Example 1 – Synopsis of poverty
Example 1: Synopsis of Poverty, Risk and Vulnerability - Chile
Source: This example is taken from the Project Concept Document for the proposed World Bank Social Protection Technical Assistance Loan to the Republic of Chile
Table 2. Despite gains in the fight against poverty, indigence remains persistent.
1987 / 1990 / 1992 / 1994 / 1996 / 1998 / 2000Mean Income / 90,598 / 101,075 / 122,353 / 126,644 / 142,892 / 159,821 / 160,441
Gini / 0.5468 / 0.5322 / 0.5362 / 0.5298 / 0.5409 / 0.5465 / 0.5457
Poverty / 40.0 / 33.1 / 24.2 / 23.1 / 19.9 / 17.0 / 15.7
Indigence / 12.7 / 9.0 / 4.7 / 5.1 / 4.2 / 3.9 / 4.2
Source: World Bank (2003)
Notes:
1. All calculations using CASEN household surveys
2. All income values are total monthly household income per equivalent adult, and deflated to Santiago 2000 pesos
3. Monthly per capita poverty line, expressed in Santiago 2000 pesos, equal to $40,562
4. Monthly per capita indigence line, expressed in Santiago 2000 pesos, equal to $20,887
Table 3. Chile’s poorest households are at greatest risk
dec 1 & 2 / dec 5, 6 & 7 / total / dec 1 & 2 / dec.5, 6 & 7 / total
From 0 to 5 years / Malnourished (incidence undernourished, underweight, overweight) / 14.5 / 11.4 / 11.9 / 13.6 / 12.2 / 12.7
Does not attend pre-school (only 5 year olds) / 30.4 / 24.0 / 25.6 / 39.5 / 44.2 / 44.1
From 6 to 14 years / Does not attend primary schools (6-11 years) / 0.7 / 0.3 / 0.4 / 0.9 / 0.3 / 0.4
Age does not correspond to grade level (6-11 years) (1) / 7.6 / 3.3 / 4.9 / 12.2 / 6.9 / 8.6
Does not attend primary nor secondary school (12-14 years) / 5.4 / 4.1 / 4.5 / 3.8 / 3.8 / 3.7
Age does not correspond to grade level (12-14 years) / 24.4 / 14.3 / 15.9 / 31.1 / 24.3 / 25.7
Child labor (12-14 years) (2) / 1.2 / 0.8 / 1.2 / 1.9 / 1.4 / 1.4
Inactivity- does not attend school and does not work (12-14 years) / men / 2.5 / 0.8 / 1.3 / 5.1 / 1.6 / 2.9
women / 2.5 / 0.9 / 1.7 / 4.8 / 4.7 / 4.2
From 15 to 24 years / Does not attend secondary school (15-17 years) / 26.8 / 11.0 / 15.8 / 43.8 / 32.4 / 34.7
Does not attend university (18-24 years) / 91.7 / 77.0 / 76.3 / 98.0 / 96.4 / 93.4
Unemployed (15-24 years) / men / 16.9 / 6.7 / 8.6 / 10.2 / 5.3 / 6.6
women / 9.6 / 5.9 / 6.7 / 5.0 / 4.4 / 4.2
Inactivity- does not attend school and does not work (15-17 years) / men / 11.2 / 5.1 / 6.8 / 14.7 / 8.7 / 11.6
women / 15.8 / 7.2 / 8.9 / 27.9 / 20.5 / 21.4
Inactivity- does not attend school and does not work (18-24 years) / men / 44.6 / 16.6 / 22.0 / 38.7 / 20.0 / 21.5
women / 60.9 / 33.4 / 37.6 / 71.8 / 57.1 / 55.9
From 25 to 64 years / Unemployed / men / 21.2 / 5.6 / 7.5 / 12.2 / 4.4 / 5.2
women / 10.8 / 3.7 / 5.1 / 3.9 / 2.0 / 2.0
Workers without a contract (3) / men / 28.0 / 10.4 / 11.9 / 37.9 / 20.6 / 21.2
women / 18.2 / 17.4 / 18.1 / 7.2 / 30.5 / 25.1
Seasonal workers / men / 36.4 / 17.5 / 17.6 / 47.6 / 28.9 / 28.8
women / 37.6 / 15.1 / 15.1 / 52.0 / 36.4 / 30.0
Self-employed / men / 15.9 / 21.7 / 20.1 / 35.2 / 27.6 / 31.6
women / 20.1 / 17.5 / 17.5 / 22.8 / 17.2 / 23.7
Non professional self-employed (% of self-employed) / men / 90.3 / 85.2 / 82.8 / 81.5 / 81.8 / 80.9
women / 89.1 / 85.1 / 79.3 / 81.0 / 78.2 / 79.9
Part-time workers (% of all employed) / men / 4.6 / 2.4 / 3.1 / 6.6 / 2.1 / 2.8
women / 21.0 / 10.9 / 12.4 / 17.8 / 14.5 / 12.3
Non-educated or with incomplete basic education (25 to 40 years) / 25.6 / 7.7 / 10.9 / 58.7 / 45.4 / 44.5
Non-educated or with incomplete basic education (41 to 64 years) / 41.7 / 22.6 / 21.8 / 75.8 / 68.8 / 64.2
Disabled (4) / men / 6.9 / 5.1 / 5.0 / 9.1 / 6.5 / 7.1
women / 7.6 / 5.4 / 5.1 / 8.0 / 6.5 / 7.0
Reports health problems (sickness or accident) / 14.3 / 13.2 / 12.5 / 16.3 / 14.1 / 14.5
Head of household with dependents (5) / 25.0 / 48.0 / 35.5 / 10.2 / 37.9 / 26.3
Women neither working nor seeking work (% of women 25 – 64) / 65.4 / 48.5 / 47.7 / 83.4 / 75.8 / 73.9
65 years and up (6) / Elderly adult (% of the total population) / men / 3.6 / 6.6 / 6.4 / 86.6 / 9.1 / 9.8
