Development Resilience as the Scope of Social Protection

Abstract

Social protection policies have traditionally provided band-aid policy responses to daily risks and vulnerabilities. In this chapter, we argue that the overall welfare objective of social protection policies should be to promote and build resilience. Historical experience of social welfare policies suggests that as countries develop and reduce poverty, social policy become more encompassing creating a virtuous cycle of progress where those ‘falling through the cracks’ are given social protection by the state. The focus, form, and scope of social protection therefore evolves along the path of structural transformation. As developing countries build their social protection strategies, plenty can be learnt from the experience of more advanced nations, but also innovations are required to adapt welfare policies to newer challenges such as deindustrialization, rising informalization of the economy, and the changing nature of work.

Introduction

According to the latest estimates, every tenth person in the world (689 million people) lives in extremely poverty.¹ These numbers are surging further as we write this book. The novel coronavirus pandemic, COVID-19, has wrecked lives and livelihoods at an unprecedented scale. In just a few months following the economic lockdown in 2020, poverty levels in India returned to 2016 levels, as almost 3% of the labor force lost jobs and many others suffered economic and health setbacks—a new cohort of poor were added while those already poor were threatened by destitution.² Many more young children would therefore be born or raised in poverty with diminished human capital, and therefore, poorer future life outcomes. While pandemics are once in a lifetime phenomenon, economic lives of the poor are exposed to multifarious unavoidable risks over the course of their lifetime which diminishes their ability to invest in long-term productive assets, consigns them to poverty traps, and thereby perpetuates intergenerational poverty.³ While some are able to escape poverty, vulnerability of non-poor to exogenous shocks such as loss of income, livelihoods, or illness ensures there is also a steady inflow of people into poverty. Lives and livelihoods, therefore, are fragile.

In traditional cultures, voluntary charitable assistance to the needy—often motivated through religious, moral, or social injunctions—acted as a form of social insurance against daily risks. Emperors and rulers maintained certain normative commitment to protecting the vulnerable against starvation during times of scarcity and famine.⁴ In the modern day of nation-states and democratic forms of governance, providing citizens with social security or social protection is a part of the economic and political commitment—social contract—which provides the state the social legitimacy to govern and builds fealty to the nation among citizens.⁵ But these commitments by the states are often absent in practice, weak or fractured, and also open to manipulations which leaves the poor behind and economic inequality across the world.

Organized state action to improve human welfare and eradicate poverty was influenced by industrial revolution-led economic transformation, suffering incurred in the World Wars in the early twentieth century, and the political need for solidarity and nation-building exercise.⁶ By 1960s, most advanced nations had introduced various social protection programs as a part of their democratic responsibilities. A strong social welfare system financed with progressive taxation and economic efficiency, along with the ideals of equality of opportunity and social justice, led to a resounding success in lowering poverty, inequality, and improved overall human and economic development in the Western nations.⁷ East Asian economies ramped up their social protection programs in order to recover from the economic crisis of 1997–1998, even though they were at a more modest level of economic development than the Western nations.⁸ Subsequently the idea of social protection spread to the poorer countries of Global South (Brazil, Mexico, India, South Africa, Indonesia, Ethiopia, among others) much like a ‘quiet’ revolution motivated by foreign aid, rights-based humanitarian concerns, threats of informality of labor, leading to various innovations in social safety net designs brought about by technological advancements and political considerations.⁹

Social protection systems in the developing countries, however, despite the recent expansion continue to be small, weak, and benefit only a few.¹⁰ The developed nations spend a large share of their overall gross domestic product (GDP) on tax-financed social protection policies which includes unemployment benefits, social insurance, and other forms of assistance (Fig. 2.1). Most notably, the Scandinavian countries famously known for the Nordic welfare model—where every citizen is covered under a variety of programs that ensure they do not fall through the cracks and maintain a certain minimum standard of living—stand out. In most developed countries, the social contract is built around a much larger role of the state in ensuring its citizens live their life with dignity and respect. Developing countries, on the other hand, have a weaker social contract where rights and responsibilities to a better life rests more on the individuals than the state. As a result, they have a relatively underdeveloped social protection system and suffer from much higher rates of poverty and deprivation.¹¹

Fig. 2.1

(Source International Labour Organization [ILO])

Expenditure on social protection and per capita income (2017)

The last few decades, however, have seen a concerted attempt at creating a social protection architecture in the low-income countries (LICs), as the concerns of poverty and redistribution have been at the center of global development.¹² Millennium Development Goals (MDGs) and its successor, Sustainable Development Goals (SDGs) explicitly invoke the need for social protection as a ‘global’ social contract in order to achieve the poverty reduction commitments (Birdsall 2008). This is in continuation of the safety nets agenda, promoted by the World Bank and other global agencies during the late 1990s—in the wake of economic restructuring and globalization in developing countries—in the “global fight against poverty.” The social risks framework as espoused by the World Bank envisaged safety nets—a combination of programs—as a bulwark against everyday economic risks and catastrophic exogenous shocks which make households vulnerable and potentially descend into poverty.¹³ Yet, despite the significant expansion of the social protection programs in the developing countries, it has not enabled the poorest of the poor to break through the poverty trap on a scale, as expected.¹⁴

