Investing in safety nets cheaper than the consequences of malnutrition.
Brazil’s Bolsa Familia safety net has been a key factor in reducing inequality.
Safety nets, access to services, jobs and finance are key World Bank Spring Meetings themes.
April 13, 2012 - Many people in Ethiopia feared the worst as drought spread through the Horn of Africa last year. But Ethiopia escaped famine, thanks to the country’s Productive Safety Net Program protecting 7.6 million people in the country’s most food insecure areas.
“There was a big shock and it wasn’t easy to handle, but because of the program it did not turn into a real crisis in Ethiopia. People were able to manage and get by with the support of the program,” says Wolter Soer, coordinator of a World Bank project supporting the program.
Faced with increasingly frequent crises in recent years, 80% of developing countries plan to create similar safety net programs or strengthen existing ones, according to World Bank assessments.
This rising interest in safety nets and social protection is reflected in the themes of the upcoming World Bank-IMF Spring Meetings. Several events between April 16 and 20 focus on efforts to “Close the Gap” in access to food, health care, gender, education, finance, and jobs. A new Social Protection and Labor strategy will be launched on April 18 and the Development Committee of the World Bank and International Monetary Fund will consider a more specific paper, “Safety Nets Work: During Crisis and Prosperity,” on April 21.
Safety Nets Work
Safety nets take different forms, encompassing comprehensive programs like Brazil’s Bolsa Familia that assist poor families with cash payments, or Liberia’s cash-for-work program providing access to public works jobs, or school feeding programs or academic stipends designed to address temporary nutrition and gender gaps.
The safety nets paper says safety nets like Ethiopia’s program and school feeding in Nicaragua helped save lives, provided families with a basic income, and kept children healthy and in school during the food, fuel and financial crises. Where such programs were absent, people more often faced malnutrition and were forced to sell assets, cut back on food and health care, and pull their children out of school.
The paper points out safety nets are also good investments during good times. “There are many poor people who even in good times face deprivation or household-specific calamities like the loss of a job or illness of a breadwinner than those affected by the big crises that garner headlines and extra policy attention," says Margaret Grosh, one of the authors of “Safety Nets Work." To serve these people, safety nets must be ongoing programs, she says.
Governments of developing countries typically spend no more than 1-2% of GDP, and sometimes less. In contrast, the cost of malnutrition in children, where it is a major problem, can amount to 2-3% of GDP annually for the entire life of the children as they grow up with diminished ability to learn and, ultimately, earn a living.
Dozens of countries have created new safety nets or improved them since 2008. In the last decade, more than 40 countries have followed in the footsteps of Brazil and Mexico, using conditional cash transfer programs to encourage poor parents to send their children to school and take them for medical checkups.
The cash payments are often given to the woman of the household, based on evidence that income in the hands of women is more reliably used in the care of children than income in the hands of men.
The extra cash helps households buy essentials. Families usually spend it on more and better food, schooling expenses, utility bills, medical expenses and the like. Sometimes it also increases their access to microfinance, seeds, fertilizer and other farming inputs, and stimulates entrepreneurial activity, says Grosh.
Inequality Falling in Brazil
Some of the 13 million families in Brazil’s Bolsa Familia program, for instance, can now access microcredit and job training so they can “make their own living,” says Bank economist Anna Fruttero. The effort is “still experimental,” she says.
The Bolsa Familia program costs about 0.5% of GDP and covers 25% of the population. It is considered a key part of a strategy to create a “Brazil without Misery,” where everyone has access to health, education, housing, water and sanitation. “Income transfer programs, as important as they are, are just one block” of the strategy, says Fruttero. While they have shown to be an important instrument in reducing poverty they are not enough to completely eradicate it, she says.
Still, researchers in fast-growing Brazil say Bolsa Familia and related programs have contributed about 25% of a reduction in income inequality in the country.
“Brazil is an extremely unequal country, but inequality has been falling steadily during the last decade. Incomes of the poor have grown much faster than the incomes of the rich,” says Jaime Saavedra, director of the World Bank’s Poverty Reduction and Equity department. He adds that Latin America is the one region in the world where inequality is falling in the majority of countries, though inequality remains very high and is a key development challenge in the region.
Saavedra says income gaps in the region are related to "inequality of opportunity," which the Bank measures in the Human Opportunity Index. Inequality starts at birth, and children have very different access to quality health and education depending on where they were born or who their parents were, says Saavedra. Conditional cash transfer programs are key ways to reduce inequality of opportunity and have the potential to even the playing field further, he says.
Tackling the Gender Gap
Cash payments have also been used to address inequality in education. Stipend programs sent 850,000 girls to school in Bangladesh in the 2008/2009 school year, and 400,000 in Punjab, Pakistan; the ratio of female-male primary net enrollment in Pakistan rose in rural areas from 61 percent to 76 percent. Likewise, scholarships through Mexico’s Oportunidades conditional cash transfer program have been set slightly higher for girls than for boys in an attempt to close the gender gap there.
Even when programs are focused on the poor generally, says Grosh, “the gain in enrollment rates is usually biggest where there was the biggest gap to start with, and that’s often been girls, and other times ethnic minorities or populations in the most remote areas.”