World Social Protection Report 2024–2026
Universal social protection for climate action and a just transition

Chapter 5. Policy orientations

Key messages

• Social protection is an enabler of climate action and the accomplishment of a just transition and greater social justice. Social protection systems, as part of an integrated policy response, enable societies to better manage climate shocks, and realize the imperatives of mitigation and adaptation in an equitable manner. Social protection compensates and cushions people, and it protects enterprises from the adverse impacts of these policies. It is key for combating growing inequality and vulnerability, poverty and social exclusion, and for building fairer and more inclusive societies and sustainable and productive economies.

• To play this role, social protection systems need to be reinforced, and become universal and robust. Doing so would send a strong signal from States that they intend to protect their people through a reinvigorated social contract. A socially just and viable future requires closing protection gaps, and ensuring the provision of social protection is rights-based and anchored in law.

• Safeguarding the planet and the well-being of humans requires further investment to achieve universal and robust social protection systems. Domestic resource mobilization is critically important for addressing both life-cycle and climate risks in a sustainable and equitable way. In addition, countries with limited fiscal capacities that are often also highly vulnerable to climate crises need international financial support to enable them to fill financing gaps and build their social protection systems.

• Social protection can contribute to rectifying long-standing global and domestic inequalities and inequities. Wealth inequities within and between countries, and differentiated risks, unfairly place the burden of the climate crisis on the most vulnerable. Social justice must inform climate action and a just transition, with human rights at the heart of the process. The climate crisis can only be overcome through common effort but with differentiated responsibility proportional to capacity, while recognizing that special remedial responsibility lies with those primarily responsible for the crisis. This has major implications for financing social protection at the domestic level, and the role of international financial support for countries with insufficient economic and fiscal capacities as a key element of social justice.

.5.1 Universal social protection for a fairer, more economically secure and greener future

Mitigating the climate crisis and achieving a just transition are accomplishable goals. Yet, without giving sufficient attention to building universal social protection systems, the necessary adaptation and transformations that they require risk exacerbating people’s vulnerabilities, worsening inequality, poverty and living standards, and becoming divisive and socially and politically unsustainable. This risks further eroding the social contract. Countries must intensify their efforts to address the existential threat of the climate crisis, while at the same time accommodating demographic, technological and other transformations. Social protection is among the most powerful policy tools that governments can deploy to manage these challenges fairly by ensuring that everyone is protected. This can help secure the political legitimacy of climate policies. Rectifying inequities intrinsic to the climate crisis demands global justice, including solidarity in financing. Time is quickly running out for arresting runaway global heating, and less than six years remain to achieve the 2030 Agenda.

As the global community reviews the progress made in achieving the SDGs, and seeks a stronger consensus on climate action, financing for development and social development, preparing for the Second World Summit for Social Development in 2025, this is time for bold action. The key role of universal social protection for safeguarding people and the planet needs to be fully recognized to inform international and national policy action, including much-needed investment to ensure sustainable social protection systems.

There are enormous gains to be had if universal social protection is accorded its due policy priority in a just transition. As part of an integrated policy framework, it can ensure that everyone can reap the benefits of a new greener prosperity, a reinvigorated social contract, and a rejuvenated planet more hospitable to life and future generations. The opportunity is there if policymakers want to take it.

.5.2 Keeping the promise of leaving no one behind

5.2.1 Ensuring universal access to adequate social protection

While this report has demonstrated the progress made in extending social protection since 2015, it has also highlighted how much still needs to be done to ensure universal access to adequate social protection. Building on the existing international normative framework and commitments, the following policy orientations are key to leaving no one behind:

Pivoting from reducing poverty to preventing poverty

To reduce vulnerability and strengthen resilience, social protection policies need to pivot. Reducing poverty by providing benefits to those who are currently in poverty is essential. However, relying only on poverty-targeted benefits is insufficient to meet today’s and tomorrow’s challenges, as these benefits can, at best, provide protection only for those who are already poor, but they are far less equipped to prevent poverty. Therefore, in addition to lifting people out of poverty, social protection needs to shift to play a more important role in protecting people from falling into poverty in the first place – this is key for reducing vulnerability and enhancing resilience (Razavi et al. 2022; UN Women, forthcoming). This requires more attention to those elements of social protection systems that can prevent (and not only alleviate) poverty, ensuring that everyone is protected for the necessities of life, so that health issues, the loss of a job or livelihood, disability, old age or having children do not become poverty risks, considering that these are often magnified by climate risks. Social protection systems need to provide robust mechanisms that deliver adequate protection throughout people’s lives in a way that is anchored in rights and is sustainably and equitably financed through collective mechanisms (in particular progressive taxes and social insurance contributions) to allow for the necessary risk sharing and redistribution. This is key for enabling people to engage in decent and productive work, and for ensuring that social protection policies are well coordinated with labour market, employment, care and tax policies (Razavi et al. 2022).

