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Coverage: the real 'old-age crisis'.


This introductory essay discusses the six substantive papers in this symposium, situating the findings and the proposals of the individual contributions within a global context that is characterized by the pressing need to respond to the real 'old-age crisis'; namely the limited extent to which existing social security and social welfare programmes provide for the income security of older people, particularly poor older people, world-wide. This is due to the on-going failure of existing provision to cover even the most basic needs of the vast majority of the older people in the South as well as their increasing failure to address the needs of significant segments of the North's populations in low paid occupations or with discontinuous work histories. This coverage crisis is further defined as presenting significant challenges to those organizations designing, planning and managing social security and social welfare programmes, specifically requiring careful handling if a new, inclusive, global consensus on appropriate policies to address the coverage crisis is to emerge.

Introduction: Symposium Themes

This Symposium appears in the wake of the 28th General Assembly of the International Social Security Association (ISSA) held in Beijing in September 2004 and the 2004 United Nation's (UN) International Day of Older Persons held on October 1. Recurrent core themes debated in Beijing included the problems of extending social security coverage and of doing so in the context of global demographic ageing. In turn, the theme of this year's UN-day for Older Persons was "Older Persons in an Intergenerational Society", a focus acknowledging the importance of the traditional but also increasingly necessary, indeed vital, roles played by older people in all societies. Appropriately, these themes are reflected in the aims and objectives of the six substantive papers that comprise this Symposium. These papers, despite being otherwise diversely focused, all address crucial issues relating to the financing and administration of policies and programmes designed to enhance the income security of older people, inevitably also dealing, albeit more briefly and tangentially, with wider issues of the management of social security and social protection in general. Coverage is the recurring problem that provides the unifying theme of this symposium. This is the kernel of the real 'old-age crisis', to borrow the World Bank's terminology from its seminal volume published a decade ago (World Bank: 1994). The terminology is retained here not least because, unlike the Bank's original, largely antipicatory, crisis of pension system solvency in the face of ageing western societies, this crisis is already with us, and cannot, therefore, be 'averted'. This current crisis of coverage is particularly acute in the developing countries (DCs) of the global South where the great majority of the world's older people currently live, mostly surviving unsupported by states and now increasingly less frequently cushioned by family and community. (2) Nevertheless, the crisis is also increasingly global in its ramifications, albeit not yet widely perceived as a pressing issue for immediate attention in the world's wealthier states.

Symposium Papers

Roddy McKinnon's paper sets the scene, defining the central problematic currently facing those organisations and individuals concerned with extending social security and social protection to older people world-wide. Prima facie, the central issue is straightforward, as 'Bridging the coverage gap: issues and questions for social security administrations', underlines. Here, summarising the disturbing findings of the ILO (International Labour Office) and ISSA (International Social Security Association) in surveying the current achievements, and shortcomings, of social security arrangements worldwide, the coverage gap is defined as referring to 'the vast majority of the world's population that is either without or has inadequate access to social protection via a social security system'. Globally, therefore, there is an absence of coverage, with most of the world's older people as yet uncovered by any formal social security provision or by any other form of statutory social protection and assistance. This is indeed a real 'old-age crisis' since it currently affects the majority of older people worldwide who already reside in DCs, and is set to become even more marked over the coming decades as populations in DCs also begin to age. Nor is this a crisis that is confined to less wealthy states. Mahmood Messkoub's contribution, 'Migrants in the European Union: welfare in old age', underlines the point that the crisis of coverage is already extending to wealthy states and will do so increasingly as the impact of 'flexibility' in employment practices impacts on pension and other social security 'contribution' over coming decades. Specifically, flexible employment practices accompanying accelerating deformalisation of economies will continue to be reflected in ever more discontinuous employment histories, particularly for women, but also extending inevitably to other groups of workers, notably to migrants, characteristically marginalized into low-paid work in risky occupations and insecure activities. The outcome will be inadequate social security contributions, undermining entitlements to benefits; a situation that constitutes a crisis for those, like many older people, who cannot work. As discussed in Messkoub's paper, the burgeoning coverage problem for the European Union's now elderly post-war immigrants, already chronic, is likely to become increasingly acute over coming decades as further migration in the form of imported labour, always a political hot potato, becomes a more pressing necessity to counteract labour shortfalls in ageing western societies. Coverage issues are, similarly, also becoming comparably pressing for the previously socialist states of Central and Eastern Europe (CEE) and the former Soviet Union (FSU), whose post-transition pension reform experience is surveyed by Katharina Muller in 'Post-socialist pension reform: contributory and non-contributory approaches'. The salutary experiences of these transition states, which, along with Latin America, were at the implementational forefront and cutting edge of the World Bank's 1990s global pension reform agenda, underline the mounting incompatibility between pension and social security systems predicated and based on full employment in socialist economies and the current situation of chronic unemployment and income insecurity. Inevitably, the Bank's central element in its 1990s pension reform strategy, responding to the fiscal challenges facing public pension systems with rapidly rising numbers of actual and potential beneficiaries, namely shifting the fiscal burden and risk from state to individual through the establishment of private retirement funds, has become as much, indeed more, a part of the fundamental coverage problem than a contribution to its solution. (3)