women / 4.3 / 10.1 / 8.6 / 6.2 / 8.6 / 9.5
Elderly adult living along or with spouse / men / 24.7 / 36.8 / 38.0 / 42.7 / 26.6 / 36.2
women / 27.6 / 36.4 / 37.6 / 46.2 / 24.9 / 35.8
(1) Children that are behind in educational level according to their age;
(2) Includes working and unemployed children;
(3) Hold a contract can act as a proxy for having access to tenure based severance, pensions & health coverage;
(4) Disability in hearing, speaking, seeing, mental, physical or psychiatric;
(5) Heads of household eligible to receive family assistance with dependents of the total heads of household w/ dependents;
(6) Note that the legal retirement age for men and women is 65 and 60 years, respectively.
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Example 2(a) - Shape of Sector-Bulgaria
Example 2 (a): Shape of Sector - Bulgaria
Source: Bulgaria: Public Expenditure Issues and Directions for Reform, Report No. 23979-BUL
8. Chapter 8: Social Protection: issues and recommendations
8.1 Bulgaria has a comprehensive social protection system consisting of a mix of programs inherited from the socialist period, such as family benefits, as well as new programs, initiated during the 1990s to address the social outcomes of economic reforms, including unemployment programs and social assistance. Prior to 1991, guaranteed employment served as the main social protection mechanism in the country. Social assistance had a relatively small role, with limited programs for those who were not able to work, such as the elderly and the disabled. With the economic restructuring and reforms of the late 1990s, the social protection system has expanded to encompass welfare programs that explicitly help households to cope with the new risks of poverty and unemployment.
8.2 Over the past decade, Bulgaria has been quite successful in completing a first phase of substantial post-socialist social protection reforms, including establishing the legislative and institutional framework for labor market and social assistance systems, and laying the ground for pension reform, based on a diversified multi-pillar model. The second phase of reforms involves steps to address new challenges, including unemployment growth, particularly long-term unemployment, the changing nature of poverty, and upcoming shocks to households, such as the planned increase in domestic energy prices. The road ahead entails important challenges to improve the sustainability of social protection mechanisms, and to strengthen the targeting and effectiveness of programs.
8.3 This chapter starts with an overview of the overall expenditure envelope for social protection, the coverage of the system, and the poverty alleviation impact. The rest of the chapter discusses issues related to the social protection system at large, as well as specific policy issues within the three subsectors: pensions, labor markets and social assistance. It also presents analyses of the incidence and effectiveness of programs, based on three nationally representative household surveys conducted in 1995, 1997 and 2001.[1]
A. Overview of Social Protection
Expenditures
8.4 Over the 1990s, social protection financing in Bulgaria averaged 12 percent of GDP, peaking at 15 percent in 1993, and dropping to a low of 9.3 percent of GDP during the crisis of 1996. Social protection spending increased at the outset of the transition period with the growth of unemployment and the influx of early retirees into the pension system. Real social expenditures started to decline in 1992 alongside inflationary financing and as a consequence of the 1996/97 crisis it fell to a record low of 36 percent of 1991 levels by 1997. After 1997, social protection spending grew alongside GDP, attaining 13.6 percent of GDP in 2001, and has been gradually recovering its purchasing power (Figures 8.1 and 8.2). As a share of total consolidated government expenditures, social protection expenditures increased from 21 percent in 1996 to 33 percent in 2001—and these are projected to reach 35 percent in 2002.