Ensuring a solid social protection floor as the foundation of national social protection systems

Ensuring a nationally defined social protection floor that guarantees at least a basic level of social security including access to healthcare and income security, is indispensable and should be given the highest priority, especially in a polycrisis context fuelled further by climate change. Particular attention should be given to extending coverage to previously uncovered categories of the population, promoting gender equality and leaving no one behind, including rural populations, indigenous and tribal peoples, migrants and displaced populations (FAO, ILO and UNICEF 2022).

Progressively reaching higher levels of protection to ensure adequate protection

To enable a just transition, countries will need to strengthen their social protection systems to provide comprehensive and adequate protection across different branches of social protection (see Chapter 4). To address the health impacts of the climate crisis, social health protection, sickness benefits and employment injury protection play an equally important role.

Many countries use a combination of inclusive social insurance and tax-financed schemes to realize universal social protection by ensuring adequate levels of coverage, allowing for broad risk sharing, solidarity, gender equality, portability, and sustainable and equitable financing of their social protection system. Social insurance schemes providing broad and adequate coverage are essential. They ensure that the social protection system as a whole functions efficiently. In many cases, social insurance schemes combine financing from contributions with general taxation for those with limited contributory capacities. At the same time, social protection policies need to be part of a wider policy framework that ensures well-designed labour regulation and employment protection mechanisms, effective labour market institutions, and other measures to protect workers’ rights and ensure fair competition for enterprises (ILO 2023c).

Enabling workers to better navigate the future of work

For a just transition to succeed, social protection systems need to enable workers and employers to better navigate the changing world of work. Workers in all types of employment, sectors and occupations, including the self-employed, need to be adequately protected (ILO 2021i) – this is essential for workers and enterprises alike. Attention to realizing gender equality and the inclusion of vulnerable categories of workers – such as workers in agriculture, domestic work and on digital platforms, own-account workers, migrant workers and refugees – are essential for a just transition.

Extending social protection is also a precondition for facilitating the transition from the informal to the formal economy, which can have a massive impact on eradicating poverty and reducing inequalities, and can further contribute to higher productivity and the formalization of employment and the economy (FAO, ILO and UNICEF 2022). Social protection enables well-functioning and sufficiently flexible labour markets that generate productive and decent employment without unduly shifting financial risks on to individual workers and employers (see section 3.3). In fact, social security is not a hindrance to flexibility – it is a precondition for it.

It should not be forgotten that social protection systems also contribute directly or indirectly to the creation of employment, including the creation of millions of decent jobs in the health and care sectors (ILO 2024a).

Harnessing the economic benefits of universal social protection

Social protection supports investment in human capabilities, including health, education and skills development, helps unemployed workers to reskill and find a new job, and it enables older persons to retire in dignity (see Chapter 4). In doing so, social protection is indispensable for supporting workers (and enterprises) in navigating the necessary structural transformations. It also serves as an “automatic stabilizer” for aggregate consumption and social cohesion during crises (ILO 2021q).

Together with other policies, social protection is key for decent and productive employment and a just transition, especially where it is part of an integrated policy package. A key effort to step up integrated and better coordinated approaches to extending social protection in face of the climate crisis is through existing partnerships (box 5.1) and efforts being made by the United Nations Global Accelerator on Jobs and Social Protection for Just Transitions1 (box 5.2).

Box 5.1 Partnerships for universal social protection

Box 5.2 The United Nations Global Accelerator on Jobs and Social Protection for Just Transitions

Source: UN (2024).

5.2.2 Making social protection systems gender-responsive

The urgency of climate action makes it imperative for national social protection systems to be gender-responsive. The climate crisis is intensifying some of the drivers of gender inequalities, for example, by causing greater health risks and increasing the time women need to allocate to fetching water and fuel and caring for sick family members. This, in turn, limits the time available for skills training, and looking for and engaging in decent employment in a fast-changing economy.

