Technical Assistance Consultant s Report Project Number: 44152 Regional Capacity Development Technical Assistance (R CDTA) August 2012 Armenia: Updating and Improving the Social Protection Index (Cofinanced by the Republic of Korea e-asia and Knowledge Partnership Fund) Prepared by Diana Ghazaryan For Asian Development Bank This consultant s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project s design.)
CURRENCY EQUIVALENTS Exchange Rate: US$1 = 363.28 AMD ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank DMC developing member country FDI foreign direct investment GDP gross domestic product NGO non-governmental organization PTR poverty targeting rate RTI Research Triangle Institute RA Republic of Armenia SPI Social Protection Index TACIS Technical Assistance to the Commonwealth of Independent States UNICEF United Nations International Children s Emergency Fund USAID United States Agency for International Development USSR Union of Soviet Socialist Republics (now Commonwealth of Independent States)
CONTENTS Page I. INTRODUCTION 1 A. Background 1 B. Definition of Social Protection 1 C. Report Structure 3 II. COUNTRY OVERVIEW 3 A. Geography 3 B. Demographic Profile 3 C. Economy 4 D. Poverty and Inequality 5 E. Employment and Labor Force 6 F. Education 7 G. Health and Disability 8 III. CURRENT SOCIAL PROTECTION PROGRAMS AND ACTIVITIES 10 A. Data Collection 10 B. Social Assistance Programs 10 C. Social Insurance Programs 13 D. Labor Market Programs 15 IV. THE SOCIAL PROTECTION INDEX AND ITS DISAGGREGATION 17 V. ANALYSIS OF COUNTRY RESULTS 19 A. Disaggregation by Social Protection Category 20 B. Disaggregation by Depth and Breadth 20 C. Disaggregation by Poverty 21 D. Disaggregation by Gender 22 VI. POLICY ASSESSMENTS AND IMPLICATIONS 22
I. INTRODUCTION A. Background 1. Asian Development Bank s (ADB) development of the social protection index contributed to the strengthening of social protection programs in developing member countries (DMCs). ADB will continue its work on updating and improving the Social Protection Index (SPI). The SPI s update will address and incorporate lessons learned from two technical assistance projects1 that developed the SPI for 35 countries in Asia and the Pacific and introduce new components and institutional arrangements to sustain the effective use of social protection indicators in policy analysis and formulation in the DMCs. 2. These initiatives is implemented under the ADB commissioned regional technical assistance project2 that seeks to (i) improve the methodology in defining social protection for each DMC in order to ensure comparability among DMCs; (ii) improve data gathering for statistical analysis on social protection; and (iii) develop capacity of DMCs in monitoring the SPI and allow comparisons between countries and over time on implementation performance. 3. This country study provides updated information and data on social protection programs and calculates the SPI for Armenia in view of the revised SPI methodology. The SPI can be updated periodically to assess progress in social protection arrangements in the country and analyse deeper aspects of targeting, coverage and expenditures on various social protection programs; for example, on the breadth (coverage) of social insurance versus social assistance or labour market programs, or on the depth (size of benefit) of various categories of social protection. The revised SPI methodology also provides scope to measure the gender responsiveness of programs, and poverty targeting of programs.3 4. The primary objective of the Armenia Country Report is to present the results of the research on social protection programs and policies in Armenia from all related ministries, particularly the Ministry of Social Welfare; and, summarize quantitative information on these activities to enable the formulation of a national Social Protection Index (SPI). B. Definition of Social Protection 5. Social protection is defined as the set of policies and programs designed to reduce poverty and vulnerability by promoting efficient labor markets, diminishing people s exposure to risks, and enhancing their capacity to protect themselves against hazards and interruption/loss of income. 6. This definition categorizes all programs under the traditional components of social protection as social insurance, social assistance and labor market programs. Microfinance as a form of social protection is excluded from the calculation of SPI since it does not involve a transfer in cash or kind and beneficiaries incur loans or debt instead of transfers. Thus, by eliminating microfinance from the coverage of social protection programs, three major programs are left: (i) social insurance (i.e. the categories of old-age insurance, programs for the disabled, 1 ADB. 2003. Technical Assistance for Social Protection Index for Committed Poverty Reduction. Manila (TA 6120- REG); ADB. 2006. Technical Assistance for Scaling Up of the Social Protection Index for Committed Poverty Reduction. Manila (TA 6308-REG). 2 ADB. 2010. Technical Assistance for Updating and Improving the Social Protection Index. Manila (TA 7601-REG). 3 To be able to calculate with relative accuracy the poverty-targeting rate of programs, household surveys need to contain a social protection data. However, the data of the survey was not available at the time of writing this report.
