaps. The overall financing gap for low- and middle-income countries combined is estimated at 3.3% of GDP annually.

Challenges in Achieving Universal Coverage

Achieving universal social protection is fraught with several challenges:

• Financing Gaps: The primary obstacle is the significant financing gap. Low-income countries need substantial external support to bridge this gap, as their GDP is often insufficient to cover the costs of universal social protection. Middle-income countries also require additional resources, though to a lesser extent.
• Informal Economy: A large portion of the workforce in low- and middle-income countries operates in the informal sector, which is often not covered by social protection mechanisms. This includes workers on temporary contracts, part-time workers, and those in self-employment.
• Climate Vulnerability: Countries most vulnerable to climate change have some of the lowest social protection coverage rates. This leaves millions exposed to the impacts of climate-related disasters without any safety net.

Strategies for Expanding Coverage

To address these challenges, several strategies can be employed:

• Innovative Financing Mechanisms: Taxation and Redistribution: Implementing taxes on carbon emissions and redistributing revenues to fund social protection can help bridge financing gaps. International Support: Low-income countries require significant international assistance to expand their social protection systems.
• Efficiency Gains: Resource Reallocation: Redirecting resources from regressive subsidies to social protection can enhance efficiency. Digital Delivery Systems: Leveraging technology can improve the reach and efficiency of social protection programs.
• Knowledge Agenda and Partnerships: Developing evidence-based policies and fostering partnerships among countries and international organizations can accelerate progress toward universal social protection.

Conclusion

The lack of social protection for 1.6 billion people in low- and middle-income countries is a pressing issue that requires immediate attention. Addressing this gap will involve significant investment, innovative financing strategies, and international cooperation. By prioritizing social protection, these countries can better equip themselves

Source: World Bank

UPSC Mains Practice Question

Q. Discuss the challenges and opportunities in expanding social protection coverage in low- and middle-income countries. How can these countries address the significant financing gaps and coverage disparities, especially in rural and informal sectors? Provide examples of successful strategies and policy interventions.

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