Social protection policies can contribute to addressing gender inequalities and promoting more equitable, inclusive and transformative outcomes if they are designed, implemented and financed in a gender-responsive way. Realizing this potential is contingent on creating powerful synergies: between social protection and labour protection, between social transfers and essential services, and between social protection and other policies, especially health, education, care, employment, formalization and fiscal policies (Razavi et al., forthcoming a).

Bridging gender inequalities as part of a just transition will require focused policy action on key priorities.

Reinforcing social health protection mechanisms to accelerate universal health coverage

As women and girls are more affected by rising temperatures, climate-related disasters and corollary impacts (Gavrilovic et al. 2022; Lenton et al. 2023), the direct health impacts of climate change are likely to be even more debilitating if they are not able to access healthcare without hardship. Indeed, financial barriers are among the most significant impediments keeping women away from healthcare services (WHO and World Bank 2023). Publicly mandated schemes, in line with international social security standards, with comprehensive benefit packages which are inclusive of the full range of women’s health needs, and which are either non-contributory or with contribution subsidies for those with little or no contributory capacity, provide the most effective pathway towards universal health coverage. They provide the necessary financial protection that is inclusive of all women.

Reinforcing social protection systems to achieve better results for women

Ensuring that social insurance schemes deliver for women means closing protection gaps and adequately covering workers in all types of employment (including part-time, temporary and self-employment) (see section 3.2.2), and incorporating effective mechanisms to recognize and compensate for care-related leave (section 3.2.5), minimum benefit guarantees and other risk-sharing mechanisms that are not usually available through individual accounts mechanisms.

Ensuring that social assistance schemes are rights-based and gender-responsive requires (a) anchoring them in national law, including clearly specified eligibility criteria, benefit levels and indexation mechanisms, and (b) where possible, transitioning from household-based to individual entitlements, based on principles of transparency, accountability and non-discrimination. This also includes revisiting behavioural conditionalities, to avoid reinforcing gender stereotypes and exacerbating women’s “transaction” costs and unpaid work; and ensuring that non-compliance does not lead to punitive measures that exclude women and girls who are marginalized or in vulnerable situations (UN Women 2019). Anchoring schemes in national law also provides for better financial stability of the scheme and better financial planning, ensuring that those who are eligible for benefits have a right to receive them when needed (and do not end up on waiting lists), which is particularly important for women (Razavi et al. 2022, see also section 5.3).

Strengthening linkages between gender-responsive social protection systems and other areas

Reforms of social protection systems can contribute to addressing and, to some degree, offsetting gender inequalities in labour markets by ensuring universal access to adequate and comprehensive social protection. Yet other measures, such as addressing occupational segregation and gender wage gaps are also essential (see section 3.2.5). Strengthening women’s right to work and rights at work, whether in the circular economy (such as waste pickers), the care economy (for example, childcare and long-term care workers), or the digital economy (for example, in situ or online), requires a package of interlinked policies. These must ensure occupational safety and health, adequate social protection with a view to formalizing their employment, fair wages as well as work–life reconciliation policies.

There is a critical need for policy coherence: gender-responsive social protection can undoubtedly make a major contribution to a gender equality agenda, but is most effective in combination with an integrated and coherent set of policy measures that seek to address and combat the multiple and interrelated drivers of gender inequality (Razavi et al., forthcoming a).

5.2.3 Facilitating access to care and other services

A just transition also requires strengthening linkages between social protection policies and access to care and other services, as well as other policies that contribute to people’s well-being and facilitating a work–life balance. Social protection benefits should be complemented by the provision of accessible, affordable, acceptable and quality social services and other in-kind benefits. In 2015, 2.1 billion people across the world were in need of care, and that number is expected to reach 2.3 billion by 2030 (UNRISD 2022).

Complementing child and family benefits by access to quality childcare services

For example, to improve children’s development and well-being, help children attain their full potential and support family livelihoods and care needs, it is imperative that social protection cash benefits and effective access to care services work in a mutually reinforcing manner. Depending on their design and delivery, healthcare, long-term care and childcare services can help maximize and sustain the impacts of cash benefits, overcoming gender inequalities, and fostering social inclusion of children from marginalized families. Quality childcare services can foster both child development goals and support parents in combining work and family responsibilities. In practice, comprehensive early childhood education and care services attuned to the needs of working families remain scarce, particularly for younger children, and especially in developing countries. However, investment in childcare services can deliver significant economic and social dividends for families, individuals and societies by enhancing children’s capabilities, supporting women’s labour market choices, and creating decent jobs in the care sector (ILO 2024a; UN Women 2015).

