Social safety net
Social safety nets, or "socioeconomic safety nets", are non-contributory transfer programs seeking to prevent the poor or those vulnerable to shocks and poverty from falling below a certain poverty level. Safety net programs can be provided by the public sector (the state and aid donors) or by the private sector (NGOs, private firms, charities, and informal household transfers). Safety net transfers include:
- Cash transfers
- Food-based programs such as supplementary feeding programs and food stamps, vouchers, and coupons
- In-kind transfers such as school supplies and uniforms
- Conditional cash transfers
- Price subsidies for food, electricity, or public transport
- Public works
- Fee waivers and exemptions for health care, schooling and utilities
On average, spending on safety nets accounts for 1 to 2 percent of GDP across developing and transition countries, though sometimes much less or much more. In the last decade[when?], a visible growing expertise in various areas of safety nets has taken place. However, even though an increasing number of safety net programs are extremely well thought out, correctly implemented, and demonstrably effective, many others face – and create – serious challenges.
Safety nets are part of a broader poverty reduction strategy interacting with and working alongside of social insurance; health, education, and financial services; the provision of utilities and roads; and other policies aimed at reducing poverty and managing risk.
Safety net programs can play four roles in development policy:-
- Safety nets redistribute income to the poorest and most vulnerable, with an immediate impact on poverty and inequality
- Safety nets enable households to make productive investments in their future that they may otherwise miss, e.g. education, health, income generating opportunities
- Safety nets help households manage risk, at least offsetting harmful coping strategies and at most providing an insurance function which improves livelihood options
- Safety nets allow governments to make choices that support efficiency and growth
The safety net as a whole should provide coverage to three rather different groups:-
- The chronic poor
- Even in "good times" these households are poor. They have limited access to income and the instruments to manage risk, and even small reductions in income can have dire consequences for them.
- The transient poor
- This group lives near the poverty line, and may fall into poverty when an individual household or the economy as a whole faces hard times.
- Those with special circumstances
- Sub-groups of the population for whom general stability and prosperity alone will not be sufficient. Their vulnerability may stem from disability, discrimination due to ethnicity, displacement due to conflict, "social pathologies" of drug and alcohol abuse, domestic violence, or crime. These groups may need special programs to help them attain a sufficient standard of well-being.
Figure A: Processes and Stakeholders Involved in a Safety Net Program
The effectiveness of a safety net intervention lies in the details of the implementation process and stakeholders’ involvement therein (Figure A). An adequate transfer program incorporates at least a system to target beneficiaries, to register them, to set up program conditionalities, to make payments, and to monitor and evaluate its performance. Moreover, a stakeholders’ strategy that clearly assigns specific tasks and responsibilities for each agent is critical for program success. It is important to acknowledge that every intervention is unique in its complexity, needs to be adapted to local circumstances, and requires a fluent communication mechanism and a solid data process system.
Source: Adapted from Arribas-Baños and Baldeón 2007
Cash transfers are defined as the provision of assistance in the form of cash to the poor or to those who face a probable risk of falling into poverty in the absence of the transfer. The main objective of these programs is to increase poor and vulnerable households' real income. The growing use of cash transfers is driven significantly by improvement in their design and implementation. Some critical issues include targeting methods, payment modalities, and institutional arrangement.
Types of cash transfer include:
- Needs-based assistance programs are mostly means-tested benefits which may either be a periodic or an occasional transfer, and may either be flat or can vary depending on the beneficiary’s resources and size. They can be found in areas as different as Eastern Europe, Mozambique and Zambia in Sub-Saharan Africa, and in Pakistan in South Asia.
- Family allowances may be a categorical or a means-tested benefit – regular or occasional – paid to families with children under a certain age. Transfers can be in the form of subsidies on school uniforms or children’s goods.
Conditional cash transfers
Conditional Cash Transfer (CCT) programs provide cash payments to poor households that meet certain behavioral requirements, generally related to improve their children's human capital, such regular school attendance and basic preventive health care. The purpose of these programs is to address the inter-generational transmission of poverty and to foster social inclusion by explicitly targeting the poor, focusing on children, delivering transfers to women, and changing social accountability relationships between beneficiaries, service providers and governments.
