IMPROVING SOCIAL SAFETY NETS PROGRAMS IN EUROPEAN COUNTRIES CASE STUDY ROMANIA Presentation by Elena Dobre, Adriana Vlad, Rodica Andreea Carausu, Martin Vavrinčík, Erkin Mamadaliev, and Victoria Strokova Social Safety Nets Core Course, December 15, 2011
HIGH SPENDING ON SOCIAL ASSISTANCE Source: ECA SP Database 2
HIGH COVERAGE OF ALL SOCIAL ASSISTANCE Social Assistance Coverage of the Poorest Quintile (%) 100 90 80 70 60 50 40 30 20 10 0 Source: ECA SP Database 3
TARGETING OF SOCIAL ASSISTANCE IS NOT AS GOOD 100 90 80 70 60 50 40 30 20 10 0 Social Assistance Percent of Total Benefits Received by the Poorest Quintile (%) Source: ECA SP Database 4
SNAPSHOT: SOCIAL ASSISTANCE IN SLOVAKIA AND ROMANIA 100 80 60 40 20 0 Slovakia - Coverage Q1 Q2 Q3 Q4 Q5 100 80 60 40 20 0 Romania - Coverage Q1 Q2 Q3 Q4 Q5 60 50 40 30 20 10 0 Slovakia - Targeting Q1 Q2 Q3 Q4 Q5 80 70 60 50 40 30 20 10 0 Romania - Targeting Q1 Q2 Q3 Q4 Q5 5 Source: ECA SP Database
SOCIAL POLICIES TRANSFERS. a very complex social protection system INSURANCE/ CONTRIBUTIVE NON- INSURANCE / NON-CONTRIBUTIVE CATEGORICAL SOCIAL ASSISTANCE NATURE CONDITIONAL CASH TRANSFERS SOCIAL SERVICES 6
WHY DEVELOPING SAFETY NETS PROGRAMS? Strengthen the social cohesion Increase the quality of life Prevent the social exclusion of poor people Tackle the poverty of the persons, family, groups and communities 7
FISCAL AND ADMINISTRATIVE CAPACITY AND POLITICAL ECONOMY Social benefits are paid from the state budget. Austerity measures in 2010 o public wage cuts; reduction in public employment o elimination of some aids and subsidies o reducing spending for some social programs such as child raise indemnity, child birth allowance, etc. Improving targeting of house heating benefits programs for families with low or medium incomes due to thermal energy subsidies cuts from the state budget in 2011. Total spending with social assistance benefits for 2010: 2,86% of GDP. 8
THE EVOLUTION OF MAIN SOCIAL BENEFITS FOR 2010-2012 Ajutoare pentru încălzirea R ASF locuinței 3324.8 2010 0 805 3 325 2011 222 436 1 535 2012 234 403 1 696 3500 3000 2500 YEAR 2010 YEAR 2011 YEAR 2012 SOCIAL AID 2000 (GMI) 269 222 234 FAMILY ALLOWANCE 805 436 403 1500 805 HOUSE HEATING BENEFITS 3 325 1 535 1 696 1000 500 0 269 222 NUMBER OF BENEFICIARIES (thousands) 1535 1 696 436 234 403 YEAR 2010 YEAR 2011 YEAR 2012 AMOUNTS (milions lei) SOCIAL AID (GMI) FAMILY ALLOWANCE HOUSE HEATING BENEFITS 857 900 YEAR 2010 YEAR 2011 YEAR 2012 800 634 SOCIAL AID (GMI) 479 452 477 516 700 FAMILY ALLOWANCE 479 634 325 300 477 300 452 325 HOUSE HEATING 600 BENEFITS 857 516 683 500 400 300 200 100 0 YEAR 2010 YEAR 2011 YEAR 2012 683 SOCIAL AID (GMI) FAMILY ALLOWANCE HOUSE HEATING BENEFITS EXECUTION ESTIMATED EXECUTION PROGNOSIS 9
ROMANIAN SOCIAL ASSISTANCE SYSTEM REFORM (milions lei) 18000 16000 14000 12000 17413 16150 16594 YEAR 2010 YEAR 2011 YEAR 2012 MoLFPS 17 413 16 150 16 594 LOCAL BUDGET 3 133 2 421 2 509 OTHER INSTITUTIO 5 317 1 768 856 M.M.F.P.S BUGET LOCAL ALTE INSTITUȚII MoLFPS LOCAL BUDGET OTHER INSTITUTION 10000 8000 3133 5317 6000 4000 2421 1768 2508,947 855,9 2000 0 YEAR 2010 YEAR 2011 YEAR 2012 EXECUTION ESTIMATED EXECUTION PROGNOSIS 10
DIFFICULTIES IN IMPLEMENTING SAFETY NETS PROGRAMS High fiscal costs: expenses related to social benefits have grown significantly since 2005 Deterioration of the share of benefits that reach low income families from about 48% in 2005 to 37.7% in 2009 3.0 2.5 2.0 1.5 1.0 0.5 Social Assistance Spending in Romania, % of GDP Support for low income households Social assistance pensions Programs for disabled Family policies Fragmentation of programs that increases the administrative and beneficiaries costs. 0.0 2005 2006 2007 2008 2009 Other Detecting errors and fraud; more specifically, the level of irregularities in the social aid programs and benefits. Dependency on the SSN - out of the nearly 11 million adults of working age and fit to work who are part of the families that get social security benefits, 20%, i.e. 2.2 million persons do not work, are not covered by the educational system or by the vocational training system either. 11