Ensuring access to quality long-term care services

Likewise, having income security in old age through a pension should be complemented by access to appropriate healthcare and long-term care services without financial hardship. With a growing global burden of non-communicable diseases, not only should prevention be prioritized from an early age and determinants of chronic and long-term diseases addressed, but health services also need to be better coordinated with social care services that respond to the needs of older people and their aspiration to live a dignified life (WHO 2015b). While modalities for the financing and delivery of long-term care services vary greatly across countries, coherence between healthcare, social care and social protection systems is critical to ensure quality, especially in care models that are pluralistic in nature. In practice, this continuum is not always realized and coordination is often weak (see Tessier, De Wulf and Momose 2022). In the absence of effective coordination, models of long-term care that rely exclusively or predominantly on families and volunteers are likely to be both inequitable and unsustainable, given the changes in family structures and employment patterns. Affordable and quality long-term care services provide an alternative to unpaid care provided by family members, predominantly women, who form the invisible backbone of long-term care systems. Social protection systems need to assume greater responsibility so those who need long-term care can access it without hardship.

Ensuring decent work for care workers

While the care economy is a major generator of employment, with a global care workforce of 381 million workers, or 11.5 per cent of total global employment (ILO 2024a, 11), many care workers lack access to adequate social protection. In view of the potential of the care economy as a source of additional decent employment as part of a just transition, more attention needs to be given to ensuring adequate social security coverage. This requires overcoming legal, financial and administrative barriers to their coverage, including those who are particularly vulnerable, such as domestic workers, migrant workers or community health or care workers (ILO 2021i; 2023x; 2024a).

Recognizing and redistributing unpaid care – the role of social protection

Families play a key role in meeting the physical and emotional needs of children and adults. More than three quarters of all unpaid care work (76.2 per cent) is provided by women, which restrains their capacity to engage in paid work (ILO 2024a, 23). Despite the essential contribution it makes to human capabilities and well-being, and the (re)production of the labour force, unpaid work is largely an “invisible” domain (not counted as part of GDP). Yet, without the unpaid work of caregivers, most societies would cease to function and workers could not survive or perform their remunerated activities (ILO 2024a). Social protection cash benefits and services can offer relief for unpaid family caregivers and enable them to better balance work and family responsibilities (Razavi et al., forthcoming a). This includes the important role that care credits play in social insurance schemes, by recognizing and rewarding periods spent caring for children or other family members, to guarantee minimum pensions in line with international social security standards (ILO 2024a).

5.2.4 Turning the tide: Can the climate crisis make health and well-being the focus of our economies?

Human health and well-being are strongly determined by the conditions in which people live, work, grow and age (Marmot 2001). Poverty, social exclusion and inequality, which are expected to increase with the climate crisis, negatively impact health, including mental health, because they affect nutrition, education, housing, healthcare-seeking behaviours, and other social determinants of health (Jay and Marmot 2009; Allen et al. 2014).

These determinants are rooted in the unequal distribution of power and resources, which generates a social gradient in health at the local, national and international levels (Marmot 2006), resulting in inequities in health outcomes within and between countries (Commission on Social Determinants of Health 2008).

Addressing inequalities in health and well-being

Climate change, as well as mitigation and adaptation policies, are likely to reinforce existing social and economic inequalities that are responsible for inequity in health and well-being globally and locally (IPCC 2023c; Ragavan, Marcil and Garg 2020; Jay and Marmot 2009). The WHO Executive Board recommended that Member States “implement joint actions for health equity in addressing climate change and major societal transitions” in the framework of intersectoral action to address the social determinants of health equity (WHO 2023b). Social protection policies, by directly tackling poverty, inequality and access to essential services, play a critical role in promoting well-being and resilience (Marmot 2013; WHO 2019 b), contributing to a broader shift towards an economy that promotes human well-being and remains within planetary boundaries.