2 and health expenditure on insurance and pensions; (ii) social assistance (i.e. the categories of non-contributory health insurance, conditional cash transfers, child protection, and unconditional cash transfers; and (iii) labor market programs as shown in Table 1.1. Table 1.1: Social Protection Categories and Types of Programs Social Protection Category Type of Program Social Insurance Programs Pensions Unemployment Benefits Health Insurance - but not universal health insurance Other social insurance (maternity, disability benefits) Social Assistance Assistance for the elderly (e.g., non-contributory basic allowances for the elderly, old-age allowances) Health assistance (e.g., reduced medical fees for vulnerable groups) Child protection (school feeding, scholarships, fee waivers, allowances for orphans, street children initiatives) Family allowances (e.g., in-kind or cash transfers to assist families with young children to meet part of their basic needs) excluding any transfers through the tax system Welfare and social services targeted at the sick, the poor, the disabled, and other vulnerable groups Disaster relief and assistance Cash/in-kind transfer (e.g., food stamps, food aid) Temporary subsidies for utilities and staple foods - only if imposed in times of crisis and if targeted at particular vulnerable groups. General subsidies are excluded even if their rationale is to assist the poor Land tax exemptions Labor Market Programs Direct employment generation through public works programs including food for work programs Direct employment generation through loan-based programs included if loans are subsidized and/or job creation is an explicit objective of the program Labor exchanges and other employment services if distinct from social insurance and including retrenchment programs Unemployment benefits if distinct from social insurance and including retrenchment programs Skills development and training included if targeted at particular groups (e.g., the unemployed or disadvantaged children. General vocational training is excluded). Source: ADB. 2011. The Revised Social Protection Index: Methodology and Handbook. Manila. 7. The term social protection corresponds to social security in Armenia. Social security involves social assistance, social insurance and employment services. Direct assistance is
3 provided to poor and vulnerable groups; and insurance and other schemes are provided to reduce vulnerability and risks associated with unemployment, old age and disability. 8. The Labor Code of Armenia has been adopted in 2004. The code regulates employment contract issues and labor relations between all types of economic entities and employees. It prohibits discrimination against employees based on age, gender religion, trade union membership etc. 9. The area of social assistance is regulated by the RA Law on Social Assistance and the Law on State Benefits both accepted in 2005. Social assistance is defined as a complex of social services which is provided to people appeared in difficult life situation to overcome, mitigate or prevent those difficulties, to satisfy their main needs and to be integrated in the society 4. C. Report Structure 10. The Armenia Country Report is structured as follows: (i) (ii) (iii) (iv) (v) Chapter II contains a brief overview of the social and economic development in Armenia. Chapter III describes current social protection activities and programs in the country using ADB s typology. Chapter IV provides an overview of the derivation of SPI and its disaggregation. Chapter V presents the analysis of the country results. Chapter VI discusses policy assessments and implications. II. COUNTRY OVERVIEW 11. This chapter provides a brief overview of the socio-economic characteristics of Armenia, main features of the country s current developmental situation and recent trends. A. Geography 12. Armenia is a mountainous country, with three quarters of the territory at 1,000 meters above sea level. There are 7 geographical zones from subtropical semi-deserts to mountainous tundra. Armenia occupies the eastern part of the Armenian plateau, and borders Azerbaijan, Georgia, Iran and Turkey. Armenia has an advanced hydro system, the main link of which is the freshwater lake, Seva. Lake waters are used for irrigation and hydroelectric power. The rivers of Armenia are part of Southern Caucasus hydro system and flow into the Caspian Sea. B. Demographic Profile 13. Armenia is an urbanized and industrialized country. Until the 1990s, the urban population is made up of 70% of the population, half of which or one-third of the total population resided in the capital, Yerevan. However, heavy emigration has reduced the urban population to 64%. 4 RA Law on Social Assistance, Article 2.
4 14. The population is about 3.2 million in 2009, 52% of which are women, 68% are working age, 13% are elderly, and 18% are under the working age. From 1960 to 2002, the average age was 73.4 years (76.4 for women and 70.3 for men). 15. The Armenian diasporas is vast with 2.5 million in Russia; 1 million in the United States; 400,000 thousand in France; 100,000 thousand in Iran; and 80,000 thousand in Lebanon. The cumulative population of Armenians abroad is estimated at approximately 5-6 million, exceeding twice the population of Armenia. Table 2.1: Republic of Armenia Population (2009) Population total (1000s) 3238.0 Urban (1000s) 2073.4 Rural (1000s) 1164.6 % Urban population 64.0 Male 1568.3 Female 1669.7 Population by age (x1000) % 0-4 191.3 5.9% 5_14 409.9 12.7% 15-24 622.9 19.2% 25-44 926.1 28.6% 45-59 658.2 20.3% 60+ 429.6 13.3% Households, number (x1000) 830.3 Average household size (person) 3.9 Vital rates Crude birth rate 13.6 Total fertility rate 1.4 Crude death rate 8.4 Rate of natural increase 5.2 Net Migration (-3.9) Life expectancy at birth: Population total 73.9 of which male 70.6 female 77.0 Sources: Statistical Yearbook of Armenia 2010, 2009; National Statistical Service Publications 2011; National Statistical Service of the Republic of Armenia C. Economy 16. Armenia is classified as a middle-income developing country. In 2009, GDP per capita was $2,666. Armenia began industrialization of its economy at the beginning of 20th century, playing an important part within the USSR s economic system. However, production was oriented to the standards of the Soviet market and not competitive in the world market. Therefore, after the disintegration of USSR, there were serious economic consequences for Armenia. More than 1,000 enterprises and 220 research institutes have practically disappeared, and 900 collective farms and state farms have been disbanded.
5 17. Armenia faces the challenge of forming a new economic system, based on exploitation of its raw materials, and a focus on an external market. This process depends on credit and support from international financial organizations, FDI, financing from donor countries, lowinterest credit from foreign Armenian funds, and creation of companies with mixed capital. Remittances from Armenians abroad are essential to the economy. Table 2.2: The Economy Unit 2009 GDP (current prices) Billion AMD 3141.65 Milion $ USD 8,648 GDP per capita 1000 AMD 968.5 $ USD 2,666 GDP (constant prices ) Billion AMD 2651.3 Official rate of exchange AMD / USD $1 USD 363.3 GDP growth (in real terms) % per year -14.1 By Sector Goods (total) % 46.9 Industry % 14.3 Construction % 17.5 Agriculture % 15.2 Service (total) % 42.5 Government Expenditure Billion AMD 9,291.1 % of GDP 29.6 Social Sectors Education 11.6 % of government Health expenditure 6.0 Social Security and Welfare 26.22 Source: Statistical Yearbook of Armenia 2010, 2009; Publications 2011; National Accounts of Armenia D. Poverty and Inequality 18. Despite the changes in the level of poverty since the mid-1990s, about 57% of the population still live below the income poverty line in 2009 as shown in Table 2.3. While poverty has declined in urban areas, this reduction has been offset by the increase in rural poverty. Table 2.3: Poverty indicators (in %) Total Population Very poor Poor Depth Severity 2009 2009 2009 2009 2009 Urban 65.5 25.0 33.7 8 2.6 Metropolitan 34.5 15.8 26.7 5.4 1.6 Other city 31.0 69.4 41.5 10.9 3.8 Rural 34.5 21.1 34.9 7.3 2 Total population 100 23.7 34.1 7.8 2.4 Source: Publications 2010, Social Snapshot of Armenia and Poverty 2009, 2010 and 2011
6 Table 2.4: Cash Value of Poverty Overcoming Very poor Poor 2009 2009 Average consumption (1000 AMD per month) 15.68 23.88 Poverty Line (1000 AMD per month) 17.483 30.92 Deficit (1000 AMD per month) 1.801 7.041 Deficit (% of Poverty Line) 10.3 22.8 GDP (billion AMD) 3,102.8 3,102.8 Meet a deficit (total, billion AMD) 2.5 93.5 Meet a deficit (total in % GDP) 0.1 3 Source: Publications 2010, Social Snapshot of Armenia and Poverty 2009, 2010 and 2011 E. Employment and Labor Force 19. About 2% of Armenia s population or 51% of the able-bodied citizens are considered to be employed. The official rate of unemployment in 2009 is 6.3%. Table 2.5: Employment and Labor Force (2009) Total Female Population of working age (x1000s) 2,232.1 1,140.3 Economically active population (x1000s) 1,170.8 595.6 of which youth 15-30 years 349.4 143.89 Employed (х 1000) 1,089.4 537.4 Unemployed (х 1000) 81.4 58.2 Employment level (%) 48.1 40.0 Unemployment level (%) according to Employment Agency 6.3 56.4 Unemployment level (%) according to Integrated Living Conditions Survey, (National Statistical Service, Statistical Yearbook 2011, 2010, Occupation) 18.7 19.8 Source: Statistical Yearbook of Armenia 2010, 2009; Publications 2011 20. According to the National Statistical Service of Armenia, employment in agriculture and service sectors dominate Armenia s economy. Women comprise 49% of the total labor force as shown in Table 2.6.