This book is an attempt at diagnosing the ineffectiveness of the social safety nets and providing a framework which allows us to envisage social safety nets as a tool for building resilience—reducing current poverty along with an enhanced human capability to reduce the likelihood of future poverty. The key contribution of this book is to argue the following: long-term success of social welfare lies in transcending the narrow conceptualization of welfare as ‘schemes for a problem’ toward a more encompassing social welfare ‘systems’ which provides support for all, at all stages of life in order to allow a life of dignity. Focusing on India, we provide policy perspective on how to operationalize a social welfare system which leaves no one behind and contributes to long-term gains in economic and human development.

Conceptualizing social protection as mere safeguard or a risk-reducing instrument—in the form cash or in-kind transfer, or public employment against an exogenous adverse shock, which could be addressed through smoothening the consumption gap—has been a major undoing of the social safety nets in bringing about transformational impact on poverty.¹⁵ Comprehensive social safety nets not only need to provide social assistance to stem the descent of households into poverty or pull them out of poverty traps, but also need to provide an opportunity to take off on the path to prosperity.¹⁶ We argue that safety net interventions need to move from merely preventive cures to the problems of poverty to building household resilience to have a transformative impact. Anti-poverty transfers should not only target consumption assistance, which removes resource constraints and enhances productive capacity in the short run, but should also promote capital accumulation over the long run.

While the empirical context of this study is rooted to India, we believe the relevance of this book goes beyond the present context. The present chapter sets the tone for this book where we highlight some of the fundamental aspects of social protection policies—its conceptualization and purported impacts—essential for long-term reduction in global poverty. We provide a framework and build a taxonomy of social safety nets to argue that for social protection programs to succeed in reducing poverty and vulnerability, one must expand the scope of them beyond the narrow objectives of social safety nets as merely instruments of safeguarding against the risks of poverty. For a transformative welfare impact, social welfare policies need to move the focus away from poverty—measured as a money metric—to those identified as poor. Poverty manifests itself multidimensionally—deprivation along the dimensions of health, education, and nutrition—and each of them require a different lever of the social welfare apparatus to promote the potential human capability.¹⁷ Similarly, the form of social protection needs to adapt to the changing nature of deprivation along the development trajectory of a nation. A more expansive scope, form, and focus of an anti-poverty program would enable a more resilient development process and bring about transformational change.

Enabling Development Resilience

We invoke the concept of development resilience as an overarching theme or scope of progress through social safety nets. Resilience, as a developmental objective, has been an important part of the global debate around increasing the “the ability of countries, communities, and households to manage change by maintaining or transforming living standards in the face of shocks or stress” (DFID 2011, p. 6).¹⁸ Safety nets, through insuring against such risks—either due to covariate (conflicts or natural disasters) or idiosyncratic shocks (health, etc.)—enhance individual or household resilience. While such risks are disproportionately more acute on the poor, they are equally threatening those around the poverty line, even above it.

For resilient development, welfare policy should not only concern itself with current levels of poverty and deprivation, but also to vulnerability to poverty in the future as well. The strategy for addressing poverty, present and future, should also depend upon where households lie on the scale of deprivation. Those pushed into poverty because of an adverse shock, since they lie closer to the poverty line, can be served through social assistance, which covers their consumption or income decline. For the extreme poor, however, merely the stability of consumption through safety nets may not suffice in pulling them from poverty, and hence, need much stronger support on multiple fronts of development, providing them with suitable opportunities to accumulate more assets so that they make a sustainable transition out of poverty.¹⁹ Both of these sets of households are at risk of being trapped in poverty but require different policy responses—the latter, a more comprehensive one.²⁰ Although the poorest households may benefit from progressive transfers, the vulnerable but non-poor groups might benefit from contingent transfers, so that they remain above the subsistence level through a multiplier effect.²¹ The resilience approach requires incorporating the goals of long-term response and transformative development, without which safety nets can only serve a palliative response of support against risks, at best.