Though the evidence is fragmented, many studies have shown the health impact of social protection. For example, family benefits in Latin America had a positive impact on both healthcare-seeking behaviour and health outcomes (de Andrade et al. 2015), and unemployment insurance positively impacts health, including mental health (O’Campo et al. 2015; Kuka 2020; Tefft 2011). Many other studies identified social protection as an essential condition to sustain healthy lives. For instance, 35 per cent of the inequity in self-reported health between those who are most and least affluent is due to “systematic differences in risk and exposure to income insecurity and the lack or inadequacy of social protection” in the WHO Europe region (WHO 2019b). The comprehensiveness of the risks covered, and the adequacy of benefit levels are key parameters of the expected health impact of national social protection systems, underpinning the importance of comprehensive and adequate benefits. Stronger integration of universal social protection and universal health coverage policies will be essential in this endeavour (FAO, ILO and UNICEF 2022).

Investing in a well-being economy

The climate crisis is exacerbating existing inequalities and urgent action is required to turn the tide. A shift in socio-economic policies is needed to gear investments towards what is good for health, well-being and the environment. There are many co-benefits between health and climate policies (Watts et al. 2015). Active transport (walking or cycling) and clean public transport systems benefit both environmental and health outcomes (Romanello et al. 2023), and so does the adoption of a balanced diet that favours plant-based ingredients (Willett et al. 2019). Reaping those co-benefits requires investment in redistributive social policies that enable individuals, households and communities to undertake the necessary changes, considering that the costs of inaction on health systems will be much greater (Romanello et al. 2023; Bosello, Roson and Tol 2006). Therefore, a major shift is needed, as promoted by the movement for well-being economies, ensuring that health and social protection system financing is not considered as a competing priority, but as a complementary investment in human well-being that can also support planetary health.

Accelerating progress towards universal health coverage

Realizing universal health coverage is a key precondition for climate action and a just transition (see section 4.4) and requires concrete action. The ILO actively contributes to Universal Health Coverage (UHC2030), Providing for Health (P4H) and other strategic alliances to advance the policy debate and support country-level action.

.5.3 Reinforcing social protection systems: Policies, legal frameworks and institutional capacities

5.3.1 Enhancing national social protection policies, strategies and legal frameworks to make them fit for purpose

To adjust to greater climate volatility, more attention is needed to strengthen national social protection policies and strategies, and to ensure a rights-based approach. This is essential to allow people and enterprises to reap the socio-economic dividends from a just transition, fostering investment in human capabilities and enabling people to seize economic opportunities.

Formulating, implementing and monitoring national social protection policies and strategies

National social protection policies and strategies are important planning instruments that can help governments to set targets and milestones to progressively reach universal coverage (Cookson et al., forthcoming; ILO 2019f). Formulating these policies and strategies through a participatory process of effective and inclusive social dialogue ensures that policies are comprehensive, transparent, consensual and well-balanced, and therefore able to achieve greater buy-in and ownership (ILO 2018c; 2021b; Fultz and Kulke 2023). These mechanisms will also facilitate policy implementation, thus strengthening coordination across government and other relevant actors, to ensure that the policies meet the needs of the population. Social dialogue urgently needs to become the rule rather than the exception when formulating and implementing policy.

Strengthening legal frameworks for social protection systems

Reinforcing the legal basis of social protection systems is essential for a just transition. This includes extending legal coverage to those not yet protected, addressing discrimination and ensuring equal treatment and gender equality, safeguarding the adequacy of benefits and services, expanding the range of benefits to progressively achieve comprehensive protection, and ensuring that governance, financing, coordination and delivery mechanisms are fit for purpose.

Addressing remaining gaps in national legislation is essential for ensuring that qualifying conditions and benefit entitlements are prescribed by law, guaranteeing the predictability of rights and benefits, and ensuring transparency and accountability. This will contribute to a more reliable financing base (OHCHR and ILO, forthcoming) and increase public trust in the system.

As part of a wider effort to enhance social security legislation, an important priority is to apply a rights-based approach for social assistance schemes, many of which still lack a sufficiently solid legal basis and would benefit from being fully integrated in national social protection systems (see box 5.3).

Box 5.3 Enhancing the rights-based nature of social assistance schemes

Sources: ILO (forthcoming b); Razavi et al. (2022).

Harnessing international social security standards for strengthening national systems

The international normative framework, in particular human rights instruments and international social security standards, provides essential guidance for reinforcing and adapting social protection systems to ensure a just transition and inclusive climate action. This also requires improving the level and quality of benefits and services, defining clear rights and corresponding obligations for the State and individuals alike, and ensuring sustainable and equitable financing structures.

International social security standards provide key guidance to support countries in reinforcing their social protection systems (ILO 2021a); yet, they are often insufficiently known and applied. To address this challenge, the ILO currently conducts a Global Ratification Campaign (box 5.4).

