Typology of Social Protection Programmes

Social Security – The term is commonly used to refer to government programmes designed to provide for the basic economic security and welfare of individuals and their dependents. The programmes classified under the term social security differ from one country to another, but all are the result of government legislation and all are designed to provide some kind of monetary payment to defray a loss of or a deficiency in income, and/or to assist individuals to build their own security mechanisms for their futures. The two most common social security programmes, in terms of the number of insured and beneficiaries as well as revenue/expenditures, are old age pensions (often together with disability and survivors’ insurance) and health insurance.

The term “social security” is most often used interchangeably with “social insurance” (the Bismark tradition). It is also used more broadly to refer to “social assistance” as well as “social insurance” (the Beveridge tradition which also included “voluntary supplemental insurances”).

Social Insurance – The term refers to compulsory public insurance programmes that protect against various common economic risks: notably, loss of income due to illness, maternity, disability, unemployment, and old age.

Private Insurance – The term refers to private insurance schemes that individuals can choose or volunteer to subscribe to either formal or informal.

Social Assistance – The term refers to public programmes that cover cases of need that are not covered by social insurance, usually targeted to the poor and disadvantaged and often, therefore, subject to a uniform means test.

Social Safety Nets – This term is used in two ways: more broadly, to describe a collection of services provided by the state which prevent individuals from falling into poverty below a certain level; and more narrowly for short-term relief measures such as food kitchens or public works to help tide individuals or groups through a difficult period.

Social Protection – This term is the broadest of all and refers to social insurance, social assistance, and various other schemes and is used most commonly in discussions of social policy in countries where social insurance/social security covers only a small portion of the population and other schemes are necessary.

In terms of how these programmes are designed, most of them may be either:

1. Contributory or Non-Contributory
Contributory programmes are financed, at least in large part, through earnings-related contributions from employers and/or employees. Non-contributory programmes are financed from the general exchequer and/or, in the case of some developing countries, by development aid. Eligibility for benefits under contributory programs is usually limited to those who have made a minimum number of contributions.

Contributions and/or benefits can be proportional or progressive in relation to income (that is, poorer people pay less, and richer people pay more) or be set at a flat rate (that is, everyone who is eligible pays the same).

Earlier, most contributory schemes were defined benefit schemes in which a worker’s promised pension or lump sum is a function of a formula tied to years worked, earnings, and social criteria and in which some entity – state, employer, insurance company – bears the financial risk associated with the promise or entitlement embedded in the formula. Recently, some contributory schemes have been converted into defined contribution emes in which a worker receives an accumulation based on contributions and investment returns and bears the financial risk. Many hybrid schemes exist that contain both defined contribution and defined benefit elements.

2. Compulsory vs. Voluntary ­– This term refers to whether individuals are legally required to subscribe/be covered or can do so voluntarily. It is possible to have a mixed scheme, where some minimum is compulsory, and voluntary supplements can be made.

3. Universal vs. Targeted – In principle, universal programmes are offered to all citizens or to all persons belonging to a particular group (usually an age cohort). Targeted programmes are targeted at specific groups, usually poor or otherwise disadvantaged. Three main targeting methods are used: group targeting (e.g. to specified groups such as pregnant mothers), means testing (e.g. based on income or assets), and self-selection. In some developing countries, a system of community identification of poor households is used. Also, some countries use geographical targeting, based on poverty levels in different areas.

Most social assistance programmes are means-tested. Formal means-testing involves assessing the amount of income or assets of an individual or a household. However, some means-tests exclude certain sources of income and certain categories of assets. A common exclusion is the house and a minimum amount of agricultural land. Where formal means-tests are not practical, informal approaches to targeting benefits can be employed. These involve using proxies – or alternative measures of the need for assistance – such as household size and composition (e.g. single parent), geographic area, age, and disability.

Self-selection involves imposing disincentives to participants to enter into programmes, either because the benefits are too low or because there is some social stigma associated with them (e.g., food-for-work programs and public works because normally only those truly in need accept to work in them).