The essential idea behind social protection, or safety nets, is that it should cease to exist or at least, over time, a very low proportion of individuals would require the support. It should progressively become an option only for those who are not able to sustain a minimum standard of living through their livelihoods. Such a situation is possible only when there is an improvement in the ability of households to accumulate human and physical assets essential to fully exercise their capabilities. Adapting to risks and the ability to withstand health shocks, or loss of jobs, essentially emanate from a certain different kind of deprivation in skills, education, or nutrition. Lack of education and skills leads to unemployment or underemployment. Similarly, poor nutrition or health undermines cognitive potentials; and certain cultural or exclusionary practices, such as participation of women in the labor force, further hinder economic growth and transformation. Social safety should play a role in promoting resilient development by addressing many such developmental shortfalls—often during the most appropriate life-cycle window, or for a specific subpopulation or geography—to have a transformational effect (Sabates-Wheeler and Devereux 2007).

To bring about this transformational change, the scope of social welfare policies should be more expansive, which not only ensures the maintenance of a minimum of consumption needs but also addresses structural inequalities, promotes equal opportunities for all, and stems the intergenerational persistence of poverty. A more ambitious social safety architecture with a wider set of objectives—like addressing livelihood insecurity, or nutritional capabilities, or promoting asset accumulation—can engender greater synergies among many of the standalone schemes, thereby increasing overall welfare impact. By combining the various aspects of social assistance—addressing essential needs; prevention of the fall into poverty; building assets and human capabilities—a resilient development process can be stimulated that leads to greater prosperity and ensures that the poorest are not left behind.²² The scope of social welfare should enhance human functioning and capabilities. Social safety nets, which engender resilience through an expansion of human functioning and capabilities, fulfill the ideals of social justice that underpin the moral philosophy of social assistance of any form.

Consistency with the Social Justice Paradigm

Welfare, in the form of state support for the poor, destitute, or vulnerable emanates from moral imperatives of social justice, where a society’s progress needs to be judged by its ability to improve the well-being of the poorest person (Rawls 1971).²³ The state, as Rawls argued, needs to have “strains of commitment” to a “social minimum” essential for citizens to lead a “decent life, and… more” (Rawls 2001, pp. 129–30). The justice-based concept of a social minimum moves beyond merely a subsistence-level consumption floor of basic needs toward basic rights and the political participation of the poor. Rawls’ social minimum seeks to ensure all citizens have equal access to primary goods, which include fundamental individual liberty, choice, income, wealth, and a sense of self-respect, so that they are able to participate in economic cooperation on an equal footing. The state, he argued, should engage therefore in some form of redistribution through transfers, so that all citizens have a “social minimum” of primary goods, thereby increasing the well-being of those on the lowest strata of society (Rawls 2001, p. 130). The social minimum in the Rawlsian world is, therefore, developmental and transformative.

Nussbaum and Sen (1993) extended the same idea further, influencing global thinking around basic needs and what constitutes a good quality of life, especially in the developing countries. In his influential essay, Justice: Means Versus Freedom, Sen extends the Rawlsian formulations of distribution and puts forth his idea that the equality of primary goods (liberty, choice, economic status, and self-respect, in the Rawlsian world), should be replaced with human capabilities (Sen 1990).²⁴ The capability-based approach, as it is commonly known, recognizes the undue disadvantages that occur to some through a “natural lottery,” as a result of disability, gender, health, etc. The ‘capability set’ in Sen’s framework, “stands for the actual freedom of choice a person has over alternative lives that he or she can lead” (Sen 1990, p. 114). A social minimum, therefore, should be based upon enhancing the actual capabilities that people need to prosper and pursue their own desired outcomes, whatever they may be. It enshrines the citizen with the “entitlements” they have over their human worth and dignity, as instrumental to further pursuits of human flourishing (Nussbaum 2000).

The social justice framework that a society’s progress should be judged by is its ability to improve the well-being of the poorest person in the society, most notably reflected in the UN’s Sustainable Development Goals (SDGs), which advocate for a development paradigm where “no one is left behind” (UN 2017).²⁵ Yet, the ideals of state commitment to a social minimum have remained limited to maintaining people above subsistence, especially in LICs. Using social protection to achieve social justice outcomes still remains a far cry from the norm, though newer forms of social contracts between states and citizens can be seen in many countries, like India with a rights-based approach.²⁶

Resilience Through Social Safety Nets: Expanding Upon Focus, Form, and Scope

The principal reason why so many fall outside of the welfare system in developing countries is that the welfare system is designed for a very few, addressing a narrow dimension of poverty and deprivation. Let us explain this further by distinguishing between the various forms of social protection.²⁷ Unpacking what is meant by social protection also allows us to understand how the welfare policies differ across developed and developing countries.