Box 5.4 Global Ratification Campaign on Convention No. 102

Note: For further information, see Annex 4, the website of the Global Campaign and the Toolkit on ILO Social Security Standards.

Coherence with social, economic and employment policies

For the structural transformations associated with climate policies to be equitable and orderly, social protection should be well coordinated with other social and economic policies, including employment, sectoral, skills and health policies. Greater policy coherence will also maximize synergies and impact (see also section 2.2). Integrated solutions include, for example, formalizing informal employment arrangements and enterprises, bolstering public investment in the care economy and fostering decent work through integrated solutions. The latter can be achieved by providing unemployed workers with income security through employment retention, public employment or unemployment support schemes, and with training opportunities to enable them to reskill or enhance their existing skills that a just transition will demand.

5.3.2 Enhancing institutional capacities for better delivery and preparedness

This section discusses the necessity to enhance institutional capacities for better delivery and preparedness, arguing for a comprehensive and systemic approach.

Enhancing institutional capacities and preparedness

Preparedness for climate shocks and just transition policies requires comprehensive social protection systems to be in place ex ante (ILO 2021q). This means formulating and implementing national social protection strategies and policies through social dialogue now rather than later. This helps to avoid improvised responses in the midst and in the frenzy of an emergency. Systems can contribute to preventing, containing and softening the impacts of crises, promoting swift recovery and building people’s capacity to cope with shocks as well as everyday risks. In the context of humanitarian crises, this requires working across the humanitarian-development-peace nexus, using existing health and social protection systems to the extent possible, and systematically reinforcing them (for example, ILO and UNHCR 2020). Well-established partnerships and inter-agency collaboration frameworks give the social protection sector a head start (FAO, ILO and UNICEF 2022).

Strengthening social protection delivery systems

In addition to a general enabling environment of rule of law, peace and security, and functioning public digital and physical infrastructure, social protection systems need to ensure sound delivery capacity at every step in the delivery chain. This will enable people to have clear entitlements and to effectively access adequate benefits and services.

This requires:

• Accessible and inclusive communication channels that ensure all members of society understand their entitlements and obligations, the administrative procedures to follow, and how to receive benefits and access services. Workers’ and employers’ organizations, as well as civil society organizations, can play an important role in this regard.

• Identification and authentication mechanisms that can verify people’s identity when registering for a scheme or receiving a benefit or services. In some countries, the national identification system is universal and can be used for this purpose. Elsewhere, countries sometimes assign unique social security numbers at birth. In the absence of a unique identifier, schemes in some countries accept up to 30 different types of documents to register for a benefit (such as birth certificates, voter identification, utility bills or tax records).

• Accessible and inclusive online and/or physical interfaces. Offices or mobile units should ensure that individuals can register and have their eligibility verified. Similarly, digital or physical points for contribution collection and payments or service delivery need to be easy to reach for recipients. Where digital options are absent or inaccessible, in-person support is important to ensure no one is excluded simply because of limited technological capacity (such as in remote areas). When digital systems are down or when a shock occurs, systems continuity needs to be maintained to allow for a rapid intake of large numbers of additional recipients.

• Institutional capacity needs to be strengthened across all administrative levels. This requires processes for regular monitoring and periodic evaluation as well as ensuring users have access to impartial, transparent, effective, simple, rapid and inexpensive complaints and appeal mechanisms. This is only possible with well-trained staff with decent working conditions, including adequate labour and social protection.

.5.4 Ensuring sustainable and equitable financing of social protection

Social protection can only deliver for climate action and a just transition if it is sustainably and equitably financed through domestic resources and, where necessary, complemented by international financial support.

Enabling sustainably and equitably financed social protection systems

Ensuring strong social protection systems that can support a just transition requires the requisite investment. Yet, many countries are struggling to deliver on this task given limited fiscal space due to high informality and sovereign debt, which is giving rise to unsustainable debt servicing costs (ILO 2024k; UNCTAD 2024). As a result, numerous countries now find their interest payments exceeding what they spend on social protection. Also, in Latin America and the Caribbean, the rise of interest payments between 2012 and 2021 curtailed spending on key public services and contributed to a decline in public investment (UNECLAC 2023). To avoid further debt accumulation, 134 governments began to cut public spending in 2021, a trend expected to continue until at least 2025. A significant aspect of this budget tightening has involved targeting and rationalizing spending on social protection as one of the main austerity measures used to reduce overall government expenditure (Ortiz and Cummings 2022).

