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Pensions Core Course 2013: Should the Elderly be Targeted? The Case for Integration
 

Pensions Core Course 2013: Should the Elderly be Targeted? The Case for Integration

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    Pensions Core Course 2013: Should the Elderly be Targeted? The Case for Integration Pensions Core Course 2013: Should the Elderly be Targeted? The Case for Integration Presentation Transcript

    • Should the Elderly be Targeted?Social Pensions for the Elderly orSocial Assistance for Households:The Case for IntegrationMargaret GroshSymposium on Social PensionsApril 3, 2013World Bank, Washington DC1
    • The Elderly are Not all Poor,Often Not Poorer than Average• In fact, many studies show that in most countries they are not poorer than average, and even incountries where elderly are poorer than average, it isn’t by much (Eg. Cotlear and Tornarolli 2009for LAC, Kakwani and Subbarao 2005 for Africa, Braithwaite, Grootaert and Milanovic 1999 for ECA,many others)• Subject to the usual caveats about measuring individual welfare with household data2
    • Because Most Elderly Live In Families3
    • And because many work,at among least the ‘younger’ elderly4
    • Moreover,the elderly poor are not the only poor5
    • 6There are Advantages to IntegratingSocial Pensions with Social Assistance• Avoids age-related horizontal inequities• Minimizes administrative costs, avoids duplication offunctions• Potential synergies– in helping with links to enrollment in social health insurance, or– encouragement via CCTs of use of health care that would be helpful inmanaging chronic conditions such as diabetes or cardiac risk– Links to activation measures• Allows SS administration to stay service-oriented rather thanbecome gatekeepers
    • And an increasing number of countries have povertytargeted cash transfers;eg have decided that targeting is desirable for somesocial assistance and invested in administrativecapacity to do itLegendCountries withCCT ProgramsData notavailableGrosh, Fruttero, Oliveri, 2013Garcia and Moore, 20127
    • And yet the trend is otherwise:Illustrations from LAC• Of 15 countries with CCT programs (eg poverty targeted socialassistance), 11 also have separate social pensions programs• Many of the social pensions programs are targeted• Many of the social pensions were set up after the CCT• Average spending:– CCT program: 0.30% of GDP– Social pension: 0.37% of GDP• Average coverage:– CCT program: 16% of population– Social pension: 2% of population8
    • DISCUSSION9
    • Targeting controversies: Should/can socialpensions be effectively targeted?Fiscal Space:Not enoughcurrently toprovide 100%coverage andmeaningfulbenefitTargeting Know-How:Progressive outcomes fortargeted programs buterrors of both inclusionand exclusion;administrative and othercosts 10
    • Targeting controversies: Should/can socialpensions be effectively targeted?Universalist:Optimistic that social unity willgarner bigger budgetPessimistic about track recordor future practice on targetingFiscal Space:Not enoughcurrently toprovide 100%coverage andmeaningfulbenefitTargeting Know-How:Progressive outcomes fortargeted programs buterrors of both inclusionand exclusion;administrative and othercostsTargeter:More pessimistic about fiscal space;More optimistic with respect totargeting practice and/or potential11
    • 12IF Social Pensions are Integratedwith Social AssistanceTo integrate elderly into general social assistance well mayimply some adjustments• To eligibility formulae: -- asset disregards, allowance for higher medicalexpenses, etc;• To benefit formulae: -- to provide higher income if no other adult earnersin household, economies of scale if living in small households, etc.• To any corresponsibilities: -- adjusting requirements for activation orhealth care useWhat do we mean by integrating social assistance and socialpensions?• Is it in the program name?• Is it in the eligibility or benefit formulae?• In the back office systems – targeting questionnaire, information system,payment system? In linkages to other programs?
