Economic case for cushioning Kenyans with social security

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This article first appeared in my column with the Business Daily on March 22, 2015

Often discussions around social security and welfare in Africa are grounded in the narrative of human rights: the right to health, food, employment, and so on.

Kenya should seriously consider putting more public funds into social security because of the economic benefits it can catalyse.

Social security can be loosely defined as the provision of a steady stream of income to replace lost wages due to unemployment, retirement, disability, or death.

In Kenya, social security is weak and only limited to free primary education, a presidential bursary scheme, retirement funds, insurance for work-related injuries, limited cash transfer programmes and the National Hospital Insurance Fund.

Implementation of these benefits, however, is mired in bureaucracy, corruption and poor implementation. The urgency of expanding social security protection is dire given that 46.7 per cent of Kenyans have difficulty getting food.

hunger(source: http://logbaby.com/files/logo/14596.jpg)

Let’s look at poverty, the ironies therein and how social security resolves the mess. Low income people have a high propensity to consume; meaning they want to buy goods and products but lack the means to do so.

Ironically, those with the highest hunger to consume are often unable to do so.

By providing income support, social security provides a means through which the poor can meet their basic needs.

This bolsters the economy because beneficiaries spend their monthly benefits, which in turn boosts the economies of counties in which the money is spent.

Remember that often those who receive social security benefits are unable to save. Kenya’s savings rate is 13 to 14 per cent of the gross domestic product.

gdp(source: http://www.tutor2u.net/blog/images/uploads/shutterstock_81874246.jpg)

Beneficiaries spend the money on goods and services, pumping it back into the economy. Clearly, this leads to the next point, the multiplier effect of social security

Income used to buy goods and services allows companies to register more profits and hire more employees who then spend their wages on more goods and services. This creates a virtuous cycle of increased spending and income for more Kenyans.

Thirdly, social security is a massive employer. In the US alone, for example, nine million jobs are linked to the social security system. The flip side of this is that, if done carelessly, it could add to the already onerous public wage bill.

However, this needn’t be the case as a creative reorganisation of the current public office positions could surely reallocate thousands of shillings to meet the needs of the most poor within a social security mandate.

Also, is something to be said for tapping into the skills of employable individuals, engaging them in meaningful work and lowering unemployment rates.

Further, Kenya arguably has a problem with labour oversupply giving rise to high unemployment, wages are often low, interest rates are high and therefore aggregate demand is muted. Social security provides an injection of capital that boosts aggregate demand.

sovereign-wealth-fund0Finally, social security strengthens savings and lowers dependency rates. This dependency dampens the ability of Kenyans to save and invest. Once relieved of the high levels of dependency, those earning an income can plan the use of their capital in a more productive manner.

Ms Were is a development economist. Email: anzetsew@gmail.com Twitter: @anzetse

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