7 Table 2.6: Employment (1000s) 2009 2009 Currently employed 16 + 1,089.0 Currently employed 16 + 1,089.4 Currently employed 16 + ** 1,152.8 Currently employed 16 + ** 1,152.8 Urban ** 610.3 Male 552.0 Rural ** 542.6 Female 537.0 By Sector Agriculture 496.5 Employment status Industry 115.1 empolyees (wage earners) 526.6 Construction 49.5 self-employed 71.2 Service 428.3 employed in agricaltural farm 491.6 State 207.7 Non-state 881.7 * Statistical Yearbook of Armenia 2009, 2010 and 2011 **According to Integrated Living Conditions Survey, Statistical Yearbook 2009, 2010 and 2011 Occupation Unemployed 16+ 81,400 Table 2.7 Unemployment 2009 2009 (%) 2009 Level of unemployment (%) Male 23,200 23.2 Male 4.0 Female 58,200 58.2 Female 9.8 Sources: Statistical Yearbook of Armenia 2010; Publications 2010, Labor market in the Republic of Armenia, 2005-2009; Publications 2011, Labor market in the Republic of Armenia, 2011 F. Education 21. Armenia s literacy levels are still very high at 96.8% in 2009, both for men and women equally as shown in Table 2.8. The State Education Development Program declared 8 years of education compulsory, with free secondary, special and higher education from the state on a competitive basis. Education is also provided to children with special needs; 27 special boarding schools in 2009 provided education for these children. 22. A reform of the education system began in 2007 with the aim of bringing Armenia at par with international standards. School education begins at the age of 6 and divided into 3 levels: primary school of 1-3 classes, high school of 4-8 classes, and senior school of 9-11 classes. Trade school is accessible to graduates of high school. Higher education will also undergo reform at the bachelor, certificated specialist certificate and master's degree levels. 7.0
8 Table 2.8: Education 2008-2009 2009-2010 State schools: Total 1,475 1,457 elementary (1-3 grades) 12 13 incomplete secondary (4-8 grades) 153 313 complete secondary (9-10 grades) 1,268 1,051 high (11-12) 42 80 of which: gymnasium 43 28 Special (Boarding School) 36 27 of which: for gifted children* 1 1 for mentally or physically retarded children 27 26 Institutions for orphans and risk families children 15 15 Number of students: total (х 1000) of which: 414.8 392.9 elementary (1-3 grades) 114.5 0.4 incomplete secondary (4-8 grades) 212.9 72.1 complete secondary (9-10 grades) 72.3 290.0 high (11-12) 15.1 30.4 of which: gymnasium 9.8 5.3 special (boarding school) (x1000): 5.7 2.8 for mentally or physically retarded children 4.7 2.8 Number of pre-school establishment 628 622 Number of children (х 1000) 53.7 53.9 % of number of corresponding age children 29.8 24.3 Number of state school teachers 41.4 40.3 Number non-state schools 51 53 Number of students (x1000) 5.8 6.0 Literacyˆ 96.4 96.8 Male 98.8 98.4 Female 97.9 98.4 SOURCES: Statistical Yearbook of Armenia 2010; Publications 2010, Social Situation of RA 2010, Specialized Secondary Education; Publications 2011, Social Situation of RA 2011, Specialized Secondary Education, Activity of Preschool establishments; *Ministry of Education and Science ˆWomen and Men, National Statistical Service Republic of Armenia, 2009, 2010 and 2011 G. Health and Disability 23. During the transition period, investments in the health sector have decreased significantly and investments in the private health sector have increased. Drugstores have been
9 privatized and medical establishments divided into three groups: state, private, and branches of foreign medical centers. 24. Despite the reforms there is no health insurance system in Armenia and most households cannot afford private healthcare. The State continues to provide outpatient treatment for all citizens; medical care and hospital treatment for pregnant women, women in childbirth, children up to 14 years old, disabled people and persons of certain illnesses (e.g., mental, infectious, tuberculosis and cancer). 25. The Armenian government is intending to establish a system of obligatory medical insurance, but will keep medical service for certain diseases free of charge, per its commitment to the Millennium Development Goals. The basic statistics related to healthcare area is presented in Table 2.9. Table 2.9: Health Indicators (2009) Indicator Number of visits total (х 1000) of which: 1,304.516 of out-patients and dispensary service 124,684 Number of registered diseases with the diagnosis set for the first time^ 897.9 Home vesting service 120.5 Ambulance service* (per 1000 people) 401.2 of which: children before 14(x1000) 307.5 Hospitals treatment total (x1000)** 317.0 of which: children before 14 46.0 women in childbirth 44.6 Maternal mortality rate (per 1000 live births) 0.5 Under 1 year Infant mortality rate (per 1000 live births) 20 Antenatal care coverage^: Early^^ 54.3 Late 43.3 Number of abortions (per 1000 women 15-49 years old) 15.0 Contraceptive prevalence rate (per 1000 women 15-49 years old, per 1000 fertile women) 12.3 Number of patients under surveillance of diseases prevention institutions: tuberculosis 1,431 malignant neoplasm 7,657 venereal diseases (syphilis) 74 HIV / AIDS*** 82 psychic dysfunctions (x1000) 2,689 Vaccination children before 14 (% of coverage) 94.95 Obligatory maintenance inspection (х 1000 ): Adult 158.7 Teenager 146.4 Children 575.8 (% of coverage): adult 92.4 Teenager 92.4 Children 93.5 Average 92.8 Source: Statistical Yearbook of Armenia 2011, Public Care SOURCE: Publications 2011, Social Station of RA *Number of persons who received medical aid (outpatient services and ambulance) **Source :Publications 2011, Social Station of RA ***Source: Year indicators of Public care State statistics, http://www.moh.am/?section=static_pages/index&id=237