Social protection policies, very broadly, comprise a set of public actions that stem from the government’s desire to address social risks, reduce vulnerability, and deprivation. It includes “all public and private initiatives that provide income or consumption transfers to the poor, protect the vulnerable against livelihood risks, and enhance the social status and rights of the marginalised; with the overall objective of reducing the economic and social vulnerability of poor, vulnerable and marginalised groups” (Devereux and Sabates-Wheeler 2004, p. iii). A schematic representation of the various social protection strategies is provided in Fig. 2.2. There are three arms to it—direct social assistance, social insurance, and labor regulations—each of which implies a distinct type of public action. Social assistance involves direct transfers—money or food—to the needy, which includes the elderly, disabled, or unemployed. Similarly, nutritional supplementation or deworming medicines are also a part of direct transfers, which address some manifestations of poverty, such as malnutrition and poor health. Many of the developing countries also use public work programs, as a form of income assistance, to provide gainful livelihoods. Since economic shocks could be consequential to many, and not only for the poor and unemployed, strategies for social protection also include employer-based insurance. Often, the government contributes to the insurance premium in poorer countries where formal sector jobs are fewer and insurance markets underdeveloped. Government can also intervene to provide social protection in the form of unemployment insurance, training programs, or other benefits. As part of their social protection strategy, developed countries also developed labor regulation policies.

Fig. 2.2

(Source Authors’ depiction)

Components of social protection policies

Social Protection Strategies Across Countries: Coverage and Instruments

The choice of public action rests on the nature of risk, the conception of poverty among policymakers, and the available monetary resources, apart from the political commitment to address these risks. Most of the LICs and low-and-middle-income countries (LMICs), despite having the largest share of poor people in the world, have a narrower set of social welfare schemes which provides protection coverage to only less than 40% of the poor. They have a narrower set of social welfare schemes (Panel A, Fig. 2.3). Developed countries, on the other hand, mostly rely upon social insurance and labor market policies as instruments to protect people against social risks. Among the range of social assistance strategies possible, in-kind transfer of food remains the most prominent choice, followed by unconditional cash transfers and conditional cash transfers (CCTs) (Panel B, Fig. 2.3) among the LICs and LMICs. Lower population coverage has meant that social assistance policies in the developing countries have largely been beneficial only to those closer to the subsistence consumption level, suggesting that the poorest have been left behind (Margitic and Ravallion 2019).

Fig. 2.3

(Source World Bank ASPIRE [2008–2016]. See https://www.worldbank.org/en/data/datatopics/aspire)

Social protection coverage by income classification

At this point, it is important to remind readers of the history of modern welfare states. Expanded social welfare in the developed world came about as a result of the forces of economic transformation. Greater industrialization facilitated rural-to-urban migration, which led to a decline in the traditional community-based self-insurance mechanisms. Cities had to cope with rising populations, which led to strains on the urban public infrastructure, such as water, housing, schools, etc.²⁸ The movement of labor from rural to urban areas created economic insecurity for the wage earners, as the work was casual in nature; employees could be laid off easily in times of lower demand. As the threat of mass unemployment, and therefore, impoverishment became imminent, workers began to unionize. The organized labor movement emerged as a potent industrial and political force, and the advanced nations were forced to consider their demands for social security and redistribution.²⁹ As the suffering of the poor had an effect on the overall economy, it came to be realized that answers to these problems should be sought in public action.³⁰ State response varied depending upon the existing economic condition and demographic structure at the turn of the twentieth century. The ability of the state to address the vulnerabilities of the poor was boosted, however, by administrative capacity that had expanded enormously during wartime and was used to bring about social and economic reconstruction with the ideals of a social commitment to the people.

Challenges of Safety Nets in the Developing World

Although some form of state-provided social assistance always existed in developing countries, its history is checkered by lack of resources, political will, and inconsistent implementation; yet, they are leading their own march toward establishing a welfare architecture. Countries in Latin America, Southeast Asia, South Asia, and sub-Saharan Africa have seen an emergence of social protection schemes since the 1990s, which include various forms of cash and in-kind transfers, social insurance, and health care to provide a modicum of security to the vast populations that the countries contain.³¹ Welfare policies in the developing countries, like in the postwar advanced societies, have responded to a change in the socio-economic situation, albeit under a different set of circumstances. Instead of industrialization and the rise of labor organizations, social policies of the developing countries have been a response to structural adjustment and the forces of globalization, which have distributional concerns arising from these factors. Economic integration of the developing countries with advanced ones has opened opportunities, while also exposing developing nations to vulnerabilities due to the changes in global markets, with greater risks falling on the less powerful countries and their residents. As a result, globalization has played an important role in increasing the demand for social protection among developing countries (Rodrik 1998). Maturing of the democratic systems in developing countries has further empowered citizens to voice their concerns and exercise their political rights. As a result, in the last decade of the twentieth century, developing countries began to use social protection programs as key components of their social policies with the aim of addressing poverty.³²

