Overview

  What are Safety Nets Programs?
  What is the Role of Safety Nets? 
  What is the Vision for a Good Safety Net?
  Target Groups

Social Safety Nets are non-contributory transfer programs targeted to the poor or those vulnerable to poverty and shocks.  Some people refer to such programs described as social assistance or social welfare programs.  Common safety net programs include:

• Cash Transfers and Conditional Cash Transfers
• Food-related Programs
• Price & Other Subsidies
• Public Works
• Health care services
• Education, electricity and housing

Social safety nets are only one part of the broader social protection policy, or social policy. Social protection will also include social insurance contributory programs such as pensions and unemployment insurance, as well as other labor market policies. Social policy will include public programs in social protection, health and education, sometimes with important elements of housing or utility policy.

Because we define safety nets rather narrowly, their costs are lower than some people associate with safety nets. In Uruguay, for example, total social sector expenditure (social assistance, social insurance, health, education, and other) is quite high accounting for between 20 and 25 percent of gross domestic product (GDP) between 2000 and 2005 but expenditures on safety nets per se are only 0.5 percent of GDP (World Bank 2007g). On average, expenditures on safety nets as we define them account for 1 to 2 percent of GDP, though sometimes much less or much more.

Safety nets are part of a broader poverty reduction strategy interacting with and working alongside of social insurance; health, education, and financial services; the provision of utilities and roads; and other policies aimed at reducing poverty and managing risk.

Safety net programs can play four roles in development policy:

1. Safety nets redistribute income to the poorest and most vulnerable, with an immediate impact on poverty and inequality.
2. Safety nets enable households to make productive investments in their future that they may otherwise miss e.g. education, health, income generating opportunities.
3. Safety nets help households manage risk. At minimum, offsetting harmful coping strategies. At best, providing an insurance function which improves livelihood options.
4. Safety nets allow governments to make choices that support efficiency and growth.

Countries will need a blend of safety  net programs, because each option covers some risks and groups better than others, each requires different administration and factors into the political economy of social policy differently. 

A good safety net system is more than a collection of well-designed and well-implemented programs, however; it also exhibits the following attributes.

• Appropriate. The range of programs used and the balance between them and with the other elements of public policy should respond to the particular needs of the country. Each program should be customized for best fit with the circumstances.
• Adequate. The safety net system overall covers the various groups in need of assistance the chronic poor, the transient poor, those affected by reforms, and all the various subsets of these groups.
• Equitable. The safety net should treat beneficiaries in a fair and equitable way. In particular, it should aim to provide the same benefits to individuals or households that are equal in all important respects (horizontal equity) and may provide more generous benefits to the poorest beneficiaries (vertical equity).
• Cost-effective. Cost-effective programs channel most program resources to their intended target group. They also economize the administrative resources required to implement the program.
• Incentive compatible. Safety nets can change households behavior, for better or worse. To ensure that the balance of changes is positive, the role of safety nets should be kept to the minimum consistent with adequacy. The safety net system often may include programs that explicitly help build assets or incomes of their individual clients or communities by linking transfers to required or voluntary program elements.
• Sustainable. Prudent safety net systems are financially sustainable, in that they are pursued in a balanced manner with other aspects of government expenditure. Individual programs should be both financially and politically sustainable so that stop/start cycles of programs are avoided.
• Dynamic. A good safety net system will evolve over time. The appropriate balance of programs will change as the economy grows and changes, as other elements of policy develop, or when shocks occur. The management of specific programs should also evolve as problems are solved and new standards set.

The safety net as a whole should provide coverage to three rather different groups:

• The chronic poor even in "good times" these households are poor.  They have limited access to income and the instruments to manage risk, and even small reductions in income can have dire consequences for them.
• The transient poor this group lives near the poverty line, and may fall into poverty when an individual household or the economy as a whole faces hard times.
• Those with special circumstances sub-groups of the population for whom general stability and prosperity alone will not be sufficient.  Their vulnerability may stem from disability, discrimination due to ethnicity, displacement due to conflict, "social pathologies" of drug and alcohol abuse, domestic violence or crime.  These groups may need special programs to help them attain a sufficient standard of well-being.

Regardless of the mix of programs used, each should be cost-effective in its own right, with appropriate benefit levels, administrative systems and targeting mechanisms.  Indeed, there is broad consensus about "good practice" with respect to these characteristics, much more so than with respect to the appropriate mix of programs.