However, diminishing expenditure on social protection will disproportionately affect the poorest households, widening the economic divide and aggravating intersecting inequalities (Okeke, Alexiou and Nellis 2021; Seguino 2010). In turn, this will leave countries more vulnerable to the impacts of climate change, undermining the achievement of mitigation, adaptation and just transition goals. Thus, reducing investment in social protection will compromise the achievement of several targets of SDG 1 on poverty, SDG 3 on health, as well as SDG 13 on climate action (Kentikelenis and Stubbs 2023). Safeguarding social spending for health, education and social protection is critical to achieving these objectives (IMF 2019). The USP2030 Principles for Financing Universal Social Protection (see box 5.5) reflect a broad consensus on key principles echoing the principles embedded in international social security standards.

Austerity measures are hitting current levels of social protection expenditure, which are insufficient to guarantee national social protection floors, let alone to provide progressively higher levels of protection to as many people as possible. Particularly for low-and middle-income countries, the additional investment needed to achieve SDG targets 1.3 and 3.8 is 3.3 per cent of their GDP (Cattaneo et al. 2024).

Filling financing gaps and securing sufficient fiscal space at the national level

Countries have different options to create and extend fiscal space for social protection (Ortiz et al. 2019). The key sources of financing, however, need to be domestic regular sources (such as progressive taxes and social security contributions) given that social protection systems imply regular long-term commitments that need to be sustainable to effectively protect people in the event of life-cycle and climate risks (see box 5.5).

Box 5.5 USP2030 Joint Statement: Principles for Financing Universal Social Protection

Source: USP2030 (2023a).

It is critical that countries formalize enterprises, employment and economic transactions, and strengthen the institutions required to collect taxes and social contributions, addressing tax evasion and the avoidance of social contributions. While the role of social contributions is sometimes contested, evidence shows that the reduction of contribution rates has not led to significant employment or formalization gains, but has instead further worsened financing gaps for social protection (Calligaro and Centrángolo 2023).

More promising strategies to increase fiscal space for social protection systems and floors are budget reprioritization, higher spending efficiency, combating illicit financial flows, macroeconomic policies that favour decent job creation, and innovative sources of financing, such as taxes on carbon (see section 3.4.3 and below). Given the immense income and wealth inequalities, countries could also apply more progressive taxation, through wealth or inheritance taxes, or excess or windfall profit taxes. In the current context of debt service-related development distress (UNECL AC 2023), if a portion of government debt could be renegotiated with lower interest rates, this could free a sizeable share of financial resources to devote to investments in social protection and essential services.

Filling financing gaps through international support

While domestic resource mobilization must remain the cornerstone of national social protection systems, in the case of low-income countries, an estimated financing gap of 52.3 per cent of their GDP (Cattaneo et al. 2024) makes international support absolutely necessary, so that countries can address immediate financing needs and build their social protection systems over time. However, official development assistance remains both unpredictable and at levels below the internationally agreed goal of 0.7 per cent of gross national income of the high-income countries (in 2022, the average rate was 0.37 per cent). According to data collected by the OECD Development Assistance Committee, only five countries met this goal. Despite some increase in the share of official development assistance allocated to employment and social protection as a result of the COVID-19 pandemic, official development assistance (ODA) allocations to social protection still remain very low.2 Moreover, the climate finance disbursed so far has not been in addition to ODA, which implies it is tapping into ODA and therefore reducing what ODA commitments can do in other areas (Mitchell, Ritchie and Tahmasebi 2021).

To unlock social protection financing opportunities especially for low-income countries, in 2021, ILO constituents requested the Office to explore options for mobilizing international financing for social protection, including as a Global Fund for Social Protection (ILO 2021m; De Schutter and Sepúlveda 2012). ILO-commissioned research on the diverse experiences of global health, agriculture and climate funds suggests that a putative global fund for social protection could give priority to low-income countries to gradually build their national social protection floors. This would complement and support domestic resource mobilization efforts (Yeates et al. 2023). However, there are also risks to creating new vertical funds, including the risk of them being under-resourced and creating fragmentation in the area of financing social protection. Ensuring effective coordination with ongoing climate financing efforts is also key (see below). While private sources of finance can make substantial new funds available, great care is needed to ensure that ethical and vested interest concerns and due diligence are soundly anchored in governance structures and processes to avoid this. The full involvement of diverse representatives – government (different ministries), social partners and civil society groups (such as users and beneficiaries) – from countries of the global South in global-level deliberations is also crucial for the legitimacy of funds (Yeates et al. 2023).