10 26. By 2009, the number of disabled persons was 179,300 people or 5.5% of the population. Out of 179,300 people, 44,7% were women. The amount of disability pension ranges from $7 to $15 per month, indicating that the great majority of this category will be poor unless they have other sources of income. III. CURRENT SOCIAL PROTECTION PROGRAMS AND ACTIVITIES 27. This chapter presents an overview of the data collection process, objectives, and current social protection activities in the Armenia including challenges and difficulties encountered during the course of the study. The two-fold objective of this chapter is to present the main features of the social protection programs in the country and provide quantitative information that will serve as the basis for the formulation of the Social Protection Index. A. Data Collection 28. There are 15 social protection programs in Armenia. These programs are classified into three major social protection components: (i) social assistance; (ii) social insurance; and (iii) labour market programs. The major social protection activities in Armenia are implemented by government agencies. 29. Relevant information and data was collected through interviews and reports of various government ministries such as Ministry of Finance, report on state budget performance and the statistical yearbook. B. Social Assistance Programs 30. The three major social assistance programs in Armenia include the assistance to disabled and elderly people; allowances to poor families or family benefit program; and child protection programs. The State Social Security Agency and the Ministry of Labor and Social Affairs implement these programs. 1. Assistance to Disabled and Elderly People 31. The policy in the area of disability issues in Armenia is directed towards integrating people with disability in the society. This implies assurance of disabled rights protection as well as equal conditions and opportunities in all areas of social life; assurance of education for disabled children, promotion of employment for the disabled; creation and expansion of community services; application of social partnership principals between state and non-state organizations engaged in the resolution of disabled issues; and increasing awareness about the issues of disabled people. This directions of State policy are included in the Strategy of Social Protection of People with Disabilities 2006-2015. This Strategy reinterprets the issues of the disabled and aims to move from the medical model of social protection to the social model 5. 32. The social protection of elderly people is implemented though social and care services. Social services of lonely elderly and disabled people is provided in daycare institutions or retirement houses, daycare centers, as well as at the place of residence. Social and care services to lonely elderly and disabled people are provided in four retirement houses which operate under the supervision of Ministry of Labor and Social Affairs. There are also three non- 5 http://www.mss.am/home/index.php?menu_id=110&child_id=125&code_id=185
11 state retirement houses in Armenia. Retirement houses are socio-medical organizations which are established for permanent residence of lonely elderly and disabled people. Table 3.1: Care Institutions for Elderly and Disabled People Care Institution No. Nursing and care health houses for aged and disabled person-adult 7 number of places 1,112 residents 1,119 Boarding school for disability children 12 number of places 1,280 residents 1,224 Source: Strategy of Social Protection of People with Disabilities 2006-2015, Ministry of Labor and Social Affairs, 2011. 2. Social Assistance Allowances to Poor Families 33. The Family Benefit program is the most important social assistance program in terms of coverage, resources and poverty impact. The Family Benefit system is based on the vulnerability assessment of families registered in the system by applying the self-identification principle 6. The eligibility of a family registered in the system to receive benefits is determined on the basis of the assessed vulnerability score for that family. The score is calculated according to a regulation accepted by the Government in December 2005. According to that regulation, a complex criteria (e.g., social status of each family member, number of members, inability to work, settlement and living conditions, and average monthly family income) is used to estimate the eligibility of families to receive the family benefit. Each criterion has its value, with the sum of those values comprising the score of family insecurity. The higher the score, the more insecure the family. Table 3.2: Beneficiaries and Payment Volume of Social Insurance Fund (2009) Item % families under Poverty Line at total number families 37.7 of which % poor families 3.6 % very poor families 34.1 % poor families, including in Poverty program 39.3 Monthly allowance beneficiaries (number of families) 123,293 (number of families members) 459,556 Size of monthly family benefits (1000 AMD) 23,560 One time allowance beneficiaries (number of families) 14,833 (number of families members) 35,277 Size of one time allowance (1000 AMD) 23,560 State Social Insurance Fund total (billion AMD) 32.32 In real prices (billion AMD) 29.17 Sources: Publications 2009, 2010 and 2011; Social Situation of RA in 2008, 2009 and 2010 (in Armenian) Number of Beneficiaries and Average Sizes of Benefits; Publications 2010, Social Snapshot and Poverty in Armenia, 2010; Armenia: Non-income Dimensions of Poverty; Armenia: Global Economic Crisis and Poverty Profile; Labor Market Development in 2008-2009 6 Caucasus Research Resource Centers Armenia Eurasia Partnership Foundation, Armenia: Social Protection and Social Inclusion, Yerevan 2011, p. 69
12 3. Child Protection and Health Programs 34. The area of child protection is regulated by some basic laws and conventions such as the Convention on Children Rights (1992); RA Law on Children Rights (1996); and RA President Decision on Motherhood and Childhood (1996); as well as several Government decrees. In September 2009, the Government approved the Child Rights Protection Program for 2010. The program s main goals are design and implementation of state policy in the child protection area, assurance of guarantees for children in difficult situations, and decreasing the number of children in childcare institutions. 35. In 2009, the Ministry of Labor and Social Security in cooperation with international oranizations, has implemented several childcare projects. The following projects were implemented: (i) (ii) (iii) (iv) In cooperation with TACIS, the Support to the Implementation of Childcare and Protection Reforms in Armenia program trained 937 community members on a topic of childcare committee empowerment in communities. In cooperation with USAID, the Social Protection Systems Empowerment Program supported 10 orphanage graduates in their adaptation to indepenent life. In cooperation with UNICEF, 6 projects were implemented: (i) training for childcare specialists in Syuniq region; (ii) database design of children in difficult situations; (iii) organization of regional consultations on childcare system reforms, consultations and awareness raising intiatives about children rights protection; (iv) provision of Goris town children day-care center operation; (v) assessment of childcare services expenses efficiency; and (vi) need and financial assesment of alternative care practices. 7 In cooperation with Worldvision, several trainings and conslutations were organized on childcare and disabled children issues. 