Cost containment in complex social security systems: The limitations of targeting

Two aspects of the structure of existing social security systems limit the scope for containing costs by increasing targeting: the insurance principle, and the use of category membership to establish eligibility for benefits. The first aspect is antithetical to targeting because the most needy people are also the most likely to fail to establish an adequate contributions record. Some countries appear committed to maintaining the insurance principle because it is part of the fabric of the relationship between employers, employees and the State. The second aspect can be seen as an effective way of identifying groups whose income is likely to fall short of their needs. However, the primary function of category definition is to establish the legitimacy of claims—to examine why a shortfall of income in relation to needs has arisen, what personal responsibility the claimant bears, and what alternative mechanisms might be available. Several countries have revised category definitions in response to issues about the motivation and “deservingness” of claimants. We designate as “pseudo‐targeting” reforms of this type, which are not likely to result in the allocation of a higher share of social expenditure to the worst‐off. The scope for increasing targeting in existing systems is very restricted, reflecting the limitations of the concept. Non‐categorical social assistance is the archetypal targeted benefit, and it has serious limitations. The obstacles to targeting are integral to the legitimation of social security. If targeting reforms undermine this legitimating structure, they risk undermining the claim on resources exercised by the social security system.