SOCIAL POLICY AND POVERTY

Lecture 2
11 Sep’ 2019
MSDS 2K19
Economic Growth & Poverty

 Economic dev with intro to social policy to address poverty;

 Eco dev taking place in many countries with little change in poverty;
 Dev will loose its essence if wealth is concentrated in few hands;
 Poverty based on income is minimum level of consumption, shelter, water
and clothing for survival. Needs are linked with prices to determine the
poverty line; Charles Booth,
 Promote economic growth by free markets, reducing govt regulations,
attracting foreign direct investment.
 Seebohm Rowntree proposed to introduce social insurance in Britain after
World War II & Paul Kellogg persuaded the US federal govt to introduce
social security.
Attacking Poverty – World Bank

 Designed in 1999 to inform World Bank report 2000/2001,

involved poor people in 23 countries, using participatory
method. (Voices of the Poor)
 “Don’t ask me what poverty is because you have met it outside
my house. Look at the house and count the number of holes.
Look at my utensils and the clothes I am wearing. Look at
everything and write what you see. What you see is poverty.
 1990s: China’s spectacular poverty reduction trend; from 280m
to 125m. Market reform, global integration, economic growth,
shift from agri to manufacturing. 8-7 Plan: access to
employment opportunities, road access, drinking water, health
care, subsidized loans, human capital, political commitment.
8-7 PLAN 1994-2000
 Subsidized loans—over half of the total funds under the plan—at first
covered mainly enterprises and later households with activities in industry
and agriculture,
 Food-for-work program, representing almost 30 percent of total poverty
funds, used surplus farm labor mainly to develop infrastructure,
 Government budgetary grants, accounting for less than 20 percent of the
total poverty funds, supported investment in poor areas across sectors.
 Empirical analysis indicates that the allocation of poverty funds across the
officially designated “poor” counties under the 8-7 Plan was correlated
with their level of poverty incidence.
INCOME INEQUALITY
 WB emphasizes on opportunities rather than outcomes to produce equitable future,
 Increases in inequality are linked to a range of economic policies which include
financial liberalization, regressive taxation, privatization in the context of weak
regulation, public expenditure policies that fail to protect the poor during crisis,
 Other causes of rising inequality include disparities in educational attainment,
technological change and employment policies that widen wage gaps between
skilled and unskilled workers; rural-urban wage differentials in the process of
structural change; inequality in asset ownership; and unequal access to credit,
 Redistributive policies that governments can adopt, including: land reform,
especially in highly unequal economies • where the poor depend substantially on
land for their livelihoods; fiscal reforms that improve tax administration, • prevent
tax evasion; income-generating employment opportunities and expenditure-related
policies that enhance the welfare of poor.
 With high levels of inequality, growth tends to be concentrated in certain
sectors, with those who are not linked to these growth sectors being
excluded from the benefits. Such exclusion, in turn, lowers the potential
for growth.
 In highly unequal societies, the poor are more likely to be locked into a
subsistence economy and have limited disposable income for the purchase
of manufactured goods.
 Inequality is often a factor in rising levels of crime and social unrest,
 In highly unequal societies, the poor have little political influence; in the
absence of meaningful representation to change underlying structures that
perpetuate inequalities.
 Poor are most likely to bear directly the burden of environmental
degradation arising from rapid industrialization.
Social Protection – Policy Framework

 Social Insurance: contribution from employers and employees

based on earnings.
 Social Assistance: transfer to those who are unable to work.
 Labor policies: minimum wage policies, unemployment insurance.
 In developed countries, tax financed social assistance aims at
protecting minority. Developing countries, the vulnerable are only
offered social assistance.
 Universal social protection
 Brazilian govt spends 0.36% of its GDP on Bolsa Famila program
with 14m household coverage in 2003.
 Employment Guarantee Scheme in India reached 48m households
in 2008.
Universal Social Protection

 Universal Social Protection, a key component of dev policy

that support people moving out of poverty, covers entire pop
with adequate benefits, contributes to human security;
 Uniform coverage on unconditional basis;
 State assumes key responsibility in financing, administrating
and regulating;
 Financed through taxation;
 Sustained improvement in the well-being;
 Supports productivity of pop if cash transfers are utilized
effectively;
 Evidence from OECD countries: income inequality and poverty
reduced in welfare states fell from 19-4%,
 Egalitarian societies;
 Benefits provided on basis of citizenship not employment;
 Korea and Taiwan: Expansion of formal employment + high
salaries = poverty reduction, focus on labor productivity. Social
insurance (health, old-age, disability, accident) in 1990s;
 Instrument role of social policy for economic development;
 Minimum Living Standard Guarantee Scheme in the aftermath
of Asian Crisis 1997-98. Cash benefits, job trainings, small
loans.
Country Initiatives - Taiwan

 1995: First universal program National Health Insurance,

covers entire population;

 Push for social sector reform occurred in context of industrial

restructuring, rising unemployment;

 1999: Introduced Employment Insurance Program offering

cash benefits;

 Civil society facilitated the expansion of non-contributory

programs for old-age, poverty and unemployment;
Country Initiatives - India

 Large informal agriculture sector majority of workforce

engaged;
 Work-based entitlements were introduced to buy the loyalty of
employees against unionization, early industrialization;
 Employees Social Insurance Scheme provides healthcare and
cash benefits, disability, maternity;
 2004: National Rural Employment Guarantee, 100 days of
labor in 200 backward districts;
 2000: Janashree Bima Yojana scheme, households contribute
fraction premium for disability rest is from govt;
 Provision of scholarships to students.
Tanzania

 Agriculture largest sector, 45% GDP, low-income country;

 Informal sector 94% engaged challenge for social protection;

 Coverage only to 1% of pop, rely on community networks;

 Free access to public health limited;

 Dependent on donor funding for its social expenditure;

Costa Rica

 HDI ranking: 54 among 182 countries;

 Expansion of social policy from 1950 to 1980 supported by
economic growth,
 State role was prominent in increasing wages and employment
opportunities;
 Strong commitment to universal health and education;
 Family allowance given, old-age insurance, annual spending
of 0.4% of GDP;
 Participation of vulnerable groups.