The conceptualization of welfare assistance in the developing countries, however, has been different. Unlike in advanced nations, the demand for social safety nets has come in developing countries when they were largely rural and with underdeveloped industrial structures. With a largely agrarian economy, developing countries have had to focus more on the economic risks that emanate from risks to agriculture and agriculture-based livelihoods. The poor, mainly in rural areas, relying on agriculture-based livelihoods, are prone to risks, such as loss of a crop, unemployment, untimely death, or famine, all of which expose individuals to multiple kinds of economic distress. Further, they are also constrained in their ability to partake in the economic activities, outside of agriculture, which could improve their well-being. They are, therefore, vulnerable to a host of risks—economic, social and natural. The urban populations in these countries are prone to the similar nature of risks present in the postwar advanced economies, and more. Much of the manufacturing and service sector jobs are informal in nature, with little or poor legal institutions to support workers in times of job losses. Therefore, even in developing countries, with a larger share of urban population, it has been difficult to create a welfare system similar to the West, because the organizational power of the labor force in these countries is lower (Rudra 2008).³³ Developing countries with abundant low-skilled labor nut divided along multiple axes of identity are less likely to form a potent coalition that could petition the state for welfare concerns. As a result, developing countries have a set of welfare programs—mainly social assistance, as a form of relief against livelihood shocks—which are much more limited compared to the population’s needs (Barrientos 2013, p. 8). This is in contrast to the developed world, where noncontributory social assistance is only a ‘residual’ part of the overall social protection strategy meant for the very few who are not captured through the more advanced forms of social protection—through social insurances or labor regulations in place—largely because of the greater formal sector jobs which means that the social protection or social security is often tied to the employer.

Social safety nets, merely as instruments of emergency relief or risk mitigation, have constrained its transformative potential in developing countries. Fundamental to addressing poverty or vulnerability is first understanding its causes and then employing a range of tools, that is, social protection programs to address it. National policy choices—the amount, intended beneficiaries, and forms of transfer—are not independent of the understanding of poverty, policy ideas, economic states, and political ideals at that point in time. The process of structural transformation and a country’s position along the path of economic development therefore has an influence on the nature of social welfare policies required (Ravallion 2015). However, even a pro-poor safety net program could ignore the concerns of citizen right and social equity—in the philosophical moorings of promoting social justice—which are fundamental components of transformative social policy design.

Expansion in Scope, Focus, and Form

The background presented here helps lay out the essential framing of our framework, according to which social safety nets should be expanded along three fundamental dimensions: scope, form and focus (Fig. 2.4). By scope, we mean the developmental objectives of safety net programs; focus refers to the beneficiaries; and form refers to the instrument or the design of the respective programs. Since social policies have multiple objectives, which evolve over time along a country’s development trajectory, safety net policies—in scope, form and focus—should consider welfare objectives beyond addressing economic risks, poverty traps, and asset accumulation that can help to arrest the further slide into poverty. Therefore, social protection policies should offer a menu of assistance, which not only ensures that human deprivation and basic needs are taken care of, but also prevents household consumption to fall below a socially accepted minimum in the current time and in the future. The policies should also allow individuals to partake equally in economic opportunities as they arise; and the policies should develop human capabilities that allow for full exercise of “human functioning” to which the social justice paradigm appeals.

Fig. 2.4

(Source Author’s construction)

A conceptual framework to explain the role of social protection policies in enhancing development resilience

Citizens in developing countries do not have the luxury of abundant resources and strong political systems to ensure the social contract is strongly in their favor. Yet, democratic accountability has led to a surge in social protection architecture, even though it remains residual in nature. To design safety nets in the future, one must first recognize that developing countries have human developmental deficits myriad in scope, and as a result, the solutions need to be equally varied. A resilient system has to encounter multiple challenges, which include provision of basic needs for some, addressing the risks to lives and livelihoods for many, while also providing an enabling environment through appropriate regulations to create equitable economic opportunities to all, for an overall transformation and gain in human capabilities. Although the developed world may have to worry more about the later stage’s challenges, developing countries have to worry about all of them at the same time, while adapting to their own typical economic transformation trajectory.

As noted previously, social assistance in the developing countries in the early stages of development has been mostly of providing for basic provisions—food transfers focused narrowly on a certain population or region. Learning from the growth process along with the democratic deepening has further led to a demand side, as well as supply side, push for preventive measures, arising out of various individual- and community-level risks. This has led to a greater stress on other forms of transfers, which address the various manifestations of poverty and the likelihood of a poverty trap. As a result, public works, child nutrition, and other forms of social insurance, which prevent people from falling into poverty, have been instituted. Insurance, health, or employment are good examples of the same, as they also prevent people from falling into poverty. Once provisions of basic consumption needs and risk prevention are installed, a large-scale transition out of poverty into prosperity is possible only when social assistance allows for asset accumulation to benefit from opportunities.³⁴ This implies a further expansion in the form of assistance, which extends the focus to the non-poor as well. The transformative aspect of social assistance would be realized when human flourishing, to use Sen’s framing, is not inhibited by deficiencies in human capabilities, such as education and nutrition. At the same time, the social welfare system becomes all-encompassing when it is able to address issues pertinent to the disenfranchised and vulnerable groups, so that social justice goals are achieved. These processes and stages overlap, as different sections of the population or geography may be deprived more and on multiple fronts.