The recently concluded agreement on a globally aligned minimum tax rate of 15 per cent on multinational corporations, despite some loopholes, could serve to retain domestic resources in the countries where firms are operating. The world is “awash” with capital, with soaring stock markets and a surge in private wealth.3 The challenge is to tap into this potential source of finance. There is growing support, including from ministries of finance of major countries, for a minimum 2 per cent wealth tax for billionaires (Elliott 2024), although the details still need to be worked out.

Harnessing climate finance for social protection at national and international level

Social protection plays an important enabling function for climate change adaptation, mitigation and loss and damage response, and in facilitating a just transition towards greener economies (Chapter 2). To fulfil this role, social protection systems need to be sustainably and equitably financed. Harnessing climate finance could be essential to complement other financing sources for social protection to support a just transition (see section 3.4.3).

In countries hardest hit by climate change, leveraging international climate financing, including loss and damage funding arrangements, should help reinforce and adapt social protection systems to ensure that people, societies and economies are better prepared to tackle the risks of the climate crisis. However, this requires a greater recognition of the role of social protection for climate action both by climate finance institutions and by applicants to climate finance, including national governments. The first concrete step to move in this direction is to introduce clear commitments regarding the role of social protection for climate action in the context of countries’ nationally determined contributions, national adaptation plans, as well as pledges for net zero and sovereign green bonds. At the same time, the total available international climate finance flows need to expand significantly, especially those available for financing adaptation needs.

At the national level, the removal of explicit fossil fuel subsidies and the introduction or expansion of carbon pricing measures (that is, the removal of implicit fossil fuel subsidies) could free up or generate additional fiscal revenue. By redistributing some of these savings or this revenue through the social protection system, governments can compensate people for the associate price increases, thus helping to make climate policies equitable and feasible. This also constitutes an important opportunity for filling some of the social protection financing gaps, particularly in middle-income countries, which spend much more on explicit fossil fuel subsidies and have higher revenue potential from carbon pricing than low-income countries.

At the same time, maximizing the reduction of emissions and boosting government revenues through carbon pricing requires international cooperation, for example by introducing an international carbon price floor (Roaf, Black and Parry 2021). Emerging proposals suggest directing revenues collected through such international financing arrangements towards funding the adaptation needs of low-and middle-income countries (UNFCCC 2023b). If directed towards social protection, such cross-country transfers would promote fairer burden sharing and help address income and health losses from climate change through revenues generated from pricing emissions where they happen.

.5.5 Promoting universal social protection to advance social justice and a renewed social contract

This report has demonstrated the key role of universal social protection to enable people to cope with often intertwined climate and life-cycle risks, as well as the uncertainties of longer-term transformations. Being adaptive and shock-responsive, such systems are essential for preventing and alleviating poverty, reducing vulnerabilities and inequalities, and increasing social inclusion and resilience.

Universal social protection is pivotal to renewing the social contract (ILO 2024i), which is essential for promoting well-being, social cohesion and the pursuit of social justice (UN 2021; ILO 2023b; UNPRI 2024). Strong social protection fosters state–society trust and can guarantee that all members of society are well protected.

However, recent decades have seen a rapidly eroding social contract. Multiple elements have created a “state of fracture” (UNRISD 2022) and shaken people’s trust in the State, including: converging and protracted economic, health, environmental and humanitarian crises; migration and displacement pressures, discrimination and exploitation; austerity and privatization of public services; elite capture of power; concentration of wealth; and political polarization. Rising levels of inequality, poverty and hunger globally, further demonstrate the need for a reinvigorated social contract (Razavi et al. 2020).

A reinvigorated social contract can secure public buy-in for urgently needed climate policies, including for mitigation measures, such as carbon tax policies or the reduction of fuel subsidies which – without adequate compensation – could aggravate economic insecurity for large parts of the population, including but not limited to the very poorest.

Simultaneously strengthening social protection systems and actively working to rebuild a social contract taking into account environmental boundaries and human impact is now crucial. Rights-based social protection systems therefore contribute to enhancing good governance, transparency and accountability, building on principles of participation, social dialogue and democracy, to restore trust and a shared sense of purpose and fairness.