Chicago, Illinois — In an attempt to protect from economic disaster in the wake of the COVID-19 pandemic, governments enacted an unprecedented number of social protection programs. According to the World Bank, Social protection “traditionally consists of labor markets, pensions, social funds and ‘safety nets’.” Although developing countries introduced 1,300+ social protection and jobs programs related to COVID-19, the International Labor Organization (ILO) “estimates 255 million full-time equivalent” job losses in 2020. Another 90-130 million losses are estimated in 2021.
Liquidity Support and Labor Regulations
The World Bank stated that the provision of liquidity support to firms and labor regulation adjustments are the most popular policies. Liquidity support included tax relief, utility support, credit and payment facilities and deferral social security contributions. At least 91% of countries provided this type of support to businesses. Additionally, 71% adjusted labor regulations. Changes to labor regulations included flexibility in working conditions, severance payment, leave policies, labor inspections, remuneration, dismissal procedure, hiring flexibility and other regulations. By the same token, one-third of countries directly supported workers through wage subsidies, unemployment benefits and/or income tax relief. Around 35% of countries “adopted wage subsidies,” 33% gave unemployment benefits and “29% reduced or postponed income taxes.”
Labor Market Policy Changes
More than before, governments “targeted self-employed and informal wage workers directly with cash transfers.” Governments targeted more than 38% of cash transfer programs to workers, some of whom are in informal settings. The World Bank found that cash transfers increase labor market programs from 55 to 60%. In a similar fashion, the World Bank explained that public works, which also got adapted to the crisis, can help informal workers who may not have income protection. As a result, low-income countries typically prioritize public works with their policy response.
Labor market policies, in which the government actively intervened in the job market, were the most common type of social assistance during COVID-19. In fact, 55% of policies were labor market policies. Social assistance policies made up 38% of social protection policies. Social insurance policies were 7%. Cash transfer programs became more popular during COVID-19 and transformed from targeting households to targeting workers. Governments allocated an average of $686 million to policies that benefit workers directly. Additionally, $1.2 billion was the average budget for credit guarantees for businesses.
Labor Income Support
Labor income support was less common than labor market policies. Fewer than 40% of countries had policies directed at increasing disposable income for workers and the unemployed. These policies include wage subsidies, income tax reduction, unemployment benefits and public works. Low-income countries prioritized public works programs and income tax reduction. Low-middle-income countries implemented more unemployment benefits programs. Upper-middle-income countries “prioritized wage subsidies, accompanied by either unemployment or income tax reductions.”
Though the percentage of countries adopting social protection programs has decreased steadily since WHO declared the pandemic, labor market policies have remained the most used social protection programs. Some countries, however, continue to introduce new programs.
Opposing Viewpoints: Nigeria and Uganda as Case Studies
Though governments intended social protection programs put in place during COVID-19 to relieve financial stress on the most vulnerable. Some argue that the implementation of the policies allowed existing inequalities to continue and even worsen.
In their analysis of Nigerian and Ugandan COVID-19 policies, the Centre for the Study of Economies in Africa (CSEA) states: “Liquidity has been provided to affected businesses and sectors such as tourism, hospitality and aviation in 92% of African countries. Yet the design and implementation of such macroeconomic policies [has allowed]existing forms of inequality to worsen.” The strong focus on labor market policies and market-based interventions left specific groups behind. This specifically includes women, youth, those informally employed and the newly poor.
This also negatively impacted agricultural and manufacturing firms and small and medium-sized businesses. Though both Uganda and Nigeria expanded the cash transfer program, CSEA found those programs insufficient. They were inefficient at targeting the most vulnerable. Similarly, the CSEA stated the percentages stayed “at 0.002% and 0.00017% respectively.”
It determined that there is meager Ugandan and Nigerian spending on cash transfer programs as a share of gross domestic product (GDP). Therefore, coverage falls short. Furthermore, it showed that Nigeria had excluded 81% of the poor from the National Social Register. Meanwhile, Uganda has an estimated 10 million living in poverty. Uganda’s Urban Cash for Work Program only benefited 1.5 million.
Women and agricultural workers are disproportionately employed in the informal sector. Most of the policies–interest rate reductions, tax relief, loan restructuring and debt moratoriums do not affect the informal sector. This leaves the employees in the cold. This is especially troubling as the informal sector makes up 65% of Nigeria’s economy and 50% of Uganda’s.
Though the central banks of Nigeria and Uganda lowered interest rates, this has not been reflected in commercial banks. There, the banks affect most low-income borrowers. Likewise, subsidies for fuel and electricity primarily benefited the rich. Budget restructuring and allocations in both Nigeria and Uganda primarily benefit the already-privileged. The countries do little to aid the most vulnerable during the COVID-19 crisis.
Evidence for the Benefits of Social Protection Programs
On the other hand, some have found that social protection programs limited the negative economic impact of COVID-19. They argue that it would have been much more disastrous had the measures not been put into place. Critics have argued that people are less likely to work when the populations have social protection. There is no evidence to support these criticisms. Evidence actually shows that social protection programs help families escape poverty.
The populations claim that even before enacting these protections, countries carefully considered who was most vulnerable and which programs would help those most vulnerable. They also evaluated the extent of the intervention, how long the intervention should last, how cost-effective the intervention should be, how to ensure accountability for these programs and what the indications for these interventions would be in the long term. This led to social protection programs that were adaptive and changeable. In fact, 40% of the COVID-19 social protection programs are adaptations of already existing policies.
Where to Go From Here?
COVID-19 has offered an opportunity to review the efficacy of social programs. People have grown more open to programs that help the vulnerable now that they have seen how those programs can help.
Ashok Khosla and Arun Sahni of the Indian Express argue that if people intend to recover from COVID-19 effectively and protect from future COVID-19-like economic shocks, they must “build a new global economy that ensures an equitable and environmentally sustainable future for all nations, big or small, will have to pay much greater attention to facilitate systemic changes by building up strong civil societies, with research capacities for innovating suitable solutions.” The populations go on to outline steps to build this global economy, including creating and using international networks and meeting international obligations.
– Hilary Brown