36. Several childcare programs are being implemented by International Donor Organizations such as the USAID, Save the Children, World Vision, and Research Triangle Institute. 37. Save the Children's NGO implements programs such as the Acculturation through Learning Program that aims to promote education, acculturation and livelihoods development for Iraqi refugee children, youth and parents living in Armenia; and the Children's Tolerance Education Program designed to help build and sustain peace and stability in the region and promote values of tolerance, cooperation and compassion among children from 5-11 years old in Armenia, Azerbaijan and Georgia. 38. Through sponsorship, World Vision is partnering with families and communities to help meet immediate needs and promote lasting changes that will strengthen communities and move families toward self-reliance. Each year, sponsors receive updates about their sponsored child and community. 7 http://www.mss.am/home/index.php?menu_id=110&child_id=128&code_id=527
13 C. Social Insurance Programs 39. The system of Social insurance in Armenia covers 7 basic programs which are being financed from the state budget. According to the law, the following kinds of pensions and benefits are established: (i) work pensions; (ii) military pensions; (iii) social pensions; (iv) honor benefits to War Veterans and National Honor Title holders; (v) financial benefits to military servants and Genocide survivors; (vi) temporary inability benefits such as pregnancy and other benefits; and (vii) funeral benefits. 11 40. People receiving pension have reached the age of 63 and at least 25 years of work experience. One can also receive pension upon reaching the age of 63 with at least 10 years of work experience 8. 41. State social insurance programs is financed through payments by employers and employees as well as budgetary grants. The State has established fixed rates on mandatory insurance. The worker s payment of social insurance is 3% of their earnings, paid by the employee, or with the help of their employer. On the other hand, the individual businessman s payment of social insurance is 3% of profit; with a minimum payment of social insurance at a monthly rate of 7,000 AMD. Tables 3.3 and 3.4 show the employment rates and expenditure of social insurance. Table 3.3: Social insurance Wage and Payment Rate Employee Monthly Wage Payment Rate 20,000 AMD 7000 AMD 7000 AMD+ 15% of the amount exceeding 20,000 100,000 AMD 20,000 AMD 19000 AMD+ 5% of the amount exceeding 100,000 AMD 100,000 AMD Contribution Rate of Individual Enterpriser Size of imposed monthly income up to 1,200,000 AMD over 1,200,000 AMD Social Payments rates 15% (no less than 60,000 AMD) 180,000 + 5% over 120,000 AMD Table 3.4: Expenditure of Social Insurance (2009) Type of Social Insurance Expenditure х1000 AMD Beneficiaries Total Pensions benefits of officer personnel and their families 17,100 19,738,397 People benefits families (poverty) allowances 419,410.3 108,460 Other social insurance programs occupational injury and diseases 82,900,000 755 baby-minding before 2 year old 1,860.1 7,114 Allowances pregnancy and delivery 2,600,000,000 1,044,973 Sources: Ministry of Finance RA, Report on state administration of budget, 2009; Statistical Yearbook of Armenia 2011 11 http://www.epension.am/arm/pensions/ 8 RA law on state pensions, Article 9.
14 1. Pensions 42. Social Welfare Pensions are paid to vulnerable groups that do not have the right to receive pensions based on the system of social insurance. The State Social Security Agency is responsible for programs of social assistance and support of certain vulnerable social groups, including determining the amount of benefits. The amount of benefits, current minimum wage and living standard levels are indicated in the Table 3.5. Table 3.5: Social Welfare Pension and Allowances (2009) Average sizes of monthly pensions Х 1000 MD Pension 24,5 old-aged 28,1 seniority 28,5 Disablement 21,9 disabled 1st group 24,6 disabled 2nd group 23,5 disabled 3rd group 18,4 disabled from childhood 11,2 Orphans 54,7 Children with one parent 15,5 Pregnancy Delivery (one time benefits)* 50,0 Before 2 year old children 18,0 Unemployment (56% of minimum size of wage) 16,7 Minimum standard minimum size of wage 30 minimum size of pension 8,0 Food poverty line (Poverty line very poor) 17,5 (Poverty line poor) 23,9 Employed average size of wage 96,0 Sources: Yearbook 2010, LIFELEVEL; Publications 2010, Social Picture and Poverty of Armenia, 2010 43. The reform of pension system in Armenia is expected to result in a higher replacement rate for participants in the newly funded pillar. A multi-pillar pension system will be established in Armenia, based on the current distributive system. It will also be supplemented with mandatory and voluntary cumulative systems. Table 3.6: Beneficiaries and Payment Rates for Obligatory Social Insurance Average monthly pension in 1000 AMD Expenditure of State Social Insurance Fund Obligatory Social Insurance Payments** billion AMD Pension insurance billion AMD Year Beneficiaries Total (x 1000) State subsidy* billion AMD 2008 523.8 21.37 92.81 21.1 207.93 2009 522.8 24.52 92.51 19.02 240.2 2010 520.257 27.11 98.48 17.8545 244.0397
15 Sources: Yearbook 2010, LIFELEVEL; Publications 2011, Socio- Economic Situation of RA, January-December 2009, Parameters of State Budget RA *Expenditures (economical classification), http://www.minfin.am/main.php?actid=0&mode=pbkat&lang=1&year=2009 Publications 2011, Socio-economic Situation оf RА, January-December 2010, State Budget Indicators **January-November 2. Honor benefits (World War II Veterans and National Honor Title holders) 44. According to RA law on World War II veterans, the World War II participants receive monthly honor benefits from the State Budget 9. National Honor Title holders also receive benefits from the State Budget on a monthly basis. This title is granted to national artists, painters, and architects. The honor benefit for this group is lifelong 10. 3. Financial benefits (military servants and Genocide survivors) 45. Several specific groups of military pension beneficiaries also receive financial benefits from the State budget. These groups received disability during World War II, during their service in other countries; while implementing military service obligation in the Republic of Armenia; and as participants in World War II. Also included are people with military actions in the Republic of Armenia, RA National Heroes, people honored with the Military Cross Medal and family members of those who died in protection of the Republic of Armenia 11. 