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Overview of Poverty Reduction and Social Inclusion Policies in the Western Balkans

Overview of Poverty Reduction and Social Inclusion Policies in the Western Balkans. Will Bartlett European Institute – LSEE London School of Economics. Outline. Pre-crisis growth and poverty reduction Impact of economic crisis on poverty and social exclusion

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Overview of Poverty Reduction and Social Inclusion Policies in the Western Balkans

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  1. Overview of Poverty Reduction and Social Inclusion Policies in the Western Balkans Will Bartlett European Institute – LSEE London School of Economics

  2. Outline • Pre-crisis growth and poverty reduction • Impact of economic crisis on poverty and social exclusion • Poverty reduction and social inclusion policies • Anti-crisis measures • What should be done in context of EU accession and regional cooperation?

  3. Poverty profiles • Rural poverty higher than urban • Bosnia LSMS 2007 rural 18%; urban 8% • Regional dimension within countries • Education and poverty • In BiH without degree 21%; with degree 1.1% • Employment does not protect against poverty • In Albania >50% of poor are employed in low skilled jobs

  4. Economic crisis • Global economic crisis struck in late 2008 as external drivers of growth collapsed • Exports • FDI • Remittances • Credit growth • Variable impact in 2009, • IMF support for Bosnia and Serbia, • Continued growth in Albania and Kosovo • Slow recovery in 2010, except for Croatia

  5. Poverty and inequality in crisis • Poverty increased as growth, main driver of poverty reduction, collapsed • Increase in poverty 2008-9 was higher in Macedonia (8.4%) than in Croatia (3.4%) • Possibly indicating lesser effectiveness of social safety net in mitigating poverty in Macedonia • Inequality increased • suggesting ability of elites to protect against income effects of crisis

  6. Macedonia: Urban equivalised income shares by quintile, 2008-09 (%)

  7. Social protection systems • Social insurance systems • Pensions (plus second private pillar in HR, MK, XK) • Health insurance (tax financed system in XK) • Unemployment benefits (limited coverage) • Social assistance programmes • Means tested social assistance (weak targeting) • Rights based social transfers (veterans benefits) • Family and child benefits

  8. Pension systems • Pensions have a significant impact in reducing poverty • State-managed PAYG systems (AL, BA, SR, ME) • State managed pension schemes challenged by aging populations • Three pillar pension systems (HR, MK, XK) • Crisis impact on pension fund unit values • Despite vulnerability, three pillar reforms are proposed in BA, SR)

  9. Health insurance • Health system is based on social insurance principles • Kosovo is an exception – tax financed system • State system covers minimum health needs • Large gaps in coverage due to non-payment of contributions • Private sector fills gaps in provision ( in Albania and Kosovo especially)

  10. Social assistance programmes • Means tested social assistance • Subjective assessments by social workers • In Albania, Ndhime Ekonomike, approved by local councils • Poor targeting and low coverage limits their effectiveness in reducing poverty • In BiH only 30% of assistance expenditure reaches poorest quintile • Roma and IDPs fall through the net • Kosovo, better targeting but low coverage reduces effectiveness

  11. Categorical benefits • Rights based social assistance • Veterans’ benefits • In FBiH, the government extended the rights of war veterans in 2008 and cash transfer expenditure increased sharply, up to 4% of GDP • Benefits to veterans are highly regressive, covering a larger proportion of the upper quintile of households than the poorest quintile in FBiH. • Family benefits including child allowance

  12. Policy measures responding to crisis • Public expenditure restraint – • IMF SBAs in Bosnia, Serbia, Kosovo and PCL in Macedonia (under negotiation Serbia) • Anti-crisis programmes • Reform / cut social assistance (BA, SR, HR, MK) • Reduced wages in public sector (BA, SR, HR, ME) • Public sector hiring restricted (BA, SR) • Public sector employment cut (SR) • Pension freeze (SR, HR) • Three pillar pension reform announced (BA, SR)

  13. What should be done? • Modernisation of public sector to increase effectiveness • Social enterprises? Diverse providers? • Bring elites back as consumers of public services • Regularise informal sector to raise tax revenues • Also to close gaps in eligibility • Active inclusion involving targeted actions for deprived and vulnerable groups • Especially in line with EU Roma Strategy (2011) • Scope for regional cooperation • Learning from best practice • Use of IPA under Lisbon Treaty ‘horizontal’ social clause

  14. Research at LSEE • Work on various aspects of social inclusion • Social impact of crisis • Health system reforms • Decentralisation and regional policy • Roma inclusion • Skills gaps and vocational education • LSEE research network on social cohesion • collaboration with local researchers and policy makers

  15. Thank you for your attention! comments welcome at: w.j.bartlett@lse.ac.uk Will Bartlett LSE

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