For Protection and Promotion: The Design and Implementation of Effective Social Safety Nets

Ruslan Yemtsov

December 2014 Washington, D.C.

Based on the World Bank SP&L 2012-22 Strategy Background Paper by David Robalino, Laura Rawlings and Ian Walker.

Building Social Protection and Labor

Systems

1

System: simplifying

2

Something complex where there are different parts working

together to generate outcome / or functions

Where the whole is bigger than sum of individual parts

Something that exists long enough / is sustained over time /

can adapt to changing environment

… anything that we like….

What do we mean by Social Protection

and Labor?

Social Protection

Social

Insurance

Social

Safety

Nets

Labor

Policy

Schemes that deliver

benefits based on

contributions of their own

members; pensions,

unemployment insurance.

Regulatory aspects

of labor; active labor

market policies,

income support for

the unemployed

Noncontributory

transfer programs

targeted to the poor;

cash transfers, food

stamps, in-kind

transfers, school

feeding programs, etc.

Why systems?

4

Global Challenges

Global Gaps

Operational efficiency

Global challenges

Depth of extreme poverty:

Poverty gap at $1.25/day (PPP, %, log scale)

INCREASING

RISK

ACCELERATED

AGING

PERSISTENT POVERTY

BULGING

YOUTH

POPULATIONS

5

Lack of Knowledge on how to

Address these Challenges

The target of 3% by 2030 Sub-Saharan Africa can and should take a leading role

* Preliminary

51

59 58

49 48

43

35

29

19 18

0

10

20

30

40

50

60

70

1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2010*

Popula

tion l

ivin

g o

n l

ess

than

$1.2

5 a

day

, 2005 P

PP

(%

)

Sub-Saharan

Africa

World

The target of 3% by 2030 Is this target feasible given recent history? Yes

Last 20 years: poverty has fallen about one percentage point per year

Requires at least keeping the pace of average consumption growth since 1999 (4.3%

per year) with no increase in inequality

Technological changes increasing effectiveness of poverty reduction efforts

Evidence of job creating growth in LICs and MICs and effective social policies

Is reaching this target certain? No

Global shocks and natural disasters could lower consumption growth

Within country inequality may increase

-2

0

2

4

6

8

10

Ann

ual C

onsu

mpt

ion

Gro

wth

(%

)

Income growth of the bottom 40% (Annual household consumption rate, early 2000s - late 2000s)

Average income growth Income growth of the bottom 40%

First — Analyze performance by income

growth of the poor

Second — Analyze performance of the

poor compared to the average

4,989

6,364 6,491 7,430

6,358

19,585

25,510

31,899

39,545

42,486

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

PP

P c

onst

ant

2005

inte

rnat

iona

l $

United States

Income Growth of the Bottom 40%

1967-2011: 0.55% p.a.

2000-2011: -1.41% p.a.

GDP per capita

Mean income of

bottom 40%

Côte d'Ivoire

Egypt

Bangladesh

Rwanda

Brazil

Mexico

Indonesia South Africa

China

Russia

-2

0

2

4

6

8

10

12

-2 0 2 4 6 8 10 12

Con

sum

ptio

n G

row

th o

f th

e B

otto

m 4

0% (

%)

Consumption Growth of the Total Population (%)

Consumption growth of the bottom

40% is positive and faster than the

average

Consumption growth of the bottom

40% is positive but slower than the

average

Growth in incomes of the poor requires overall growth.

But the same level of growth might result in different outcomes.

Growth

Job

Creation

Poverty

Reduction

Opportunities

For All

Transfers Taxes

Pathways

Growth, Jobs, Social Protection and Poverty Last decade: reductions in poverty mainly due to labor market and transfers

0.4 0.4 0.5 0.3 0.6

0.4

2.9

1.9

1.0 1.0

1.4

0.8

0.5

0.9

0.3 0.6

0.1

0.6

0.2

-0.2

0.4

-0.4 -0.2

-1.0

0.0

1.0

2.0

3.0

4.0

Peru(2005-2009)

Nepal(1996-2003)

Ghana(1998-2005)

Brazil(2001-2009)

Bangladesh(2000-2010)

Thailand(2000-2009)

Ann

ual P

over

ty R

educ

tion

(pe

rcen

tage

poi

nts)

Demographic Change Labor Income Non-Labor Income Other

Source: Inchauste, Gabriela & Olivieri, Sergio & Saavedra, Jaime & Winkler, Hernan, 2012. “What is behind the decline in poverty since 2000 ? evidence from Bangladesh, Peru and Thailand," Policy Research

Working Paper Series6199, The World Bank.