The key problem posed by the coverage shortfalls in the middle and high income countries discussed in Muller and Messkoub's contributions is that neither traditional, that is state, insurance and contributions-based, social security, nor its privatised offshoots, were originally designed to cope with the discontinuous, sometimes very discontinuous and often fractured, employment experiences characteristic of the contemporary era. Nor can they easily, quickly, indeed at all in the case of private provision, be adjusted and extended to cope with either the shorter or longer-term outcomes of these developments. In the short-term, therefore, the only feasible, indeed the only available, solution to the coverage problem is to compensate for the shortfalls in contributions-based provision by extending coverage on a non-contributory basis. As Muller points out this is precisely what is already occurring organically in the post-socialist states; states, as she emphasises, with little previous need for, and therefore little previous experience in, provision on a social assistance basis. It is also vital to underline the point that it is state provision that is expected, and is currently attempting, to address the coverage gap in CEE and the FSU. A similarly organic, that is internally generated from within individual states, set of innovations and developments in large-scale noncontributory provision in the form of social pensions (SPs) has been provided by another set of middle income countries (MICs), this time mainly in southern Africa and Latin America. Their experiments in providing large SP programmes forms the basis for Mark Gorman's paper, 'Securing old age: the case for 'social' pensions in developing countries'. On the basis of the experience of Brazil and South Africa in particular, two MICs but with poverty problems on a scale more typical of low income countries (LICs), Gorman builds on and reinforces the findings of earlier research (e.g. Barrientos and Lloyd-Sherlock, 2002), presenting a convincing case for extending this non-contributory SP model, with appropriate donor support, increasingly widely across the poor countries of the South (see also HelpAge International, 2004). These are precisely the countries where the coverage crisis is set to become steadily worse, and not simply because DC populations are ageing too. Other factors, including among many others, sluggish economies, corrupt states, internal war and unpredictable climates, are exacerbating the problems faced by older people, increasing the need for compensatory responses. HIV/AIDS, for example, is already ensuring that there will soon be more seventy five year olds than there are forty five year olds across much of sub-Saharan Africa in what have become hour-glass demographies, requiring grandparents increasingly to substitute for parents within household economies. Moreover, the SP initiative is particularly timely since not only is it focused precisely on those countries where the coverage gap is greatest and is growing fastest, but also where traditional contributory social security offers limited short and medium term prospects for expanding its share of coverage in economies dominated by non-formal employment profiles. These countries characteristically exhibit a combination of small, often shrinking, formal sectors, alongside large and growing informal sectors that are developing in tandem with rural self-employment and casual, intermittent, wage labour.

Inevitably, such an ambitious coverage-extension programme, ultimately aiming for universal coverage and promising small cash incomes for the first time to the many, many millions of older people across the South previously completely uncovered by any form of social security or social assistance, raises questions of both feasibility and affordability. In practice, the available evidence, well marshalled and summarised in Gorman's paper, indicates that, when set at realistic levels in countries where even tiny injections of cash can have huge positive impacts on household economies, SPs are both feasible and affordable on a sustainable basis for even the poorest of states. Costs for such programmes need not be, as HelpAge International's (HAI) recent careful collation of the available evidence underlines, inhibitive, let alone prohibitive (HelpAge International, 2004), suggesting immediate affordability for some MICs at least, particularly if these are given, at least, initial donor support and guidance. Nevertheless, achieving wider coverage quickly across a range of countries and regions sharing low coverage and many other indicators of poverty and, ultimately, aspiring to the goal of universality of provision in relation to at least some minimal degrees of social protection for the developing world's growing numbers of older people, requires not only imaginative policies but also demands significant injections of new resources. Given both the size of the problem and the ambition of the solution, the SP project and agenda will present a dauntingly large challenge to the great majority of the LICs and many, if not most, of the MICs that collectively constitute the global South. For low income developing countries in particular, where the great majority of the world's poorest older people reside in states with very low administrative capacities, inauguration, implementation and sustaining of what will inevitably be perceived as 'ambitious' and 'complex' SP programmes will require large and sustained injections of external finance. Initial, inaugural and start-up, arrangements, including support for the requisite capacity-building and training in countries with no previous experience of the administrative infrastructure required for universal provisioning and often with only limited experience of beneficiary identification within a handful of, often small-scale, social assistance programmes, will require extended donor support. Inevitably, this will also be costly given the number of countries involved and the size of the individual programmes within them. This donor support will require a hefty chunk of donor budgets into the foreseeable future, and, given the limited budgets currently assigned by donors to social development and social protection, clearly involves a need for new money, in turn highlighting the pressing need for the additional global funding sources so clearly identified and delineated by Anthony Clunies-Ross in his paper, 'Resources for social development' which identifies seven potential sources of such new money. In particular, if the implementation of the SP programme across the South were to be assigned to the United Nations (UN) as the lead donor--an appropriate assignation given that the poverty eradication goals of the Millennium Development Goals (MDGs) themselves were developed and are now monitored through the UN, and given that SPs provide a serious prospect for significant poverty alleviation among older people--the new money that is clearly needed could most aptly come from among the variety of potential funding avenues for global public goods (GPGs) that Anthony Clunies-Ross identifies, summarises and quantifies.

