The document discusses promoting sustainable growth through sequencing, cost-efficiency and fiscal sustainability of social protection. It establishes the International Initiative on Cooperative and Partnership-driven Solutions for Development (IICPSD) to leverage private sector solutions for development challenges. IICPSD aims to support inclusive markets, foster private sector engagement, become a center of excellence for capacity building, and convene partners to expand dialogue and partnerships. It analyzes declining labor shares, rising inequality, and the need to revise social models through business-led reforms and inclusive business approaches. IICPSD establishes partnerships across sectors to design inclusive business models, offset social protection costs, and build markets through cooperation.

1. Mitigating Vulnerabilities and Promoting Sustainable Growth
Sequencing, cost-efficiency and fiscal-sustainability of social
protection
A policy dialogue proposal
IICPSD Global Partnership for Business-led Solutions to Social
Development Challenges
1-2 November 2012

2. UNDP and the Government of Turkey established IICPSD to
leverage private sector-born solutions to development challenges
+
• Support the development of inclusive and competitive markets and inclusive business
models
• Foster private sector engagement and advocacy for the achievement of the MDGs and
Objectives: other IADGs
• Become a center of excellence in terms of capacity development activities that harnesses
Trilateral Development Cooperation and South-South partnership
• Convene business and supporting actors to expand dialogue and create actionable
partnerships

3. Inclusive Market Development
IICPSD AND BUSINESS- LED SOCIAL
PROTECTION REFORM– LAUNCHING
THE DEBATE

4. Over the last three decades…
• Technological progress has accelerated
• Competition in the global marketplace has deepened
• Capitals have increased mobility
• Bargaining power of unions has progressively decreased
Consequently:
• Labor’s shares in National Income distribution have declined from
above 70% to as low as 50% (i.e. wages increased at a lower pace than
productivity)
• Human Development Index average growth rate has declined
• Inequality between capital owners and labor suppliers has deepened
• Aggregate demand too low to restore growth / Deflation
• Social distress is growing

5. Ireland
Netherlands
Canada
Sweden
Japan
Korea
Switzerland
France 1980-1990
Israel
Finland
Iceland
Belgium
Denmark
Spain
1991-2000
Hong Kong, China
Greece
Italy
Luxembourg
Austria
UK
UAE
2001-2010
Malta
Cyprus
Hungary
Bahrain
Portugal
Chile
Argentina
Latvia
OECD
Non-OECD
Arab States
East Asia and Pacific
Europe and Central Asia
Latin America & the Caribbean
South Asia
Human Development Index (HDI) - average annual growth rate (%)
Sub-Saharan Africa
Sub-Saharan Africa

6. 85.00
Labor's share in % of GDP in selected OECD countries 1990-2012
Labor’s share as % of GDP in OECD countries 1990-2012 1990
80.00
1991
1992
75.00 1993
1994
1995
70.00
1996
1997
65.00 1998
1999
2000
60.00
2001
2002
55.00 2003
2004
2005
50.00 2006
2007
2008
45.00
2009
2010
40.00 2011
2012

8. % of Labor Force
0
2
4
8
6
12
16
10
14
Australia
Austria
Belgium
Canada
Chile
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Italy
Japan
Korea
Luxembourg
Mexico
Decline in union density 2000-2007
Netherlands
New Zealand
Norway
Poland
Changes in bargaining power
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
OECD countries

9. Declining labor’s shares have…
• Reduced social security contributions and taxes
• Discouraged employment / deepened unemployment trap
and created labor market rigidity
• Replaced earning- with borrowing- based consumption
• Polarized growth and enlarged the Bottom of the Pyramid
(BOP)
• Reduced personal investment in long term gains (education,
health)
• Prompted the need for a revised social model

10. Public – Private Sector nexus in social protection
“ Social protection is the most subtle State intervention in the market”,
Mattei Dogan und Dominique Pelassi (1990) “How to Compare Nations”
• Public promises buy votes at the expense of future stability
• Young men will contribute more to the system than they will receive
back (Exp: in Estonia (335%), Hungary (296%) and Slovakia (183%))
• European social security implicit debt exceeds 30,000 Bill Euro
• Passive social protection- not enough to live, but more attractive
than work
• Governments borrow to offset declining tax revenues, labor suppliers
borrow for basic consumption, capital owners do not save enough
• Inclusive business models, a bridging solution from passive to active
social measures
• Businesses call for more flexible labor markets to grow

