Transcript Bank Presentation Template - Regional Cooperation Council

Poverty and Social Assistance
Priorities in the Western Balkans
What Kind of Social Agenda for the
Western Balkans?
Sarajevo, May 25-26, 2011
Boryana Gotcheva
The World Bank
1
Objectives of the presentation and outline
Poverty trends before and after the crisis
Renewed role of social assistance
Performance (targeting accuracy and coverage) of
social assistance
The reform of social assistance for more effective
poverty reduction
2
Positive developments before the crisis
Headway on poverty
reduction
High growth
12
10
Albania
2003
50
2008
45
8
Bosnia and
Herzegovina
40
Kosovo
35
Percent
6
Macedonia, FYR
4
Montenegro
2
Serbia
30
25
20
15
10
ECA
0
2002 2003 2004 2005 2006 2007 2008
-2
-4
3
Euro area
5
0
Overall ($5 a day)
Urban ($5 a day)
Headcount
Rural ($5 a day)
But the crisis stalled progress
More people at risk of
poverty
6.0
-2.0
2008
2009
2010
-6.0
2011
Percent
2.0
31.0
8.0
30.0
7.0
29.0
6.0
28.0
5.0
27.0
4.0
26.0
3.0
25.0
2.0
24.0
1.0
23.0
Albania
Bosnia and Herzegovina
Kosovo
Macedonia, FYR
Montenegro
Serbia
4
0.0
2008
2009
2010
Headcount $5 a day, crisis scenario (Millions)
Headcount $2.5 a day, crisis scenario (Millions)
Headcount, $5 a day (%) Base scenario
Headcount, $5 a day (%) Crisis scenario
Millions
The crisis hit
10.0
In the aftermath of the crisis, the countries
have to cope with higher poverty risks
… in a worsening fiscal environment, and
unresolved structural problems, where
 Labor force participation rates remain some of the
lowest in Eastern Europe …
 Activation as a policy priority
 … while households continue to rely heavily on
migration and foreign labor markets
 Agriculture’s contribution to growth is decreasing while
poverty remains disproportionally rural
 Turning agriculture into an engine of growth
 Sustaining poverty reduction in rural areas
 Some groups such as the Roma are at distinct
disadvantage (‘pockets of poverty’)
 Forwarding the poverty reduction and social inclusion agenda
5
… and need to prevent and offset crisis-inflicted
negative changes in behavior of households




6
With long-term negative impact on the quality of human
capital, such as:
Cutting on health care expenditures: preventive medical
examinations, prescription drugs; dental medicine
Cutting on certain education expenditures: extra-curricular
activities and lessons, book and magazine subscriptions
Purchase of cheaper but lower quality food
Cutting on expenditures for cultural and recreational activities
(Summary findings from crisis surveys in the Western Balkan region, 2009-2010)
The crisis evoked a renewed role for social
assistance in poverty reduction
PROMOTE
PREVENT
from falling into
chronic and multigenerational poverty
(risk mitigation)
human development
(invest in human capital)
for long-term poverty
alleviation
PROTECT
* alleviation of longterm chronic poverty
* helping the poor in
coping with shocks
and transient poverty
7
COVERAGE
TARGETING
GENEROSITY
FLEXIBILITY
A comprehensive mix of social assistance
programs already existed when the crisis hit
Disability
benefits
Last Resort Social Assistance
War Veteran
Benefits
8
Family and Child
Allowances
However, specific program design and
implementation characteristics limited the
capacity of social assistance to reduce poverty
Low and, more importantly, inequitable spending on
different types of social assistance programs
Mixed performance in protecting the poor
Low flexibility for immediate crisis response
Implementation drawbacks
Built-in work disincentives in LRSA
9
Low and contracting social assistance
spending envelope
• Considerable and
increasing spending
on pensions
• Only Croatia and
Serbia managed to
increase spending
on social assistance
as share of GDP
• Overall, social
assistance spending
remains lower than
the ECA average of
1.7% of GDP
• BiH and Croatia
are exceptions, with
high SA spending as
share of GDP, mostly
due to the
proliferation of war
veteran related
benefits
Tajikistan 09
Kosovo 09
Georgia 08
Azerbaijan 09
Armenia 09
Kyrgyz Republic 09
Turkey 08
Albania 09
Latvia 09
Russia 08
Moldova 08
FYR Macedonia 09
Belarus 09
Lithuania 08
*Estonia 08
Bulgaria 08
*Slovakia 08
BiH 07
Montenegro 09
Romania 09
Croatia 09
*Slovenia 08
*Poland 08
Serbia 09
*Hungary 08
Ukraine 09
Social Assistance
Labor Market
Social Insurance
0%
10
5%
10%
15%
20%
25%
… and inequitable, with growing share of
spending on categorical programs
Last-Resort Social Assistance
Family and Child Allowances
Disability Benefits
War Veteran Benefits
Social Pension
Other
4.0%
3.0%
2.0%
1.0%
Western Balkans
11
Other ECA
Tajikistan 09
Latvia 09
Kyrgyz Republic 09
Georgia 08
Bulgaria 08
Azerbaijan 09
Moldova 08
Armenia 09
Lithuania 08
Belarus 09
Ukraine 09
Russia 08
Romania 09
Croatia 09
FYR Macedonia 09
Montenegro 09
Albania 09
Kosovo 09
Serbia 09
BiH 08
0.0%
Mixed performance of social assistance
12
Impressive
targeting
• The percent of benefits going to the poorest
consumption quintile is high; targeting
accuracy differs a lot across programs and
countries
Low coverage
• The percent of poorest quintile who receive
benefits, is low
Generosity:
moderate overall, but low for
LRSA
• Contribution to consumption: average transfer
amount as a fraction of average consumption
for beneficiary households in poorest quintile
• Unit transfers as a fraction of minimum wage
Standardized methodology for performance
measurement indicators
Welfare indicator
Harmonized consumption aggregate1
Individuals ranked on
Per capita consumption before cash transfer2
ADePT SP3
Standardized software to compute indicators
1. Developed by ECSPE (ECA Databank) – a standard basket of goods and services across all countries, and all
expenses are similarly deflated across countries and expressed in per capita terms
2. Individuals are sorted into quintiles for each transfer using "per capita consumption - per capita transfer“
3. Developed by DECRG
13
14
BiH 2007
Moldova 2009
Latvia 2008
Hungary 2004
FYR Macedonia 2006
Bulgaria 2007
Poland 2008
Ukraine 2008
Romania 2009
Georgia 2007
Armenia 2008
Croatia 2008
Serbia 2007
Montenegro 2009
Kosovo 2006/07
Albania 2008
Impressive targeting accuracy, masking
regressive veteran benefits
Overall Social Assistance
Percent of Total Benefits Received by the Poorest Quintile
90
80
70
60
50
40
30
20
10
0
15
Montenegro 2009
BiH 2007
Albania 2008
Georgia 2007
FYR Macedonia 2006
Serbia 2007
Kosovo 2006/07
Armenia 2008
Moldova 2009
Croatia 2008
Ukraine 2008
Poland 2008
Bulgaria 2007
Latvia 2008
Romania 2009
Hungary 2004
Low coverage of the poor, and high rate of
exclusion of deserving poor
Overall Social Assistance
Coverage of the Poorest Quintile (%)
100
90
80
70
60
50
40
30
20
10
0
Coverage is especially low for the last
resort social assistance programs
• As low as 5% of
Q1 in BiH and 7%
in Serbia
• Only in Kosovo
is close to 40% of
Q1
• Due to rigorous
means test, and
• Low income
thresholds, and
• Presence of
binary filters that
overrule the
means test and
increase
exclusion error
Albania’s Ndihma Ekonomike Program
Exclusion errors due to filters. Out of Individuals in Bottom Decile (= 122,172 individuals)
Not eligible for NE
Yes
81.8%
1. Does anyone in the family work?
No
18.2%
2. Does anyone in the family receive old-age pension?
Yes
25.9%
No
74.1%
3. Does family receive remittance from abroad?
Yes
14.9%
No
85.1%
No
96.3%
4. Does family own a car?
Yes
3.7%
Yes
0.8%
Yes
0.4%
5. Does family have rental income?
No
99.2%
6. Does anyone in the family receive Survivor Pension?
No
99.6%
Percentage of bottom decile eligible for NE after applying all filters is 7.9%
16
Implementation characteristics also limit
coverage
Home visits before
determining
eligibility with high
discretionary power,
not standardized
Rigorous
enforcement of
eligibility rules
17
Limited outreach
efforts to identify
deserving poor
High cost of
application; no
unified registries
Key
implementation
characteristics
Leakage due to weak
internal audit, errors
and fraud detection
arrangements
Work disincentives in the design of LRSA
 Registration as unemployed is required when applying for last




