Activation: what are the Western Balkan client countries asking for? Boryana Gotcheva September 6-8, 2011 ECA Activation Cluster Kick-off Workshop

Transcription

1 Activation: what are the Western Balkan client countries asking for? Boryana Gotcheva September 6-8, 2011 ECA Activation Cluster Kick-off Workshop

2 Outline: a social assistance lens on how to activate SA beneficiaries? Types of social assistance systems and summary of demands for activation in the Western Balkan countries Drivers of the demands for activation Instruments for World Bank participation in a policy dialogue and reforms Results of the on-going policy dialogue and technical assistance Immediate unfinished agenda

3 Different types of social assistance programs in the Western Balkans, different challenges and demands Encompassing benefit programs Last resort programs Only categorical schemes and/or absence of national minimum income scheme Austria Luxemburg Poland Romania Slovak Republic Belgium Czech Republic Netherlands Sweden Bulgaria Denmark Estonia Latvia Lithuania Portugal Slovenia Finland France Germany Ireland United Kingdom Greece Hungary Italy Spain With long implementation record: evolved from the FY SA system Bosnia and Herzegovina, FYR Macedonia, Serbia, Montenegro Albania, Kosovo Newly introduced 3

4 Activation demand-driven, on the agenda of established SA programs, but also Kosovo How to discourage long-term stay on SA? SA is with small coverage, high errors of exclusion but at the same time slow turnover / long-term stay (dependence) o Investments in employability of SA beneficiaries (all, IPA) o Incentives for independent job search and job placement (Serbia) o Incentives for participation in ALMPs and public works (Serbia) o Penalties (Serbia, FYROM; coming in MNE and BiH), mostly legal limitations of duration of benefit receipt o Delinking SA and registration as unemployed from eligibility for health insurance??? 4

5 Activation demand-driven, on the agenda of established SA programs, but also Kosovo Along with making SA more open and dynamic (higher turnaround), clients also want to know how to combine cash assistance with social services (not instead of ) Also, how to reinforce the principle of mutual obligation - social assistance should be earned, and not given for free, however is still mostly for free Finally, how to encourage those who are stigmatized to apply for SA - avoid the CSW or combine employment and SA under one roof 5

6 Main areas of policy dialogue 2. Institutional setting closer interaction of PES and CSWs 3. How feasible is to activate? / study of the profile of beneficiaries 4. Tax incentives - is work paying/ how much of the earned income is taxed away? 1. LRSA design to promote activation and related changes in authorizing environment ACTIVATION 5. ALMP design and M&E, IA 6

7 Driving forces of client demand: three institutional centers with different entry points Ministries of finance higher efficiency of SA and budget cuts despite that spending on SA is moderate, and a bit lower than ECA average (MNE, Serbia); activation (reforms more generally) with the same budget envelope / fiscal concerns activation should not be expensive Ministries of labor and social policy / welfare / protection aim at modernizing SA: better access, higher coverage, other changes mostly parametric; conservative /hesitant in case of need for budget reallocations (maternity, veterans) or in case of longer-term reforms (PES-CSW) Departments for European integration, responsible for promoting the active inclusion agenda, JIMs and reporting on JIMs (Serbia) 7

8 Main instruments Public expenditure DPLs/DPOs with strong focus on social assistance and social inclusion (Serbia, BiH, Albania, Kosovo) Regional SSN AAA/TA FY10/11, and follow-up in FY12/13 with Smart Safety Nets in the Western Balkans Country-level AAA/TA - MNE, Serbia Public expenditure reviews (Serbia, MNE, BiH, Kosovo) SILs (BiH, FYR Macedonia, Albania) 8

9 What has been changed in the design of LRSA or is being changed now to open opportunities for activation? More flexible in-and-out - easier or automatic return to LRSA after treatment with activation measures; before that SA beneficiaries were punished for trying to graduate Disregard of certain temporary and one-time earned incomes as a result of participation in activation, when determining eligibility for LRSA Legal linking of LRSA benefits to employment and social care services Private provision of employment services 9

10 What has not been changed in the design of LRSA programs to open them for activation? The definition of those who are not required to work, and subsequently not subject to/ excluded legally from activation, remains very broad The mandatory registration as unemployed remains - it provides the easiest access to health insurance, hence the UR (registered) is very high; PES have too many cases but are administering health insurance instead of offering employment services Weak or non-existent mutual obligation, not even workfare requirements Little interest in activation of Roma, disabled 10

11 What has not been changed in the institutional setting to encourage activation? Weak interaction between the PES and CSW o SA beneficiaries are obliged to take suitable jobs offered by PES but PES is not obliged to report to the CSW of whether this is the case PES no individual cases, ALMPs are supply-driven (private providers) or too much discretion left with applicants PES not much focus on LRSA beneficiaries (only in Serbia with the new Employment Strategy) Main challenge: to radicalize reforms, incentivescompatible, flexible and proactive safety nets in WB 11

12 Unfinished agenda: research and policy dialogue on generosity of cash social assistance Generosity of last-resort social assistance Has been analyzed through average transfer value as share of the post-transfer consumption of the bottom quintile and average transfer value as share of minimum wage or other similar pay standard 12

13 A measure of generosity of LRSA in the Western Last-resort social assistance Balkan countries Average Transfer Value per capita (Beneficiary Households Only), % of minimum wage Total Poorest Quintile Albania NE Bosnia-Herzegovina CSW Kosovo SA Macedonia SFA na na Montenegro FMS/MOP Serbia MOP Serbia CA

14 An additional measure: is work paying? Simulations with the OECD Tax-Benefit model for some of the Western Balkan countries Made for Serbia, FYROM, BiH (FBiH and RS) (for details - Johannes / notes on informality of employment in the Western Balkans) Will be done for MNE in FY12 Main message: the tax wedge is high, incomes from low-paid jobs are severely taxed away Single earners with no children(means that able-bodied individuals who live alone and receive LRSA have little incentives to make the transition from SA to low-paid job) Single earners with family (of 2 adults with 2 children) Simulations with the OECD Tax-Benefit model will be updated More countries will be covered in FY12 14

15 Tax Wedge at Various Levels of the Average Wage in BiH, FYR Macedonia, and Serbia (%, 2008) Bosnia and Herzegovina FYR Macedonia Serbia Tax wedge for single earner with no children 33% of average wage 37.8 (FBiH) 31.1 (RS) % of average wage 39.5 (FBiH) 32.8 (RS) % of average wage 41.8 (FBiH) 34.5 (RS) Tax wedge for one-earner couple with two children 33% of average wage 37.8 (FBiH) 30.6 (RS) % of average wage 37.8 (FBiH) 30.6 (RS) % of average wage 37.9 (FBiH) 33.0 (RS) Source: OECD Tax and Benefit model 15

16 Next steps: to consider other aspects New AAA on Smart Safety Nets in FY12 Building on the knowledge of SA systems (ECCU4 Safety Nets Study) and intensive policy dialogue and trust Work on informality Work on activation in other countries (Kazakhstan, Armenia, others), in EU and OECD ECA-wide analytcial work on activation and smart safety nets Translation into policies: DPLs