The first generation of conditional cash transfers (e.g. Mexico’s Oportunidades and Brazil’s Bolsa Familia) have been marked by good implementation with respect to targeting, general administration and impact evaluation. These programs have been proven to be very effective in reducing poverty in the short term since they have helped to increase household income and consumption in poor families. These programs have also helped to increase school enrollment and attendance and they also have shown improvements in children’s health conditions. Most of these transfer schemes are now benefiting around 110 million people in the region, and are considered relatively cheap, costing around 0.5% of their GDP.
These outcomes represent an increase in the investment of human capital, thus becoming a very important tool for reducing the inter-generational transmission of inequality. However, studies by the UNDP have shown that conditional cash transfers did not represent a significant increase in the quality of education and in learning, nor in significant increases in salaries, once the recipients entered the labor force.
CCT Programs have been proved to be very well-targeted and effective in reaching the poor and the excluded groups, notably the extreme poor living outside the reach of social protection programs tied with formal sector employment The programs have also promoted equality of gender since they provide larger funds to girls given that it is common that they tend to drop out earlier from school, so this has increased their enrollment and attendance to secondary levels of education. In the long run, these investments may also yield to significant changes in women’s empowerment and insertion in economic networks. However, it has been critiqued that these programs do not serve the needs of other marginalized groups, such as some indigenous people and poor families living in certain rural areas, since they live too far away from schools and health centers to effectively comply with the program conditions
More recent pilot adaptations are testing CCTs in a diverse range of settings including a growing list of low income countries, urban settings, and for more specialized purposes.
CCT Programs are efficient tools for reducing poverty and inequality but only in the short term. Hence, it is important that these programs are coordinated with other social programs in ortder to strengthen synergies in poverty alleviation. The progrmas should be linked with programs that support labor market insertion and employment to provide incentives for graduation and opportunities for moving out of poverty. For example, Chile’s Programa Puente targets the 100,000 poorest and most excluded families in urban areas and provides beneficiaries with the support of a social worker for two years. While the monetary value of the transfer is relatively low (US$ 22 PPP 2003 per family per month), the program aims at inserting families into the wider safety net through a tailored plan of conditionalities. Similarly, Bolsa-Família in Brazil seeks to promote local synergies by linking the beneficiaries to preferential housing, micro-credit and local business development, and Oportunidades in Mexico piloted various expansions to the basic program through the Plataforma Oportunidades – albeit with limited success to date,-- as well as credits for secondary school graduates that can be used for micro-enterprise, further education or housing.
Food-based safety net programs support adequate consumption and contribute to improving nutrition and securing livelihoods. They differ from other safety net programs in that they are tied to the provision of food, either directly or through cash-like instruments (food stamps, coupons) that may be used to purchase food.
The debate on the use of cash rather than food has been receiving renewed attention in recent years, in part because of changing donor practices. In parallel there has been growing attention on the appropriateness of food transfers taking into account a number of concerns, e.g. impacts on food markets, transaction costs, type and size of transfers, and preferences of beneficiaries.
Supplementary feeding programs provide a direct transfer of food to target households or individuals. The food may be prepared and eaten on-site (e.g., in child feeding centers or at schools), or given as a dry ration to take home. Supplementary feeding is often provided as an incentive for participation in public services such as primary health care (pre- and post-natal and well-baby care) and education. The most common forms are maternal and child feeding, and school feeding.
School feeding programs encourage children’s enrollment and improve their ability to pay attention in class. They vary from the provision of breakfast, lunch or a midmorning snack, to a combination of these. School feeding programs are often integrated with health and nutrition education, parasite treatment, health screening, and provision of water and sanitation.
Food for work (FFW) programs provide food rations in exchange for a given amount of work done. FFW programs have long been used to protect households against the decline in purchasing power that often accompanies seasonal unemployment, drought, and other periodic disruptions.
Emergency food distribution includes direct provision of food, supplementary feeding for vulnerable groups, and therapeutic feeding during crises, emergencies and situations in which people are displaced (see UNHCR and WFP 1999 for guidelines on the size and type of on-site and take-home food rations). These last-resort programs save lives by preventing malnutrition and morbidity.