11. 40
Unemployment rates 1999-2011
Youth unemployment rate 2011 European Union (27 countries)
Euro area (16 countries)
Belgium
35
Bulgaria
Czech Republic
Denmark
Germany (including former GDR from 1991)
30 Estonia
Ireland
Greece
Spain
France
25
Italy
Cyprus
Latvia
Lithuania
20 Luxembourg
Hungary
Malta
Netherlands
Austria
15
Poland
Portugal
Romania
Slovenia
10 Slovakia
Finland
Sweden
United Kingdom
Croatia
5
Turkey
Norway
United States
Japan
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Youth

12. Minimum wage impact on youth unemployment

13. Interpretation of fixed effects regression results
22 countries 1995-2010
• 88% of variation in youth unemployment due to
variation in minimum wage
• 1% increase in minimum wage leads to 0.14% increase
in youth unemployment (i.e. every 10% increase in
minimum wage leads to 1.4% increase in youth
unemployment
Youth unemployed variation against minimum wage-Spain Youth unemployment versus Minimum wage ROMANIA Youth unemployed variation against minimum wage-Portugal
24
Regression Results Regression Results
25
40
• Robustness: Error in confidence >95% is 0.265
22
20
35
yun_romania
yun_spain
yun_portugal
30
20
15
25
18
10
20
16
5
500 550 600 650 700 750
Annual amount
0 50 100 150 5 10 15 20 25
MW Annual amount_Romania Annual amount Portugal

14. Unemployment Trap (tax in % from wage minus unemployment
benefit)

15. Perspective on the social dimension of the New Economy
• Social welfare paradigm of redistributive growth versus social investment still standing.
• Shifting pro-poor growth to inclusive growth received a slow institutional response due to gaps between
expectations and opportunities.
• Balancing Competition and Solidarity remains a common denominator of governance efforts worldwide
through social dialog and corporate social responsibility
• Current social models : responsible for fiscal imbalances, labor market rigidity, high long-term
unemployment, youth vulnerability and social exclusion , intergenerational discrepancies in terms of
returns to mandatory contributions
• Social investment unable to overcome age-driven productivity deficit, misallocation of skills (over 50% of
employed labor force performing jobs requiring different skills than those acquired through education –
ILO Global Wage Report 2010/11), leading to declining competitiveness
• Institutional cost-effectiveness analysis shows highly regulated social systems responsible for growing
informality
• Social agenda increasingly political, time-framed to government’s terms in disregard of economic trends
• Decreasing union’s power worldwide doesn’t reduce liabilities against promises made to current
generations, but offers opportunity for radical social reforms to restore sustainability and create pro-
cyclical mechanisms / optimal, growth restoring spending.
• Generous social schemes may encourage labor force migration and reduce capital relocation (capital
flows channeled towards less social costly markets)

16. Risks posed by declining labor’s shares
• Higher distribution of income towards capital owners as opposed to
labor may increase inequality
• Marginal propensity of consumption is higher as opposed to capital
owner’s inclination to saving. Consequently, declining shares will
lead to declining demand
• Slower pace of labor’s share increase will trigger a similar pace of
adjustment of earnings related social benefits
• Without addressing declining labor’s shares, monetary policies will
continue to lead to low interest rates due to the absence of
inflationist pressure, discouraging savings, encouraging debt-led
consumption, reducing capital inflows and maintaining the status –
quo
• Without reflecting declining labor’s shares into production functions
(Cobb-Douglas, CES), potential GDP (demand excess) will be
erroneously determined

17. The way forward
• Bring private sector in the public policy space for revised social
models
• Begin social reforms from below (new social protection
arrangements for new comers)
• More active social protection measures to reduce passiveness
• Replace social protection with business solutions for poverty
reduction
• Join IICPSD in a global debate on a new social model
• Use post 2015 Development Agenda consultations to refine social
protection reform strategy for sustainable human development and
growth
• Seek optimal parameters for labor, goods and capital markets to
grow together

