Social Safety Net Programs Help Millions Escape Poverty, But Coverage Gaps Persist

Stocks and Financial Services Press Releases Thursday April 5, 2018 09:12
WASHINGTON--5 Apr--World Bank

WASHINGTON, April 4, 2018— Among the very poor who received safety net benefits, 36% escaped extreme poverty, providing clear evidence that social safety net programs are making a substantial impact in the global fight against poverty, says a new World Bank Group report. The impact of social safety nets on poverty is measured based on available household data from 79 countries by comparing the welfare of the safety nets beneficiaries to what it would have been had they not received such support.

Data from the State of the Social Safety Nets 2018 report shows that safety nets—which include cash, in-kind transfers, social pensions, public works, and school feeding programs targeted to poor and vulnerable households—also lower inequality, and reduce the poverty gap by about 45 percent, even if they do not emerge from poverty. These positive effects of safety net transfers hold true for low and middle-income countries alike.

Despite the increased adoption of safety net programs by countries in recent years, global coverage of poor and vulnerable people remains inadequate. About 2.5 billion people worldwide are covered by a social safety net, of which 650 million are in the poorest 20 percent. However, only one out of five persons living in a low-income country is covered by a social safety net. Furthermore, countries at high risk of natural disasters often have lower safety net coverage.

"In a volatile world there is strong evidence that social safety net programs can help to build the resilience of poor families and reduce their poverty, making them a vital instrument for the rapid development of countries," said Annette Dixon, World Bank Group Vice President for Human Development. "In the absence of these safety net programs, poor people facing shocks can fall into deeper poverty, often having to sell their remaining assets or borrow more."

Developing and transition countries spend an average of 1.5 percent of GDP on social safety net programs. Many countries are spending more on such programs because they see the impact they make on poverty reduction. Countries in the Sub-Saharan Africa and Asia regions are also introducing flagship social safety net programs and are rapidly expanding coverage. For example, in Senegal, the flagship National Cash Transfer Program expanded swiftly from 3 to 16 percent of the population in just four years, while in the Philippines, the Pantawid conditional cash transfer program has expanded from 5 to 20 percent of the population since 2010.

Spending as a percentage of GDP by Region are as follows: Europe and Central Asia, 2.2 percent; Sub-Saharan Africa, 1.5 percent; Latin America and the Caribbean, 1.5 percent; East Asia and Pacific, 1.1 percent; Middle East and North Africa,1 percent; South Asia, 0.9 percent.

The report also looks at two thematic areas pertinent to managing risk and vulnerability, namely social assistance and aging, which looks specifically into the role of old-age social pensions, and adaptive social protection, which discusses shocks and how social safety net programs can be adapted to better respond to them.

In terms of social pensions, the report shows that old-age pensions have helped the elderly reduce or altogether escape poverty, and that elderly people in the poorest quintile have benefited the most, no matter the program design. Europe and Central Asia region currently has the largest percentage of elderly people; in the long term, Latin America and the Caribbean, South Asia, and East Asia and Pacific will experience the biggest increase.

Despite the evident aging trend, most countries do not have systems and benefits that can fully cover elderly people or their special needs. While nearly 90 percent of Organization for Economic Co-opeation and Development (OECD) economies have old age social pensions, only 70 percent of Latin America and the Caribbean economies, and nearly 65 percent of Europe and Central Asian do.

The report is the third in a series of studies that monitor and report on the growth and coverage of social safety nets in the developing world, and helps benchmark where individual countries and regions stand in terms of social safety net spending, key performance indicators, and the impact on reducing poverty and inequality. The analysis presented in the report uses administrative data for 142 countries and household survey data for 96 countries from the ASPIRE database, and provides much needed empirical evidence in the context of an increasing global focus on social protection, as evident in the SDGs.

"Social safety net programs matter if we want to reduce poverty and inequality. Our data shows that only countries with substantial coverage and benefit levels make important gains in poverty reduction," said Michal Rutkowski, World Bank Group Senior Director for Social Protection and Jobs Global Practice.

Despite progress, much more needs to be done regarding social safety nets programs for the poor and vulnerable around the world. Significant gaps in coverage and benefit levels remain, and the international development community needs to continue working with such countries to address these disparities.

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