Food stamps, vouchers, and coupons are near-cash paper tokens targeted to poor households that they can use to purchase food at authorized retail locations. The transfer is often based on the gap between the amount of resources spent on food and the amount needed to acquire a minimum food basket. Some instruments restrict households to buying only a few specific foods, while others allow them to purchase any food.
Subsidies guarantee access to essential commodities at prices that consumers can afford. The rationale for using subsidies is based on the potential to shift consumption as well as on low operating costs as beneficiaries are not administratively targeted. Although subsidies require little administrative capacity, they tend to be expensive and regressive with respect to targeting the poor.
Universal/Indirect price supports for food are open-ended, untargeted subsidies that attempt to lower the price paid for staple foods. Controlling these prices responds to the need to prevent prices from becoming too high. The interventions are implemented via indirect taxes or producer subsidies which are often part of general price stabilization efforts.
Subsidized untargeted sales take place at public distribution centers or designated private outlets on a first-come, first-served basis. Quantities may be rationed by limiting the amount households may purchase.
Subsidies for energy and utilities most often include gasoline and diesel used for transport and for electricity generation; kerosene for lighting and heating; and liquefied petroleum gas for cooking. Their costs can be higher than for food subsidies, while their targeting efficiency tends to be much lower than for food.
Public works programs provide unskilled workers with temporary labor-intensive jobs during critical times. Public works can include road construction and maintenance, maintenance of public spaces and buildings, irrigation infrastructure, reforestation and soil conservation. The output of such programs is twofold: jobs of short duration for work to increase income, and creation of public goods in the form of new or improved infrastructure.
The level of the wage rate is a critical design issue. Self-selection can be encouraged if the wage paid is set at slightly below the market wage for unskilled labor. Cross-country evidence suggests that programs are worthwhile if planners give careful attention to the quality of the assets to be created, and to their potential to create second-round (employment) benefits.
Fee waivers, exemptions, and scholarships
The main objective of fee waivers, exemptions, and scholarships is to provide poor people with the financial resources to use public services such as education and health facilities. These systems are targeted to a pre-determined group of people that would not have access to these services otherwise. These are relatively recent programs that were implemented in Africa in the latter part of the 1990s, counterbalancing the negative effects on the poor of the introduction of fees in the health and education sectors in the 1980s.
Fee waivers and exemptions for health care enable the poor to obtain free health care even when fees are charged. Exemptions are granted to everyone for defined services and allow people to receive free prenatal care, immunizations, and treatment for tuberculosis. By contrast fee waivers are granted to some individuals, usually for specific health care activities which also account for the bulk of charges even though they may only account for a minority of interactions with the health care system.
Fee waivers and scholarships for schooling include stipends, education vouchers, targeted bursaries, and interventions related to tuition and textbooks. Benefits range from covering the direct costs of uniforms, books, or transport, to compensating for the opportunity costs of students’ time. Programs may be complemented by grants to schools to ensure quality of education.
Financing of and spending on safety nets
Figure B: Safety Net Expenditures as a Percentage of GDP, Selected Countries and Years
Most developing countries spend 1 to 2 percent of their GDP on safety nets. If countries wish to increase their spending on safety nets, they can reallocate expenditures, raise taxes, obtain aid grants, or borrow. Reallocation of funds from less important items is preferable. If taxes are to be raised, the government must pay attention to the economic and political costs. If international grants are to be used, the government and donors should ensure that funding flows are stable and that procedures are conducive to building capacity. Debt finance is appropriate when programs benefit future generations by raising their productivity and consequently increasing future tax revenues, or during recessions.
Even where safety nets have a place within budgets, they may face financial constraints so tight that policy makers will have to make difficult decisions about how to allocate money insufficient to meet needs. In response, there are three approaches that may be taken in different combinations:
- Keep the role of safety nets small relative to possible needs. Benefits may be limited to only a portion of the poor by defining specific subcategories of individuals, by using an eligibility threshold well below the poverty line, or by only providing seasonal benefits.