18. Introduction
IICPSD – A PARTNERSHIP FOR
INCLUSIVE GROWTH BUILDING

19. IICPSD is part of a global network of UNDP thematic centers
The only one to focus on and involve private sector actors in development
Oslo Governance Centre Seoul Policy Centre for Global
(Oslo, Norway): Development (Seoul, South
“Provide policy guidance Korea):
and technical support to “Through promotion of global
the more than 130 UNDP learning, networking and
Country Offices around the dialogue, … will help to foster
world.” comparative experiences and
approaches of new development
partners.”
IICPSD
International Policy Centre
for Sustainable
Development(Brasilia,
Brasil): “Global forum for
policy dialogue… (Singapore) Public Service
equipping policymakers in Excellence
the developing world with The Drylands Development
the skills necessary to Centre (Nairobi, Kenya):
design, implement and “Carries out research and
evaluate policies and analysis of policies that affect
programmes towards the communities in the drylands, and
attainment of high provide advice and policy-
inclusive growth.” making support to decision-
Source: Centres’ websites
makers.”

20. ….Together with UNDP’s corporate partners
Businesses

21. … including its network of academic institutions…
7 in Eastern
Europe and the CIS
13 in donor
countries
11 in Asia
3 in MENA and the Pacific
9 in sub-
6 in Latin Saharan
America and Africa
the
Caribbean

22. IICPSD Business Process
IICPSD & partners
Multi-Stakeholder
Research and Training and Capacity
Partnership Platforms &
Development Development
Inclusive Value Chains
- Academic Partnerships
- Advisory Board (AFD, IFC, - Training Licensing in
- Open partnerships with
EBRD, WEF, JICA, CIDA, inclusive and responsible
governments and business
Danish Confederation, entrepreneurship
community
KOC University, TOBB and - Network of Experts
others)

23. IICPSD’s Partnership Ecosystem
UNDP COs ACADEMIA
IICPSD
I I
I UNDP RBEC
UNDP Turkey I
C RBx
C
P P
S S
D UNDP BERA/ Government D
BDP/BCPR of Turkey
IICPSD
GOVERNMENTS CORPORATE WORLD

24. The IICPSD engages in different types of partnership arrangements
Dr. Eduardo Aninat,
•Example: •Example: former Minister of
Implementation Advisory Board Finance, Chile, and
Joint project of IKEA Foundation
of development members former IMF Deputy
and UNDP India to empower 2.3
Managing Director
million poor women across 4 projects
States
Jane Nelson, Senior
Fellow and Director of
CSR Initiative, Harvard
Formal Advisors / Kennedy School, and
Joint project of WEF Business Alliance Against operational thought Director of Strategy,
IBLF
Chronic Hunger, UNDP Kenya and Ministry of partnerships leaders
Agriculture to spread irrigation solutions for
improved food security and youth
empowerment
Institutions Informal
engaged activity-
Sourav Mukherji, through based
Organization of a global expert
Associate Professor, individuals collaboration workshop on impact assessment
Indian Institute of
•Example: •Example: methodologies
Management,
Bangalore Research Thematic events
Fellows
Olayinka David-
West, lecturer, Organization of a LDC-IV side event
Lagos Business on Financial Inclusion through G2P
School Payments and Emergency Cash
Transfers

25. IICPSD Signature Alliances and Programmes
• Signature Alliances:
– Building Tomorrow’s Markets
– Energy Access for Productive Use (SE4ALL)
– Strengthen & Improve Sustainable Development Impact of Extractive Industry
– Economic Recovery and Employment Creation in Fragile States
– Better Than Cash (Financial Inclusion)
– Transport and Trade facilitation
• Signature Programmes:
Research, business model design, training and capacity development in:
– Inclusive Business / Value Chains
– Impact Investment
– Inclusive Procurement
– Low Cost Housing
– Green Commodity
– Financial Literacy and Inclusion
– Public-Private Partnership for Skills Development
– Transport and Trade Enhancement

26. IICPSD Goals
Along with business and government partners we:
• Enable economic environments in emerging markets to foster inclusive growth
employing untapped resources
• Design inclusive business models and build PPP platforms to offset lower yields
of the income pyramid
• Contribute to reduction in passive social protection costs by including poor
and disadvantaged in supply chains and productive work
• Build markets from below enhancing local content and balancing competition
and solidarity
• Broker private sector’s relationships with governments for reinforced
complementarities

27. IICPSD promotes development gap offsetting exchanges
including through SSC