A review of social protection today provides examples of systems that help people who need support and help reduce the gaps in social provisions.
Automation and a rise in atypical forms of employment have triggered welcome and necessary debates about how social protection systems can maintain effective support for those in need. For instance, the recent upsurge in interest in different forms of universal income support, such as a basic income, is in part linked to concerns associated with the evolving future of work. On the one hand, growing uncertainty over career prospects and work patterns can be expected to drive a greater demand for effective social protection as a backstop to less predictable labour markets. On the other hand, existing social protection systems were, in large part, modelled on employer-employee contracts, stable career patterns and social compacts, which may appear outdated today.
Notwithstanding concerns over future job losses due to automation, overall employment in fact reached new highs in 2016 in most OECD countries, including in Canada. Nonstandard employment, such as self-employment, part-time work or temporary contracts, is not new (figure 1). But a large majority of employees in Canada and in other OECD countries remain engaged in so-called “standard” types of employment, working on open-ended full-time contracts. At the same time, available data consistently point to substantial, and often growing, numbers of people in new forms of nonstandard work that have been largely unknown until very recently. For instance, 0.5 percent of all workers in the US provided services through online intermediaries in 2015, 3 percent of adults in the UK tried gig work in some form during 2016-17, and 5 percent in selected European countries reported doing paid work that is organized through an online platform. Digitalization and advances in artificial intelligence are also driving an accelerating trend toward automation. The pace of growth in the global stock of industrial robots nearly tripled between 2008 and 2016, and greater reliance on machines at the workplace is expected to reduce the need for human labour in some areas and require new skill sets in others.
As automation and new forms of employment transform global labour markets, new challenges for social protection systems will arise. Yet these future challenges should not distract from existing ones, and the performance of present-day social policies in different countries can give valuable clues about the scale of the consequences of failing to adapt policy configurations to evolving labour market realities.
Is cash support accessible for those in need?
Even now, when a large majority of workers are still in traditional forms of employment, fewer than 50 percent of active job seekers in Canada and many OECD countries receive unemployment support. Lower-tier safety nets, such as minimum income benefits for poor people (often called social assistance), are typically less accessible still, in part because of the negative stigma that can come with claiming these transfers. Despite the limited reach of unemployment benefits in Canada and several other countries, the total support package paid to low-income groups exceeds that received by their high-income counterparts (figure 2). But targeting is weak in the OECD area on average, with better-off families receiving almost the same amount of income transfers as poorer ones. Difficult-to-access unemployment support is one reason why low-income groups in some countries, for instance in southern Europe, are substantially less likely to benefit from cash assistance than better-off families.
New types of atypical employment make effective targeting harder, for instance because occasional short spells of gig work make it unclear whether someone is “in employment” or looking for work. Tying social protection entitlements to people’s employment status and history is more difficult in such circumstances. If existing policies are not designed to provide adequate coverage for all those in need, governments may need to invest in re-examining the legal rules for entitlement and ensuring that the rules are adequately implemented so that assistance reaches the intended beneficiaries. Moving toward greater universality (for instance, through a universal basic income) may be another, though fiscally more costly, option to keep social protection accessible.
Is social protection responsive to economic conditions?
Large parts of social protection systems are designed to be responsive to changing social and economic conditions, and to provide an essential stabilizer for family income and the economy as a whole. For instance, spending on unemployment support automatically expands when job losses mount during a recession, and means-tested assistance programs pay more when the numbers of low-income families increase.
But in practice, this automatic adjustment functions only to the extent that job and income risks are adequately covered by social protection systems. And even then it may not necessarily work as designed: governments may seek to limit crisis-related expansions of social programs to reverse spending increases enacted during boom times. In the average OECD country, public spending during the crisis years of 2007 to 2012, when the need for support was much bigger, grew slightly more strongly than during the boom years that preceded the Great Recession (figure 3). But in several countries, including in hard-hit parts of Europe, spending increased at a rapid pace when the economy was doing well, and slowed during the downturn. To a lesser extent, this was also the case in Canada, where spending in real terms grew by just under 10 percent over the four years before the crisis, but by only 3 percent afterwards.
To crisis-proof social protection systems and ensure that social protection acts as an effective stabilizer to family incomes and for the economy, governments would arguably need to look beyond the recent downturn. First, they need to find ways to build up savings during upswings so that they can meet rising costs during downturns. On the revenue side, they should work to broaden tax bases and reduce their reliance on labour taxes. On the spending side, they should link support more to labour market conditions — for example, by credibly reducing benefit spending during the recovery, and by shifting additional resources from benefits to active labour market policies that help families re-establish self-sufficiency.
Do activation policies tackle the most pressing employment barriers?
Across OECD countries, between 16 and 50 percent of working-age persons are without employment, and a significant share of them work intermittently or for fewer hours than they would like. The factors contributing to joblessness or underemployment are varied and can relate to individual circumstances and characteristics, to specific policy choices, or to the broader economic context, such as a cyclical labour market weakness. Good-quality information on the employment barriers that people are facing is crucial for formulating strategies to overcome them, but it rarely exists in a format that is easily accessible to policy-makers and practitioners. As employment patterns diversify further in a future world of work, timely information on people’s labour market circumstances and employment barriers will become even more crucial for ensuring that activation measures, such as training, job-search assistance and other support programs, go to those who need them most.
A recent OECD project called Faces of Joblessness developed a set of tools that allow governments to monitor and visualize the most prevalent barriers to stable employment, putting people at the centre of policy dialogues and providing pointers for reform priorities. Results show, for instance, the extent of skills deficiencies, health problems, work incentives or scarce job vacancies for different population groups. A key finding is that large shares of jobless people face a combination of several employment obstacles, highlighting the limits of narrow policy approaches that focus, say, only on training, and the need to coordinate employment support measures across institutions and levels of government.
A close look at the performance of social protection systems today can provide valuable pointers for the challenges that lie ahead. Faster-moving labour markets will exacerbate any existing gaps in social provisions and their negative impact on inclusiveness and cohesion. Yet there are also good examples of social protection systems that successfully navigate present-day challenges and provide accessible support to those changing jobs, training or looking for work. Although adaptations will be needed, these existing policy configurations illustrate essential ingredients that are needed for easing transitions in a changing world of work.
The opinions expressed and arguments employed in this article, as well as any errors, are the sole responsibility of the author and cannot be attributed to the OECD or its member countries.
This article is part of the special feature Inclusive Growth in an Age of Disruption