What Kind of Social Agenda for
the Western Balkans?Sarajevo, May 25-26, 2011
Boryana GotchevaThe World Bank
1
Poverty and Social Assistance Poverty and Social Assistance Priorities in the Western Priorities in the Western
BalkansBalkans
Objectives of the presentation and outline
2
Poverty trends before and after the crisis Renewed role of social assistance Performance (targeting accuracy and coverage) of social assistanceThe reform of social assistance for more effective poverty reduction
Positive developments before the crisis
3
But the crisis stalled progress
4
In the aftermath of the crisis, the countries have to cope with
higher poverty risks
5
… 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 marketsAgriculture’s contribution to growth is decreasing
while poverty remains disproportionally ruralTurning agriculture into an engine of growthSustaining 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
… 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 foodCutting 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
7
COVERAGETARGETING
GENEROSITY
COVERAGETARGETING
GENEROSITY
FLEXIBILITYFLEXIBILITY
A comprehensive mix of social assistance programs already
existed when the crisis hit
8
Family and Child Allowances
War Veteran Benefits
Last Resort Social Assistance
Disability benefits
However, specific program design and implementation characteristics
limited the capacity of social assistance to reduce poverty
9
Low and, more importantly, inequitable Low and, more importantly, inequitable spendingspending on different types of social assistance programsMixed performanceperformance in protecting the poorLow flexibility for immediate crisis responseImplementation drawbacks Built-in work disincentives in LRSAwork disincentives in LRSA
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
10
0% 5% 10% 15% 20% 25%
Ukraine 09*Hungary 08
Serbia 09*Poland 08
*Slovenia 08Croatia 09
Romania 09Montenegro 09
BiH 07*Slovakia 08
Bulgaria 08*Estonia 08
Lithuania 08Belarus 09
FYR Macedonia 09Moldova 08
Russia 08Latvia 09
Albania 09Turkey 08
Kyrgyz Republic 09Armenia 09
Azerbaijan 09Georgia 08Kosovo 09
Tajikistan 09
Social Assistance
Labor Market
Social Insurance
… and inequitable, with growing share of spending on
categorical programs
11
0.0%
1.0%
2.0%
3.0%
4.0%
BiH
08
Serb
ia 0
9
Koso
vo 0
9
Alb
ania
09
Mon
tene
gro
09
FYR
Mac
edon
ia 0
9
Croa
tia 0
9
Rom
ania
09
Russ
ia 0
8
Ukr
aine
09
Bela
rus 0
9
Lith
uani
a 08
Arm
enia
09
Mol
dova
08
Aze
rbai
jan
09
Bulg
aria
08
Geo
rgia
08
Kyrg
yz R
epub
lic 0
9
Latv
ia 0
9
Tajik
ista
n 09
Western Balkans Other ECA
Last-Resort Social Assistance Family and Child Allowances Disability Benefits War Veteran Benefits Social Pension Other
Mixed performance of social assistance
12
Standardized methodology for performance measurement
indicators
13
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
Welfare indicator
Harmonized consumption aggregate1
Individuals ranked on
Per capita consumption before cash transfer2
ADePT SP3 Standardized software to compute indicators
Impressive targeting accuracytargeting accuracy, masking regressive veteran
benefits
14
0102030405060708090
Alb
ania
200
8
Koso
vo 2
006/
07
Mon
tene
gro
2009
Serb
ia 2
007
Croa
tia 2
008
Arm
enia
200
8
Geo
rgia
200
7
Rom
ania
200
9
Ukr
aine
200
8
Pola
nd 2
008
Bulg
aria
200
7
FYR
Mac
edon
ia 2
006
Hun
gary
200
4
Latv
ia 2
008
Mol
dova
200
9
BiH
200
7
Overall Social AssistancePercent of Total Benefits Received by the Poorest Quintile
Low coverage Low coverage of the poor, and high rate of exclusion of
deserving poor
15
0102030405060708090
100
Hun
gary
200
4
Rom
ania
200
9
Latv
ia 2
008
Bulg
aria
200
7
Pola
nd 2
008
Ukr
aine
200
8
Croa
tia 2
008
Mol
dova
200
9
Arm
enia
200
8
Koso
vo 2
006/
07
Serb
ia 2
007
FYR
Mac
edon
ia 2
006
Geo
rgia
200
7
Alb
ania
200
8
BiH
200
7
Mon
tene
gro
2009
Overall Social AssistanceCoverage of the Poorest Quintile (%)
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
16
Yes81.8%
Not eligible for NE
Yes25.9%
Yes14.9%
Yes3.7%
Yes0.8%
Yes0.4%
6. Does anyone in the family receive Survivor Pension?
2. Does anyone in the family receive old-age pension?
Percentage of bottom decile eligible for NE after applying all filters is 7.9%
3. Does family receive remittance from abroad?
4. Does family own a car?
5. Does family have rental income?
No 18.2%
No 74.1%
No 99.6%
No 99.2%
No 96.3%
No 85.1%
Albania’s Ndihma Ekonomike ProgramExclusion errors due to filters. Out of Individuals in Bottom Decile (= 122,172 individuals)
1. Does anyone in the family work?
Implementation characteristics also limit coverage
17
Work disincentives Work disincentives in the design of LRSA
18
Registration as unemployed is required when applying for last-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 : second generation reforms in social generation reforms in social
assistanceassistance
19
“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
Reform priorities: second : second generation reforms in social generation reforms in social
assistanceassistance
20
Target better, strengthen and standardize eligibility criteria Eliminate the use of Yes/No filters in LRSA program designs Introduce single, simple scoring formulasingle, 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
The World Bank social protection engagement in the Western Balkan
countries
21
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
The World Bank social protection engagement in the Western Balkan
countries
22
Country / instrument
Policy dialogue and related lending
Investment lending
Analytical and advisory services
Albania X X X
Bosnia and Herzegovina
X X X
Croatia X X
FYR Macedonia
X X X
Kosovo X X X
Montenegro X
Serbia X X X
Top Related