Economic Security: Meaning, Importance and Types

Economic security includes basic social security, which is defined as access to basic needs infrastructure in the areas of health, education, housing, information, and social protection, as well as work-related security.

 

Seven aspects of workplace security are identified by economic security. While all seven dimensions are important, two in particular, such as income and voice representation, are critical for basic security.

 

Basic security entails limiting the impact of daily uncertainties and risks while also providing a social environment. People can belong to a variety of communities, and they have a fair chance to pursue their goals. Decent work, as defined by the ILO, allows people to work and develop their skills.

 

Also Read | AI in workplace safety

 

 

What is Economic security?

 

Economic security, according to the ICRC, is defined as an individual's, household's, or community's ability to meet their basic needs in a sustainable and dignified manner. This varies depending on an individual's physical requirements, the surrounding environment, and cultural norms. 

 

Essential needs include food, basic shelter, clothing, and hygiene, as well as related expenditure; essential assets required to earn a living, as well as health care and education costs, also qualify.

 

"Economic security" can be defined as the ability of people to meet their basic needs on a regular basis. When there aren't enough resources to pay for food, housing, medical care, and other necessities, "economic insecurity" tends to happen.

 

Most governments attempt to maintain economic security by establishing social safety nets that provide citizens with minimal protections. However, there are often differences in how people experience economic insecurity within a population.

 

Also Read | Maslow’s Hierarchy of Needs

 

Why is Economic Security Important?

 

Economic stability is an important factor in happiness. When the economy is stable and predictable, people can plan and invest for their own and their children's futures. They foster trust in others and institutions while promoting innovation and strengthening social ties. 

 

Even in children, worry and anxiety about the future have a negative impact on one's health, ranging from mental health problems to heart disease and an increased risk of obesity. Popular discontent is fueled by widespread economic insecurity, which jeopardizes political stability.

 

Individuals, households, and communities become impoverished and lose their dignity and worth as a result of a lack of economic security. Economic security is the polar opposite of income and asset poverty. According to the World Bank, 700 million people lived on less than $1.90 per day in 2015.

 

1. Increasing Risks

 

Fears of economic insecurity are becoming more prevalent. These long-term trends, which have sparked hopes but also fears, are exacerbated by new threats, such as those posed by climate change and the COVID-19 pandemic. Climate change is one of these rapid transformations that is threatening lives and livelihoods all over the world.

 

The COVID-19 crisis and insecurity are linked in two ways: while the crisis has a clear impact on insecurity, the economic insecurity that preceded the crisis has amplified its effects. The crisis has brought to light massive disparities in virus exposure and the ability to work from home, access to adequate health care and e-learning, and social protection coverage.

 

Also Read | AI in Climate Change

 

2. An accurate measurement of economic security is required

 

Existing economic insecurity measures capture downward economic shocks as well as the buffers available to cushion them. In developed countries with data, the level of income volatility and, by extension, the risk of downward economic shocks varies by country.

 

When income and personal financial buffers are combined, it is revealed that while only 12% of the population in OECD countries lives in relative poverty, more than a third (36%) of people would fall into poverty if they were to forego just three months of income.

 

Measuring and analyzing economic insecurity is critical in developing countries, where social protection systems and other risk-pooling mechanisms are weaker and informal unemployment is higher.

 

While economic security is correlated with national GDP per capita, these studies show that it is not lowest in the poorest countries and highest in the wealthiest. Both developed and developing countries share the role of health shocks and medical spending as drivers of economic loss and impoverishment. 

 

3. Placing economic security at the core of a new global agreement

 

The foundations of a renewed social contract within countries should be quality public services that promote equal opportunity, universal social protection that promotes income security, and institutions that are fit for today's world of work.

 

Globally, rising insecurity and the resulting mistrust are major roadblocks to achieving the Sustainable Development Goals. The desire for economic security is a powerful, universal sentiment that most people can relate to in both developed and developing countries.

