Transcript Social Protection for Equity and Growth

THE SOCIAL PROTECTION CHALLENGE
IN MIDDLE INCOME COUNTRIES
Ana Revenga
Director, Poverty Reduction
The World Bank
SP challenges in Middle Income
Countries (MICs)
Most MICs are facing pressure to expand social
protection
 Financial crisis has added to these pressures
during times of increased fiscal constraints

 Crisis
highlighted the need to develop cost-effective
safety nets in advance


Responses have varied depending on structures
in place
Building SP takes time
Better to act promptly
Features of SP systems in MICs
Objective
Reduce poverty and
encourage human
capital investment
Help households
manage risks
Improve
productivity
Target group
Chronic poor
Design Element
Targeted and noncontributory
Households
Contributory, with
vulnerable to shocks public subsidies for
the poor
Groups facing
Targeted SP/Labor
special challenges interventions
What are other MICs doing?



Establishing a ‘core’ non-contributory safety net
program
Expanding coverage of social insurance
 Emerging best practice in pensions
 More diversity in financing models for health
Developing active labor market and skill development
policies
Country example– Mexico (1)
New Social Policy that started in 1994
Figure 2.1: Broad-based and Targeted Policies
•A switch from general subsidies to
targeted interventions in late 1990s,
following “Tequila” crisis
Social Security
Health
Broad Policies
(General Population)
• Introduced a whole set of targeted non
contributory programs aimed at
developing opportunities for the poor
Education
Job Training
Housing
Social
Policy
Development of Human Capital
(health, nutrition, education)
Targeted Policies
Opportunities for Income
(Extreme Poor)
• Maintained a contributory “core” social
insurance tied to formal employment
contract
Development of Physical Capital
(basic social infrastructure)
Country example– Mexico (2)
“New” elements introduced since late 1990s:
 CCT (Progresa) full implementation in 1997. Renamed and a scaled
up as Oportunidades in 2000.
 Workfare programs (PET) implemented in 1998; reinvigorated in
recent crisis
 Health insurance for the poor (Seguro Popular) implemented in
2003/04
 Social pensions for the elderly in 2003
=> Great improvement in coverage for people outside the formal
sector; positive impacts on education and health of the poor
These systems co-exist with a parallel payroll-tax based social
security system for formal sector workers (covering pensions, health,
disability) => has raised issues of disincentives to becoming formal
Where does Thailand fit?
Strong poverty reduction but persistent disparities
Poverty by
region in
2007
Poverty
over time
20.98 %
17.46 %
12.93 %
13.05 %
Poverty line = 1443 Baht and number of
poor people = 5.4 Mil. in 2007
14.93 %
11.16 %
5.88 %
9.55 %
8.48 %
3.08 %
1.14 %
1998
2000
2002
2004
Source: NESDB
2006
2007
Bangkok
Central
North
North-East
South
Where does Thailand fit?
.4
.5
.6
Informal Sector
.1
.2
.3
THA
400
4000
10000
GDP Per capita 2006(current US$)
40000 80000
Where does Thailand fit?
Aging Society
2010
2050
100+
100+
Female
Female
90-94
90-94
Male
80-84
80-84
70-74
70-74
60-64
60-64
50-54
50-54
40-44
40-44
30-34
30-34
20-24
20-24
10-14
10-14
0-4
0-4
6.0%
4.0%
2.0%
0.0%
2.0%
4.0%
6.0%
6.0%
Male
4.0%
2.0%
0.0%
2.0%
4.0%
6.0%
Where does Thailand fit?
Ongoing Rural-Urban Migration
100%
90%
80%
70%
70.6
69.7
68.9
61.1
57.8
54.2
67.7
66
63.8
38.9
42.2
45.8
36.2
2015
2020
2025
2030
60%
50%
40%
30%
20%
29.4
30.3
31.1
32.3
34
1990
1995
2000
2005
2010
10%
0%
Urban
Rural
Harmonization
Health
Pensions
Community
Based SP
Safety Nets
Labor Market
Interventions
Sustainability
Informal
Sector
Common
Challenges
Thai SP panorama - challenges
Experience from MICs
(Conditional) Cash Transfers as Safety Nets




(Conditional) cash transfers are increasingly
adopted as core safety net program
CCT are more a “contract” than a cash transfer
They alleviate poverty but also encourage
investment in human capital (education and
health) and improve consumption
Little evidence of welfare dependency and negative
impact on labor markets
Experience from MICs
Adoption of CCTs
CCT impacts on poverty, education and
health outcomes

CCTs have generally led to substantial reductions in
consumption poverty:


And had significant impacts on education outcomes:



In Mexico, PROGRESA (now Oportunidades), a program
with national coverage, reduced the poverty gap in rural
areas by 19 percent
In Mexico, Oportunidades decreased dropout between 6th and
7th grade by 9% points
In Pakistan, the Punjab Education RSP increased the school
enrollment of 10-14 year-old girls by 11% points
And health outcomes:

In Colombia, Familias en Acción increased the proportion of
children who had growth monitoring by 20-30% points
CCT impacts on health and education
outcomes


Because impacts are concentrated among the poorest
households, CCTs have helped increase “equality of
opportunities”
Example: Nicaragua
Experience from MICS – labor market
interventions

Active Labor Market Policies (skill development and
employment services)
 Programs
targeted to youth (the “Jovenes” programs in
Latin America)

Unemployment insurance/assistance
 Unemployment
Insurance Savings Accounts (Chile,
Colombia)

Graduation and work activation linked to social
safety net programs
Reflections

Thailand faces the challenge of establishing an effective
social protection system


Such a system is not just important from a social perspective,
but necessary to underpin a competitive, risk-taking
economy with a growing middle class
After the 1997 crisis, similar reflection on SP needs took
place; but no sustained investment in SP institutions took
place.
 facing
similar issues and similar reflections in the wake of
the 2008-2009 crisis
 Thailand cannot afford to lose this opportunity to modernize
its SP institutions and adapt them to the needs of a modern
economy
THANK YOU