Asia and Pacific's 'missing middle' lacks vital social protection

Social protection systems in many fast-growing middle-income countries in Asia and the Pacific are failing to support large numbers of poor and vulnerable people, leaving them exposed to risks and unexpected difficulties like unemployment, ill health, and natural disasters, says a new Asian Development Bank (ADB) study.

“There are many vulnerable groups, including women and informal sector workers, who can’t access unemployment, health or other social insurance but are also not poor enough to be eligible for social assistance such as cash transfers,” said director in ADB’s Regional and Sustainable Development Department Bart Édes, on the release of the study, ‘The Social Protection Index: Assesing Results for Asia and the Pacific.’
“Government social protection programmes need to be expanded to cover this unprotected ‘missing middle,’ who are at risk of falling into poverty in the case of an economic, environmental, or health shock of some kind.”

The study, which analyses government programmes providing social insurance, social assistance, and labor market support in 35 countries across Asia and the Pacific, shows varied spending patterns across income groups and subregions. A few countries - Japan, the Republic of Korea, Mongolia, and Uzbekistan - have Social Protection Indexes that are higher than 0.200, meaning that they are already investing eight per cent of their gross domestic product (GDP) on social protection programmes. However, spending in most middle-income countries, including Armenia, Fiji, India, Indonesia, Pakistan, the Philippines, and Samoa, remains below three per cent of GDP, whereas in low income countries it stands at below two per cent except in Nepal that spends 2.1 per cent of GDP.

The study notes that because social insurance tends to dominate government social protection spending, benefits accrue disproportionately to men and non-poor. Poor and disadvantaged persons, particularly those working in the informal sector, benefit less because they lack access to social insurance. They are instead targeted by social assistance programmes that in many countries are fragmented and provide inadequate transfers.

Relatively little is being spent on labor market programmes like cash-for-work and skills development. This needs to be addressed amidst rising youth unemployment, critical skills gaps, and the disproportionate number of women who are unable to enter the formal labour market. Areas for government attention include employment guarantee schemes to construct or rebuild basic infrastructure, skills development, and technical and vocational education and training.

Countries at various stages of development need to set their own targets, taking into account available public resources. However, governments need to accelerate the review and reform of pension schemes in view of the region’s huge informal sector and rapid aging. Preventive social protection programs such as micro-insurance schemes to cushion the impact of variable weather patterns and natural disasters should also be explored, the study says.

Expanding social protection coverage requires mobilisation of additional public revenue which can be secured by broadening the tax base, improving tax collection, and improving public expenditure management. Governments should also encourage private firms to contribute more to social insurance programs. After many years of high growth, the Asia and Pacific region is in an excellent position to invest in better social protection systems that are attuned to the needs of its people.

The new Social Protection Index (SPI) was prepared by ADB and development partners; the Organization for Economic Cooperation and Development (OECD); the OECD Korea Policy Center; and the International Labour Organization. It provides detailed information on the extent of social protection public expenditure, population coverage, as well as the impact on specific groups, including the poor and women. It allows governments to assess the effectiveness of programs, and provides guidance for improvements to social protection systems.