- Ensure complementarities with building physical and human capital. This helps the poor survive today and will reduce the causes of poverty in future years.
- In very low-income countries, international assistance may be used to finance social assistance. In fact there is an increasing willingness on the part of donors and countries to use aid in such ways.
Source:Weigand and Grosh 2008
Note: Kosovo data are for 2003
Customizing safety nets for different contexts
There is a recognized need to adapt social safety nets programs to local contexts. Both the program mix and shape of individual programs should vary from place to place.
Safety nets in low-income countries are increasingly being recognized as effective tools to reach out to the most vulnerable. At their worst, they protect households facing hard times from falling into deeper poverty and help them manage risk by allowing them to maintain assets on which their livelihoods are based. At their best, they can provide households with a cushion to invest resources more efficiently and effectively in human capital. Common interventions vary from public works and food-based interventions to more recently cash and conditional cash transfer programs. Low-income states may face institutional capacity and financial constraints.
Safety nets in middle-income countries may aspire to cover all target groups although they tend to focus on helping the chronically poor. Individual programs may be sophisticated, but sophistication may not have spread to all programs in the country. Evidence suggests that they possess strong track record progress in design and implementation.
Safety nets in crisis contexts attempt to protect incomes and avoid irreversible losses of physical assets and human capital. They also help maintain political consensus around the policies needed to resolve crises (financial, fuel, food). Scaling up programs quickly is difficult, so some compromises with respect to targeting, incentive compatibility, and accountability may be needed.
Safety nets after natural disasters help households avoid irreversible losses that could ensue. Effective safety nets should be seen as a complement to larger efforts to protect livelihoods and undertake reconstruction and recovery. Countries with existing programs that they can modify will be better placed to deliver safety nets after natural disasters. They may need to adjust procedures during the response.
Safety nets to facilitate reforms can help compensate the poor for any losses suffered as a result of reforms such as abolishing subsidies. These may also promote the political tolerance required for reforms to take place. Some programs with a temporary political goal may be at a scale that is too large to sustain. Others with a clearer poverty focus may be meant to be permanent, and so must be designed to be sustainable.
Safety nets in fragile states are increasingly recognized as helping endangered and/or displaced households cope in post conflict or complex settings. Selected safety nets interventions, integrated with other actions, may assist in rebuilding societies and preventing future conflict. A critical issue is how and when to transition from primarily humanitarian relief efforts to more strategic sustained development.
Safety nets in developed countries have resulted in a much lower crime rates and generally lower poverty levels. One example is Canada's universal healthcare, known as Medicare, which was first proposed by Thomas Clement "Tommy" Douglas (called one of the "fathers of medicare"); in 2004 Douglas was voted the Greatest Canadian for his achievements and contributions to Canada, including working towards Medicare.
Aspects of design and implementation
The main objective of targeting is to deliver more resources to the poorest groups of the population. Targeting is a tool that has costs and benefits. Decisions about whether to target, how precise to be and what method to use will depend on the relative size of these costs and benefits, which will vary by setting.
Good evidence indicates that, for the most part, programs can focus resources on the poor to a moderate or high degree without incurring unacceptably high errors of exclusion (excluding poor groups) and cost.
A few methods of targeting and types of programs go hand-in-hand. However, several different methods can be used for a particular program resulting in better targeting:
- Means tests: A targeting method based on income that seeks to collect comprehensive information on household income and/or wealth and verifies the information collected against independent sources.
- Proxy means tests: A targeting method by which a score for applicant households is generated based on easy-to-observe household characteristics, such as the location and quality of the household's dwelling, ownership of durable goods, demographic structure, education, and so on.
- Community Based Targeting: A targeting method in which a group of community members or leaders (whose principal functions in the community are not related to the transfer program) decide who in the community should benefit.
- Geographic area: A targeting method in which location determines eligibility for benefits or allocates budget to concentrate resources on poorer areas.
- Demographic characteristics: A targeting method in which eligibility is based on age and gender.
- Self-selection: Programs designed so that take-up is expected to be much higher among the poor than the non-poor, or the level of benefits is expected to be higher among the poor e.g. low wage public works programs.
