POVERTY IN SERBIA DURING TRANSITION – TRENDS, POLICIES,

DILEMMAS

GORDANA MATKOVIĆCENTRE FOR LIBERAL – DEMOCRATIC

STUDIES

Poverty trends• During the 2000s decade up until the crisis at the end of 2008,

significant reduction in absolute poverty

• According to LSMS from 2002 until 2007 poverty was halved (from 14 to 6.6%)

• During the crisis poverty increases (8.8% in 2010, preliminary HBS data) - precisely in those population segments where it had previously declined, particularly in non-urban areas and among the less educated

• The poor were affected through loss of formal and informal employment, decreased wages in the informal economy, decreased support from friends and family, who themselves were also affected by the crisis

Poverty trends

Table 1 Poverty indictors in Serbia, 2006 – 2009.

2006 2007 2008 2009

Percentage of the poor – absolute poverty 8.8 8.3 6.1 6.9

Percentage of the poor – relative poverty 14.4 13.4 13.2 13.6

At –risk- of- poverty rate 20.9 21.0 17.9 17.7

Self-perceived at-risk-of-poverty rate 50.0 43.6 43.4 42.2

Source: HBS data (Government of the Republic of Serbia, 2010)

Policies Through both the (current) Social Protection Law and Law on Financial Support to Families with Children:

•Introduction of a single administrative poverty line at republic level• Benefits defined in absolute terms and indexed by CPI• Continuous access to rights

In addition, division of social and population policy measures - CA became a social assistance program, targeting only poor families with children

In the new draft Social Protection Law

•New equivalence scales (higher benefits/census for multimember families) modified OECD equivalence scale•Increased number of eligible household members to 6•Higher benefits/census for households with members that are unable to work •Activation of SA beneficiaries

Beneficiaries

2000 2001 2003 2005 2007 2008 2009 20100

100,000

200,000

300,000

400,000

500,000

600,000

700,000

486,147

589,584

499,773 487,268436,778

383,084 376,433 379,841

Number of children beneficiaries of child allowances

2001 2003 2004 2005 2006 2007 2008 2009 20100

10,000

20,000

30,000

40,000

50,000

60,000

70,000

34,068

42,61545,441 43,912

47,91150,848

58,803 59,624

66,385

Number of households beneficiaries of MOP

Amounts of benefits and budgetary expenditures

• Child allowance :o from 19 Euros per child, to 25 Euros for special

categories o the income per family member must not exceed 63

Euros per month o the expenditure share in GDP only 0.3% in 2009

• Social assistance: o from 57 Euros for single member households to 140

Euros for families with 5 memberso the expenditure share in GDP is low, only 0.15% in 2009

Policy Dilemmas

The first group of dilemmas – related to conceptual and technical issues:

1. Absolute or relative poverty 2. Income versus consumption3. Survey data sources

The second group of dilemmas- related to the design of benefits:

4. Consolidating social assistance and child allowances5. Indexation of benefits6. Decentralization7. The status of social assistance beneficiaries capable of work

Absolute or relative poverty

• Initially a significant part of the population could not satisfy even the most basic needs (in 2002 more than 14%)

• Irrespective of EU aspirations and conceptual differences it was easy to reach a consensus - both analysis and policy must be focused on absolute poverty

• In 2009 Monitoring Social Inclusion in Serbia formally introduces relative poverty, while the policy focus is still on absolute poverty

• Monitoring absolute poverty should not be abandoned until it decreases to a low level

• Material deprivation indicator is not completely adequate for gaining a fully realistic picture of the true level of deprivation in Serbia

Absolute or relative poverty •Moving to social inclusion concept opens up dilemmas on how to effectively monitor the phenomenon

•Since Serbia is still a country with very limited resources, being able to compare, rank and prioritize is an imperative

•Social inclusion : comprehensive concept monitored according to segmented indicators – in Serbia a multidimensional indicator would be important for prioritization

•In addition, general surveys reveal little about specific vulnerable groups (Roma, SA beneficiaries, PWD..)

•In Serbia conducting an additional survey, with a booster sample together with the general survey (within the SILC or HBS) would provide a more realistic picture on specific vulnerable groups that is important for prioritization

Consumption/income

• World Bank experience + confirmation in reality - a widespread grey economy, significant and unreported remittances, a high share of in-kind consumption and vast irregularities in wage payments

• Consensus on measuring poverty according to consumption – once again easily reached

• It is still relevant – while poverty according to consumption increased in 2009, income poverty kept decreasing

• Including a consumption module into the SILC in Serbia makes sense

Survey data sources•If the decision was to be made today, the choice would be SILC implemented by RSO

•At the time (2002) the only option was LSMS conducted by a private firm

•From 2006 HBS conducted by RSO, plans to start SILC in 2011.

•Downside – confusion among general public, lack of a continuous series of poverty data

•Advantages – LSMS is wider in scope

•Based on these experiences it is important to:ocontinue monitoring absolute consumption poverty based on the HBSocommunicate more with the media and the general public about the new data source and new concepts of poverty

•RSO should officially publish poverty data

Consolidating social assistance and child allowances

• Arguments in favor – improved targeting, increasing the adequacy, increased income elasticity

• Reasons for rejecting:

o Keeping two policy instruments - option of favoring poor families with children over the total poor population

o A significant number of children that are not well-off would be excluded from assistance

o Child allowances are part of Serbia/EU tradition

Indexation of benefits• Discarding the concept of expressing cash benefits as a

percentage of the wage and defining it in absolute terms, indexed by CPI since:o It was in line with the concept of absolute povertyo Wages increased repeatedly due to technical reasons o Wages do not adequately reflect the increase in living

standard of the population in Serbia

• Downside – In the case where initial amounts are too low and inadequate even under the absolute poverty concept, how to force the government to revisit the issue

• Setting a trigger after which it would be mandatory to re-examine the benefit/census amounts, until they meet the absolute poverty criteria?

Decentralization of cash benefits •Non existent dilemma initially, but issue revisited subsequently by different actors

•Conceptual reasons - cash benefits, having a redistributive function should be legally defined at national level, at least in the minimum amount

•Pragmatic reasons – without regions, dangerous to devolve CB to LS - many of which are poor and without capacity, social welfare loses the battle with other, politically more attractive areas

•Negative experiences from other countries in transition

The status of SA beneficiaries capable of work

• Still a dilemma – different views ranging from:o they should be excluded from SA programso limited duration of SA (9months)o introducing activation

• The current legislation on the limited duration of 9 months based on:o belief that those who are capable of work should not

completely rely on SA o previous practice – inclusion of (estimated)

unregistered income into the eligibility criteria

The status of SA beneficiaries capable of work

• The new draft law also retains this concept, foreseeing the gradual introduction of activation program as well

• Activation programs will not provide quick results since:o Capacity of implementing agencies is lowo Unemployment is high and it is not realistic that the

capacity of the NEO will be focused on SA beneficiaries