46. According to the RA decision 12, people who were born in Western Armenia and Ottoman Turkey before 1915 and survived in the Armenian Genocide, also receive a monthly financial benefit of 25,000 AMD. 4. Temporary inability benefits (pregnancy and childbirth) 47. All self-employed and paid workers receive pregnancy and childbirth benefits for all vocational days. This comprises 140 days (70 days during pregnancy and 70 days for childbirth). In terms of maternity leave benefit, many employers especially in sphere of small business, either do not register their female workers, or dismiss them during pregnancy to avoid paying these benefits. The Government gives benefits in the form of one time grants during the birth of a child and during funerals. There is also a benefit for the children up to 2 years, paid monthly. 5. Funeral benefits 48. The State budget also allocates funeral benefits for pensioners and disabled people. D. Labor Market Programs 49. The State Employment Agency implements the annual state programs on employment regulation. There are six labor market programs in Armenia. These include professional training courses (for unemployed, disadvantaged groups, long-term service and privileged pension beneficiaries), public works, and job fairs. 9 RA Government decision N 236, April 19, 1999 10 RA Government decision N1841, December 16, 2004 11 RA Government decision N 668, May 5, 2011 12 RA Government decision N 687, May 5, 2011
16 50. Within the RA Ministry of Labor and Social Security State Employment Agency, 41 Regional and Local Employment Offices are currently in operation. Regional Employment offices are located in 31 regional cities of Armenia, and 10 are in Yerevan. 51. The State Employment Agency implements annual state programs on employment regulation such as payment of unemployment benefit, professional training courses, compensation of material expenses of the unemployed in connection with business missions to some other residential area, organization of research and forecast of the labor market, financial support to the unemployed for state registration of entrepreneurial activities, partial salary compensation to the employer in case of employing persons uncompetitive in the labor market, organization of paid public works and job fairs 13 The level of employment addressed in employment centers is shown in Table 3.7. Table 3.7: Job Placement of Local Employment Center 14 (2009) Item No. Number of persons applied for job placement 99,308 of which unemployed 84,500 Number of person placed in a job 9,400 of which unemployed 8,293 % placed unemployed 10.19 52. The unemployment benefit is assigned to persons having the unemployment status and at least a one-year insurance pattern. The minimum duration of the unemployment benefit payment is 6 months. The terms of the unemployment benefit payment for each three years are prolonged for one month. The maximum duration of the unemployment benefit receipt is 12 months. Starting in 2011, the unemployment benefit is fixed to 18,000 AMD monthly. Table 3.8: Number of Unemployed Beneficiaries and Payment Rate 15 (2009) Beneficiaries Payment Rate Job seeking persons 99,308 Unemployed 84,493 Benefits received (unemployed) 33,300 Public work participation 4,690 Таble 3.4. Expenditure of Social Insurance Fund & Unemployed Beneficiaries 16 (2009) Item Number of unemployed 84,493 Number of unemployed beneficiaries 25,737 Minimum size of Benefit (x1000) 16.7 Unemployed Insurance Fund (x1000) 4,500,000 13 http://employment.am/en/5/free.html 14 Source: RA NSS Yearbook, Publications 2011, 2010, 2009 Social-economical situation of RA, Occupation, 2009, 2010, 2011 15 Data on unemployment benefit recipients and public work participants is provided by RA State Employment Agency 16 Sources: Publications 2011, Armenia in figures, 2011, Labor market, Appendix of Report on State Budget Performance of RA 2009,2010 Social insurance, Social Fund, Report on State Budget Performance of RA 2008
17 1. Professional Training Courses 53. The professional training courses aim to support an attendant in finding a suitable job through the acquisition of new abilities and skills according to the requirements of the labor market, including the capacity to engage in entrepreneurial activity. The following unoccupied jobseekers registered in the employment office can be involved in the training programs: (i) unemployed; (ii) disabled persons; (iii) pensioners with long-term service and privileged pensioners. Those interested in participating in the professional training courses of the employment offices are provided with consultation on professional orientation, information on professions demanded by the labor market, and trainings organized by the regional and local office. 2. Public Works programs 54. The objective of the program of paid public works is to support the provision of temporary employment to the unemployed and jobseekers, and the execution of accessible work and work not requiring preliminary professional education. The program has useful social direction, aimed at the fulfillment of work of social and domestic importance for the community 17. IV. THE SOCIAL PROTECTION INDEX AND ITS DISAGGREGATION 55. The revised Social Protection Index (SPI) is a unitary indicator that can be disaggregated for analytical purposes. The revised SPI is calculated by Total Social Protection Expenditures per Total Potential Beneficiaries by 25% of the GDP per capita (representing average poverty line expenditures). In other words, the total social-protection expenditures spread across all potential beneficiaries are compared to poverty-line expenditures in each country. 56. The revised SPI index can be disaggregated into two components, one for the depth of coverage and the other for the breadth of coverage of social protection programs. The first indicator is the Total Social Protection Expenditures divided by the Total Actual Beneficiaries (i.e., the average size of benefits actually received or depth ). The second indicator is the Total Actual Beneficiaries divided by the Total Potential Beneficiaries (i.e., the proportion of potential beneficiaries actually reached or breadth ). 57. The revised SPI can also be disaggregated by the major categories of social protection programs: social insurance, social assistance and labor market programs. When the total expenditures per total potential beneficiaries for each major program are weighted in population terms, the program SPIs add up to the total SPI. 58. Furthermore, the revised SPI can also be disaggregated by expenditures per potential poor and non-poor beneficiaries. Finally, gender-wise data allows the disaggregation of expenditure by gender. 59. The derivation of SPI poor/non-poor and SPI women/men used poverty and gender targeting rates. The said rates are based on the results of household surveys, administrative 17 http://employment.am/en/5/free.html
