Introduction
Social policies provide various ways societies react to global poverty, globalization, migration, and social, economic, and demographic changes (World Bank, 2022). Social protection policies in Bhutan aim at reducing vulnerability and poverty by limiting exposure by the people to risk, promoting proficient labor markets, and increasing the people’s ability to protect themselves from loss of income, interruptions, and risk factors. According to Gentilini et al. (2022), sustainable social policies should target the extremely poor and other categories as they are prone to economic shocks. Bhutan’s social protection policies face sustainability challenges instigated by failing to cover the non-poor informal sector. The number of people covered or should be covered by the policies exceeds the available support resources instigating unsustainability (Yuda et al., 2022). Lack of inclusion leaves the sector at risk of economic shocks resulting in business closure or lay-offs, thus, further increasing the number of people requiring support. The report evaluates the sustainability social protection policy challenge in Bhutan instigated by the policies’ failure to cover the non-poor informal sector.
A Summary of the social policy challenge
Bhutan’s social protection policies aim to safeguard minimum social security during covariant and idiosyncratic shocks (Rogers, 2021). Regardless, the policies emphasize offering social security to the lower class and impoverished society members. The policies mainly focus on offering basic needs, life insurance, and semi-contributory housing plans to vulnerable society challenges (Yuda et al., 2022). Cushioning vulnerable society members is fundamental as most members lack the resources to acquire basic needs and healthcare. Thus, it is fundamental for social protection policies to make an impact on vulnerable society members.
Nevertheless, the policies should incorporate measures to cushion the non-poor informal sector from potential economic shocks that may adversely impact their business. According to Rogers (2021), the non-poor informal sector covers 75% of the total workforce in Bhutan. Therefore, the potential collapse of a large composition in the sector induced by economic shocks would instigate a loss of livelihood as the industry players would close or lay off employees (Mumtaz & Whiteford, 2021). The reflections manifest the need to incorporate financial and insurance cushions covering the sector on social policies.
Cushioning the sector would assist in preventing low-income earners from becoming extremely poor due to loss of livelihood by losing their source of income. As a result, covering the sector makes the social protection policies sustainable on two fronts. The inclusion prevents low-income earners from depending on the government for basic needs and healthcare by keeping their jobs or businesses (Mumtaz & Whiteford, 2021). In addition, the inclusion would attract more investors in the informal sector by limiting the possibility of collapse, thus, creating employment opportunities for some extremely poor depending on the protection programs (Mumtaz, 2022). As a result, the government would spend less on social protection policies covering vulnerable society members.
Lack of sustainability in the social protection policies poses the risk of limited economic growth in the country. Investors may hesitate to make considerable investments in the informal sector, especially with the current economic challenges inducing inflation (Mumtaz, 2022). Investors need a secure environment to operate to limit potential losses that would emanate from potential economic shocks. The experienced shocks deter economic growth in the country as the industry players play a fundamental role in the country’s economy. According to Walsham et al. (2019), the government possibly overlooks the sector regarding social protection policies due to the failure to accrue direct taxes from the sector. However, the sector is vital as it comprises many employees who pay taxes in purchasing commodities and other activities. Failure to secure the informal sector would result in decreased economic activities and growth as shocks like economic turndowns and natural disasters would limit the industry players’ ability to reinvest in their businesses (Yuda et al., 2021). Thus, the workers in the sector would join the number of people depending on social protection programs. As a result, the number of people depending on the social protection initiatives would exceed the available support resources resulting in unsustainability in the social protection initiatives.
Furthermore, the failure of the sector’s inclusion instigates the challenge of increased inequality among society members. One of the fundamental objectives of social protection policies in Bhutan entails reducing societal inequality levels. The policies target reducing inequality by ensuring that every society member has the availability of basic needs and quality healthcare services (Walsham et al., 2019). Failure to cushion the non-poor informal sector from economic shocks holds back the industry players and instigates a risk of losing their livelihood. Potential closure or lay-offs would increase the number of unemployed individuals and threaten their ability to have basic needs and quality healthcare services (Mumtaz & Whiteford, 2021). The trends would instigate increased poverty and social inclusion. Therefore, the social protection policies would have failed the sustainability test by failing to limit increased inequality in society.
Lastly, the social protection policies lack sustainability as they risk increasing gender inequality and reducing social cohesion. According to Rogers (2021), most non-poor informal sector players encompass females who face obstacles in getting opportunities in the formal sector for various reasons. As a result, the risk of losing their jobs or businesses would enhance gender inequality by males earning while females lack income opportunities (Mumtaz, 2022). Besides, the risk of the non-poor informal sector losing their incomes would limit participation in social activities instigating limited social cohesion (Yuda et al., 2022). Therefore, Bhutan’s social protection policies need to incorporate the non-poor informal sector to achieve its objectives sustainably.
