Protecting The Vulnerable: The Design and
Implementation of Effective Safety Nets
December 4-15, 2000 - Washington, D.C.
December 6, 2000
Steven R. Tabor
• Major role in industrialized states: near universal
insurance and assistance coverage.
• Coverage: <10% in Africa and Asia, 15-60% in
Latin America, 20-25% in N. Africa and 50-80%
in the transition states. Mainly insurance.
• OECD states spend 8% of GDP on cash social
• Few developing countries spend > 1% GDP
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• 50-80% of cash social • Why so limited coverage
assistance reaches the in LDCs?
poor in well-managed – Fiscal constraint
programs and 25-50% of – Large informal sector
social insurance reaches
the poor. – Social insurance
products don’t match
• Family assistance and Y-protection needs.
social pensions play a
large role in transition – Hard to collect
– Weak administration
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• Democratization and rising inequity
• Income insecurity, shocks, crisis and global
• Market friendly reforms have crowded-out
• Trend in industrialized economies towards more
affordable and incentive compatible cash-transfer
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• Categorizing Cash Transfers
• Cash vs. In-kind transfers
• Design Considerations
• Building Institutional Capacity
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• Safety Net vs. Safety • Voluntary private
Rope Types of Cash transfers
Transfers • Long-, intermediate-
• Social Insurance and and short-term risk
Social Assistance management
• Universal, Means- • Near-cash transfers
Tested and • Gross vs. Net transfer
• Fiscal churning
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• Assess as a package, and net of tax.
• Spending doesn’t measure adequacy.
• Spending doesn’t measure effectiveness.
• Cash transfers are launched for reasons
other than immediate poverty reduction--ie.
equity, harmony, social solidarity. Indirect
poverty reduction impacts may be
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• Economics: don’t directly • Administration: high fixed
distort prices, institutional costs &
• Lower deadweight losses lower operating costs.
• Less excess burden • Administrative and
• Less adverse Y- financial infrastructure
distribution effects arises with development.
• May play an automatic • Can’t self-target: is no
stabilizer function, but can “inferior form of cash”
lead to fiscal creep & loss • Lower stigma attached to
of fiscal flexibility. receipt and use of cash.
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• Politicians may not want to fund “de-merit goods”.
• Providing basic goods to the poor helps assure voters that
“basic needs” are being addressed.
• Commodity lobbies prefer aid linked to their products.
• Easier to explain the why a commodity subsidy is provided
to a target group when that subsidy has been removed for
the general public.
• In-kind programs may be linked to behavior modification,
such as keeping children in school, that politicians wish to
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Design Issue 1: Matching Types of Cash
Assistance Programs to Different Needs
• Social Insurance: Can be effective to reduce the
poverty risk in urban, formal sector, employment
• Micro-insurance: can broaden the net to provide
catastrophic coverage to those in the informal
• Social Assistance: main cash transfer safety net
for the chronic poor
• Need to harmonize public cash assistance and
private cash transfers
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Design Issue 2: overcoming the beneficiary
• Formal income and means tests: too costly, time
consuming, error prone and inaccurate.
• Categorical, proxy-means and geographical targeting can
work quite well.
• Local knowledge, in community targeting, can be tapped.
• Conditional transfers (utility offsets, education grants) can
generate positive social outcomes while using service
providers to screen and verify beneficiaries.
• Universal programs such as family assistance and social
pensions are less information intensive. Impact depends on
poverty & family size, and poverty & old-age link.
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Design Issue 3: How generous should cash
• How is benefit generosity measured.
• Should benefits be in line with the Minimum Standards Convention?
• Need: minimum income for those who cannot earn, have savings or
expect to receive private transfers. Poverty gap (Poverty line Y-
earnings-net savings-private transfers) for the bulk of the poor. Gap
likely to be well below replacement income.
• Fiscal limits: poverty gap of 2% of GDP would need transfers of 5-6%
• Adverse incentive effects with many near-poor households and
• The need for a full-replacement income approach, fiscal affordability,
and ability to offset adverse incentive increases as economic
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Design Issue 4: Avoiding adverse labor
• Transfers impact the labor supply of those who finance and
those who receive them.
• Poverty traps, high MERTs and rigidities are problems in
• Focusing assistance on those unable to work (or work
more) reduces adverse labor effects.
• Welfare to work-fare: are new approaches to making work
financially attractive, rewarding welfare graduation and
tightening access to transfers.
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Design issue 5: Using Cash Transfers to
Combat Gender Discrimination
• Female-headed • Family assistance and old-
households face greater age pensions can help
poverty risk reverse gender bias.
• Direct discrimination in • Social protection
social assistance systems legislation can be
• Indirect discrimination reformed to remove
because of women’s labor gender bias.
force role • Start with a gender review
• Women may make better of the labor market,
use of transfers poverty and assistance
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Design Issue 6: Securing Political Support
• The stop-and-start problem and the electoral cycle.
• Political crises give rise to new cash transfer
• Excess political involvement can contaminate
• Politics of narrow versus universal transfers
• Using information to build program credibility
• Stakeholders, social-partners and the incentives
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• Is tremendous variation in the way in which cash transfers
are administered---NO ONE RIGHT WAY!
• In many cases, cash-transfer administration is just part of
the duties of national and local officials--may have other
health, labor, union or welfare responsibilities.
• “public social security schemes were commonly viewed as
inefficient public monopolies which provided poor service
to their members… And among social security staff there
was often low morale owing to poor conditions of service
and inadequate training” (ILO, 2000, p.222)
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• Political interference in
staffing & investment • Poor terms of service
• Fragmented policy making • Excessively complex
• Delays in processing procedures and regulations
claims • Neglect of compliance,
• Poor record-keeping enforcement and policy
• Failure to explain the
schemes to members and • Fiscal limits on staffing
public and other recurrent costs
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• Computerization and use of cash-dispenser
• Consolidating management, integrating programs
and providing uniform-terms;
• Contracting-out specialist functions to the private
• Establishing multi-pillar social assistance
measures to tap private risk management capacity;
• Forging links with non-profit organizations
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Recent OECD Administrative Capacity
• Use of public charters and • Automation in record
performance targets keeping and use of
• Separation of policy and universal social-numbers
management roles • Use of direct bank deposit
• Use of stakeholder and • Anti-fraud programs
public consultations prior • Public awareness
to reforming programs campaigns
• Bench-marking • Monitoring, policy
performance over time research and advisory-
and across countries. panel effort to lead reform
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• The design and administration of cash transfer
programs is central to their effectiveness in a
social safety net.
• Programs must be matched to varying needs--
which change over time.
• Administrative capacity needs to be built to
manage cash-transfer programs effectively.
• Political support must be nurtured.
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