Targeting systems should allow new or newly poor households to access the program and move out the ones that are no longer eligible. The inputs to good targeting outcomes include adequate staffing; well-defined rules of the game; clearly assigned and sensible institutional roles; and adequate information systems, material inputs, monitoring, and evaluation.
Determining benefit levels
Benefits may be differentiated by household characteristics such as poverty level, size and composition, or specific needs or behaviors. Such customization will improve the poverty impact, but will complicate administration. Available budget allocations will greatly determine the efficacy of safety net programs. Programs with benefits that are too small will have little impact on beneficiaries and administrative costs will be high relative to benefits. Programs with high benefits will have a larger impact on recipient households, but will have a higher fiscal burden, require better design and targeting, and may induce disincentives.
Monitoring and evaluation
Monitoring and evaluation (M&E) systems are the hallmark of good program management. A new wave of results-oriented programs, such as CCTs in Latin America and public works programs (e.g. Argentine, Ethiopia), have developed and use integrated M&E. These programs demonstrate that strong monitoring systems support credible program evaluation and that both provide feedback for improvements in productivity, effectiveness and impact.
Program monitoring systems are tools that regularly supply information about how well a program is working, so that program managers can take action to improve implementation. Effective monitoring systems require a strategic focus and political support. They also require adequate skills, management attention, and information technology.
Program evaluation refers to an external assessment of program effectiveness that ascertains whether a program meets some standards, estimates its net results or impacts, and/or identifies whether the benefits the program generates outweigh its costs to society. It generates evidence that programs are well implemented and are achieving their intended results, and provides feedback for improvements.
The most frequently used types of evaluation in safety net programs are:
- Process evaluation, also known as formative evaluation, implementation research, implementation analysis, or descriptive evaluation. Process evaluation documents, assesses, and explains how a program is being implemented.
- Targeting assessment describes how public spending is distributed across population groups, whether defined as deciles or poor versus non poor. A targeting assessment is a descriptive analytic tool. It is not an alternative to a full impact assessment since it does not explain incidence outcomes or generate specific policy implications.
- Impact evaluation measures the programs causal effect on the outcomes it seeks to achieve. The specific technique for estimating impacts varies according to the setting but all methodologies center on ways of constructing a plausible comparison or control group to establish the counterfactual. This helps to approximate the impact of a program on beneficiaries (treatment group).
- Intra-household bargaining
- Social insurance
- Social network
- Social security
- Social welfare provision
- Welfare (financial aid)
- Welfare state
- Social Protection Floor
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- Actuar Sobre el Futuro: Romper la Transmisión Intergeneracional de la Igualdad (2010). Regional Human Development Report for Latin America and the Caribbean. UNDP
- Societies on the Move (2010, September 11). The Economist. 396(8699), pp. 11-15
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- Hoddinott, John. 1999. Principles and Practice in the Design of Food-Based Targeted Assistance. Washington, DC: World Bank.
- Rogers, Beatrice Lorge, and Jennifer Coates. 2002. Food-Based Safety Nets and Related Programs. Social Safety Net Primer Series 0225. Washington, DC: World Bank
- Subbarao, Kalanidhi. 2003. “Systemic Shocks and Social Protection: The Role and Effectiveness of Public Works.” Social Protection Discussion Paper 0302. Washington, DC: World Bank
- del Ninno C, Subbarao K, Milazzo A, 2009. "How to Make Public Works Work: A Review of the Experiences"." Social Protection Discussion paper 0905. Washington, DC: World Bank.
- Weigand, Christine, and Margaret Grosh. 2008. “Levels and Patterns of Safety Net Spending in Developing and Transition Countries.” Social Protection Discussion Paper. Washington, DC: World Bank
- Coady, David, Margaret Grosh, and John Hoddinott. 2004. Targeting of Transfers in Developing Countries: Review of Lessons and Experience. Regional and Sectoral Studies. Washington, DC: World Bank.
- World Bank Safety Nets Homepage
- World Bank report on Water, Electricity and the effect of utility subsidies on the poor
- Free e-learning course on social safety nets from FAO and the World Bank
- Pension Watch is a comprehensive online resource on non-contributory (social) pensions.