The State of Social Safety Nets 2018

FIGURE 2.1 Average Global and Regional Spending on Social Safety Nets

Source: ASPIRE database.

Note: The number of countries in each region appears in parentheses. The difference in the regional average for Africa in this report as opposed to the Africa regional report (Beegle, Coudouel, and Monsalve, forthcoming) is that in the regional report, average social safety net spending (1.3 percent of GDP) does not include South Sudan as an outlier in terms of spending. The regional numbers presented in this figure are simple averages across countries. See appendix B for details. The conceptual treatment of health fee waivers is not straightforward because it depends on how countries arrange and report their provision of health care. Although in some cases the health fee waivers are reported under public health expenditures, in other cases they are counted under social protection expenditures. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity.

Countries in the Europe and Central Asia region spend on average the highest share of GDP on SSN globally. Georgia, at 7 percent of GDP on SSN, spends the most in the region (see appendix B). Spending in this country is driven by the universal old-age social pension scheme, which is part of the SSN system, as well as the targeted social assistance program.

Countries in Sub-Saharan Africa spend around the global average on SSN. However, many programs in the Africa region are donor-funded (see figure 2.2).² About two-thirds of the United Nations High Commission on Refugees budget is allocated to programs in Africa, and this humanitarian assistance is counted as SSN spending.³ The country with the highest share of GDP spent on SSN is South Sudan (10 percent of GDP), which has only two emergency assistance programs, both of which are fully financed by donors, reflecting the fragile environment in the country.⁴

FIGURE 2.2 Share of Donor-Funded Safety Nets in Sub-Saharan African Countries

Source: Beegle, Coudouel, and Monsalve, forthcoming.

The Africa region is very heterogenous in its SSN spending. Some of the world’s top spenders, such as Lesotho (7 percent of GDP) and South Sudan (10 percent), are in Sub-Saharan Africa; but so are many countries that spend very little on SSN as a percentage of GDP. Those include Cameroon, Republic of Congo, Côte d’Ivoire, Guinea-Bissau, Madagascar, São Tomé and Príncipe, Somalia, and Togo, which spend less than 0.2 percent of GDP on SSN.

In the Latin America and Caribbean region, the mean SSN spending is 1.5 percent of GDP, or 1.3 percent, excluding heath fee waivers. The highest spender is Chile (3.5 percent of GDP), whereas the median country spends 1.5 percent of GDP (1.1 percent, excluding health fee waivers). Guatemala (0.19 percent of GDP) and St. Lucia (0.48 percent of GDP) are the lowest SSN spenders (see appendix D).

The East Asia and Pacific region spends on average 1 percent of GDP on SSN, but significant variation in spending exists across countries. SSN spending ranges from 0.2 percent of GDP in Lao PDR and 0.3 percent in Myanmar to 2.0 percent in Mongolia and 6.5 percent in Timor-Leste (see appendix D). Timor-Leste spends the most on SSN in the region (figure 2.3). The median East Asia and Pacific country spends 0.8 percent of GDP on SSNs, or 0.7 percent, excluding health fee waivers (see table 2.1).

FIGURE 2.3 Social Safety Net Spending Variations across Countries and Regions: East Asia and Pacific, Latin America and the Caribbean, and Europe and Central Asia

Source: ASPIRE database.

Note: Based on the most recent spending data available between 2010 and 2016 (except for the following four countries, for which only total spending data are available for years before 2010: Bhutan, Jordan, Marshall Islands, and Vanuatu). See appendix D for details. The number of countries in each region appears in parentheses. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity.

FIGURE 2.4 Social Safety Net Spending Variations across Countries and Regions: Africa, Middle East and North Africa, and South Asia

Source: ASPIRE database.

Note: Based on the most recent spending data available between 2010 and 2016 (except for the following four countries, for which only total spending data are available for years before 2010: Bhutan, Jordan, Marshall Islands, and Vanuatu). See appendix D for details. The number of countries in each region appears in parentheses. The scale is restricted for convenience; the true value for South Sudan is 10.1 percent. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity.

TABLE 2.1 Social Safety Net Spending across and within Regions

Percentage of GDP

Source: ASPIRE database.

Note: See appendix D for details. The number of countries in each region appears in parentheses. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity; SSN = social safety net; .. = values below 0.01.