Available policy options
The policy options to address the sustainability issue encompass amending the social protection policies to incorporate cushions to the non-poor informal sector. One of the potential cushions entails tax credits and subsidies to the non-poor informal sector. Tax credits, for instance, the earned income tax credit, would aid the sector in reducing tax burdens (Zastrow & Hessenauer, 2022). In a struggling economy, reducing the tax burden massively enhances the sector’s survival chances by enabling the industry players to afford business expenses such as rent to limit them from winding up their operations (Baptista et al., 2021). Subsidies assist in reducing the service or product provision associated costs to enable the industry players to continue with their operations with minimal disruptions.
In addition, the provision of regulatory relief would assist in cushioning the non-poor informal sector. Bhutan’s government should provide the reliefs to aid the sector to operate with minimal disruptions. Potential interventions include streamlining the licensing requirements and lessening the paperwork regulatory burden (Baptista et al., 2021). The issues impact the operations in the sector; thus, solving them would aid in limiting the sustainability challenges in the country’s social protection policies.
Furthermore, the social protection policies should incorporate practical training and skills development initiatives to enable industry players to navigate the challenging economic state impacting their operations (Ortiz, 2018). Government-sponsored training would assist the industry players in learning to be more competitive and productive to realize growth (Leisering, 2021). As a result, the sector would absorb some of the vulnerable community members, resulting in fewer people covered in the social protection policies, thus enhancing the policies’ sustainability.
The social protection policies should also cover the sector through a government partnership with the private sector to facilitate access to tax. Arrangements between the government and the private sector would ensure that the informal workers access low-interest and timely financial access to cushion their businesses from economic shocks (Zastrow & Hessenauer, 2022). The finances assist in covering short-term expenses, growing operations, and making additional investments in their businesses. According to Yuda et al. (2021), most industry players lack easily accessible financial sources, thus, impacting their operations should emergencies require quick financial backing.
Lastly, the government may intervene and offer social protection support to the people in the non-poor informal sector. The benefits may include health insurances and pensions to limit them from covering the healthcare expenditure of their workers from personal contributions (Leisering, 2021). The move would encourage the industry players to expand their operations to recruit more workforce as the government reduces the costs incurred in medical emergencies involving the workers. The outlined policy interventions would assist in enhancing the sustainability of Bhutan’s social protection policies by expanding the sector and giving vulnerable employment opportunities (Ortiz, 2018). As a result, the government would not need to offer social protection support for basic needs as the vulnerable society members get an opportunity to get a source of livelihood.
Recommendations and conclusion
The report recommends policy amendments to enhance the sustainability of Bhutan’s social protection policies. The government should amend the policies to include coverage for the non-poor informal sector. The coverage should incorporate two fronts; government partnership with the private sector to facilitate low-interest and convenient financial access and provision of effective training and skills development initiatives. According to Mumtaz (2022), the government can enhance its chances of comprehensively covering the non-poor informal sector through cooperation with private investors. Studies indicate that the Chinese government offers financial cushions in many sectors by partnering with industry players from the financial realm (Huang & Han, 2022). The government acts like a guarantor and would pay the money if the sector industry players default on the loan payment.
According to Huang and Han (2022), the Chinese government’s decision to cushion its non-poor financial sector, especially after the covid-19 hiatus, decreased the basic social protection needs in society. In addition, the United States government manages the number of vulnerable community members by enabling the non-poor informal sector’s industry players to recover from economic shocks through financial backing (Mumtaz, 2022). The government notes the role played by the sector in reducing the number of vulnerable people through job creation. Thus, through partnerships with the private sector, the government seeks to assist the industry players in maintaining their operations or expanding to absorb more people through increased employment opportunities. (Visser et al., 2018) The trends continue to garner momentum globally as most governments realize the importance of cushioning the sector in reducing the basic needs of social protection interventions.
The second policy change entails creating an effective organ to facilitate training and skills development for the sector’s players. Training and skills development would assist in making the sector more competitive and productive (Mumtaz, 2022). Countries with the most significant informal economy sizes emphasize training and skills development to assist and keep the sector growing. For instance, with an informal economy of 43.1% of the gross domestic product, India consists of various organs providing training in the sector (Yuda et al., 2021). A study evaluating the informal sector manifests that the government reduces the unemployment rate and vulnerability in partnership with employers in the sector (De Hoop et al., 2022). The training centers on ways to limit the sector from economic shocks and innovative ways to enhance the sector’s competitiveness.
In conclusion, the study demonstrates that failure to incorporate the non-poor informal sector in Bhutan’s social protection policies instigates unsustainability in the policies. The lack of inclusion risks making the demand for social protection interventions very high than the available support, thus, making the policies fail to sustain their objectives. In addition, the lack of inclusion instigates potential business closures or lay-offs induced by economic shocks in the sector. As a result, the government should amend the policies to ensure the sector’s inclusion to enhance the policies’ sustainability. The report recommends the government partner with players in the private financial realm to facilitate low-interest and convenient financial support to the sector’s players. Besides, the government should initiate a practical training and skills development initiative to make the sector more competitive and productive.
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