Social Protection And Social Safety Net

What is social protection and safety net?

Social protection is a broad set of public arrangements and instruments that help individuals, households and communities in managing risks and shocks well, assure a basic level of consumption to the extreme poor. Social protection includes: social insurance, social assistance, safety nets, social services, legal and regulatory protection. So that social protection should complement family, community, and market mechanisms for protect the vulnerable against livelihood risk, and enhance the social status and assisting the very poor.

Safety nets are basically income maintenance programs that protect a person or household against two adverse outcomes: a chronic incapacity to work and earn, and a decline in this capacity caused by imperfectly predictable lifecycle events (such as the sudden death of a bread winner), sharp shortfalls in aggregate demand or expenditure shocks (through economic recession or transition), or very bad harvests. Safety net programs serve two important redistribution (such as transfers to disadvantaged groups) and insurance (such as drought relief). (World Bank, 2003)

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Social safety net is non-contributory, ex post intervention, it is paid for by the Government from general revenues includes taxation and development assistance, in order to deal with existing poverty or shocks that have already occurred and targeted to the poor and vulnerable. Well-designed safety net can protect the poor in the short term and it also can promote growth, for instance, it can enable the poor to engage in the economy by expanding their opportunities to take risks, diversify livelihoods, innovate, invest the human capital of their children etc.

Safety net instruments include: unconditional cash and near-cash transfers, for instance, non-contributory old age pensions and disability payments; conditional transfers includes conditional cash transfers such as scholarships and conditional in-kind transfers such as food rations and nutrition and feeding programs; unconditional food and other in-kind transfers; fee waivers for health, education and other basic services; general commodity price subsidies includes for food or energy; public workfare.

Social risk management concepts

Arrangements to manage risks can be made in advance, before a shock has occurred risk reduction and risk mitigation can be taken into account. Risk reduction is arrangements that make it less likely that shock will occur, and risk mitigation is arrangements that ensure that if a shock does occur, the effects are small rather than large. Moreover arrangements to manage risks also can be made after a shock has occurred, coping strategies to deal with the impact of the shock

Links between poverty, vulnerability and growth

The poor are the most vulnerable group, they are exposed to diverse risks, so are more likely to suffer a shock; they have fewer resources to deal with these risks, so when a shock does occur, the effects of a shock are more serious for the poor; the rich can afford insurance, or use savings to cope, but the poor generally can’t. High vulnerability makes the poor avoid risk, so they are unable or unwilling to engage in higher risk or higher return activities. Therefore reducing vulnerability is thus both a means and an end: as a means, reducing vulnerability expands opportunities and supports growth; as an end, reducing vulnerability reduces poverty, which is a goal in its own right.

Shocks can affect people as individuals or groups

Individuals

Groups(geographical communities, occupational groups)

Shocks

Accident, illness, old age, house burns down, robbery, family business fails etc

Macroeconomic and labor market shocks, war, riots, nature disasters, disease epidemic etc

Safety net plays multiple roles in national development policy

Safety net plays multiple roles in national development policy, such as reduce poverty and inequality directly by raising the living standards of those at the bottom of society; help households manage risk and vulnerability that experience a shock to keep their children in school, to continue eating enough, to avoid selling productive assets; enable households to make long-term investments; encourage households to innovate, take some risks, invest in their children’s education and health (human capital of the next generation); help Governments make policy reforms and ensure political support for reform by compensating those who suffer short-term losses due to reforms needed for long-term economic growth. Safety net is only one part of an overall poverty reduction strategy.

（Source：Kalanidhi Subbarao.” Social Safety Nets: Concepts and Definitions.” World Bank.）

The figure above illustrate what safety nets contains and belongs, safety nets contains and also belongs a part of social protection, equity, social risk management and poverty reduction. Equity includes land redistribution, enforcement of contracts and property rights, universal education and safety nets. Poverty Reduction contains providing services and facilities to the poor, and safety nets provide security. Social risk management supplies insurance and safety nets.

Social insurance (social security)

These are ex ante, contributory schemes to mitigate risk that people pay small sums (contributions) in advance, generally on a regular basis. This entitles them to benefits when shocks or events occur, for instance health insurance, contributory old-age pensions and unemployment insurance.

Social insurance is most easily provided for non-poor groups in formal employment who can pay contributions; have a little spare cash left after buying food and other immediate needs; and have regular, stable wage incomes. Social insurance is very important in developed countries and middle-income developing countries, and typically plays a smaller role in low income countries. However, some low income countries are piloting insurance schemes for poor people, In Ethiopia and India, the rainfall index-based crop insurance programs have been done very successfully. The disaster insurance programs have been done very well in Bangladesh.

Steps in an overall strategy in developing a national safety nets system

Identify major risks and vulnerable groups by collecting and analyzing household data;

Review existing programs and identify gaps in coverage

Review options for instruments to address each of these gaps

Identify available financial envelope, such as raise taxes, reallocate existing public spending from inefficient and ineffective programs.

Review institutional capacity and weaknesses

Choose a combination of instruments to cover major risks and groups. “Weave” different programs and instruments together into a coherent system. In a poor country with limited capacity, likely to start with safety nets, but build up social insurance over time

Social safety net in Egypt

One out of every five people is poor in Egypt, and the poverty increased mildly between 2001 and 2005 from 18.36 percent to 19.63 percent. The government of Egypt has worked on reforms of economic, social and political transformation. This reform driven by the need to raise sustainable economic growth, and ensure that the poor benefit from it. The role of state also redefined, the state can no longer be seen as the job provider, goods and subsidies supplier. But the state is faced with the challenge of poverty reduction, and oversees the public interest and protects the poor and vulnerable. Furthermore, the Government must redefine the social safety net to improve people serves by expand programs in fighting poverty.