At the same time, it is important to be aware that social policy, even or especially, global social policy, cannot and should not be imposed on the South, and that, crucially, SPs must not only be feasible and affordable but also politically acceptable to implementing states. In this regard, the initial signs are good, as Roger Charlton points out in his concluding essay, 'Social security beyond pension reform'. Crucially, SPs have so far proved to be as politically acceptable to electorates as they have been effective as poverty alleviators. However, as Charlton underlines, significant bureaucratic hurdles will still remain to be cleared before SPs can be inserted into governmental systems currently poorly organised to provide effective social protection to their populations on this scale. In particular, the privileging of noncontributory over contributory, traditional, social security inherent in the SP agenda clearly threatens to further marginalize and alienate existing social security institutions and administrations across the South; organisations already reeling under the double blows of the international financial institutions' (IFIs) neo-liberal, state-shrinking agenda, and of the widespread collapse of formal employment, hence of contributions-based support arrangements, in the aftermath of the debt crisis. Placing donor leadership of the SP roll-out in the hands of the UN would go some way to reassuring these marginalized social security institutions that their interests have not been forgotten, given their existing close ties to the ISSA in particular. However, as both McKinnon and Charlton indicate in their respective contributions, the biggest challenge will be to begin to put together what the highly divisive, World Bank-driven, pension reform agenda tore apart, namely a global consensus on social security and social protection and on how, optimally, it should be managed and delivered. Putting together such a new, unifying and unified, consensus currently remains a strong possibility, but it is important to be aware that actualising the requisite framework, encompassing contributory and non-contributory funding mechanisms, and public and private management and delivery mechanisms, faces formidable obstacles at every level from global to sub-national.

The 1990s Pension Reform Agenda

Among the greatest of these problems is the undermining of traditional contributory social security, institutions and programmes alike, that has occurred over recent decades, but that culminated in a sustained assault, mounted in the name of pension reform, from the mid-1990s. A decade on, it has become clear, retrospectively if it was not prospectively, that the type of 'comprehensive' pension reform advocated and espoused by the World Bank in the wake of the publication of 'Averting the Old-Age Crisis' (World Bank, 1994) simultaneously both promised too much of privatisation and, ironically, also asked too much of states, particularly the relatively administratively weak and fiscally challenged ones in developing and transitional economies. In respect of privatisation, as recent developments in the world's wealthier economies, not least those of the United States (USA) and the United Kingdom (UK), have painfully underlined, supporters of private over public management had contrived to confuse the, by definition, temporary successes emanating from the admittedly potent combination of buoyant stock markets and supportive taxation regimes with the inherent virtues of the private management of contributory pension systems. We are all now more clearly aware that private provision is no panacea for predicted future fiscal limits to, or anticipated shortfalls in, state provision. What is more surprising is why it should ever have seemed plausible that 'decentralised' private provision, based on the idea of increasing competition among providers for customers, thereby automatically driving administrative costs upwards and further stretching the capacities of an already limited pool of talent among fund managers, should ever have been regarded as the potential key to solving even hypothetical problems of pensions adequacy within the public sector. Falling stock markets, in turn, not only revealed the limited individual and collective capacities of the pool of fund managers to deal with bear markets effectively, but also, acting in tandem with politician proclivities to tax pension fund assets punitively once these had accrued significantly, as in the case of the UK's previously generally healthy occupational pension sector, provoked an effective collapse of confidence in the private retirement savings industry that is likely to have serious long term ramifications for any pension reform strategy that continues to attempt to prioritise private over public provision. Similarly, the negative impacts on company, hence also, uncomfortably often, on occupational pension fund, profitability and viability, accompanying stock market downturns underlined the dangers of shifting the risks inherent in any long-term savings arrangement from the state to the individual even in countries with developed corporate governance systems and oversight arrangements backed by legal sanctions and effective states. Argentina provided, for the present decade, the most painful recent reminders of the dangers inherent in assuming that private provision can be expected to operate effectively and efficiently, not least in protecting the interests of savers, in weak states with limited abilities in, perhaps better lacking effective capacities for impact on, macroeconomic management (Baker and Weisbrot, 2002). Such states, by definition, also lack experience in the development and operation of the type of microeconomic management that could substitute state-mandated and enforced administrative and legal arrangements for more organically evolved corporate governance arrangements in nascent private sectors, thereby at a stroke indicating that further large-scale extensions of private pension provision should sensibly be precluded into the foreseeable future across both developing and transition economies, irrespective of current national income levels.

