Pensions Core Course 2013: Should Older People be Targeted?

Should older people be targeted? Social pensions for elderly or social assistance for households

Charles Knox-Vydmanov, HelpAge International Morning Symposium on social pensions verses social assistance World Bank, Washington 3rd April 2013

Social assistance vs social pensions

What are countries saying?

An guaandBarbuda

Argen na

Australia

Bangladesh

Belize

Bolivia

Botswana

Brazil

Canada

CapeVerde

Colombia

CookIslands

CostaRica

Denmark

EcuadorElSalvador

Finland

France

Guatemala

Guyana

Iceland India

IndonesiaIreland

Jamaica

Kenya

Kiriba

Kosovo

Lesotho

Malaysia

Maldives

Malta

Mauri us

Mexico

Namibia

Nepal

Netherlands

NewZealand

Nigeria

Norway

Panama

Paraguay

Peru

Philippines

SaintVincentandtheGrenadines

Samoa

Seychelles

SouthAfrica

Suriname

Swaziland

Sweden

Thailand

Timor-Leste

TrinidadandTobago

Turkey

UnitedKingdom

Venezuela,BolivarianRepublicof

VietNam

0

2000

4000

6000

8000

10000

12000

14000

1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Incomeperperson(fixedPPP$)

Year

Latin America

In spite of CCTs, many countries

are introducing social pensions

• Mexico

• Ecuador

• Paraguay

• Peru

China

Long history of catch-all social

assistance. Since 2009,

massive expansion of Rural

Social Pension.

Agenda Why are countries making this choice?

Beyond

Poverty and vulnerability are too widespread and complex to be dealt with by a single safety net

Beyond

Old age is a societal issue

“the poor”

“the elderly”

versus

Beyond “the poor” Logic for a catch-all safety net

Resources are limited

A residual group we can

identify as “the poor”

Target resources efficiently to

the poor:

“Surgical targeting”

+

=

"How I would like a poor church for the poor"

Poverty is dynamic with complex causes

Mother died

She was very bright and was doing well at school, but father refused to pay her school fees. She had to drop out.

1963. Married and first child born

Father died

Husband lost job

Husband became sick

Lack of money to buy basics

Low fluctuating wellbeing Children born: 1963, 1965, 1968, 1970, 1973, 1978, 1981

2000s 1963 1986

Wellb

ein

g

Grand children left with them

Bukuluki and Carol Watson (2012)

Implications (1) poverty and vulnerability widespread

13%

24%

38%

50%

57%

69%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Po

pu

lati

on

belo

w p

overty

lin

e

(%

)

$PPP 1.2

$PPP 1.4

$PPP 1.8

$PPP 2.1

$PPP 2.4

$PPP 3.0

World Bank (2012) Targeting poor and vulnerable households in Indonesia

Implications (2) poverty-targeting incredibly challenging

• Significant exclusion errors – normal for half of those targeted to miss out

• Driven by:

• Complexity of poverty

• Long gaps between targeting (2 years is good)

• Administrative costs and perverse incentives

• Political costs

• Targeting of the poor suggests it is something that one part of society does to another

• “Benefits meant exclusively for the poor often end up being poor benefits.” Amartya Sen

• Social assistance rarely large in scale

“The aim was maximum mobilization of resources, from all sources, to be targeted upon the needs of the poor as assessed ‘scientifically’. .... As it turned out, the extent of poverty was too great, its causes and cure too complex for such simple ‘scientific’ treatment; … After a decade or so the policy was an admitted failure.”

Pat Thane (2000) Old Age in English History: Past Experiences, Present Issues

The alternative?

Resources are limited

A residual group we can

identify as “the poor”

Target resources efficiently to

the poor:

“Surgical targeting”

+

=

Not so simple

+

Poverty and vulnerability are

widespread and dynamic

Overlapping system covering

the big life course risks:

A social protection floor

=

Beyond “the elderly” Why to countries invest in basic pensions?

• Basic pensions (including social pensions) often prioritised in social protection system

• Sequencing: Set pace for wider SP system development

• Remain core spend

• with major impact on poverty and inequality for whole population

• But why?

• Because older people are poorer?

• Evidence of relative poverty rates not compelling

• Poverty analysis from household surveys can only tell us a limited amount about individual wellbeing of older people

• The “grey vote”?

• Lesotho? – 4.3% over 65

• Nepal? – 4.2% over 65

• Brazil? – 7% over 65

Characteristics of old age? Old age doesn’t just affect older people

• A fundamental human concern

• “How will I support myself when I get older?”

• Affects life course decisions (eg. fertility)

• “Having too many children was for a long time, and still is today, the main form of social protection in Mozambique and, perhaps, in most Sub-Saharan African countries.” Francisco, Ali and Ibraimo (2010)

• Good evidence of link between pension provision and fertility

• Situation of current older people is an shared/intergenerational issue

• Supporting an older person is an additional strain for a vulnerable family

• Pensions shared amongst other household members

• Dignity and autonomy: enough to rely on family support?

Universal and inevitable

We all expect to get old

Issue of autonomy and dignity

Few want to be wholly dependent

Changing expectations?

53%

45%

40% 40%

31%

9%

31%

36% 37%

32%

39%

63%

5% 7%

12%

22%

14%

4%

0%

10%

20%

30%

40%

50%

60%

70%

South Korea Taiwan Hong Kong Singapore Malaysia China

Retirees themselves

Government

Grown children or other familymembers

“Who, ideally, should be mostly responsible for providing income to retired people?”

Pensions as a societal good Katete, Zambia

“Before, people used to bypass us as we had nothing to offer. Now there is a much stronger relationship within the community.”

“the village is very proud of us, they call us ‘bosses’ now.”

“The people who receive assistance, the aged, are my old parents; so I am relieved when the transfer is given to them.”

“Now they buy enough food and the children come to school fed. When the child is fed concentration levels are higher and the output of the pupils is good. So, even the results are improving.”

Concluding thoughts

• Poverty and vulnerability go beyond “the poor”

• Ultimately need for a more systematic approach

• Issues of old age go beyond “the elderly”

• Challenge is to guarantee basic income security for all people when they reach old age

Changing the question • What is the “mix” for guaranteeing income security in

old age

• How to integrate non-contributory (basic security/adequacy) and contributory (consumption smoothing/insurance)?

• How to integrate the two sides of a system? (avoiding perverse incentives)

Thank you

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