Poverty continues to be a major policy challenge

Poverty continues to be a major challenge in Egypt, with one out of every five people (about 13.6 million people) living below the poverty line. In order to attack poverty, a better understanding of who the poor are should be included initially. In Egypt, almost three quarters of the poor live in rural areas, in Upper Egypt, most of them working in agriculture and construction and with little education.

Strengthening the social safety net

In Egypt, while the social safety net provide assistance to the poor critically, benefit still many more non-poor individuals and group than poor, and do little to reduce overall poverty.

Egypt spends about 2 percent of its GDP on the core social safety net, a roughly stable level since 2000. It does not have every type of program above, but resources are devoted to:

General social protection (5 percent of GDP);

Consumer subsidies on food (1.7 percent of GDP);

SFD (Social Fund for Development) programs (0.18 percent of GDP); and

Social assistance cash transfers from MOISA (Ministry of Insurance and Social Affairs) (0.12 percent of GDP).

The largest share of resources, 8.1 percent of GDP, is spent on energy subsidies to producers and consumers which serve as an important safety net but also absorb resources that could be better directed to the poor. (World Bank, 2005) Those numbers is significantly below most European countries.

So that reform of the safety net is important for three reasons: firstly, the program often does not reach the poor and the fewer subsidies can not provide meaningful assistance. Secondly, programs are too expensive when subsidies taken into account. And thirdly, inefficient programs that with overlapping beneficiaries and objectives.

Administration of Social Assistance Programs in Egypt

Eligibility for MOISA (Ministry of Insurance and Social Affairs) social assistance cash-transfer programs require applicant supported with document including family birth certificates and salary records at a local MOISA office. This assistance program supply more subsidies to females than males. Application is followed up with a home visit by social workers and a decision is made within 60 days. Total expenditures for the programs were 1.1 billion of Egyptian Pound in 2004, this figure includes pension and social assistance functions.

Geographic targeting

The geographic target should aim in overall poverty reduction, but not reduces poverty in the poorest areas. If all the existing resource devoted to poorest area, no matter the resident is poor or not, the uniform distribution would decrease poverty in the Upper Rural areas. However, poverty will increase slightly in the other areas. Nowadays Egypt use basic poverty map to guide projects, which contains regularly household income, consumption and expenditure.

Smart Safety Net in Egypt

The project intends to create E-Government, which brings all information and services of government for citizens online, and make service more efficient. This project started in 2005, and it will be finished in 2010. The card itself contains a variety of information as the number of family members, birth, death and other eligibility criteria, which will automatically verify the rations and accurate amounts transferred. Government of Egypt expected the smart-card system will decrease the cost of providing subsidies by 10 percent, and amount of saving is 400 million Egyptian pounds annually. This is a pilot project, which will gradually be expanded nationally. (Ministry of State for Administrative Development, www.mcit.gov.eg )

Conditional Cash Transfer Programs (CCTs)

Conditional cash transfer programs (CCTs) are a relatively new instrument that seeks to foster human capital development. The cash helps reduce poverty in its own right, compensates families for the opportunity cost of changing behavior, and is expected to contribute to long-term human capital development for the young. (Rawlings and Rubio, 2004) The target more focuses on vulnerable families with children. So that cash transfer can be an important mechanism to alleviate poverty, such as education and basic health care must be available for the poor. CCTs had a great impact in some countries, for instance, Mexico provided additional equipment and medicines in order to meet increased health services demanded; Nicaragua provided teachers and pay for school materials; Honduras provided direct CCTs to schools and health centers.

CCTs become more popular in Latin America, Jamaica used CCT to replaced former food stamps and social assistance programs; Mexico used CCT to replaced the tortilla subsidy; Brazil created the largest CCT in the developing world by consolidating four cash transfer programs into the Bolsa Familla program.

Using Nicaragua as an example, CCTs have a great impact in education, health and consumption:

Nicaragua CCTs

Program Impact

Education

(primary school)

Health

(children under 2 years-old)

Consumption

(Per capita annual)

+ 21.7%

+18.3%

+N$ 753

CCTs have also been a means to consolidate disparate cash transfer programs into more efficient, effective targeted interventions to support human capital formation. (Ayala, 2003)

Conclusions

Social safety nets are the most important priority, which deal with existing poverty or shocks have already occurred and targeted to the poor and vulnerable. Before policy making and action implementing, several questions should be figure out initially: Who are the poor and vulnerable group? What kind of risk face now? What programs against what risks? What programs cover what kind of groups? Where is the gap? What is the new challenge?

For each program and instrument, the steps in developing national social safety nets can be: firstly set objects; secondly develop an implementation structure to clear define the institutional roles and responsibilities; thirdly, develop mechanisms for targeting, enrolment and payment, use technology to help policy making and action implementing, such as use poverty maps and smart cards in Egypt; finally, monitory and evaluate during the programs, which can be good experiences to learn. While getting better understanding of poverty causes and dynamics, however social protection and social safety nets still face many challenges, there is a need for a long-term strategy to fulfill a number of specific gaps in the future.