HOW CAN DEVELOPING COUNTRIES CREATE A SAFETY NET FOR VULNERABLE FAMILIES DURING THE PANDEMIC?

Responsible researcher: Eduarda Miller de Figueiredo

Authors: François Gerard, Clément Imbert and Kate Orkin

Location of Intervention: Countries around the world

Sample Size: General Analysis

Sector: Social Protection

Variable of Main Interest: Social Protection

Type of Intervention: Government measures to mitigate the effects of the pandemic

Methodology: Other

Summary

Covid-19 required social distancing and, as a result, there were several negative impacts. These impacts were especially felt by the most economically vulnerable families and, as a result, necessitated the adoption of emergency economic measures by governments to provide some safety net to these families. Therefore, this article provided an overview of policies that could constitute a comprehensive social protection strategy in low- and middle-income countries, providing an emergency safety net with broad coverage. Therefore, strategies may include: expansion of the social insurance system, building on existing social assistance programs and involvement of local governments and non-state institutions.

1. Policy Problem

Covid-19 left no one out, it affected all countries, from low to high income. The response to the spread of the virus was through strict restrictions on movement and economic activity. Such measures will probably, according to Unu-Wider (2020), have an immediate negative impact on family income and could threaten the livelihoods of families that are already economically vulnerable. Because of this, it is necessary for governments to adopt emergency economic measures to provide some safety net to these families.

The severity and duration of restrictions imposed on mobility and economic activity will determine the immediate impact on household income and therefore the scale of the social protection response needed to mitigate it. In which, the support provided to help vulnerable families can increase compliance with public health policies (Financial Times, 2020).

Therefore, it is necessary for developing countries to form a comprehensive social protection strategy, with specific policies to provide livelihoods for vulnerable families who will feel the impact of the pandemic.

2. Implementation and Evaluation Context

For the authors, low- and middle-income countries may be able to create a broad-coverage safety net if they use a broader set of solutions than higher-income countries, where these strategies include:

• expand your social security system
• based on existing social assistance programs;
• involvement of local governments and non-state institutions to identify and help vulnerable groups who are outside social assistance programs.

However, these governments need to finance such economic and health measures, even facing deficits in tax revenues. Thus, the scale of social protection response will be limited and developing countries may not have the resources for a public health response by imposing strict restrictions on their economies. With this limited scale of response, the economic consequences of the crisis for families in developing countries will be severe. In that a larger share of workers will be less compatible with social distancing, families with more limited access to credit and their means of smoothing income shocks, through casual work for example, are limited by the restriction of mobility and economic activity.

3. Policy/Program Details

The authors therefore provide an overview of these policies that could form a comprehensive social protection strategy in developing countries.

• Expansion of the social insurance system.

By expanding the social insurance system to provide more support to formal employees, it provides an important pillar of developing countries' social protection strategy, even if it is not enough to reach all workers. Governments around the world adopted job retention schemes, which provided subsidies for temporary reductions in the number of hours worked, replacing a portion of the earnings lost by the worker due to hours not worked, thus avoiding the destruction of existing jobs (Giupponi and Landais, 2018).

Even with a job retention scheme, many workers will likely be laid off and those developing countries that have unemployment insurance programs will be in a better position to support these workers. However, the authors state that, given the current situation, it may be important to adjust their programs, such as relaxing job search requirements and extending eligibility rules.

To expand social insurance programs to formal self-employed workers, the authors highlight that governments in developing countries have two options: (i) unconditional monthly transfers of a fixed amount; (ii) provide emergency credit lines at low interest rates.

• Based on existing social assistance programs

Social insurance programs will not be able to reach a large proportion of families in developing countries, particularly those working in the informal sector. However, many of these families can be reached through social assistance programs. Thus, such programs could be temporarily extended to new families by removing conditionalities.

Regarding the infrastructure for making payments, the authors highlight the possibility for beneficiaries to check availability online with payments made through a national bank. To register new beneficiaries, records of eligible families registered in the Cadastro Único can be used, and the government can create a new website to extend the coverage of this program to reporting workers in general. However, this may exclude individuals without access to computers, therefore, it is necessary to implement physical collection points or home interview systems, respecting social distancing measures.

• Involvement of local governments and non-state institutions

According to the authors, it would be possible to use local governments and a range of non-state actors to collect better information about needs not met with other measures and, thus, provide targeted assistance. This information could be about people's movements, food prices and availability, whether new social protection measures have been successfully implemented and whether specific groups remain unexpectedly without coverage.

Local governments generally have better information about local needs and preferences, therefore, they can be more responsive and, as a result, their decisions are likely to have more legitimacy. Non-governmental institutions are active in providing a voice for groups that are outside the reach of the state, so they can be in a position to facilitate the collection of information about those specific groups in need of assistance, as well as partners who can provide assistance. emergency.

4. Method

Analysis of emergency economic measures adopted by countries to provide families with some safety net during the Covid-19 pandemic.

• Main Results

An analysis was carried out highlighting that governments in developing countries will have to find creative solutions to build a comprehensive social protection response to the economic impacts of the Covid-19 epidemic.

Regarding job retention programs, the authors highlight that Brazil is an example of a country that already had this type of program and that it could be used more broadly to protect employment in the formal sector.

The governments of Chile and India have chosen to leverage open bank accounts for financial inclusion purposes, thus providing direct support to the poor. Thus, even populations living on the margins of social protection systems – workers in the informal sector – can be reached.

Finally, the authors emphasize that the use of social insurance programs can reach the formal sector, leaving out the informal sector, which is an important portion of the workforce in developing countries. Therefore, it is necessary to involve local governments and non-state institutions to help provide assistance to this group.

6. Public Policy Lessons

The challenge of mitigating the economic effects of a pandemic is enormous. Where any solution will encounter barriers and have many defects, because, in cases like Covid-19, what is essential is the speed at which measures are taken.

References

GERARD, François; IMBERT, Clément; ORKIN, Kate. Social protection response to the COVID-19 crisis: options for developing countries. Oxford Review of Economic Policy , vol. 36, no. Supplement_1, p. S281-S296, 2020.