Transcript NSPS - PKSF

Is there a trade off in investing on old age
population in Bangladesh?
Bazlul H Khondker
Department of Economics
Dhaka University
Presented at PKSF
Dhaka
June 02, 2015
Introduction and Background
•
•
•
•
Population ageing is one of the most significant trends of
the 21th century. It is happening in all over the globe.
Bangladesh-no exception. In 2010, around 7% of the
population was aged over 60 years. Bangladesh will reach
the 10% threshold – when countries are considered as
ageing – in around 2026. By 2050, 60s + age group will
comprise a massive 23% of the population.
While comparing poverty rates across various age groups
between 2005 and 2010, it appears that older people may
have benefitted less from development gains in recent
years.
Against this background, here we assess current situation
of old age population and also discusses a range of options
for their well-being.
Longitudinal Analysis
Reduction in poverty headcount rates between 2005-2010
by age of household head
% point reduction in poverty
12
10.8
10.3
10.5 10.3
10
8.7
8.5
8
9.3
7.7
7.5
6
6
5
4
2.7
2
0
All age
<=29
30-39
Lower poverty line
40-49
50-59
Upper poverty line
60+
Incidence of Higher Disability
Proportion of population (%)
35
30
25
20
15
10
5
0
5-9
Eye sight
10-14
Hearing
15-24
Walking
25-34
Mental
35-44
45-54
Self-care
55-64
Speaking
65+
Any disability
• Growing old is strongly associated with greater incidence of disability.
• Rates of disability are relatively consistent between the sexes, difficulties
with walking and self-care are more common amongst older women.
• The greatest gender difference is reported for self-care, where older
women are more than four times as likely as men to experience difficulty.
Labour force participation
rate (%)
Lower Earning Capacity
100
80
60
40
20
0
15-24
15-64
25-34
25-54
35-54
55-64
65+
Age group
Men
Women
• Incidence of disability in old age correlates strongly with lower labour force
participation at older ages.
• Discrimination against older workers is another driver of lower labour force
participation.
•Older people can face discrimination in the labour market, such as being denied
access to micro-credit. A 2008 survey by HelpAge International found that only 19
% of older people in Bangladesh were able to access credit, compared to 45 % of
poor adults.
Old Age and Gender
Men
Women
8.0%
31.3%
67.1%
Currently
Married
Widowed
91.3%
• Gender has an important influence on the sources of support in old age.
• Older women are much more likely to be widowed than older men. This gap,
is remarkably wide in Bangladesh, with over 90 % of older men still married
but nearly two thirds of older women widowed.
• Many factors influenced this: men marrying women younger than themselves
and having a higher likelihood of remarrying at older ages. The difference in
marital status in old age suggests radically different experiences of old age
according to gender.
• While the majority of older men will be able to look to their spouse for
support in the case of illness or frailty, most older women will need to look to
extended family members or the wider community.
Old Age Allowance in Bangladesh
An overview
Evolution of OAA Programme
Value of the OAA: monetary vs. estimated
real prices
350
Value of benefit (BDT)
300
250
200
150
100
50
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0
Current prices
Real value (constant, 1998 prices)
Source: Department of Social Services, website
Source: Authors’ calculations based on Ministry of Social Welfare,
Department of Social Services and International Monetary Fund, World
Economic Outlook Database, April 2013 (for inflation figures, average
consumer prices
Targeting performance
How well does the OAA target the poorest?
Proportion of OAA recipient
households (%)
Distribution of OAA recipients by expenditure decile (2010)
Male
age
<65
14%
20
15
>50% inclusion error
15 16 15
10
12 11
5
9
7
7
0
1
2
3
4
5
6
7
Expenditure deciles
8
5
3
9 10
Female
age
<62
19%
Above
eligibili
ty age
67%
Households receiving OAA according to presence
of age-eligible member (2010)
Key issues:
• Lack of accountability, monitoring system, selection processes are not yet
clear, open to political manipulation (Barkat et al, 2013).
• Beneficiaries and non-beneficiaries report selection processes to have been
unfair, significant inclusion of underage, understaffing and not yet in urban
areas (Begum & Wesumperuma in ADB 2012).
OAA Reform Proposal: Universal Citizen Pension
• Age eligibility: 60; Transfer: BDT 600/month; Universal
• BDT 68 billion or 0.65% of GDP FY2013.
• Poverty rate fell by 1.62 percentage-points for all HHs; and
5.76 percentage-points for HHs with 60+ population.
Percentage point reduction in headcountr
poverty rate (UPL)
Poverty impacts of universal pension scenarios – all households
4.5
3.96
4
3.5
3
2.57
2.5
2
1.5
1
1.77
1.62
0.78
0.86
1.14
1.11
0.71
0.63
0.33
0.5
0
65 (m)
62 (w)
60
65
300
70
60
65
600
70
60
65
1000
70
60
1600
OAA Reform Proposal: Universal Citizen Pension
Poverty impacts of universal pension scenarios – households with an older person 60+
Percentage point reduction in
headcountr poverty rate (UPL)
16
14.08
14
12
9.12
10
8
6
4
6.28
5.76
2.78
3.05
4.04
3.94
2.22
2
2.51
1.16
0
65 (m)
62 (w)
60
65
300
70
60
65
600
70
60
65
1000
70
60
1600
• A consequent question of the above micro-simulation is their
possible effect on key macro-variables (i.e. GDP).
