Transcript Document 7664353

Social Protection in PERs
PEAM course
April 2007, Washington DC
Margaret Grosh
What is Social Protection?
• Definition in Bank’s SP strategy paper
“SP as public interventions (i) to assist individuals,
households, and communities better manage risk, and (ii)
to provide support to the critically vulnerable”
• Contrasts with traditional definition, as a group of
public programs:
pensions, labor market interventions, safety nets, and
social care
• New definition conceptual useful and clarifies
trade-offs but causes some boundary issues in
PERs
Conceptual definition leads to issues with respect to
boundaries in treatment of SP in PERs
• Traditional SP vs other sectors: SP chapters usually stick to
traditional boundaries, social risk management framework can be used
throughout report and other sectoral analysis viewed through that lens.
• Public/private. A great deal of SRM is delivered through private
mechanism. A PER cannot cover all private spending in detail, but
must have a notion of it to draw appropriate conclusions about the
public part.
• What programs specifically? Fuzzy conceptual boundaries,
fragmentation in institutional responsibility and budgets
• PER vs fuller sector work: PER is selective and summary; fiscal
issues predominate, institutional and service delivery systems usually
the least treated
Summary of SP in PER
Guidance Note:
• Sector wide view
– Very brief synopsis of poverty, risk and vulnerability
– Overview of budget allocation, trends, processes*
• Individual program analysis
–
–
–
–
–
–
–
Adequacy
Equity*
Efficiency*
Contribution to risk management*
Delivery mechanisms
Sustainability
Impact
* Denotes issues selected for discussion in rest of presentation
Selected key issues:
Budget Allocations
Is spending on SP productive? significant ideological
controversy
– Traditional view:
• redistribution justified by moral philosophy;
• social protection as a cost, a luxury
• Both taxes and transfers discourage work effort
– New view:
• SP as an investment
• Disincentives in fact not so large as usually thought
PERs often don’t touch this issue frontally
SP/SRM is worth financing because:
Redistribution is valued
• by moral code,
• for immediate impact on poverty reduction and inequality. Half or more of
poverty is transient, SP can help reduce that substantially.
SP allows governments to make choices that support efficiency and growth
• Safety nets can facilitate macroeconomic and structural changes in the
economy, thereby allowing faster growth to occur, i.e. through more efficient
policy choices for trade, industry, labor, etc.
• Societies can use good social assistance programs to replace inefficient
redistributive elements in other programs.
• Safety nets can help temper inequality and reduce its costs.
SP allows households to make choices that support independent earnings
• Families that can't afford a bad year can't use the most effective earnings
strategies.
• SP helps people avoid coping strategies that perpetuate poverty.
• Safety nets can act as springboards to greater self-sufficiency.
Social Assistance and Social
Insurance as percent of GDP
Social Assistance and Social Insurance as a % of GDP
ALL REGIONS
Social Assistance
Social Insurance
14
12
10
8
6
4
2
0
Africa Sub-Saharan
East Asia Pacific
Eastern Europe and
Central Asia
Latin America and
Carribean
Middle East and
Northern Africa
South Asia
OECD 23
Notes: Data on 76 countries taken from WB Public expenditure reviews or other similar work. We used OECD-23 since OECD countries such as Poland and Mexico are
already accounted for in the regional averages. OECD data from the OECD Social Expenditure database (OECD, 2004).
Source: Blank, Grosh, Hakim and Weigand 2006, OECD SOCX
What is right assignment of
resources within sector?
• No single right answer
• Look at diagnostics on risk and
vulnerability
• Look at overall balance among programs
(including outside SP sector)
• Review individual programs’ performance
diagnostic process
Some very summary information from
poverty and risk and vulnerability
assessments
Then a look at what groups are protected
from which risks by which programs, look
for gaps and overlaps in program coverage
Balance among programs: Bulgaria
Benefit Program
Old Age Pensions
Unemployment Benefits
Disability Pensions
Child Allowances, insured parents
Sickness Benefits
Occassional and monthly means tested
benefits
Energy Subsidy
Social Pensions, means tested
Farmers pensions
Maternity and child benefits, uninsured
paraents
Child Care benefits, insued parents
Social Care Services and Institutions
Other programs
Andministrative Costs
Total, including administrative costs
Rank
Share in Total
Social Protection
Expenditures
(%)
55
5
5
3
3
1
2
3
4
5
Expenditures
(million lev)
2,205
212
220
106
102
6
7
8
9
90
75
73
60
2
2
2
1
10
11
12
13-34
47
45
39
148
607
4,026
1
1
1
4
15
100
Table 4. Federal Social Protection Programs in Mexico
Type of Program
Number of
Programs
Budget 2000
(million pesos)
1. Social Insurance
—Social Security
—Negative Income Tax
2. Sectoral Social Assistance
—Education
—Health
—Housing credit
—Other
3. Income Transfers and Subsidies
—Progresa (conditioned income T)
—Food Programs
4. Income Generation
—Temporary Employment
—Labor Training
—Rural Development
5. Social Infrastructure
4
3
1
29
18
5
2
4
7
1
6
54
1
2
51
5
170,539.0
158,687.0
11,760.0
15,861.9
6,622.8
4,740.7
3,779.6
718.8
14,765.2
9,635.0
5,130.2
15,531.8
3,997.7
1,683.9
9,850.2
2,250.1
6. Natural Disaster Protection
1
4,839.9
Percent of
total
Budget
76.1
70.8%
5.2%
7.1%
3.0%
2.1%
1.7%
0.3%
6.6%
4.3%
2.3%
6.9%
1.8%
0.7%
4.4%
1.0%
2.2%
Major Beneficiaries
- Formal sector employees
- Formal sector employees
- Poor, low educated
- Rural poor
- Public sector employees
- Various vulnerable groups
- Rural poor
- Poor
- Poor unemployed
- Low income
- Rural communities
-- Communities with low
access to basic infrastructure
-- Communities hit by natural
disasters
-- Poor communities
7. Other
5
202.8
.09%
TOTAL
105
223,990.7
100%
Source: SHCP. Category “Other” includes institutional strengthening, community development, etc.
Program analysis
• Will cover only selected issues in this
presentation, more covered in guidance note
Managing risks – a tension between
fiscal risks and risk protection
• PERs very concerned with fiscal risk
• Adequate SRM and SSN implies programs with
“entitlement” access
– Argentina’s Trabajar program vs Maharasthra’s Employment
Guarantee Scheme
– very rare in practice because of fiscal issue (and sometimes
administrative constraints)
– Even counter-cyclicity rare: in LAC for each 1% loss of GDP, the
amount of targeted spending per poor person declined by 2% (de
Ferranti, et al 2000) despite protection of budget share
Fiscal Sustainability in Pensions
Brazil: Critical Social Security Issues, June 2000.
Efficiency example 1 – unit cost analysis
Ethiopia PER: average cost per ton of food delivered in various safety net
programs (excluding administration and program implementation
costs):
International Price
International Shipping
:
Transport Djibouti-Regional center
Local distribution & transport:
Total cost:
$130 /mt.
$ 50
$ 65
$ 40
$285
Add in administration and even “free food” cost 3 birr/kg
Benchmark: open market price of 1.5-2 birr/kg
Implies that cash transfers could be more efficient. But would equivalent cash be
made available? Is food available on these markets?
Efficiency example 2 – inference from
basic design features
•
Ethiopia PER compares public works there with “best practice” and finds
shortcomings:
•
Value of works likely to be sub-optimal because:
– Non wage costs at most 20%, much lower than international experience for well
done, diverse portfolio of works
– Planning process on-off; separate from investment process
– Food typically arrives during rainy season when works can’t be done;
•
Transfer gains likely to be sub-optimal because:
– Can’t enforce work requirement (due to rainy season issue) so self-targeting
element weak (though this does reduce issue of foregone earnings)
– Transfer too low to affect material welfare, too irregular to affect risk planning
•
Solutions are institutional and being addressed since the PER
Equity analysis
• At first blush seems easy, but some real technical
issues, to be discussed in Hinz’s and Lundberg’s
complementary presentation within this session
• NB:.
– Equity is important in all sectors
– Judgments about SP sector are based on more than
equity.
– Methodology of equity analysis is within SP session
because as this course is designed, each sectoral session
includes a “public good” of methodology
Equity is still an issue – social assistance
• Coady, Grosh, Hoddinott 2004 review 122 targeted transfer
programs in 48 countries and find:
– Moderate results on average: Mean outcome
delivers one quarter more benefits to poor than would
universal transfer
– Very much better results in best programs: top ten
deliver two to four times more benefits to poor than
would universal transfer
– Significant targeting failures: one quarter of
“targeted” programs are regressive.
– So lots of progress yet to make
Equity is still an issue – pensions
Source: De Ferranti et al. 2004, Figure 9.9
Equity is still an issue – pensions
• Mexico results not unusual
• But is the comparison fair?
– If payments are deferred compensation (earnings) then
poverty targeted expenditures the wrong benchmark.
– But pensions commonly receive subsidies from general
revenue and so are a mix of transfer and deferred
compensation
– Even as compensation, there are still issues of equity
across generations, genders, income levels, work
histories because pensions plans almost always have
some internal redistribution
Summary of SP in PER
Guidance Note:
• Sector wide view
– Very brief synopsis of poverty, risk and vulnerability
– Overview of budget allocation, trends, processes*
• Individual program analysis
–
–
–
–
–
–
–
Adequacy
Equity*
Efficiency*
Contribution to risk management*
Delivery mechanisms
Sustainability
Impact
* Denotes issues selected for discussion in rest of presentation
Hallmarks of good analysis
• Numbers clearly defined and sources given.
• Uses benchmarks extensively (not just on expenditures but
on inputs, prices, outputs, ratios among these)
• Chooses benchmarks wisely (e.g. neighboring countries,
countries of similar income, others the country wants to emulate; or adjusts for
differences in demographics or poverty profile)
• Contrasts trends and point in time as applicable
• Conveys enough of the storyline and details to
persuade reader of recommendations
• Crafts together story from available sources and
literature outside of PER.