Investments in health act as an economic stabilizer in times of crisis

Financial and economic crises often result in adjusted fiscal priorities, aimed at reducing public budget deficits. Also health protection is frequently a target in this context as observed during the recent global economic crisis: The wages of civil servants - among them health workers - were cut or capped in as many as 98 countries, including 75 developing countries. According to the World Social Protection Report, public expenditure was cut in 122 countries, among them 82 developing countries.

As a result, fiscal consolidation measures create a viscous cycle of unmet needs: While the need for health services increases, the number of health workers available to deliver such services decreases. Consequently, social and economic repercussions driving people into poverty and out of the workforce can be observed.

Instead, health protection can mitigate the economic and social effects in times of crises. The role of health protection and wider national social protection floors have been particularly highlighted as a human right that safeguards the economic productivity of a healthy workforce and serves as a social and economic stabilizer during financial crises. This can be attributed to the close links between health, the labour market and income generation.

Investments in health protection have been shown to improve the health of the population, and in combination with education and training help to reinforce formal-sector employability of individuals. In turn, higher levels of formal-sector employment increase the potential of governments to raise taxes and generate income for social protection, which may subsequently be used for financing higher levels of coverage and benefits for social protection, including health protection. This triggers what is known as a "virtuous cycle of development".

Cycle of development as a result of investments in health protection

Source: ILO, 2014 (ESS Paper)

 

In times of crises, changes made to health care systems or social protection schemes should be based on the overarching values of universality, access to quality care, equity and solidarity. The availability and affordability of quality health care needs to be ensured. Cuts to the health protection budget lead to adverse economic and social effects, as has been the case during past financial and economic crises.

Social protection enhances human capital and productivity and is therefore a critical policy for transformative national development. Health protection as a core part of national social protection floors is essential for recovery, inclusive development and social justice.