Monday, March 15, 2021

Social protection + health spending in Europe and Asia

Angela Merkel, the German chancellor, during the early years of the financial crisis in the last decade used to often say that Europe has 7% of the world’s population, 25% of its GDP and 50% of its social spending.

Social spending is a sum of education, health, and social protection expenditures, while social protection relates to sickness and disability; old age; survivors; family and children; unemployment; housing; social exclusion n.e.c. (not elsewhere classified); R&D social protection; social protection n.e.c.

The data used by Merkel came from a 2012 World Bank report where Europe comprising 36 countries had a social protection expenditure that was 58% of the global spending. The EU-27 (including UK but not yet Croatia) accounted for 54% — full data here (Excel).

In 2019 the EU-27 (ex-UK) general government expenditure on social protection stood at €2.699tn; 19.3% of GDP in 2019 and 41.4% of total expenditure.

Germany had 25% of EU-27 GDP in 2019 (the Irish value is exaggerated).

Eurostat reports that 5 EU member states – Finland (24.0 % of GDP), France (23.9 % of GDP), Denmark (21.4 % of GDP), Italy (21.2 % of GDP) and Austria (20.1 % of GDP) – devoted at least 20% of GDP to social protection with Norway being the highest among EFTA countries (19.7%), while Ireland (8.9 % of GDP), Malta (10.8 % of GDP), Bulgaria (11.5 % of GDP) and Romania (11.9 % of GDP) as well as Iceland each spent less than 12% of GDP on social protection.

A more realistic rate for Ireland was 15% when multinational firm tax avoidance distortions are stripped out.

The World Bank report, 'Golden Growth: Restoring the lustre of the European economic model,' noted "The hallmark of the European economic model is perhaps the balance between work and life. With prosperity, Americans buy more goods and services, Europeans more leisure.

In the 1950s, Western Europeans worked the equivalent of almost a month more than Americans. By the 1970s, they worked about the same amount. Today, Americans work a month a year more than Dutch, French, Germans, and Swedes, and work notably longer than the less well-off Greeks, Hungarians, Poles, and Spaniards (chapter 6)."

Asia's social protection and gig economy

A report from the International Labour Organisation in 2018 stated that more than 68% of the employed population in Asia-Pacific are in the informal economy.

The ILO says the "informal economy is defined as all economic activities by workers and economic units that are — in law or in practice — not covered or insufficiently covered by formal arrangements."

Its guidelines added: "all remunerative work (i.e. both self-employment and wage employment) that is not registered, regulated or protected by existing legal or regulatory frameworks, as well as non-remunerative work undertaken in an income-producing enterprise. Informal workers do not have secure employment contracts, workers' benefits, social protection or workers' representation."

Informal work that involves smartphones connected to a digital platform, is now commonly called the gig economy.

It works for some people but in recent years in a first world country, a third of workers have insecure jobs in the gig economy, according to a report by the Bank of Canada.

Also over a third of the world’s workers are employed in the gig economy.

Nikkei Asia, the Japanese business publication has noted:

"The pandemic was yet another illustration of how the gig economy has failed to live up to its promise of empowering workers. For those who lost work, there was no specific government assistance in most Asian countries because they are not classified as workers but independent contractors.

At the advent of the 'sharing economy' around a decade ago, companies assured workers that as independent contractors with digital platforms, they would have more flexible work hours and higher earnings. They also told workers that they could convert their existing assets, such as cars, into productive assets, for example by driving them for a cab service and earning some extra cash.

The reality in both developed and developing Asian countries is that gig workers have to work very long hours to make a living. Worse, many gig workers took out loans to finance these productive assets. When their earnings failed to live up to promised levels, they struggled to pay them back.

Unlike in the West, in some Asian countries, gig workers do not even own these assets — they work through traditional contractors who own, for example, a fleet of taxis. These contractors take a cut of workers' meagre earnings. They end up having neither flexibility nor security.

Gig workers ought to be paid much better when the economy normalises, but that should be just the beginning. They need to be covered by basic labour protections like unionised workforces and by specific protections, like the right to algorithmic transparency and fairness."

Most of the effective wage slaves now have to provide capital equipment too.

