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Welfare Risk Essay

576 words - 3 pages

Summary assignment

Social protection historical involved traditional welfare instruments like labour, social insurance and provision of social assistances in welfare states. The onset of globalization causes a rethink of approach to social protection especially for those in the developing countries after the Asian financial crisis.
This paper examines social protection from the perspective of social risk management approach were the notion of poverty reduction is seen through the lens of vulnerability of the poor and its instrumentalities. Social risk management approach involves four main goals; poverty as in vulnerability of the poor, consumption smoothing, enhancing equity and catalyst for economic development.
Firstly, vulnerability as defined by Holzmann and Jorgensen (1999) is ‘‘risk of economic units to fall below the poverty line or for those below the poverty line, to remain in or fall further” (p.6). ...view middle of the document...

Furthermore, he states that better risk management can enhance the welfare distribution and societal welfare without actually re-distributing income. Lower income earners don’t have access to risk instruments thus improve risk management will alleviate the problem.
The fourth approach, enhancing economic development were social risk management opposes the view of using child labor for income gain as detrimental for the future and the over generous pension system as placing burden on labor taxes. Instead the adoption of social risk management instruments is seen as a stimulus where functioning families can reduce individual risks and well devise pension systems may stimulate economic growth (Holzmann & Jorgenson, 1999)
The article whilst attempting to portray social risk management strategy as a refine approach to addressing social protection issues in the developing world via four main goals also has missing gaps. Firstly, the suitability and credibility of framework for developing countries is questioned given that it is pilot tested in just two countries (Togo and Yemen). There is little in the way of supporting empirical evidence of the framework in practice (McKinnon, R 2002). Secondly, the promotion of risk to enable people to take on higher risk as a means to opt out of poverty might in actual fact prove the opposite. Appropriate risk management instruments constraints the poor from engaging in riskier but also higher return activities (McKinnon, R 2002).
Finally, the general assumption that consumption smoothing will minimize income risk for the vulnerable is a tainted misconception as it is applicable only in urban poor whilst those in the rural areas have much more difficultly accessing these instruments

Holzmann, R & Jorgensen S, 1999 ‘Social protection as social risk management: conceptual underpinnings for the social protection sector strategy paper’, Social Protection Discussion Paper Series, No.9904.
McKinnon, R 2002 ‘Social risk management: a conceptual fallacy of composition,’ Risk Management, vol. 4, no 2, pp 21-31.

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