Social Protection Gaps in Low-Income Countries

As of 2022, nearly two billion people in low- and middle-income countries lack adequate social protection. A recent report from the World Bank marks the dire situation. It reveals that around 1.6 billion people receive no social protection at all. The report calls for urgent reforms to address these shortcomings.

Current Situation

The report indicates that over 80 per cent of individuals in low-income countries (LICs) lack access to social protection systems. In lower-middle-income countries (LMICs), over 30 per cent are similarly affected. These gaps exacerbate poverty and inequality.

Regional Disparities

Sub-Saharan Africa is the hardest hit region. More than 70 per cent of its population lacks any form of social protection. In LICs and sub-Saharan Africa, 98 per cent and 97 per cent of those living in extreme poverty lack adequate support.

Progress and Challenges

Between 2010 and 2022, LICs and LMICs made progress in expanding social protection. The percentage of people receiving support rose from 41 per cent to 51 per cent. However, this progress is insufficient. Three out of four people in LICs still do not receive any support.

Social Insurance Deficiencies

Social insurance systems are nearly non-existent in LICs. Only 2 per cent of their population receives benefits like pensions or health support. In LMICs, this figure is only 8 per cent.

Future Projections

If current trends continue, full coverage for those living in extreme poverty may not be achieved until 2043. The Sustainable Development Goals (SDGs) for 2030 will remain unattainable without acceleration in social protection systems.

Impact of Climate Change

Climate change is worsening existing vulnerabilities. It could push an additional 130 million people into extreme poverty by 2030. Most social protection systems are unprepared to address climate risks.

Financial Barriers

Countries spend an average of 5.3 per cent of their GDP on social protection. However, high-income countries spend more. Low-income countries allocate only 0.8 per cent of GDP to social assistance.

Need for Reform

There is a pressing need to reform subsidy systems. Redirecting subsidies from wealthier households to support the poor could free up essential resources. Investment in robust delivery mechanisms is crucial for expanding social safety nets.

Strategies for Improvement

Tailored strategies are needed based on each country’s capacity and context. Low-income nations should focus on expanding targeted assistance and economic inclusion programmes.

Questions for UPSC:

1. Examine the relationship between social protection systems and economic development in low-income countries.
2. Discuss the role of climate change in exacerbating poverty and social protection gaps in vulnerable regions.
3. Critically discuss the importance of social insurance in supporting vulnerable populations in low-income countries.
4. With suitable examples, discuss the potential impact of subsidy reforms on social protection funding in developing nations.

Answer Hints:

1. Examine the relationship between social protection systems and economic development in low-income countries.

1. Social protection systems are crucial for poverty alleviation and economic stability.
2. LICs show over 80% of the population lacking adequate social protection, reflecting their economic struggles.
3. Countries with stronger economies tend to have better social safety nets; e.g., upper-middle-income countries have lower exclusion rates.
4. Investment in social protection can stimulate economic growth by enhancing productivity and consumer spending.
5. Without adequate social protection, LICs face deepening inequality and hindered development progress.

2. Discuss the role of climate change in exacerbating poverty and social protection gaps in vulnerable regions.

1. Climate change increases the frequency of shocks, pushing vulnerable populations into extreme poverty.
2. Regions like Sub-Saharan Africa, where over 70% lack social protection, are disproportionately affected by climate impacts.
3. Social protection systems in these regions are often ill-equipped to address climate-related risks.
4. Projected increases in poverty due to climate change could add 130 million more people to extreme poverty by 2030.
5. Urgent reforms in social protection are needed to incorporate climate resilience and support affected communities.

3. Critically discuss the importance of social insurance in supporting vulnerable populations in low-income countries.

1. Social insurance provides critical safety nets like pensions, health, and unemployment support.
2. In LICs, only 2% of the population has access to social insurance, denoting gap.
3. Social insurance can help stabilize incomes and reduce poverty during crises.
4. Without social insurance, vulnerable populations face increased risks of falling into poverty due to unforeseen events.
5. Strengthening social insurance systems is essential for achieving long-term economic security and resilience.

4. With suitable examples, discuss the potential impact of subsidy reforms on social protection funding in developing nations.

1. Subsidy reforms can redirect funds from wealthier households to support the poor and vulnerable.
2. Currently, global subsidies amount to over $7 trillion, often benefiting the rich more than the poor.
3. For example, redirecting fossil fuel subsidies could provide resources for social assistance programs.
4. In fragile states, where social assistance relies heavily on international grants, reforms could enhance local funding.
5. Effective subsidy reforms can help create sustainable funding for social protection initiatives, improving overall social safety nets.