 

Economic security must be recognized as a human right, a universal concern, and thus a global responsibility in any new global agreement. A global agreement based on promoting economic security is likely to gain widespread support and can aid in the formation of coalitions in support of the 2030 Agenda and SDGs.

 

4. Policies not keeping up

 

People living in poverty are more vulnerable to adverse events, ranging from illness to the growing effects of systemic shocks like climate change and pandemics. The growing diversity of working arrangements is putting pressure on national labor market institutions and regulations.

 

They have little job security and limited access to social protection, just like workers in more traditional categories of temporary or other non-standard forms of contract, as well as those in the informal economy. 

 

Collective bargaining is also being hampered by dwindling trade union membership and, in many cases, traditional unions' failure to represent workers on non-standard contracts or in informal employment. 

 

In many countries, rising health care, education, and housing costs have become a major source of economic insecurity, with long-term consequences for future generations.

 

Also Read | Income Distribution

 

 

Types of Economic Security

 

We’ve listed 6 Types of Economic Security below : 

 

1. Labour market security

 

When there are numerous opportunities for adequate income-earning activities, the labor market becomes secure. It has a structural component in that it represents the different types and quantities of opportunities available. 

 

It also has a cognitive component because it includes expectations that opportunities are or will be adequate. Full-employment macroeconomic policies, the establishment of employment agencies, and other placement services have all been implemented to improve this form of security.

 

2. Income security

 

Income security refers to having enough actual, perceived, and expected income, which can be earned or obtained through social security and other benefits. 

 

It includes the level of income (both absolute and relative to needs), the assurance of receipt, and the expectation of current and future income, both during and after working life and after disability retirement. 

 

Traditional income security protection mechanisms include minimum wage machinery, wage indexation, comprehensive social security, and progressive taxation.

 

3. Skill reproduction security

 

Skill reproduction security refers to workers' access to basic education and vocational training in order to develop capacities and acquire the qualifications required for socially and economically valuable occupations. 

 

Skills reproduction security can be improved by policies that promote widespread opportunities to gain and retain skills through education, apprenticeships, and on-the-job training.

 

4. Employment security

 

Employment security refers to safeguarding against the loss of a source of income. In organizations and countries that provide strong protection against unfair or arbitrary dismissal and allow workers to redress unfair dismissal, wage and salary workers have employment security. 

 

It refers to self-employed people's protection against the loss of independent work and/or business failure. Protection against arbitrary dismissal, hiring and firing regulations, and the imposition of penalties on employers who break the rules have all been used to improve job security.

 

Also Read | Types of Economic Systems

 

5. Job security

 

Job security refers to the existence of niches in organizations and labor markets that provide employees with some control over the content of their jobs as well as opportunities to advance their careers. 

 

Rather than referring to a worker's ability to continue working for a company, job security refers to a worker's ability to pursue a line of work that matches his or her interests, training, and skills.  

 

Barriers to skill dilution have been used as protection mechanisms, such as craft boundaries, job qualifications, restrictive practices, craft unions, and so on.

 

6. Representation security

 

Individual and collective representation are both covered by representation security. Individual representation refers to both legalized individual rights and individuals' access to institutions. 

 

Collective representation is the right of any individual or group to be represented by a body that can bargain on their behalf and is sufficiently large, independent, and competent to do so. 

 

Independent trade unions with the right to collectively bargain over wages, benefits, and working conditions, as well as monitor and strike, have been common forms of granting representation security.

 

Also Read | Security Analytics

 

Social Security benefits, pensions and savings, earnings and employment, and health insurance coverage all play a role in the financial security of people over the age of 50. People cannot plan for their own or their children's futures without basic economic security. 

 

People's quality of life will suffer as a result of a lack of security, which will reduce innovation and trust in institutions. Financial worries and feelings of insecurity have a variety of negative consequences, including extending the time victims of domestic abuse stay with their abuser.