18 reports of SP implementing agencies and in some instances, on the professional judgment of the compilers. Table 4.1: Basic Statistics, 2009 Statistic Unit * 2009 Value Source of Data GDP (current prices) Millions 3,141,650.0 Statistical Yearbook of Armenia 2010 GDP per capita (current prices) Units 968,539.0 National Statistical Service RA GNI (current prices) Billions 3,202.0 National Statistical Service RA Total Population Millions 3.238 Statistical Yearbook of Armenia 2010, Unemployed/underemployed Millions 0.272 25% of employed Population aged 60 years and over Millions 0.434 Statistical Yearbook of Armenia 2010 Employed Population Millions 1.089 National Statistical Service RA Population living below national poverty line Millions 0.761 National Statistical Service RA Disabled population Millions 0.179 Children aged 0 to 14 years Millions 0.614 Per capita poverty line income or expenditure (annual) Statistical Yearbook of Armenia 2011 Statistical Yearbook of Armenia 2010 Units 310,524 National Statistical Service RA Average household size persons 3.9 National Statistical Service RA Exchange rate**** US$1= 363.28 Source: Country Sources, 2011. Statistical Indicators: External Economic Activity SP Category Table 4.2: SP Expenditure by SP Category 2009 Annual Expenditure (in millions) % Distribution Pensions 17,100 24.9% Health Insurance 0 0.0% Unemployment Benefit 4,552 6.6% Other Social Insurance (e.g. maternity, disability benefits) 2,759 4.0% ALL Social Insurance 24,411 35.6% Assistance for Elderly 1,584 2.3% Health Assistance 0 0.0% Child Protection 7,965 11.6% Disaster Assistance and Relief 0 0.0% Other Social Assistance 33,883 49.4% ALL Social Assistance 43,433 63.3% Labor Market Programs 719.6 1.0% TOTAL SP EXPENDITURE 68,563 100.0% GDP 3,141,650
19 Share of SP Expenditure Indicator to GDP 2.2% Source: Consultant s estimates, 2011 60. Social protection expenditures in Armenia amount to 68.5 billion AMD. This amount is about 2.2% of the GDP in 2009. Majority of the expenditures (63.3%) funded social assistance programs while the labor market programs was only 1.0% of GDP. Expenditures on social insurance programs reached 24.4 billion AMD, which was about 36% of GDP. 61. Table 4.3 shows the three largest individual social protection programs in terms of expenditure. These programs comprise 82% of the total. The targets groups for these three programs are the poor, elderly, mothers/children. Just over 50% of all expenditure is the expense on Family Benefit Program. Table 4.3: Largest SP Programs in terms of Expenditure Rank Programs Annual Expenditure (AMD) % Distribution 1 Family Benefit Program 32324 50,2% 2 Pensions (by age) 12690,7688 19,7% 3 Childbirth, pregnancy and delivery, up to 2 7973,589 12,4% year-old childcare benefits % share to Total SP Expenditure 82% Source: Country Sources V. ANALYSIS OF COUNTRY RESULTS 62. To derive the SPI, identification of target groups is necessary. Table 5.1 presents the target beneficiaries and the reference populations that will be used in deriving the SPI. Table 5.1: Target Groups, Social Protection Programs and Reference Populations Target Group Types of SP program* Reference Population** The unemployed and the underemployed All Labor market programs (relevant training and job creation through SME support); food for work programs; targeted public works programs The unemployed and the underemployed The elderly The sick -Pensions -Social assistance to the elderly - Formal health insurance - Micro-insurance - Subsidized health costs or exemptions - Senior citizen treatment allowance Population Aged 60+ years Total population The poor (especially the severely poor and disadvantaged) - All recipients of basic social welfare/ assistance payments - Land tax exemptions - Residential care for vulnerable groups - Food aid BUT excluding education and health programs as well as those for the disabled. Poor population
20 The disabled Children with special needs (CWSN) All forms of assistance programs for the disabled (including recipients of social assistance, training programs) - Educational programs (e.g. fee exemptions, scholarships, school feeding programs, etc.) - All other identified child protection programs The disabled population Poor children, aged 5-14 years A. Disaggregation by Social Protection Category 63. The overall SPI for Armenia in 2009 is 0.085. This implies that on the average, the per capita social protection expenditures is about 8.5% of the poverty line expenditures (set at 25% of per capita GDP). The social protection index for social insurance programs is 0.054 or 5.4% of the poverty line expenditures, while the index for social insurance and labor market programs are 0.030 and 0.001, respectively. Item Table 5.2: SPI by Category, 2009 Units Social Insurance Social Assistance Labour Market Programs All SP Programs Total SP Expenditure Millions 24,410.99 43,432.75 719.65 68,563.38 Beneficiaries 000s 568.28 513.11 6.21 1,087.60 Reference Pop Millions 1.52 1.55 0.27 3.35 25% of GDP per capita units 242,134.75 242,134.75 242,134.75 242,134.75 SPI 0.030 0.054 0.001 0.085 Source: Consultant s estimates, 2011 B. Disaggregation by Depth and Breadth 64. The breadth index refers the proportion of beneficiaries actually reached by social protection; while the depth refers to the average benefits receives. The 2009 index for breadth is 0.325 while the depth is 0.260. These indices implies that social protection expenditures reached about 32.5% of the targeted beneficiaries and the benefits received is about 26.0% of the poverty line expenditures. These figures also indicate that the country provides smaller benefits to a wider number of beneficiaries. Among the three social protection categories, labor market programs has the highest depth but is considered the lowest in breadth. This implies that large benefits, about 47.8% of the poverty line expenditures, were received by a only handful (0.2%) of target beneficiaries. Table 5.3: Social Protection Categories by Depth and Breadth Social Insurance Social Assistance Labour Market Programs All SP Programs Depth 0.177 0.350 0.478 0.260 Breadth 0.170 0.153 0.002 0.325 SPI 0.030 0.054 0.001 0.085 Source: Consultant s estimates, 2011