• Or is there a trade off between investment in pension vs an
infrastructure?
Simulation Set Up
A SAM multiplier model is used to assess the macroeconomic impacts of Universal Pension scheme and/or
Investment project . Two simulations are carried out:
• Simulation 1: in the first simulation labelled “OAA”, 68
billion BDT has been transferred to all six
representative household groups on basis of their
observed share in old age population (i.e. those aged
60 and over).
• Simulation 2: instead of transferring 68 billion BDT to
the six household groups, in the second simulation,
labelled “INV”, the funds are allocated in equal
proportion to two investment sectors namely (i)
construction and (ii) machineries.
A Typical SAM Structure
Y =f (X)
Current Accounts of Institutions
Production
Production
(PA)
Input-output
Factor
(FP)
Distribution
of value
added
Household
(HH)
Government
(GoV)
Indirect Tax
(Production
and Import)
Government
Private
Consumption
Public
Consumption
Redistribution
of value added
(labour, capital
and land)
InterHousehold
Transfers
Redistribution
of capital value
added
Income Tax
Enterprise
RoW
Total
Total
Exports
Investment Domestic
Demand
Total Factor
Income
Exogenous (X)
Endogenous (Y)
Intermediate
Imports
Leakage
Capital (CAP)
Total Supply
(TSS)
Household
Government
Transfers
Enterprise
Transfers
Total
Household
Income
Remittances
Corporation
Tax
Redistribution
of capital value
added
Enterprise
(ENT)
Rest of the
World (RoW)
Factor
Capital
Accounts
Sectoral
Supply /
Output
Payments of
Factors of
Production
Total
Enterprise
Income
Imports of
Consumption
Goods
Household
Savings
Government
Savings
Enterprise
Savings
Outlays by
Household
Outlays by
Government
Outlays by
Enterprises
Unrelated
Imports of
Capital
Goods
Foreign
Savings
Total
Savings
Investment
Macro Impact simulations; SAM model
Measuring change in:
• Domestic output by major
activities
• Agriculture
• Manufacturing
• Construction
• Transport
• Services
• Value added by factors
• Labour
• Capital
• Land
• Consumption by Household
type
• Rural land based
• Rural non-farm
• urban
Investment in construction
machinery (50:50)
(68 billion BDT)
Y1=Output of
Domestic
Activity
Y2 = GDP
(Factor
Income)
Y3 =
Commodity
Y4 =
Household
Income
OAA
transfer to households (68
billion BDT)
Transmission Mechanisms and Impact Paths of
Intervention into Activities and Households
Impacts on major activities
Per cent Change in Domestic Output
OAA_Agriculture
INV_Agriculture
OAA_Manufacturing
INV_Manufacturing
OAA_Construction
INV_Construction
OAA_Transport
INV_Transport
OAA_Services
INV_Services
OAA_Output
INV_Output
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
• OAA_Agriculture refers to impact on agricultural output due to old age
allowance; INV_Agriculture stands for impact on agricultural output due to
investment project.
• Agriculture is the largest beneficiary activity – OAA while construction is the
largest beneficiary activity – Investment project.
• Impacts of OAA and Investment project on output is more or less similar.
Impact on factor income
Per cent Change in Value Added
OAA_Labour
INV_Labour
OAA_Capital
INV_Capital
OAA_Land
INV_Land
OAA_Value Added
INV_Value Added
0.00
0.20
0.40
0.60
0.80
1.00
1.20
• As Agriculture is the largest beneficiary activity – land factor income is
highest under OAA.
• While under INV – capital factor is the highest gainer.
• Impacts of OAA and Investment project on Value added is more or less
similar.
Impact on household consumption
Percent Change in Household Consumption
OAA_"Rural Land Based"
INV_"Rural Land Based"
OAA_"Rural Non-Farm"
INV_"Rural Non-Farm"
OAA_"Urban"
INV_"Urban"
OAA_"Consumption"
INV_"Consumption"
0.00
0.50
1.00
1.50
2.00
2.50
3.00
• Impacts of OAA on consumption is significantly higher the impact of
equivalent Investment project.
• Land factor income growth led to the largest consumption gain for the
rural land based household.
Conclusion
• A pension and infrastructure investments would have
comparable impact on economic growth.
• A benefit level of Taka 600 to people aged 60 and
over would cost 68 billion BDT, additional 0.5% of
GDP.
• Would lift 2.5 million people out of poverty and
reduce the poverty rate of the population living with
older people (32% of the population) by 6
percentage points.
Recommendation
1. Recreational center for the Older people.
2. Introduce pension for PKSF beneficiaries aged 45.
3. Effective linkages between PKSF beneficiaries with
local level health services at no or low cost.
4. Extending ‘Career and Employment Services’ to Older
people.
5. Extending the ‘subsidized’ credit facilities for senior
entrepreneurs.
6. Campaign to introduce subsidized transportation and
entertainment facilities for the senior citizens.
7. Reform the OAA to improve targeting and enhance
coverage and transfer amount of the OAA.