We have described earlier how economic progress and progressive political mobilization in the developed world led to a more encompassing form of social welfare program in the developed world, where gradually, social assistance of the kind in which transfers were merely to support basic (provisions) needs faded away. Industrialization and formalization of jobs ensured further prosperity, and livelihood risks were largely covered through employers, who also provided health insurance, or else, the government covered it. With lower levels of poverty and higher human development, the state’s responsibility largely relied on ensuring people had something to fall back upon when they were transitioning between jobs. A more urbanized economy meant less exposure to adverse, weather-induced, exogenous shocks; and better institutions ensured more egalitarian public systems, with greater equality of opportunity, thereby ensuring a resilient development process. Developing countries, on the other hand, have a large share of the population engaged in agriculture, albeit declining. Nonfarm workers are mostly engaged in informal wage labor, which again implies a form of livelihood risk. Poorly developed health systems further expose these workers to other forms of morbidity-related vulnerability, especially at young ages. Developing countries, along their path of economic development, encounter many of these changes, and social welfare policies need more encompassing systems of social protection to promote development resilience.³⁵

The adaptation of social welfare strategy will vary depending upon the nature of poverty and its understanding among the policymakers. Largely, the developing world is characterized by a preponderance of safety net schemes that are focused on reduction of absolute or extreme poverty, depending upon the developmental concern of the times. For example, the Programa de Educacion, Salud y Alimentacion (PROGRESA) in Mexico was aimed at reducing intergenerational poverty, while the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) in India focused on reducing seasonal unemployment. Since the various schemes aim at different objectives, it is helpful to classify them accordingly. The representation in Table 2.1 is rather simplistic, but still useful to illustrate the point around the specific role each of form of safety net can play in terms of building development resilience. In-kind transfers, the most common form of assistance, are essential to maintaining consumption levels, especially in the context of absent or underdeveloped markets. However, income—targeted or untargeted—goes to smoothening consumption, but also has the ability to promote the accumulation of productive assets. If focused on a particularly vulnerable group—like the disabled, elderly, widows, etc.—who cannot actively participate in the labor market, concerns of equity are addressed, too. For long-term development concerns, the debates around public action and state support have, therefore, led to a wider portfolio, which includes what economists called the “graduation approach” into sustainable livelihoods.³⁶ Yet, any one program fails to address the risks and vulnerability across the life cycle of an individual—from nutritional deprivation in early life, to livelihood and health risks in later years—and the challenges of inequitable intra-household resource allocation.

Table 2.1 A taxonomy of social safety nets

Safety Nets for the Future

Social safety nets in the developing countries have proven to be useful but not effective enough.³⁷ The poorest of the poor have been left behind, as only a third of the families in the poorest quintile receive any direct social assistance. They are stuck in dynamic poverty traps, a low-level equilibrium, and are unable to benefit from the current set of social safety nets because of inadequate coverage for the poor (Margitic and Ravallion 2019).³⁸ This naturally leads to the question: how should we pursue a rethinking of safety nets, relying upon decades of experience in development practice as well theoretical refinement around these issues? This book proposes that the scope, focus, and form of social safety net strategies should revolve around the issues discussed in the following section.

Newer Form of Risks and Existing Poverty Traps

Economic adversity could arise from a variety of shocks—idiosyncratic or covariate—which could lower individual income or impair earning capacities. Idiosyncratic reasons include loss of employment, damage to the crops and poor harvest, illness, or death in the family, among other individual specific shocks. Covariate shocks, on the other hand, could occur due to natural disasters, famine-like conditions, or closure of an industrial plant, which affect a large set of people. Such abrupt livelihood and income decline or uncertainties lead to economic deprivation, which can force households into transient as well as chronic poverty. A transient decrease in income implies a short-term loss, mostly reflected in consumption expenditure. Chronic poverty, on the other hand, refers to a structural problem where the adverse conditions hinder the ability to work, and hence, further decrease the accumulation of productive capacity. Both of these adverse economic outcomes, at the household or individual levels, affect overall productive capacity of the economy and inhibit optimal use of the economic resources. Overall higher poverty levels could produce further systemic risks to social harmony, engendering a plausible democratic backlash. Most governments, therefore, put into place some form of assistance programs that ensure safety against these risks.³⁹