The median SSN spending across the globe is 1.1 percent of GDP, or 1 percent, excluding health fee waivers. The regions form two clusters in terms of median SSN spending. In Latin America and the Caribbean and in Europe and Central Asia, the median country spends 1.5–1.9 percent of GDP on SSN, whereas in East Asia and Pacific, Middle East and North Africa, South Asia, and Sub-Saharan Africa, the median country spends almost 1 percentage point less, around 0.7–0.8 percent of GDP (see table 2.1).

Countries with very high SSN spending levels are often those that contend with fragility, conflict, and violence. For example, Timor-Leste introduced a universal social pension for war veterans in 2008 as a response to violent conflicts in the mid-2000s. In South Sudan, as mentioned, all SSN spending consists of two large programs financed and implemented by the World Food Programme. These programs are in-kind and include multiple components, such as general food distributions, blanket supplementary feeding programs, and targeted supplementary feeding programs for internally displaced persons and returnees.

DO HIGHER-INCOME COUNTRIES SPEND MORE ON SOCIAL SAFETY NETS?

FIGURE 2.5 Social Safety Net Spending across Country Income Groups versus the OECD

Source: ASPIRE database.

Note: The number of countries in each country income group appears in parentheses. High-income countries included in the analysis are Chile, Estonia, Hungary, Kuwait, Latvia, Lithuania, Poland, Saudi Arabia, Seychelles, Slovak Republic, Slovenia, and Uruguay. Data for OECD countries refer to 2013 and are based on the Social Expenditure Database. Social safety net spending for OECD countries here is approximated by the sum of the “family” and “other social policy” social protection functions, as defined in the Social Expenditure Database. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity; OECD = Organisation for Economic Co-operation and Development.

TABLE 2.2 Variations in Social Safety Net Spending across Country Income Groups

Percentage of GDP

Source: ASPIRE database.

Note: The number of countries in each country income group appears in parentheses. High-income countries included in the analysis are Chile, Estonia, Hungary, Kuwait, Latvia, Lithuania, Poland, Saudi Arabia, Seychelles, Slovak Republic, Slovenia, and Uruguay. Data for OECD countries refer to 2013 and are based on the Social Expenditure Database. SSN spending for OECD countries here is approximated by the sum of the “family” and “other social policy” social protection functions, as defined in the Social Expenditure Database. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity; OECD = Organisation for Economic Co-operation and Development; SSN = social safety net; .. = values below 0.01.

The analysis using individual country observations suggests that there is no global relationship between a country’s income level and SSN spending as a percentage of GDP. In the Latin America and the Caribbean region, spending appears weakly, positively associated with income levels, whereas in other regions, spending is either negatively associated with income levels or has no correlation (figure 2.6). Globally, it appears that countries with the same GDP per capita levels choose different levels of spending on SSNs reflecting different policy preferences rather than economic conditions.

FIGURE 2.6 Total Social Safety Net Spending and Income Levels across Regions

Sources: ASPIRE database; World Development Indicators for GDP per capita, PPP US$.

Note: ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity; PPP = purchasing power parity.

Globally, the median country spends around US$80 (US$66, excluding health fee waivers) in purchasing parity power (PPP) terms annually per person (considering the total population, not just beneficiaries), while the mean country spends around US$157 (US$150, excluding health fee waivers). As a complement to the relative spending analysis, absolute annual (PPP US$) spending per capita can more accurately assess actual spending on SSNs in a country. For example, in absolute terms per person annually, the Latin America and the Caribbean countries spend PPP US$158 (US$139, excluding health fee waivers), whereas African countries spend PPP US$16 (figures 2.7 and 2.8). Even though the Africa region is the second-largest spending region in the world in relative terms (percentage of GDP), in absolute terms it is last among the regions (figure 2.9).

FIGURE 2.7 Absolute Annual Spending on Social Safety Nets per Capita across Countries and Regions: East Asia and Pacific, Europe and Central Asia, and Latin America and the Caribbean

Source: ASPIRE database.

Note: Values are converted to constant 2011 prices using the PPP and CPI from the World Development Indicators. Also, 2011 is used as the base year value to calculate the CPI ratio, as deflator, between the observed year and 2011 for all sample countries. Then it is divided first by the CPI ratio and then by the 2011 PPP value to obtain the constant 2011 PPP US$. In cases where CPI series are not available from the World Development Indicators, the GDP deflator is used as a proxy for deflation, particularly for Argentina and Belarus. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity; CPI = consumer price index; PPP = purchasing power parity.

FIGURE 2.8 Absolute Annual Spending on Social Safety Nets per Capita across Countries, Economies, and Regions: Middle East and North Africa, Sub-Saharan Africa, and South Asia

Source: ASPIRE database.

FIGURE 2.9 Regional Median Annual Social Safety Net Spending per Capita

Source: ASPIRE database.

Note: The number of countries in each region appears in parentheses. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity; PPP = purchasing power parity; SSN = social safety net.

The absolute benefit level per household also differs significantly across country income groups. In a subsample of 36 countries that have flagship (main) programs with the household as a beneficiary unit (see appendix E for details), the benefit amount (in PPP US$) per household is four time greater in upper-middle-income countries than in low-income countries—PPP US$106 versus PPP US$27, respectively (figure 2.10).

FIGURE 2.10 Transfer Amount for Cash Transfer Programs, by Income Group

Source: ASPIRE database (see appendix E for details).

Note: The number of countries (one program per country) appears in parentheses. The largest, or flagship, cash transfer program is selected per country. See the full list of selected programs in appendix E. Transfer amount values (as designed) are converted to constant 2011 prices using the PPP and CPI from the World Development Indicators. Also, 2011 is used as the base year value to calculate the CPI ratio, as deflator, between the observed year and 2011 for all sample countries. Then it is divided first by the CPI ratio and then by the 2011 PPP value to obtain constant 2011 PPP US$. In cases where CPI series are not available from the World Development Indicators, the GDP deflator is used as a proxy for deflation, particularly for Argentina and Belarus. High-income countries are excluded from this analysis because of a small sample. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity; CPI = consumer price index; PPP = purchasing power parity.

HOW HAS SPENDING CHANGED OVER TIME?

FIGURE 2.11 Trends in Social Safety Net Spending in Latin America and the Caribbean

Source: ASPIRE database.

Note: GDP in Latin America and the Caribbean constitutes member countries of the International Development Association and International Bank for Reconstruction and Development. A balanced panel of seven countries (Argentina, Brazil, Colombia, Ecuador, Mexico, Peru, and Uruguay) is used. The average social safety net spending in Latin America and the Caribbean before 2010 should be interpreted with caution because data availability was more problematic, particularly for program-based disaggregated data up to 2009. Social safety net spending excludes health fee waivers. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity; GDP = gross domestic product; SSN = social safety net.

In Europe and Central Asia, the increase in social spending over a similar period was moderate. This book analyzed a subsample of 15 countries in the region (Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Estonia, Kazakhstan, Latvia, Macedonia, Montenegro, Poland, Romania, Serbia, Turkey, and Ukraine) with balanced panel time-series spending on SSN.⁵ Their total population represents about 60 percent of the Europe and Central Asia countries.⁶ The analysis suggests that in this group of countries, average spending rose steadily, from 1.2 to 1.8 percent of GDP from 2003 to 2009, and then fell slightly, to 1.6 percent in 2014. Before the financial crisis, the region seems to have reached a steady level of SSN spending; then spending grew in response to the financial crisis; and now it is converging to the prior level (see figure 2.12).

FIGURE 2.12 Trends in Social Safety Net Spending in Europe and Central Asia, 2003–14

Source: ASPIRE database.

Note: GDP in Europe and Central Asia constitutes International Development Association and International Bank for Reconstruction and Development countries. Social safety net spending data do not include a data point for Poland in 2003 or for Montenegro, Poland, Serbia, and Turkey in 2014. The averages for these years should be interpreted with caution. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity; SSN = social safety net.

Many countries in Sub-Saharan Africa and Asia are introducing flagship SSN programs and are rapidly expanding coverage. However, these initiatives come at a fiscal cost. In Tanzania, the Productive Safety Net Program expanded from 0.4 to 10 percent of the population from its launch in 2013 to 2016 (figure 2.13, panel a). This coverage expansion was accompanied by a rapid increase in program spending, from 0.03 to almost 0.3 percent of GDP in two years. In Senegal, the National Cash Transfer Program expanded from 3 to 16 percent of the population in four years (figure 2.13, panel b). The corresponding program spending increased from 0.05 to 0.2 percent of GDP during 2013–15. In Indonesia, the Program Keluarga Harapan increased its coverage from 1 to 9 percent of the population between 2008 and 2016, and the respective budget also increased (figure 2.13, panel c). In the Philippines, the flagship conditional cash transfer program called 4Ps increased its coverage from 4 to 20 percent of the population between 2008 and 2015, and the respective budget increased from 0.1 to 0.5 percent of GDP (figure 2.13, panel d). The global inventory of the biggest SSN programs (by category) per country can be found in appendix C.

FIGURE 2.13 Expansion of Flagship Cash Transfer Programs in Tanzania, Senegal, the Philippines, and Indonesia

Source: ASPIRE database.

Note: Data for Tanzania include Zanzibar. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity; CCT = conditional cash transfer.

WHICH SOCIAL SAFETY NET INSTRUMENTS DO COUNTRIES FUND?

FIGURE 2.14 Social Safety Net Spending across Regions, by Instrument

Source: ASPIRE database.

Note: This figure shows estimates based on a sample of 112 countries with program-level data disaggregation available, as presented in appendix D. For comparability, health fee waivers are dropped from total spending and from the fee waivers category, which comprises educational fee waivers and utility fee waivers only. ASPIRE = Atlas of Social Protection: Indicators of Resilience and Equity; CCT = conditional cash transfer; SA = social assistance; UCT = unconditional cash transfer.

The analysis suggests that cash transfers take up more than half of all SSN spending. Europe and Central Asia has the largest cash transfer budget share among regions (with cash transfers consisting of unconditional and conditional cash transfers and social pensions). Cash transfers in Europe and Central Asia account for 76 percent of the total SSN spending portfolio. At the same time, the Middle East and North Africa countries, on average, allocate just over 40 percent of their budget to cash transfers (see figure 2.14).

The Latin America and Caribbean region has the largest conditional cash transfer budget share. The region spends around 21 percent of its total SSN budget on this instrument. However, the Latin America and Caribbean region is not alone in its substantial reliance on conditional cash transfers. It is followed closely by Sub-Saharan Africa, where conditional cash transfers account for around 18 percent of the SSN budget. East Asia and Pacific spends 12 percent of GDP on conditional cash transfers (figure 2.14).

In-kind transfers account for a significant share of SSN spending in a number of regions. These include Middle East and North Africa (18 percent), Africa (11 percent), South Asia (10 percent), and Latin America and the Caribbean (9 percent). The spending on in-kind transfers in the Middle East and North Africa is driven by such countries and economies as West Bank and Gaza and Djibouti, where emergency and fragile context leads to in-kind interventions (mostly donor funded). In Iraq, the spending on food rations accounts for more than 85 percent of the total SSN spending.⁷ In South Asia, India’s Public Distribution System program costs more than 1 percent of GDP (see appendix D) and contributes almost 70 percent of the total SSN budget captured in administrative data. Regions allocate between 4 and 9 percent to school feeding programs (see figure 2.14).

As this chapter has illustrated, SSN programs take many forms, and their budgets tend to expand across space and time. The next chapter explores the performance of SSN programs around the world. It looks at what countries achieve in terms of coverage, benefit incidence, and poverty/inequality impact for the SSN budget they spend.

NOTES

1. This chapter focuses on social safety nets only, as a subset of social protection and labor market programs.

2. “Sub-Saharan Africa” and “Africa” are used interchangeably in this book.

5. SSN spending data do not include a data point for Poland in 2003 or for Montenegro, Poland, Serbia, and Turkey in 2014. The averages for these years should be interpreted with caution.

6. Those exclude high-income Organisation for Economic Co-operation and Development (OECD) countries.

REFERENCES

Beegle, K., A. Coudouel, and E. Monsalve, eds. Forthcoming. Realizing the Full Potential of Social Safety Nets in Africa. Washington, DC World Bank.

CHAPTER 2

Spending on Social Safety Nets

HOW MUCH DO REGIONS AND COUNTRIES SPEND ON SOCIAL SAFETY NETS?

DO HIGHER-INCOME COUNTRIES SPEND MORE ON SOCIAL SAFETY NETS?

HOW HAS SPENDING CHANGED OVER TIME?

WHICH SOCIAL SAFETY NET INSTRUMENTS DO COUNTRIES FUND?

NOTES

REFERENCES