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Policy debate on "Toward a New Social Contract"

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On January 10 at 12:00 PM, the World Bank will host a policy discussion on rethinking the social contract.

Globalization and rapid technological change have created opportunities but also intensified risks and insecurity. As shown by the recently published Toward a New Social Contract, societies need a welfare state now more than ever. Insecurity and risks are not shared equally: distributional tensions between groups (generations, workers, regions) are rising, and inequality of opportunity remains persistently high. The report shows that the current tax and transfer and markets regulation systems – the existing social contract – are not very effective in coping with these distributional tensions. Dissatisfaction with the status quo and the trust deficit towards the current social and political arrangements have resulted in voting polarization and rise of populism.

How would a renewed social contract look like? The report highlights three policy principles which, considered jointly, should inform a renewed social contract: 1) encourage universal provision of social assistance, social insurance, and basic quality services; 2) promote equal protection of all workers, regardless of their type of employment; and 3) improve the fairness of the tax system by supporting progressivity of a broad tax base that complements labor income taxation with the taxation of capital. The debate will focus on two of the policy principles proposed: labor market regulations and taxation.