Strengthening the social contract

Building a healthy, protected and productive workforce requires a strong social contract, based on social and political dialogue between the State and its citizens on their mutual roles and responsibilities. All segments of society, from individuals and business leaders to policymakers, must be part of this dialogue and commit to a shared vision that can help build the workforce that is needed. In this way, social contract can be underpinned by solidarity and trust. 

The social contract influences how public resources are generated and allocated and how policies are shaped to further the pursuit of common societal objectives. Governments must convince the public that increased government revenues and expenditures will be used effectively and efficiently. By investing in policy areas critical for the workforce today and in the future, governments can deepen solidarity and re-build trust, thereby accelerating the implementation of the 2030 Agenda for Sustainable Development.

A virtuous cycle for inclusive and sustainable development

The COVID-19 pandemic has created momentum for change and expectations are high. The pandemic has underscored the need to build the resilience and strengthen our capacity to overcome challenges such as climate change, population ageing and digitalization. It has sharpened the focus on what people expect of their governments. In several countries surveyed, two thirds of people expect their governments to provide a job for everyone who wants to work, ensure an adequate standard of living for the unemployed and older persons and to reduce income inequalities. In almost all countries, over 90 per cent of the population expect their governments to provide access to health care. When asked where governments should spend more money, health care and social protection were key demands.

High expectations on governments in the Asia-Pacific region

Source: ISSP Research Group (2016): International Social Survey Programme: Role of the Government Survey.

Progressive taxation lies at the heart of the relationship between the State and members of society. While indirect taxes, such as excise taxes, have a role to play by mitigating negative externalities, progressive taxation serves an essential function of redistribution. Intelligently designed, taxation can reduce extreme inequalities in wealth and income and raise sufficient revenue to support a sustainable transition to a greener economy. This requires broadening the tax base and taxing incomes, wealth and profit, and moving away from taxing consumption, which often hits the poorest disproportionately. In many countries throughout the region, the main share of taxes collected still comes from value-added taxes and other consumption taxes. 

In Asia and the Pacific, tax revenue has been relatively low. It stands at 21 per cent as a share of GDP on average but falls below 17 per cent in many countries in South-East Asia and South Asia, which is insufficient to tackle inequalities or provide a basic level of protection to all. Progressive taxation is a product of a strong social contract. For increasing compliance and amassing political support for such tax reform, the importance of trust and solidarity cannot be overstated.