the social protection challenge in middle income countries
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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 - PowerPoint PPT PresentationTRANSCRIPT
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THE SOCIAL PROTECTION CHALLENGE IN MIDDLE INCOME COUNTRIES
Ana RevengaDirector, Poverty ReductionThe World Bank
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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 Building SP takes time Better to Better to
act promptlyact promptly
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Features of SP systems in MICs
Objective Target group Design ElementReduce poverty and encourage human capital investment
Chronic poor Targeted and non-contributory
Help households manage risks
Households vulnerable to shocks
Contributory, with public subsidies for the poor
Improve productivity
Groups facing special challenges
Targeted SP/Labor interventions
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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
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Country example– Mexico (1)
Social
Policy
Broad Policies(General Population)
Targeted Policies(Extreme Poor)
Social SecurityHealth
EducationJob TrainingHousing
Development of Human Capital(health, nutrition, education)
Opportunities for Income
Development of Physical Capital(basic social infrastructure)
Figure 2.1: Broad-based and Targeted Policies
New Social Policy that started in 1994
•A switch from general subsidies to targeted interventions in late 1990s, following “Tequila” crisis
• Introduced a whole set of targeted non contributory programs aimed at developing opportunities for the poor
• Maintained a contributory “core” social insurance tied to formal employment contract
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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
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Where does Thailand fit?
Strong poverty reduction but persistent disparitiesStrong poverty reduction but persistent disparities
Source: NESDB
Poverty by region in 2007
Poverty over time
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Where does Thailand fit?
THA
.1.2
.3.4
.5.6
Sel
f-em
ploy
men
t, 20
06 (%
em
ploy
men
t)
400 4000 10000 40000 80000GDP Per capita 2006(current US$)
Informal SectorInformal Sector
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Where does Thailand fit?
Aging SocietyAging Society
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Where does Thailand fit?
Ongoing Rural-Urban Ongoing Rural-Urban MigrationMigration
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Thai SP panorama - challenges
Harmonization Sustainability InformalSector
Health
Pensions
Community Based SP
Safety Nets
Labor Market Interventions
Com
mon
Com
mon
Chal
leng
esCh
alle
nges
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Experience from MICs
(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
(Conditional) Cash Transfers as Safety Nets(Conditional) Cash Transfers as Safety Nets
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Experience from MICs
Adoption of CCTsAdoption of CCTs
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CCT impacts on poverty, education and health outcomes
CCTs have generally led to substantial reductions in consumption poverty: In Mexico, PROGRESA (now Oportunidades), a
program with national coverage, reduced the poverty gap in rural areas by 19 percent
And had significant impacts on education outcomes: 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
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CCT impacts on health and education outcomes
Because impacts are concentrated among the poorest households, CCTs have helped increase “equality of opportunities”
Example: Nicaragua
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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
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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
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