18
resort social assistance
Additionally earned incomes are 100% deducted from the due
benefit
When making a transition from SA to work, much of the
incremental income from work is taxed away (work does not
pay, as per OECD tax-benefit model calculations)
Absence of institutional structures for joint support for income
smoothing (passive cash transfers) and job brokerage services
(‘one-stop’ shops)
No incentives for social workers and job brokers to deal with
‘hard-to-serve’ cases
Limited supply of active labor market programs specifically
designed for last resort social assistance beneficiaries
Reform priorities: second generation
reforms in social assistance
“Second generation” reforms of safety nets: promoting
links of cash transfers to
 Jobs / activation agenda
 Social services and human capital development
Increase coverage
 Focus on the errors of exclusion rather on the errors of inclusion
 Reduce spending on rights-based programs and increase
spending on means-tested ones with good targeting accuracy
 Consolidate small and duplicative programs
 Introduce smart design features that do not exclude working poor
from eligibility for social assistance
19
Reform priorities: second generation
reforms in social assistance
Target better, strengthen and standardize eligibility criteria
 Eliminate the use of Yes/No filters in LRSA program designs
 Introduce single, simple scoring formula, with objective weights (AL, BiH)
Design taxation and benefit rules in a way that encourages the
transition from social assistance to work – ‘make work pay’
 Lower taxes on low earned incomes
 Gradual benefit reduction as recipients’ earned income increases
 Introduce earned income disregards (up to a certain level)
 Increase the ‘exit threshold’ for means tested programs, compared to
the entry thresholds
Track / measure targeting accuracy and coverage
 Regular HBS, LSMS, SILC modules
 Improved questionnaires
 MIS, unified registries
20
The World Bank social protection engagement in
the Western Balkan countries
 Budget support in coordination with the EU and IMF SBAs
 Investment lending
 Analytical and advisory services at regional and national level
 Poverty analyses
 Poverty and social impact assessments
 Public expenditure reviews
 Pension actuarial analyses
 Social assistance
smart safety nets, activation, breaking the
welfare traps and dependence on social transfers
 Numerous cross sectoral analyses on labor markets, skills and
competitiveness
21
The World Bank social protection engagement in
the Western Balkan countries
Country /
instrument
Policy dialogue and
related lending
Investment lending
Albania
X
X
X
Bosnia and
Herzegovina
X
X
X
X
X
Croatia
FYR Macedonia
X
X
X
Kosovo
X
X
X
Montenegro
Serbia
22
Analytical and
advisory services
X
X
X
X