Opening remarks at the Conference on Global Social Security and Economic Development At the 13th International Forum on Social Security

By Mr Tim De Meyer, Director, ILO Country Office for China and Mongolia

Statement | Nanjing, China | 16 September 2017
Executive Vice Chancellor Yang Zhong, Nanjing University (NJU)
President Zheng Gongcheng, Vice-President Lu Dezhi, Vice-President Tong Xing, of China Association of Social Security,
Professor Hong Kyung-Zoon, Sungkyunkwan University of Korea,
Professor Noguchi Sadahisa, Nihon Fukushi University, Japan,
Director Christoph Pohlmann, Friedrich-Ebert-Stiftung China,
Ladies and gentlemen,

Good morning and a warm welcome everyone to this Conference on Global Social Security and Economic Development at the 13th International Forum on Social Security. I would like to thank our friends from the China Association of Social Security (CAoSS), the Friedrich-Ebert-Stiftung (FES) Foundation, and Nanjing University for organizing this Conference. You have convened an impressive group of Chinese and international experts, and I appreciate the opportunity for ILO to plot the future of social protection under their leadership. The International Forum on Social Security has championed social protection since a long time, and its leadership is critical particularly today at a time when the centrality of social policies and values of social justice more broadly are coming under pressure.

Social security is not a drag on economic development but a powerful force driving it forward. That is the theme of the Forum this year and one is hard pressed finding a better example than. China to illustrate the synergies between social security and economic development.

First, it is difficult to overstate China’s achievements in building a comprehensive social protection system for over 1.3 billion people. The International Social Security Association (ISSA) 2016 Award for Outstanding Achievement testifies to this remarkable accomplishment. Today, China is setting the standard for emerging economies and developing countries to emulate. China is demonstrating that growth and development do not benefit from denying people a fair share of the productivity gains their societies are generating, nor are economic transformation and innovation served by leaving the poor behind. Eliminating extreme poverty by 2020 and putting a Social Protection Floor in place by 2020 will be a major contribution for the realization of a number of Sustainable Development Goals beginning with the first: end poverty in all its forms everywhere.

Secondly, building a robust social security system is about much more than only eliminating poverty – again, China’s economic growth story over the last 3 decades demonstrates how social security supports reform and opening up. In the early days of reform, social security measures facilitated the reform of SOEs and the gradual unleashing of market forces by protecting workers from negative repercussions of structural adjustment. Then, China leveraged the power of social security to speed up its recovery from the global subprime crisis in 2008. Today, China is the 2nd largest economy in the world and entering a stage of industrial upgrading; expansion of the services sector; transition to a low-carbon economy and more inclusive growth. At this stage, social security will complement its traditional role of mitigating the social impact of economic transformation with newer functions such as redistributing income and reducing inequality; or investing in human capital through education or health protection.

This conference has set itself the task of reviewing the evidence of a positive influence of social security on economic development. This task is ambitious but politically vital. Our world is finally emerging from the doldrums of a Great Recession, but many keep arguing that universal social security based on the principle of solidarity between rich and poor, young and old or sick and healthy stifles economic dynamism, misallocates capital and ultimately weighs down fragile economies. The ILO has always firmly believed that economies, whatever their level of development, cannot continue to grow for long and sustainably while structurally leaving many in their societies behind.

Some see social security as nutrition fortifying healthy social tissue, or as an investment in the social peace which is a pre-condition for sustainable economic development. The protection of minimum income, health care, social insurance, and other elements of the welfare are all important for securing human capital and thus productivity gains – a perspective that is rather lopsidedly economic.

A growing body of evidence suggests that income inequality has a sizable and statistically significant negative impact on growth and that redistributive policies achieving greater equality in disposable income has no adverse growth consequences. Recent OECD studies show that countries where income inequality is decreasing grow faster than those with rising inequality. Inequality at the bottom of the distribution in particular hampers growth. These findings are generating strong interest among policy makers in addressing inequality through social security measures – a development demonstrated in recent G20 and BRICs labour and employment ministerial declarations brokered by China’s Presidency.

The negative impact of inequality on the economy becomes more pronounced when an economy achieves a more advanced stage of development and the return from human capital tends to rise while the return from physical capital tends to decrease. China is at this point. To propel the economy into a higher income orbit and achieve more balanced and inclusive growth, it would make sense for China to address a declining labour and consumption share in the GDP and widening income gap. It is for good reason that the 2030 Development Agenda is devoting an entire Goal (No. 10) to inequality and that the labour share is one of select number of statistical indicators. Public goods such as accessible education, a healthy range of decent employment opportunities and social protection floors are essential to reducing inequality.

I should not conclude without thanking CAoSS and FES for joining hands and minds with the ILO. Lao Tzu observed many centuries ago that the path into the light seems dark and the path forward seems to go back. That is certainly true for researching a topic as complex and politically charged as the one on our agenda today. The values on which the ILO was founded nearly 100 years ago would remain empty letter without your renewed efforts to bring together the best Chinese and international scholars for this research. I believe we share the same hope that the findings and recommendations of the report will be useful for the policy-makers of China in steering the future direction of social security and convince a wider public a wider public social security deserves their full support.

Lastly, I think we all share in the same belief: economic success is not an end in itself; social security is a staircase to social justice. We are all making our modest contribution in building such a staircase. I thank you for your contribution.