Scholars have also argued that poverty persists not only because of poor lack of employment opportunities, but often the work pays little, often below the subsistence needs. Since returns to work depend upon the quality of skills and educational training, largely classified as human capital, the poor lack the opportunity for higher returns, and therefore, they are stuck in a “poverty trap.” The rise in anti-poverty policies, such as social safety nets, has been inspired by the idea of eliminating the poverty trap.⁴⁰ Poverty traps also emerges from nutritional deprivation, savings constraints, barriers to mobility, or geographical disadvantages. In developing countries, particularly, these risks are more pronounced, as private forms of insurance, such as credit markets are absent. Market failure, therefore, is more commonplace. Not only do markets function poorly, but there are information failures, which imply asymmetric knowledge when carrying out economic transactions (Barr 1992). Although households undertake possible strategies of risk management, it turns out to be rather imperfect in resource-constrained scenarios. Adverse shocks significantly impair the welfare outcomes, thereby eroding the asset base—physical, financial, and human—for future wealth creation (Morduch 1995; Dercon 2002). Initial endowments, therefore, need to be enhanced to break out of this trap and achieve greater potential. The poverty trap argument, therefore, suggests that sufficiently large, positive wealth or income shocks could work toward moving individuals or households above the critical threshold of a poverty trap (Carter and Barrett 2006). This intrinsically implies that sustainable poverty reduction strategies require an intervention of some sort, which breaks this limited endowment barrier. These kinds of transfers are sort of “big push” policies that require concerted government interventions, one of which is often the social safety net transfers.⁴¹

Asset Accumulation and Redistribution

Social protection programs, in general, and noncontributory safety nets, in particular, therefore aim to safeguard vulnerable populations from poverty and address redistributive concerns. Hanna and Karlan (2017) classified the programs into four types, based upon the underlying motivation for intervention: redistributive concerns; filling in for the missing insurance markets; behavioral constraints faced by households inhibiting productive investments; and market failures that erode productive asset accumulation. All of these responses essentially seek to transfer resources to the poor—depending upon the policy objectives—which lowers vulnerability to future poverty and accumulates productive assets. Social protection programs in the developing world have sought to achieve three main objectives. First, the programs aim to ensure a minimum level of consumption for the poor or those vulnerable to falling into poverty. Second, the programs assume that this support—in-kind or cash—would facilitate investments in productive assets—human, physical, and financial—which potentially provides an escape from the likelihood of future poverty. Third, it should improve social standing of the poor—as political actors and citizens—thereby increasing their agency.

Since poverty traps emerge from a loss of income or deprivation in nutritional or physical capital, various forms of safety nets specifically address these deficiencies. Consumer food subsidies are particularly aimed at addressing hunger and food security through maintaining a minimum level of food consumption. Many countries, like India, have large programs that specifically address this issue. Hunger, in many contexts, has shaped the contours of social policy, as a prerequisite to human functioning. Since, hunger itself could manifest in multiple forms, particular policies address hunger and nutritional deprivation among schoolchildren and pregnant and lactating mothers, as the intervention has longer-term benefits. Specifically focusing on vulnerable populations also takes care of inequitable intra-household distribution of resources. Public work programs, in addition to creating public infrastructure, also reduce involuntary unemployment and augment family income. Direct cash to older and vulnerable people is a common form of assistance to control mortality and destitution. One of the primary causes of poverty in developing countries is related to illness of a family member. This becomes a particular challenge if the health shock is particular to an earning member of the household, which not only erodes accumulated assets but also implies less future income through the duration of illness. Subsidized health insurance, therefore, has emerged as a newer form of safety net programs by which government contributes to the insurance premiums.

Many of these schemes involve long and tedious bureaucracy, which often usurps the intended benefits, thereby depriving the beneficiaries. Newer forms of direct transfers, such as cash payments, are therefore being tried, instead of food assistance. Some schemes are now beginning to discuss universalizing a certain minimum income to households, so that they are able to maintain a certain minimum standard of living. Yet, safety net policies seem to be designed to ensure at least the poorest are not left behind. The question of development resilience comes only as a desired by-product.

Changing “Future of Work”

As developing countries could see the sectoral share of output and employment moving away from agriculture, there would be a greater share of people employed in wage-based work outside of agriculture—within and outside of the rural areas.⁴² Structural transformation of the economy would therefore constantly require the policy paradigm to evolve and rethink ways to address existing as well as newer forms of risks to livelihoods. In the developed world, emergence of welfare systems evolved out of similar concerns with wage insecurities, as a result of technological progress which assisted industrialization, and therefore, promoted rural–urban labor mobility. To imagine safety nets for the future, it is particularly important to understand the changing nature of work in the developing world.

