Social Assistance Pilots Program SA P ilot s Seminar

1. Social Assistance Pilots Program SA Pilots Seminar Social assistance to able to work unemployed based on their participation in public works Liudmyla Kotusenko CASE Ukraine March, 2010

2. Objectives of the proposal Characteristics of the low income allowance beneficiaries Options of introducing public (socially significant) works for able to work unemployed beneficiaries Description of options of implementing the mechanism Expected outcomes of implementing the mechanism Legal conclusion on possibility of implementing the mechanism Conclusions Content 2

3. Objectives of the involvement of able to work unemployed SA beneficiaries to participate in public works The problems the introduction of mechanism aims to solve: social assistance beneficiaries may leave the labor market for a long time while receiving assistance, and it can be extremely difficult for them to reintegrate into the labor market later some social assistance recipients may be informally employed and not declare their income in order to stay eligible or/and to get larger amounts of social assistance. Thus, public funds are wasted on support of persons who are not needy. Objectives of the proposal: improvement in targeting of the social assistance creation of the incentives for able to work unemployed social assistance beneficiaries to return to the labor market 3

4. Distribution of the low income allowance beneficiaries by categories of families (HBS-2008) 4 * The low income families allowance

5. Able to work unemployed persons in families of LIA beneficiaries (HBS-2008) 5

6. LIA distribution by deciles(HBS-2008) LIA targeting indicators are very high: • 80% of LIA beneficiaries belong to deciles* 1-2 • 90% of LIA funds reach deciles* 1-2 However, the targeting may decline if the assistance is based on the minimum subsistence level and wealthier families get into the system * Deciles are formed by total income less LIA amounts, per person 6

7. Characteristics of the deciles (all households in HBS database) Source: HBS-2008 7

8. Variants of introducing public (socially significant)works for able to work unemployed beneficiaries 8

9. Categories of people that can be involved in public (socially significant) works Able to workapplicants and/or their relatives that belong to one of following categories: • persons who are not employed / not studying / taking care of a child and not registered at the employment center; • unemployed persons who are registered at the employment center, but do not receive unemployment benefits; • employed in formal or informal sector of economy able to work persons, whose average monthly income is below the minimum wage level. 9

10. Impact of participation and non-participation in works on social assistance eligibility and its amount 10

11. Types of assistance that could be optioned with mechanismof public (socially significant) works Mechanisms of voluntary involvement in public (socially significant) works may be applied to low income allowance claimants only Mechanisms of obligatory involvement in public (socially significant) works may be applied to claimants for: • low income allowance; • housing subsidies; • means-tested benefits to families with children up to 3 years and benefits to single mothers 12

12. Number of working hours 12

13. Assistance re-applications 13

14. Implementation mechanisms • Welfare offices form lists of people to be involved inpublic (socially significant) works and submit the lists to: • local authorities – in case of unpaid works • employment centers and / or local authorities – in case of paid works • Organization of public works and control over involvement of recipients of SA to be exercisedby employment offices (paid works) and / or local authorities (unpaid works). 14

15. Expected results from the mechanism implementation • Improving the targeting of social assistance through: • reaching a greater number of poor families, particularly families with 1-2 children • reduction of abuses while receiving social assistance, particularly by persons who are involved into informal activity and do not declare their incomes (in case of obligatory works) Social effects from mechanism implementation: • creation of new workplaces • possibility to obtain additional income for recipients of social assistance in cases of: • unpaid voluntary socially significant works (option 1, the differentiated amount of assistance) • paid public works (options 4 and 5) • Social adaptation oflong-term unemployed persons • Addressing specific community problems 15

16. Assessment of expected impact of mechanism implementation based on HBS HBS allows to estimate maximum number of families which will have the right to apply for LIA after introduction of proposed mechanisms. However HBS does not allow to estimate the initial stance and calculate the change in number of potential receivers as well as define the families that will fall out of the system. The reasons for that are: • HBS does not provide information about unemployed able to work people who are not registered in employment centers. This leads to underestimation of the number of potential receivers in initial situation and overestimation of increase in potential beneficiaries after mechanism implementation. • Those able to work people who declare themselves as unemployed while applying for help, but in fact work in informal sector, may state that they are working while participating in HBS 16

17. Assessment of expected impact of mechanism implementation based on MLSP statistics In 2009 the number of families with non-working able to work members who received LIA, fell twice - from 70.5 to 35.3 thousand people (Ministry of Labor and Social Policy data on the activities of Commissions) The reduction was mostly caused by narrowing the circle of families who may apply for assistance through Commissions It can be assumed that after the implementation of the mechanism of public (socially significant) works, these families can apply for assistance provided their members agree to participate in the works 17

18. Effect of mechanism introduction on number of SA receivers * The number of plus signs is used to approximately compare the effects of different variants 18

19. Expected targeting of social assistance after mechanism implementation * The figures include potential SA beneficiaries who would not necessarily apply for SA 19

20. Risks of mechanism implementation • Requires time and quite complex and well-coordinated cooperation of local authorities and social welfare offices for the organization of public (socially significant) works • Increases the burden on local authorities: may require the involvement of additional staff for the organization of works • Since the inclusion of additional families into the LIA program depends on the availability of public (socially significant) works, the introduction of the mechanism can lead to unequal access to assistance in different regions: • in case of paid public works access to SA in depressed regions will be worse than in others; • in case of unpaid public works creating equal access to social assistance will depend on the ability of local authorities to organize public (socially significant) works. 20

21. Obligatory involvement in public works and forced labour issue: legal conclusion (1) • Public (socially significant) works may not be characterized as “forced or obligatory labor” in the meaning of international conventions if the able to work unemployed persons are involved on their agreement with the aim to obtaining the social assistance. • Implementation of mechanism with obligatory involvement of applicants into public (socially significant) works does not contradict current legislation system and the norms and regulations of international agreements ratified by Ukraine. • Able to work unemployed persons in need for social assistance and eligible to obtain it may contribute to their unemployment protection by participating in public (socially significant) works. 21

22. Obligatory involvement in public works and forced labour issue: legal opinion (2) Applicant’s involvement in public (socially significant) works is possible: • upon the written agreement of the applicant (temporary job agreement, contract) • if job conditions correspond to general regulations of the current labor legislation • if there is «non-use of the labor force for economic development» asan incentive of implementation of public (socially significant) works Implementing the mechanism needs additional changes to the legislation regarding the definition of terms and establishment of mechanisms and procedures. Mechanisms, conditions and procedures of the social assistance granting based on participation of the applicants in unpaid public (socially significant) works should be regulated with a separate Cabinet of Ministers Resolution. 22

23. Conclusions • Options that presume obligatory participation of stated categories of applicants in public (socially significant) works will be more effective in achievement of the stated goals in comparison to "voluntary" ones • The probability that the mechanism will operate effectively in case of unpaid works is higher than in case of paid works, given the possible lack of funds for financing works • Mechanisms of obligatory participation in public (socially significant) works can be applied not only to LIA applicants, but also to claimants for housing subsidies or assistance to families with children that are subject to income test 23

24. Further steps • Calculating impacts by means of simulation scenarios based on HBS data adjusted/corrected with the Ministry of Labor and Social Policy administrative data • Conducting a mini-survey of households during which we will examine the applicants' attitudes to the proposed mechanisms and estimate the number of those who would be excluded from the system in case of implementation of obligatory mechanisms • Designing a piloting mechanism which will be proposed to be carried out in selected regions, based on results of which a well-tested system of public (socially significant) works could be gradually introduced to the whole country 24