Social spending without contribution |
A fresh debate resurfaced over the allocation on social welfare and security programs.The current govt increased the spending on social security programs over the years. In the previous post, I delineated how these programs rendered ineffective.Argument put forward in favor of raising social spending is that in many developed economies social security spending occupies a decent share of GDP and in Bangladesh it is still below 3%.
In many of these developed economies, public opinion,petition lead the public representatives to scrutinize opaque issues,to summon concerned people at the Parliament to offer explanation. And the free press is allowed to broadcast and print details of the hearing. In Bangladesh that never happens. There are privileged people who roam scot free and hardly have any accountability. And a section of press,capable of manufacturing « narrative », keeps disseminating disinformation to maintain status-quo.
In many of these developed economies, unemployment rate is pretty low and they have a concept of social contributions apart from income tax.In a country of 160 million where we have only 7.5 million registered taxpayers,this idea of social contribution is alien. Many here enter job market pretty late. And prospect of job at private sector is pretty uncertain as ruling elites dominate the business. In the wake of regime change or corruption, many found themselves in the club of unemployed. In addition, a large part of our workforce involved in informal sector where scope for saving or making social contributions is very minimal. In developed economies, people contribute to government fund very long time to receive benefits during their post retirement age.In Bangladesh that kind of prospect is very bleak as very few could manage to do so. Here govt finances the social security programs through indirect tax,borrowing from banks and abroad.People’s participation in social contributions is absent. And most of this tax money falls into wrong hands. To sustain a government-run social security program,government has to collect contributions from many people just to give benefit to one retired person. But the concept of ratio of active age to retired age population and intergenerational transfer 1are not working in Bangladesh as we do not have well functioning institutionalized job market. One solution is to call for voluntary support to social security fund.
Govt may float social security bond,starting from TK 100. Those who are interested may buy these bonds using NID card. And NBR will track the number of bonds held by each NID. Based on the amount of one's contribution, one individual may receive a certain sum during his post retirement life. Government may also add fund to it. For instance, if social security bond fetches TK 100 crore. Government may contribute another TK 100 crore and distribute the money among the target population. Government may also launch a lottery to finance the program,more plausible than the social security bond. 5% of lottery buyers have chance to win some prizes while 95% will have the feel good factor. The point is if you really want social security then you have to contribute to it. Government in no way is going to pay fully the whole social security spending.
I personally think except the elderly allowance all social spending should be wound down. A government that depends on borrowing and indirect tax does not have the luxury to spend public money on universal pension and social security. Rampant corruption even makes that idea very untenable in the context of our country.As govt is mulling to offer ration card to 10 million vulnerable families, it is better to downsize/abolish other social programs. At the end of the day,money well spent or lost belongs to people. While incurring a rising budget deficit,it is not wise to open new spending avenues where risk of leakages looms large.
Notes And References:
- “Macroconomics”,Rudiger Dornbusch,Stanley Fischer,Richard Startz,7th edition,McGraw-Hill.
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