Rapid changes in technological advancements in the twenty-first century have changed the global debates around the “future of work.” The nature of work and the worker–employer contract have changed over the years, as economic activities have shifted away from industrial production and manufacturing-based employment, toward more service- and technology-based work, which requires more skill and training. Automation and artificial intelligence (AI) is further transforming how businesses operate, and labor productivity is rewarded, as a result of it. Compared to earlier times, where workers worked for the same organization for all of their careers, they now work at multiple places or do various gigs. Currently, around 40% of the people in the European Union are either engaged in self-employment or work under a contract which is not full time (EC 2018). In the United States, a person of average working age is likely to hold around 11 jobs in their life course, often holding multiple jobs, at once (BLS 2020). Even in developing countries, where agriculture continues to be the largest employer, changes were felt in the demand for labor. As labor moved out, agricultural productivity would increase, but to maximize poverty reduction, there needed to be gainful complementary employments avenues, especially which improved the cultivation environment, such as irrigation facilities or encouraging mixed cropping (Christiaensen and Martin 2018).

The International Labor Organization (ILO) estimates that around 61% of the employed population globally works in the informal economy, with little or no access to any form of employer-based social protection (ILO 2018).⁴³ For developing countries, this number is as high as 91%. Although not everyone in the informal economy is poor, most of the people employed as informal workers face a higher risk of poverty because of the uncertainties around coping with shocks. It is in this context that the World Development Report 2019, titled Changing Nature of Work, calls for “rethinking the social contract” between the state and citizens through the provision of appropriate social safety nets (World Bank 2019, p. viii). The report calls for a “broader and more permanent coverage than most social assistance programs currently provide” (World Bank 2019, p. 109). The rising informality in developing countries should also be understood in terms of the precariousness of the “working poor” (Fields 2012).

Poverty in developing countries, along their structural transformation process, moves from the rural to urban areas, too. Although the traditional, weather-related risks continue to be relevant for the rural cultivators, the lack of jobs and not having sufficient income increasingly become important, as salaries or wages become a major source of household income. The poor, in these contexts, are largely dependent upon their labor to escape poverty, but may still remain in poverty because of lower wages due to surplus labor availability. While economic development brings about improved markets—credit and factor markets—the transitions are not smooth, but depend upon the nature of economic restructuring. For many developing countries, opening of markets to global trade did bring about a reduction in poverty, but it also exposed them to the risks of higher inequality. Safety nets, therefore, have an important role to play to improve human development, as the nature of work is changing and households are exposed to a greater variety of risks—even when markets are developed—which inhibit asset accumulation needed to arrest future poverty.

Moving from Schemes to Systems

The success of safety nets to take a transformative role is hindered by a rather myopic view of the developmental policies, where they are seen as singular ways to address the concerns of development at particular points in time; for example, hunger, unemployment, poverty, or malnutrition. The nature of vulnerability itself is dynamic and multi-scalar. When there exist poverty traps and deprivation along multiple dimensions, “small adjustments often fail to move people out of low-level dynamic equilibria unless they happen to be carefully targeted at precisely the context-specific mechanism and threshold that trap people in poverty. Rather, systems must change, major poverty shocks must occur, or both” (Barrett et al. 2016, p. 322).⁴⁴ A common characteristic of social safety nets across developing countries is the use of self-standing welfare schemes, aimed at the removal of poverty, hunger, and other forms of human deprivation. These schemes, without being institutionalized, are only an edifice, which is an elementary structure for social policies to work. The other most important aspect of social safety net strategy is to conceptualize and implement it in a context-specific way, in tune with the specific developmental requirements for long-term growth (Gentilini 2009). This would require greater synergy across the social welfare programs for the welfare system to promote economic resilience.

Lessons for India

The framework presented here lays out the fundamental arguments for a robust social protection architecture and provides a valuable lesson for India. India has not been able to reduce poverty—in money-metric and other various dimensions—to the desired low levels, despite economic growth and many social protection programs. Here, we argue that social protection policies have a fundamental role in ensuring a more resilient development process in the country. Subsequent chapters in this book build upon our arguments. First and foremost, we argue for a more nuanced understanding of the nature of deprivations or human development deficits—at present and in the future—and then conceptualize ways through which various social safety net programs can address these deficits. Subsequently, we focus on specific programs aimed at poverty and livelihoods, food and nutrition, and mitigating shocks, with the idea that individuals face different kinds of risk and vulnerability through their life cycle. For an effective social protection strategy, the state must act on all of these risks, and therefore, there have been multiple programs. We focus on each of these programs, study their impacts, highlight how they should have worked more effectively, and consider potential improvements in different chapters. A synthesis of these programs calls for greater synergy between them and a greater readiness among policymakers to innovate upon these to achieve a resilient development process. We call for a social protection system in the future where no one is left behind, as we are seeing a changing economic structure. Given that the nature of poverty will be increasingly linked with work and wages, while weather-related shocks will continue to affect farmers, social protection policies need to be more encompassing, transformative, and not just palliative.