21 C. Disaggregation by Poverty 65. The third disaggregation of SPI is the proportion of the poor who receive social protection benefits from any of the identified programs. The calculation of this indicator involves a series of assumptions on the poverty targeting rates (PTRs) for different social protection programs. 66. In the absence of data showing the incidence of poor beneficiaries of different social protection programs identified in this study, it has been necessary to adopt an ad hoc estimation methodology. This involves the assignment of PTRs or the proportion of the beneficiaries who are poor, to each social protection program. The principles used to assign PTRs to individual programs are shown in Table 5.4. Table 5.4: Principles for Assigning Poverty Target Rate Type of Program Rationale/ Comment Programs designed for the poor The PTR was calculated according to Benefit Targeting Rate Programs for all beneficiaries considered to be poor (e.g., homeless, orphans) Programs with target group members characteristics distributed according to the Normal Income Distribution Programs with PTR is calculated based on Household Integrated Survey of Life Standards (2009). Programs for all beneficiaries considered to be poor (e.g., homeless, orphans) In these programs, the National Poverty Level was the basis for PTR These are labor market programs 67. The assignment of these PTRs necessarily involves an element of professional estimation. The estimations were done based on the following assumptions or justifications: In the programs designed especially for poor (mainly Family Benefit Program), the PTR was calculated according to Benefit Targeting Rate (i.e., according to estimations of which percent of the Benefit Fund is targeted to the people below the National General Poverty Line). In programs with all beneficiaries considered to be poor (e.g., homeless, orphans), the PTR was estimated as 80%-90%, assuming a 10% to 20% leakage. In programs with target group members characteristics distributed according to Normal Income Distribution, the National Poverty Level was used as the basis for PTR (34%). Programs with PTR is calculated based on Household Integrated Survey of Life Standards (2009).
22 Table 5.5: Disaggregation by Poverty Status Poor Non-Poor SP Expenditure 15,516.87 53,046.51 Reference Pop 3.35 3.35 25% of GDP per capita 242,134.75 242,134.75 SPI 0.019 0.065 Total SPI 0.085 Source: Consultant s estimates, 2011 68. Table 5.5 shows that total social protection expenditure going to poor beneficiaries is about 15.5 million AMD, only about a third of the expenditure for non-poor. The results show that the SPI for the poor (0.019) is lower compared to the SPI for non-poor (0.065). This figure implies that the average social protection expenditures received by poor beneficiaries is about 1.9% of the poverty line expenditures while the average for non-poor is 6.5%. D. Disaggregation by Gender 69. The social protection expenditures benefiting women reached 30.2 million AMD while total social protection expenditures for men is about 38.4 million AMD. These expenditures show that the SPI for men is at 0.047, which is higher compared to the SPI for women with 0.037. The indices imply that on the average, the social protection expenditures received by men is about 4.7%, while for women is 3.7% of the poverty line expenditures. This indicates that there is gender disparity in the targeting of social protection programs. Table 5.6: Disaggregation by Gender Women Men SP Expenditure 30,192.83 38,370.56 Reference Pop 3.35 3.35 25% of GDP per capita 242,134.75 242,134.75 SPI 0.037 0.047 Total SPI 0.085 Source: Consultant s estimates, 2011 VI. POLICY ASSESSMENTS AND IMPLICATIONS 70. The results of the 2009 compilation of SPI in Armenia reveal that social assistance has the largest share of social protection expenditure, having AMD43.4 billion or 63.3% of GDP, while social insurance and labor market are 35.6% and 1.05 of GDP, respectively. 71. Armenia s index on social protection at 0.085 indicates that social protection programs in the country need more attention since it is quite far from reaching the poverty line expenditures, which is about 242,000 AMD per year. With an SPI depth of 0.260 and a breadth of 0.325, the depth of coverage of social protection programs is lower compared to the breadth or the proportion of beneficiaries actually reached by social protection programs. 72. However, the large discrepancy of index between poor and non-poor is an indication of poor targeting of beneficiaries or there has been leakage in the social protection benefits. A
23 similar situation is exhibited by SPI for women and men. The 0.037 SPI for women is slightly lower than the 0.047 SPI for men, which is an indication of some gender disparity in the provision of social protection benefits in the country. 73. These figures reveal that more focused social protection programs and policies are still needed in Armenia to help a greater number of people escape from poverty. There should also be a need to revisit the targeting strategy to limit some leakages in the provision of social protection benefits.
24 Appendix 1 FORMULATI ION OF THE SOCIAL PROTECTION INDEX AND ITS MAJOR DISAGGREGATION A. Structure of the SPI 1. Based from the 2011 SPI Handbook by Baulch and McKinley, the SPI is described as a simple and unitary indicator rather than a composite index. It is not an abstract index and should provide a normative reference such as the magnitude of the impact on people. 2. The formulation of the revised SPI, under the present study, refers to the total SP expenditures dividedd by the total potential beneficiaries, and relative to a quarter of GDP per capita. This is mathematically expressed in the following equation: where E represents the sum of all SP expenditures; PB epresents the sum of alll potential beneficiaries; and Z represents poverty-line expenditures which is 25% of GDP per capita. 3. The term Total Expenditures per Total Potential Beneficiaries has two parts: (i) Total expenditures per total actual beneficiaries this represents the Depth of the SPI; (ii) Total actual beneficiaries per total potential beneficiaries this representss the Breadth. 4. It is noted that 25% of GDP per capita is roughly the averagee national poverty line across ADB s sample of countries. B. SPI s Major Disaggrega ation 1. Disaggregation by Depth and Breadth 5. The SPI can be disaggregated into measuring the depth of coverage and also, the breadth of coverage. Depth represents the average expenditures that the government spends for every actual beneficiary as a percentage of poverty-line expenditures. a. Depth 6. The index is measured as (Total Expenditures divided by Total Actual Beneficiaries); Divide by Z or the poverty-linee expenditure. 7. The index is represented by the following equation: