Transcript Social Protection

Social Protection
Presented to:
Public Expenditure
Analysis and Manage
Core Course
The World Bank
March 21-24, 2005
Presented by:
Margaret Ellen Grosh
HDNSP
Social Protection
PEAM course
March 2005, Washington DC
Margaret Grosh
What is Social Protection?
• New 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
Boundary Issues
• Traditional SP vs other sectors: SP chapters sticks to traditional
boundaries, social risk management framework can be used throughout
report and other sectoral analysis viewed through that lens.
• Public/private. 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
Selected key issues:
What level of spending is appropriate?
• Significant ideological controversy
– Traditional view: redistribution justified by
moral philosophy; social protection as a cost, a
luxury
– New view as typified in social risk management
framework: social protection as an investment
in income generation, human capital formation
and growth
SP/SRM as investment
• Half or more of poverty is transient, SP can help reduce that
substantially.
• SP helps people avoid coping strategies that perpetuate poverty.
• Families that can't afford a bad year can't use the most effective
earnings strategies.
• Societies with good SP programs may be able to take more efficient
policy choices for trade, industry, labor, etc.
• Societies can use good SP programs to replace inefficient redistributive
elements in other programs.
• SP can help temper inequality and reduce its costs.
• Many safety net programs contribute to human or physical capital
formation in addition to providing for current consumption.
Social Assistance and Social
Insurance as percent of GDP
14
12
10
8
SI spending
SA spending
6
4
2
0
Af rica-SubSaharan
M iddle East and
Nort h Af rica
Europe and
Cent ral Asia
East Asia and
t he Pacif ic
Sout h Asia
Lat in America
and Caribbean
OECD
Source: Blank, Grosh, Hakim and Weigand 2004, OECD SOCX
What is right assignment of
resources within sector?
• No single right answer
• Diagnostic process as defined in PRSP
sourcebook:
– Step 1: diagnostics on risk and vulnerability
– Step 2: look at overall balance among programs
(including outside SP sector)
– Step 3: review individual programs’ performance
– Step 4: conclusions/reform plan
Step 1: diagnostic process
• Some very summary information from
poverty and risk and vulnerability
assessments
Step 2: balance among programs:
Example 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.
Step 3: program analysis
• Will cover only selected issues in this
presentation, more covered in guidance note
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
? 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
Equity analysis
• At first blush seems easy, but some real technical issues, to
be discussed in Schwarz’s and van de Walle’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.
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.
– Still issues of equity across generations,
genders, income levels, work histories
Pension System Equity in MENA
Comparison of Benefit Rates Across Different Income Groups
1.25
1.25
Iran
Egypt
Yemen
1
Net replacement rates
Net replacement rates
1
Bahrain
.75
Algeria
.5
Djibouti
Jordan
.75
Tunisia
Morocco
.5
.25
.25
0
Libya
0
0
.5
1
1.5
2
2.5
Individual earnings, proportion of average
•
•
•
3
0
.5
1
1.5
2
2.5
Individual earnings, proportion of average
In countries like Iran, Egypt, and Yemen, low income workers earn more in
retirement than while working
Higher income workers in Egypt earn much lower pensions relative to their
income level than low income workers even though their contributions
were much higher
Few incentives to contribute in these countries – evasion is high
3
Pension System Equity in MENA
Comparison of Benefit Rates Across Different Income Groups
1.25
1.25
Iran
Egypt
Yemen
1
Net replacement rates
Net replacement rates
1
Bahrain
.75
Algeria
.5
Djibouti
Jordan
.75
Tunisia
Morocco
.5
.25
.25
0
Libya
0
0
.5
1
1.5
2
2.5
Individual earnings, proportion of average
•
•
•
3
0
.5
1
1.5
2
2.5
Individual earnings, proportion of average
In countries like Iran, Egypt, and Yemen, low income workers earn more in
retirement than while working
Higher income workers in Egypt earn much lower pensions relative to their
income level than low income workers even though their contributions
were much higher
Few incentives to contribute in these countries – evasion is high
3
Managing risk – a tension
• 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)
Fiscal Sustainability in Pensions
Brazil: Critical Social Security Issues, June 2000.
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
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.