Rethinking social security financing in the shadow of the digital age: A view from the global South

Abstract

Over the past several decades, there has been a significant expansion in social security coverage across the global South. Yet, access to social security remains highly uneven. In low- and lower-middle-income countries, fewer than one third of the population has effective access to social security benefits – and this proportion is even smaller when considering able-bodied adults of working age. Recent debates have largely centred on expanding tax-financed social assistance. Advocates of this approach argue that contributory schemes tied to employment are inherently exclusionary and increasingly obsolete in a digital age where labour is being displaced by machines. However, the digital age has also eroded the state’s capacity to raise the revenue necessary to finance social security programmes. As a result, most tax financed social security measures are inadequate to meet household’s reproductive needs. Without new sources of financing, social security responses will continue to be constrained by the fiscal space available. Drawing on case studies from across the global South, this paper examines innovative approaches to financing social security systems in the digital age. The first section traces the historical evolution of social security and the contested politics that underlie it. The second section proposes a normative framework for assessing financing options, based on the principles of progressivity, feasibility, sufficiency and sustainability. The third section considers the role of contributory social insurance, noting both their redistributive potential and challenges posed by widespread informality. The fourth section explores new strategies for resource mobilisation in the digital age, including global corporate tax regimes, financial transaction taxes, robot taxes, taxes on digital financial services and sovereign wealth funds. Drawing on the normative framework, the paper evaluates the redistributive potential and political implication of each approach. Ultimately, the paper argues that the financing of social security is not merely a technical matter but a political question of how to restructure redistribution in an increasingly precarious world of work.