HOW DO WE INTEND TO IMPROVE THE SAFETY NETS PROGRAMS 2012: Implementation of the new framework law: The main new provisions are: o Reduction and limitation of dependence on state aid through the active participation of the person / family; o Establishing and providing social benefits and social services in a coordinated and complementary package of measures; o Simplification of administrative procedures by setting up a single point of submission and by establishing a single application form to claim social assistance benefits o Establishing the level of social benefits using the reference social indicator, the same used to establish rights for unemployment; o Targeting the social benefits on those who are in the highest risk of poverty and social exclusion. 2013: Consolidating 3 programs for low income households (Guaranteed minimum income, family allowance, heating benefit) into one program for tackle poverty. The targeting accuracy of these specific programs, would improve, from 64% to over 90% 2013: Improving Management Information System and reducing error and fraud for the social benefits programs. 12
LOW INCOME HOUSEHOLDS PROGRAMS Social aid (MIG), granted for the families and persons without incomes or small incomes, set as the difference between the MIG levels and the monthly net income of family. Family allowance is means tested and is granted for poor families with children. Heating benefit program for families with low or medium incomes. 13
Targeting Accuracy, Coverage and Generosity of Main Social Assistance Programs in Romania (2009) Targeting Coverage Generosity Poorest 20% Population Poorest 20% All beneficiaries Poorest 20% Total social assistance programs, of which: 37.7 57.5 82.2 9.3 26.2 Programs for Low Income Households - Guaranteed Minimum Income 81.5 3.4 14.2 19.4 23.6 - Family Allowance 59.5 7.9 23.8 4.0 5.5 - Single Parent Allowance 68.6 0.8 2.8 6.4 8.4 - Heating Benefits 53.0 2.5 4.6 18.5 40.4 Source: World Bank estimates based on HBS 2009. Deciles constructed based on per capita income net of transfers 14
Steps in the Modernization of the Social Assistance System The distributional impact of these reforms could only be estimated using household survey data: o evaluated through a micro-simulation model together with the WB team Programs for the poorest persons minimum insertion income: o Targeting accuracy, the share of program funds that accrue to the poorest quintile, is expected to increase for these programs from an average of 64 % in 2009 to over 80 % in 2013; o The coverage of the population from the poorest quintile with means-tested programs is expected to rise from about 45% in 2009 to almost 60% in 2013; o The generosity of the last-resort program (GMI in 2009, MSII in 2013), which measures the share of the GMI transfers in the total income of beneficiary families, will go up from 24 % in 2009 to almost 30% in 2013. The intensification of social assistance programs oversight and control Making operational the data cross-checking program Future collaboration with National Institute of Statistics developing the capacity of MoLFSP for the elaboration of micro-simulations, improving the administrative data, ex-ante evaluation for subsequent laws 15
Steps in the Modernization of the Social Assistance System COMMUNITY SERVICE WORK for work-able beneficiaries: - proportional with the level of the benefit; - one of the persons who has the legal age for work from the family shall carry out community actions or other works for local benefit which mayors assign to them, not exceeding the regular work schedule; - on a monthly basis; SCHOOL ATTENDANCE FOR CHILDREN - benefit is reduced or discontinued if child does not attend school regularly FA; INCENTIVES TO RETURN TO THE LABOR MARKET for work-able beneficiaries - increasing the amount of benefit with 15% if one person from HH has a job GMI; - incentives for employees hiring old aged people and people over 45 years old; 16
CONCLUSIONS the fight against poverty and social exclusion continues to be a national priority implementation of the strategies for the promotion of the social inclusion of disadvantaged people by encouraging them to actively participate in the labor market and in the society special attention will be paid to avoid the creation of dependence on receiving social benefits special measures will be taken in order to encourage vulnerable people to find an active place for themselves in society 17
THANK YOU 18