J.P. Azevedo, G. Inchauste, S. Olivieri, J. Saavedra and H. Winkler, "Is labor income responsible for poverty reduction? A decomposition approach". Background paper for the WDR 2013. Forthcoming.

2015

Bol

ivia

ESF

198

7

Headline 2008

Food & Fuel Price Increases, Financial Crisis Hits

Bra

zil

and

Mex

ico

star

t C

CT

E

ast A

sia

+ F

inan

cial

cri

sis

Firs

t C

CT

Loa

ns

WB

SP

Str

ateg

y pa

per

Eth

iopi

a P

SNP

Indi

a N

RE

GA

W

DR

200

6

Cri

ses

World Bank Index of Commodity Prices

0

100

200

300

400

500

2000 2001 2002 2003 2004 2005 2006 2007 2008

(June 2008

Energy Food Grains

2015

Bol

ivia

ESF

198

7

Headline 2008/9

2/3s developing countires improve SSN during crisis

Bra

zil

and

Mex

ico

star

t C

CT

E

ast A

sia

+ F

inan

cial

cri

sis

Firs

t C

CT

Loa

ns

WB

SP

Str

ateg

y pa

per

Eth

iopi

a P

SNP

Indi

a N

RE

GA

W

DR

200

6

Cri

ses

* Counts CTs with clear start dates only; green countries have had or currently have a CT

2000 2012 9 countries,

25 programs* 41 countries,

245 programs

The revolution is happening where needs

are greatest

2010 35 countries

123 programs

15

3 7 8

14 17

19

26

42

55

67

0

10

20

30

40

50

60

70

80

1997-2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Planned

20%

Not

reported

30%

Available

50%

An increasing attention to systems: SPL strategies

are instituted around the world

Recap

17

Social protection is central to poverty reduction

And to shared prosperity

To respond to other challenges (shocks, technology…) new

ways to protect people are needed

There is an increasing commitment to social protection,

but…

SPL challenges

Low Coverage, particularly in low-income

countries

Large variance across and within regions

75 70 65

46 32

22

12 17

9

21

22 43

13 13

23 27

46 33

0 0 3 5 0 2

SS Africa MENA SAR LAC EAP ECA

No transfer

Only social insurance

Only social assistance

Only labor market programs

(% of households that receive)

Social welfare or related ,

35%

Social security/ labor 9%

Health, 4% Education, 2%

Social Fund, 1%

Other, 4%

Outside govern-

ment, 45%

Fragmented

Programs Example: where cash transfer programs in Sub-

Saharan Africa are based

18

Source: Household survey data from 64 countries

Fragmentation of SPL…

19

…leads to coverage gap

20

This is how the system should

work. Does it? STEP framework (Source: World Bank 2010)

CCTs:

Nutrition

Risk

mitigation

and

innovation:

Social

Insurance

Active

labor

market

programs:

Training

CCTs:

Education

Labor

regula-

tions

SPL System for Skills

Recap: Global Gap What to do?

Fragmentation Build appropriate, country-specific,

social protection systems

Coverage

Expand coverage, especially in low-

income countries and

fragile states

Weak link to

productivity

Promote links to human

capital, skills and labor

market insertion

Knowledge

Expand investment in results

and knowledge

22

Social Protection and Labor System

Social Insurance

Labor Market Programs

Social Assistance

23

•Last-resort social assistance

programs (LRSA)

• Family and child benefits

• Social pensions

•Heating and housing allowances

• Disability allowances

•Labor market services

• Training

•Employment incentives

• Supported employment and

rehabilitation

•Direct job creation

•Start-up incentives

•Unemployment benefits

• Early-retirement benefits

•Old age

•Disability

•Survivor

•Sickness

•Family/children

Different way to classify functions of SP

system

Promotion

Opportunity

Security

Equity ALMPs:

Training

Credit

Intermediation Social assistance:

In-kind transfers

Cash transfers

Subsidies

Social insurance:

Pensions

Unemployment

Health

Prevention

Protection

24

Promoting Shared Prosperity through

Better Earnings, Employment and

Job Quality

Reducing Risk of Slipping into Poverty

through Better Insurance against Effects of Shocks

Reducing Extreme Poverty

Now and for future generations

Labor Markets Pensions Safety Nets

Social Protection and Labor Systems

25

SP System with 3 Functions goes beyond SP programs

26

Promotion

Protection

Prevention

Insuring against

the Impact of

Risk • Health insurance

• Crop and weather

insurance

• Remittances

• Old age and

disability pensions

• Unemployment

and disability

insurance

Poverty alleviation • Charitable, family and

community transfers

• Conditional and

unconditional cash

transfers

• Public works

• In-kind transfers

Promotion of

opportunities • Education, health &

nutrition services

• Agricultural

extension

• Microfinance

• CCT

• Skills training

• Labor facilitation and

regulation reforms

Pregnancy, Early

childhood

School age

Youth Working

age

Old age

27

Virtues of systems: (i) multiple instruments can be mobilized to

manage a given risk; (ii) coordination of instruments across risks

(iii) ensure incentives compatibility (less confusion) across program

Promotion:

nutrition/ECD, CCTs for

pre-school, health

Protection: OVC

programs, child allowances

Promotion:

Employment

services,

entrepreneurship,

training and skills

Protection: Cash

and in-kind

transfers, public

works programs

Prevention:

Unemployment,

disability insurance

Promotion: CCTs

for (girls) education

Protection: Child

allowances, school

feeding

Promotion: Youth

employment

programs, skills

training

Protection: Social

pensions

Prevention: Old-age

pensions, disability

insurance

Examples of programs

Source: “Building Resilience and Opportunity”, World Bank Social

Protection strategy background work, available at

www.worldbank.org/spstrategy

Program

Program

Program

Program

Levels of a

SPL System

Administration level:

Aim: Building basic subsystems to support one or more programs for security, equity or opportunity

Admin. sub-

systems

Program level:

Aim: Improving design of existing programs and harmonizing across portfolio of programs

Policy Level:

Aim: Ensuring overall policy coherence across programs and levels of government

Portfolios of coherent programs that can communicate with each other, often share administrative sub-systems, and work together to deliver resilience, equity and opportunity

Systems: Better social protection

for the future

Goal: Building the “nuts and bolts” sub-systems to provide

one or more 3P functions

Low capacity contexts

Few or no functional formal 3P programs

Goal: Policy coordination to

ensure efficiency, equity and incentive

compatibility

Better capacity contexts

Well-functioning programs with aligned incentives and clear institutional roles

Goal: Improving efficiency and efficacy

of each program, improving coordination

across programs

Emerging capacity contexts

Existing systems often fragmented, with limited capacity to coordinate

29

Policy choices (i) How various programs will be designed both in terms of their mandate

and the choice of instruments?

Balance between 3Ps;

Rights vs discretion.

Harmonization, coordination or integration?

(ii) How they will be financed?

Affordability and sustainability.

From “given budget” to mandates.

Donor

(iii) What type of institutional arrangements will be used for implementation?

Roles, rules, controls. Agencies and ministries. Decentralization.

Role of beneficiaries: from “recipient” to “principal”

Common platforms (implementation mechanisms): registries, targeting, payments, outreach/intake staff, audits and control, evaluation.

30

Transition paths to more integrated SP

systems

31

Challenges in the move beyond

programs towards systems Ownership/identity. How to rally/mobilize support / attract

leaders to impersonal “system”.

Agility/flexibility. How to ensure rapid reaction when coordination has to involve many parties? How to avoid building large overly bureaucratized mega institutions?

Incentives for innovation. Sometimes it is easier to make/test changes in isolated programs.

Externalities can be negative: poorly performing scheme can draw resources from other parts;

Costs for beneficiaries: in terms of knowing complex landscape/choices and being able to make decisions;

Interaction with private/informal arrangements. Expanding coverage of increasingly complex public arrangements poses a challenge of crowding out private /informal networks.

32

What should we expect from more

integrated social protection systems? Expanded coverage of SP programs.

A good SP system identifies coverage gaps and works to ensure the inclusion of the most vulnerable in the SP system and to eliminate overlaps and redundancies

Greater equity A good SP system will ensure that fiscal resources are equitably distributed,

will achieve horizontal equity,

Sustainability By lowering administrative costs, garnering political support and directing

resources to most efficient uses.

Better labor market and human development outcomes. By minimizing distortions, providing incentives to beneficiaries to graduate,

workers to move to more productive employment and service providers to target services to most needy and to focus on results (rather that outputs)

Ability to respond to crisis/resilience. Less poverty.

33

Thank you

34

© Andrea Borgarello / World Bank