Zomato, a food delivery platform in India, sacrificed workers' "privacy at the altar of customer reassurance during the pandemic. It shared minute details about delivery workers with customers, including their exact body temperature" but the customers were also a potential threat to the delivery individuals.

The GRAB taxi and food delivery service that was founded by Malaysians, has had an influx of new drivers and part-time students' workers during the pandemic. That has been good for customers in reducing the time to wait for a car, but it has meant that long-term drivers have had to increase their hours of work.

Bloomberg reported last December that 2m "jobless motorbike drivers show Covid's toll on Indonesia's gig economy. Millions of sidelined motorcycle taxi drivers in Indonesia are bracing for a long recovery as the country's coronavirus outbreak shows no signs of abating."

MasterCard said in a 2019 report that the global gig economy currently generates $204bn in gross volume, with transportation-based services (e.g. ride-sharing) comprising 58% of this value. It forecast transactions would grow by a 17% CAGR (compound annual growth rate) with a gross volume of ~$455bn by 2023.

LONG HOURS TOO FOR SOME OF THE FORMALLY EMPLOYED

Asian countries generally have high working hours and official rules are not always followed.

In Japan, it's common not to leave work before your boss.

The BBC cites a 33-year-old engineer, who works for a technology company in Tokyo, who had only two leave days in 2019. "It’s not because he couldn’t take more: he is in fact entitled to 20 days annual leave."

A government report confirmed that workers took only 52.4% of the paid leave to which they were entitled, in 2018.

"Karoshi" (death by overwork) is a word that was invented in the 1970s.

Japan classified 189 deaths from overwork in 2015 — 93 suicides and 96 from heart attacks, strokes and other illnesses related to overwork — and that may be an underestimate.

A Japanese law limiting overtime came into effect in April 2019 but critics said that there were many loopholes.

In 2019 Jack Ma, co-founder of Alibaba — the Chinese e-commerce service — endorsed the “996” work practices prevalent in China’s tech industry, under which employees are expected to work 9 am to 9 pm, 6 days a week.

In Malaysia office workers typically work a 5-day week but in most job categories the 6-day week applies.

Countries of the United Nations' Economic and Social Commission for Asia and the Pacific (ESCAP) had an average 7% of GDP allocated to social protection in 2017.

However, many countries in the region spend less than 2% of GDP on social protection. Such low levels of expenditure are more common in countries in the Pacific, South-East Asia and South (India is the biggest country) and South-West Asia.

Japan and Mongolia lead at about 16% of GDP while China increased expenditure levels from 3.2% of GDP in 1995 to 7% in 2017. Russia has a rate of 13% compared with New Zealand at 11.5% and Australia at 9.4%.

Wealthy economies South Korea and Singapore have low rates of 6.3% and 4.6%.

Malaysia and Singapore in South-East Asia focus on employer liability and mandatory savings through retirement provident funds.

Malaysia has authorised withdrawals from its fund during the pandemic while Singapore provided a cash grant of SG$800 (US$595) to low-income native workers for 3 months.

India has a very low rate of 3%.

United Nations: The Protection We Want: Social Outlook for Asia and the Pacific

Health: Europe and Asia-Pacific

The charts below are from the Organisation for Economic Cooperation and Development (OECD) 1) using Eurostat data for Europe and the World Health Organisation (WHO). This chart is in Euros adjusted for price differences (PPP) 2) the second chart covers Asia-Pacific countries and WHO data are in USD (PPP).

The lowest per capita health expenditure in the European Union is in Romania at €983. Non-members such as Albania, Serbia and Turkey have lower levels.

However, in the Asia-Pacific, only 7 countries exceed annual expenditure above $1,000 and even the very low levels involve people contributing themselves.

India has a per capita annual rate of $253 and Bangladesh $94.

OECD: Health at a Glance 2019

OECD: Health at a Glance: Europe 2020

OECD: Health at a Glance: Asia/Pacific 2020

The EU-27 has a population of 448m while the Asian and Pacific region has a population of over 4.6bn people, about 60% of the world’s population in 2020.

Almost 107m people from Asia-Pacific countries lived outside their countries of birth in 2019, representing about 40% of the world’s migrants. The number of international migrants in the region has grown from almost 52m in 1990 to 65m, in 2019.