Insights: Rethinking a new social welfare model for GCC countries

As GCC countries transition towards diversified economies with increasing private sector participation, they must rethink their welfare system.

A common challenge for GCC social welfare systems, is the lack of a coherent philosophy. Indeed, some social welfare programmes work towards different outcomes. There is fragmentation and inconsistency at the governance, programmatic, and operational levels.

At the programmatic level, policymakers may design rules in silos, with the result that one programme can offset the intended outcome of another. Sometimes governments introduce temporary programmes to address imminent social challenges without a long-term view of how these initiatives integrate into the broader social welfare system.

At the operational level, there are delivery inefficiencies because of the lack of unified beneficiary and household information, along with limited opportunities for knowledge-sharing.

GCC countries also tend to rely on social assistance programmes, which places pressure on the government budget, while underutilising social insurance.

Generally, social insurance is limited to basics such as old age and survivor pension, along with disability and work-injury insurance. There is insufficient use of unemployment insurance and expatriate saving schemes.

The absence of mature social insurance offerings, such as defined-contribution pensions, discourages people from remaining active in the labour market for longer. Instead, early drop-offs from the labour market and career interruptions are more common than in comparable economies, further increasing the pressure on social assistance.

Another issue is that many social welfare programmes in the GCC provide economic relief to low-income segments without encouraging economic activity.

Some GCC countries are starting to emphasise activation and are helping people into work. However, they can do more to improve labour market participation, which promotes their ambitious economic development and diversification goals.

Governments have not sufficiently sought effective social policy instruments that promote activation because of the popular belief that welfare is an entitlement rather than an earned benefit. This entrenched perception prompts governments to avoid negative perceptions by directly, or indirectly, providing hand-outs that create dependencies.

Three imperatives to reshape the social welfare system

GCC countries can reshape their welfare system by following three imperatives. The first imperative is to strengthen coherence among social protection programmes.

Building a new model means systemic adjustments in program design and funding. Social welfare programmes should primarily aim to deliver pre-defined national economic and human capital policy objectives. GCC governments should proactively design beneficiary-centered programmes that are integrated as one portfolio that provide the maximum, coordinated response – thereby ensuring the best use of resources. That demands a new architecture for programme administration ensuring proper coordination, oversight, and data-gathering.

The second imperative is to expand the social insurance offering. GCC governments should establish a clear link between the labour market and social policy. They can reform existing social insurance programs and institute new ones to maximise workforce coverage and achieve labour market policy objectives. That would also allow governments to target resources on the neediest cases and those unable actively to participate in the labor market.

The third imperative is to focus on the economic activation and behavioural change of social assistance beneficiaries.

GCC countries can incorporate mechanisms into social programmes that activate and motivate people who can work to participate in the economy. Such mechanisms provide eligible recipients with the necessary skills training, education, and incentives to join the workforce.

Governments can adopt active case management to engage relevant multi-sectoral agencies and beneficiaries in a coordinated manner. They also can integrate beneficiary data management to make it easier to assess eligibility, tailor services, and monitor impact.

Promoting activation also requires behavioural interventions to change public perceptions. It is critical to address any sense of entitlement, which has grown over time with over-reliance on generous government-financed assistance. Governments must communicate these changes through effective public engagement.

Governments can use behavioural approaches and tools to communicate the need for a new social welfare model to the public.

People are understandably wary of reforms that could take away their benefits, particularly when they are locked into long-standing programmes.

GCC countries are going through significant economic changes, with new sectors emerging and vast investments in infrastructure and cities.

The development of a modern, internally consistent, holistic social welfare model can support economic transformation, and a new era of prosperity, improve labour market efficiency and provide people with a stake in the system.

Sami Zaki is a partner; Rasha Salem is a principal; and Efe Savas is a manager with Strategy& Middle East.