Beyond Blueprint Reform: The Coverage Consensus

Unsurprisingly, the logical, hence also the practical, implications of the interconnected developments outlined above--that 'comprehensive' pension reform, at least those versions of reform that were envisaged in the original World Bank blueprint, had, in asking too much of both states and private sectors, further undermined confidence in public provision without building confidence in the capacity of private provision to meet future needs--have yet to be fully translated into alternative policy reform strategies in any clear-cut or comprehensive fashion. Indeed, one of the most predictable, as well as pleasing, outcomes to date of the concerted orchestra of criticism to which the Bank's reform agenda has been subjected is the retreat from blueprint, one model fits all, approaches; a revisionist mantra that even the World Bank is now happy to appropriate from its critics (World Bank, 2001; Operations Evaluation Department, 2004; Holzmann and Hinz et al., 2005). Nevertheless, there are, on the other hand, a number of indications of the emergence of alternative reform priorities that are arguably both desirable and feasible in this otherwise less abrasively self-confident post-Averting world. Among these alternative priorities the most clear-cut, and the most important, is the identification of coverage as the central and the most pressing issue to be addressed. Attention to coverage deficiencies should occur in tandem with attention to issues of income adequacy and income security and sustainability in developed and wealthy states, or, in developing countries and transitional economies generally and in the poorest among them in particular, even in advance of such inherently open-ended issues. Predictably, therefore, it is the issue of coverage, above all others, that most frequently emerges to take central stage within and across the papers that comprise this Symposium, all variously focusing on emerging policy issues facing ageing societies and on their financing and administrative ramifications in particular.


Baker, D. and Weisbrot, M. 2002. The role of Social Security privatisation in Argentina's economic crisis, Washington. D.C.: Center for Economic and Policy Research.

Barrientos, A. and Lloyd-Sherlock, P. 2002. Non-contributory pensions and social protection, Issues in Social Protection, Discussion Paper 12, Geneva: ILO.

Gill, I. et al. 2004. Keeping the promise of old age income security in Latin America: a regional study of social security reforms, Washington DC: World Bank.

HelpAge International. 2004. Age and security: how social pensions can deliver effective aid to poor older people and their families, London: HAI.

Holzmann, R. and Hinz, R. et al. 2005. Old-Age income support in the twenty-first century: an international perspective on pension systems and reform, Washington, DC: World Bank.

Operations Evaluation Department. 2004. Review of Bank assistance to pension reform and the development of pension systems, Washington DC: World Bank.

World Bank. 1994. Averting the old age crisis: policies to protect the poor and promote growth, Washington DC: Oxford University Press.

World Bank. 2001. Social protection sector strategy: from safety net to springboard, Washington DC: World Bank.

Roger Charlton

Glasgow Caledonian University


Roddy McKinnon

International Social Security Association (1)


(1.) The views presented are those of the author alone and should not be attributed to the International Social Security Association. The Symposium editors and other contributing authors thank their anonymous referees for the constructive comments and helpful suggestions made on earlier drafts of the articles.

(2.) The most recent 'official' compilation of the World Bank's current thinking on pension reform is in the form of a position paper issued by the Operations Evaluation Department on March 2, 2004. This contained the following felicitous slip of the keyboard, aptly announcing that 'in 1994 the Bank published a comprehensive study called Averting the Old Crisis ... ' (2004: 2).

(3.) The Bank's recognition of this in relation to continuing Latin American coverage problems post-privatisation is reflected in the focus of the recent study entitled Keeping the Promise Of Old Age Income Security in Latin America (Gill et al., 2004).

Bibliographic sketch

Roger Charlton is a Reader in the School of Law and Social Sciences, Glasgow Caledonian University, Scotland. Roddy McKinnon is a Regional Information Analyst with the International Social Security Association (ISSA), Geneva, Switzerland. They have published widely on issues relating to the international political economy of pension systems, pension reform and social security both individually and jointly.
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Author:Charlton, Roger; McKinnon, Roddy
Publication:Public Finance and Management
Geographic Code:0BANK
Date:Mar 22, 2005
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