    • IF Social Pensions are Integratedwith Social AssistanceSome potential disadvantages:– Differences in perception and stigma– Receipt of family-based social assistance won’t empower the elderlywithin the household the way receipt of an individual-specific pensionmight;– Politics:• support for social pensions may be higher than support for social assistance amongthose of working age;• politicians may get rewarded for new or multiple programs;13
    • • In any case there is probably both a policy anda technical/administrative agenda making surethat social assistance, social pensions, andcontributory pensions are well coordinatedwith one another14
    • SOME EMPIRICSWITH LATIN AMERICAN EXAMPLES15
    • Older are Not Always PoorerCotlear and Tornarolli,2009Poverty Headcount Ratio by Age16
    • 17Myth busting:poverty and the elderly in Niger and PanamaHHs withoutelderly; 83%HHs withelderly17%65%25%6%4%Elderly contributing to family incomeElderly not contributing to family incomeMissing generationElderly only0% 5% 10% 15% 20% 25% 30% 35%Elderly not contributing tofamily incomeElderly contributing to familyincomeMissing generationElderly onlyHHs without elderlyTotal* (heads characteristic)poverty ratespoverty gapResults largely insensitive to specification of economies of scale (over plausible range of θ from 1 to 0.7); to FGT(0); FGT (1), etc.HHs withelderly 22%3%24%16%56%HHs withoutelderly; 78%Elderly contributing to family incomeElderly not contributing to family incomeElderly onlyMissing generation0% 10% 20% 30% 40% 50%Elderly not contributingto family incomeElderly contributing tofamily incomeMissing generationElderly onlyHHs without elderlyTotal* (headscharacteristic)poverty ratespoverty gapNIGER PANAMA
    • Targeted social pensions would reduce povertymore than universal social pensionsChanges in Extreme Poverty RatesSimulation with .5% of GDP given to all elderly (65+)vs poor (<US$2.5/day) elderly (65+)Acosta, Leite and Rigolini, 2012 18
    • Figure 12: Coverage of Social Pension Programs byCountry and Deciles of Income Distribution,Adjusted by AgeSource: ASPIRE DatabaseUniversal Social Pensions May not HaveLarge Coverage or Good Targeting,(which will limit their impact on poverty overall)Figure 12: Coverage of Social Pension Programs byCountry and Deciles of Income, Total PopulationDistributionSource: ASPIRE Database0102030405060708090100D1 D2 D3 D4 D5 D6 D7 D8 D9 D10%ofpeoplecoveredBolivia 2007: Bonosol Brazil 2009: BPCChile 2009:PBS,APS Mexico 2010: Programa Adultos Mayores0102030405060708090100D1 D2 D3 D4 D5 D6 D7 D8 D9 D10%ofpeoplecoveredBolivia 2007: Bonosol Brazil 2009: BPCChile 2009:PBS,APS Mexico 2008: Programa Adultos MayoresFrom Oliveri, Fruttero and Grosh, forthcoming,based on ASPIRE data19
    • RRetirement AgeFormal workersSelf-employment / InformalAge 50 Age 70ProportionofpopulationWhere informality and self-employment arehigh, the earnings “cliff” is less an issueNon participants20
    • Employment Rates decline gradually with agePoorer older workers are self-employed or informal0%20%40%60%80%100%50-54 55-59 60-64 65-69 70-74 75-80Source: PNAD 2008.Richest40 percent0%20%40%60%80%100%50-54 55-59 60-64 65-69 70-74 75-80Formal workers Informal Self-employed UnemployedBrazil: Employment during AgingTransition, by Income Level(percent of population by labor status)Poorest40 percent0%20%40%60%80%100%50-54 55-59 60-64 65-69 70-74 75-80Source: ENIGH 2008.Richest40 percent0%20%40%60%80%100%50-54 55-59 60-64 65-69 70-74 75-80Non participant Formal workers Informal Self-employed Unpaid workerMexico:Employment during Aging Transition, by Income Level(percentof population by labor status)Poorest40 percent21
    • Significant but lowerlabor force participationamong the elderly;Significant variation bycountryTable 1. Labor Force Participation in Latin America: Adults and ElderlyAdults (25-64)Elderly(65+)RatioElderly/AdultsCosta Rica 72.8 14.3 0.20Argentina 77.4 15.5 0.20Uruguay 82.2 17.3 0.21Chile 72.3 18.5 0.26Brazil 77.4 23.1 0.30Colombia 73.6 22.1 0.30Barbados 86.7 27.0 0.31Guyana 70.4 23.0 0.33Panama 74.7 25.4 0.34Dominican Rep. 68.4 23.6 0.35Venezuela 78.1 27.6 0.35Jamaica 82.5 31.7 0.38Mexico 72.0 30.1 0.42El Salvador 73.3 31.0 0.42Belize 68.7 32.8 0.48Paraguay 79.2 39.2 0.49Nicaragua 73.9 37.2 0.50Ecuador 78.0 39.5 0.51Haiti 76.2 41.7 0.55Honduras 68.3 38.6 0.57Peru 84.9 51.1 0.60Bolivia 83.1 57.8 0.70Source: CEDLAS.Source: Murrugara, 201222