Figure 8.1 Social Protection Expenditure: 1991-20001 (% of GDP)
Source: MOLSP, MOF.
8.5 The composition of social protection spending has changed as follows in the 1990s. Family benefits have declined relative to other benefits, as the main benefit, child allowance, has been frozen in nominal terms since 1997. Social assistance benefits, including the two main targeted cash benefit programs for low income households—the Guaranteed Minimum Income (GMI) and energy benefit programs—have increased as a share of GDP. Pensions after falling to 6 percent of GDP during the crisis in 1996/1997, account for 9.1 percent of GDP in 2001.
8.6 Figure 8.2 Social Protection Spending and GDP Dynamics in Real Terms (1991=1)
Source: MOLSP, NSI, MOF.
8.7 Old age pensions comprised almost 55 percent of total social protection spending in 2001 (Table 8.1). Another 11 programs account for more than 30 percent of spending: the larger ones are the unemployment benefit (5 percent), disability pensions (5 percent), child allowances for children of insured parents, and sickness benefits (3 percent each). The remaining 22 programs account for 4 percent of social protection spending. The major ones are described in Sections B through E.
Table 8.1 Main Social Protection Programs by Level of Expenditures, 2001Rank / Expenditures (Mil. Levs) / Share in Total Social Protection Expenditures (%)
Old Age Pensions / 1 / 2205 / 55
Unemployment benefits / 2 / 212 / 5
Disability pensions / 3 / 220 / 5
Child allowances, insured parents / 4 / 106 / 3
Sickness benefits / 5 / 102 / 3
Occasional and monthly means tested benefits / 6 / 90 / 2
Energy subsidy / 7 / 75 / 2
Social pensions, means tested / 8 / 73 / 2
Farmers pensions / 9 / 60 / 1
Maternity and child benefits, uninsured parents / 10 / 47 / 1
Child care benefits, insured parents / 11 / 45 / 1
Social care services and institutions / 12 / 39 / 1
Other programs / 13-34 / 148 / 4
Administrative costs / 607 / 15
Total, including administrative costs / 4,026 / 100
Note: The heading “Other programs” refers to the remaining 22 programs from both social insurance and social assistance category.
Source: MOLSP, MOF.
8.65 The effectiveness of the overall intergovernmental fiscal system needs to be strengthened in order to ensure that local governments have sufficient resources to cover their expenditure obligations, including social assistance. This will require adequate own revenues at the municipal level, as well as a transparent, predictable and equitable system of intergovernmental transfers. The current formula for allocating transfers is excessively complicated and changes annually. In the case of the earmarked transfers for social assistance, the transfers allocated do not cover local needs and, as a result, the central government provides compensating transfers periodically, either in the fiscal year in which the deficits accrue, or afterwards. This considerably limits the capacity of local governments to plan expenditures. The fiscal decentralization program approved in mid- 2002 addresses some of these issues.
8.66 The 2002 budget law increases the share of funds coming from the central budget to 75 percent (25 percent to come from local budgets) and there are plans to centralize funding of social benefits in 2003. This is a step in the right direction since it would improve the safety net for the poorest households and help to assure that a basic safety net is provided to all who qualify. In the absence of centralized financing, the poorest municipalities will still not be able to fully cover social assistance. Local governments will retain the discretion to provide additional benefits on top of the national programs. The benefits of centralized funding is demonstrated by the energy benefit program, another social assistance. It is provided during the November-April heating season, and it is 100 percent financed through central transfers and experiences no delays in payments.
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Example 2(b) - Shape of Sector-Costa Rica
Example 2 (b): Shape of Sector - Costa Rica
Source: This example is taken from the report Costa Rica: Social Spending and the Poor, Report 24300-CR Vol. 1 .
3.64 Unlike many other LAC countries, Costa Rica has relatively few institutions managing and operating social assistance programs. There is only one single institution, the FODESAF, charged with financing social assistance programs. FODESAF is, thus, in a unique position to influence institutions and programs to improve efficiency and coordination by introducing production-based financing mechanisms and promoting program coordination. Some of these actions have been introduced since 1999, when FODESAF instructed programs and institutions to provide targets to be achieved and to rate programs and institutions according to the attainment of these targets. These efforts will need to be, however, consolidated and formalized in the institutional and legal framework of FODESAF to be effective.