2013 EUROMOD Research Workshop
University of Lisbon, Portugal02-03 October 2013
Simulating a Low IncomeSocial Assistance Reform
in Time of Crisis
Venelin Boshnakov /UNWE/Dragomir Draganov /MLSP/,Ekaterina Tosheva /UNWE/
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Introduction
Structure of presentationMotivation and goalsCurrent status and developments since the start of crisisLow income social assistance system in Bulgaria: main parametersSimulation scenarios: main resultsOutline for future analysis
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Motivation and goals
After a period of stabilization in the period 2001-2008 (EU accession period) Bulgaria entered the crisis period (2009 – …?)
Failures of SMEs leading to layoffs… Jump in unemployment rates –
unemployment raised from about 200 thousand (5.7%) in 2008 to 410 thousand (12.3%) in 2012 (LF 15-64)
Youth unemployment (LF 15-29): from 9.4% to 20.8%
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Minimum and Average Monthly Wage /BGN/ (1 EUR ≈ 2 BGN )
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Main household income sources Source: Bulgarian HBS /NSI data/
Shares in monetary Income
Sources: 2005 2006 2007 2008 2009 2010 2011 2012
Wages and salaries 51.8 52.2 52.4 53.9 54.1 52.0 52.8 53.8
Pensions 26.4 25.7 24.2 24.1 28.6 31.6 30.7 27.2Unemployment benefits 0.5 0.4 0.3 0.2 0.6 0.6 0.7 0.7
Family allowances for children
0.9 0.8 0.6 0.7 1.0 0.9 0.9 0.8Other social allowances 2.20 2.10 2.60 3.20 1.80 1.80 1.70 1.80
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Main non-contributory social benefits
Contributory benefits – health & child-related Non-contributory
Lump sum pregnancy & childbirth grants Monthly allowance for bringing up a child up to age
1 Child benefit (monthly child allowance for bringing up a
child until completion of secondary education) Scholarships Social Old Age Pension Social Invalidity Pension Pension supplement in case of deceased spouse Monthly social assistance allowance Targeted Heating Allowance Monthly allowance for social integration of disabled
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Main non-contributory social benefits
Monthly social assistance allowanceNon-contributory, means-tested allowancegranted to persons living alone, orto families whose income for the previous month is below the so-called “Differentiated Minimum Income” (DMI)Except the income test, beneficiaries should satisfy additional eligibility criteriaDMI derives from GMI (65 BGN since 2009)Target: extreme poverty!
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Monthly social assistance allowance
DMI for each person of a particular type DMI is set as percentage of GMI Calculated at individual level and then, at
family level Family DMI = Sum[DMIs] Claimants receive MSAA if their gross income is
lower than the calculated DMI The amount of MSAA should equal the
difference DMI–GrossIncome (top-up) In fact, the “actual” unit of assessment is the
household!
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Monthly social assistance allowance
Category of person 2007 2008 2009 2010-2012person over the age of 75 living alone
165% 165% 165% 165%
person over the age of 65 living alone 140% 140% 140% 140%person under 65 living alone 73% 73% 73% 73%person over the age of 65 cohabiting with other persons 100% 100% 100% 100%two spouses living together, per each spouse 66% 66% 66% 66%person with reduced working capacity of 50% or more 100% 100% 100% 100%person with reduced working capacity of 70% or more 125% 125% 125% 125%
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Monthly social assistance allowance
Category of person 2007 2008 2009 2010-2012
child aged between 0-16 (up to 20 when studying) 75% 81% 81% 81%
child aged between 7-16 (up to 20 when studying) – if having 5 or more unexcused absences from school
30% 30% 30% 30%
child aged between 7-16 and not attending school 37% 20% 20% 20%
orphan or child accommodated in a host family 100% 100% 100% 100%
child with permanent disability 100% 100% 100% 100%
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Monthly social assistance allowance
Category of person 2007 2008 2009 2010-2012
lone parent taking care of a child under age 3
120% 120% 120% 120%
lone parent with a child or children aged under age 16 (under 20 for children attending school)
100% 100% 100% 100%
pregnant woman 45 days before the term
100% 100% 100% 100%
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Real levels of main SBen parameters
2006 2007 2008 2009 2010 2011 2012
CPI (2005=100)
1.073 1.163 1.306 1.342 1.375 1.433 1.475
GMI nom 55 55 55 65 65 65 65GMI real 51.28 47.30 42.10 48.42 47.27 45.36 44.06
ChBen nom 18 18 25 35 35 35 35
ChBen real 16.78 15.48 19.14 26.07 25.45 24.42 23.72
SOAPension 63.00 67.88 80.18 96.70 100.86 100.86 100.86
SOAP real 58.73 58.38 61.38 72.04 73.35 70.38 68.36
Min.IOAP 78.73 85.31 108.17 130.46 136.08 136.08 141.28
MinIOAPr 73.40 73.37 82.80 97.19 98.97 94.96 95.76
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At-risk-of-poverty rates(Source: EUROMOD estimates)
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At-risk-of-povertyMost severely affected: unemployed, multi-child families (e.g. roma minority), elderly (espec.in rural
areas)
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At-risk-of-povertyMost severely affected: unemployed, multi-child families (e.g. roma minority), elderly (espec.in rural
areas)
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At-risk-of-povertyMost severely affected: unemployed, multi-child families (e.g. roma minority), elderly (espec.in rural
areas)
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At-risk-of-povertyMost severely affected: unemployed, multi-child families (e.g. roma minority), elderly (espec.in rural
areas)
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At-risk-of-povertyMost severely affected: unemployed, multi-child families (e.g. roma minority), elderly (espec.in rural
areas)
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At-risk-of-povertyMost severely affected: unemployed, multi-child families (e.g. roma minority), elderly (espec.in rural
areas)
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At-risk-of-povertyMost severely affected: unemployed, multi-child families (e.g. roma minority), elderly (espec.in rural
areas)
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MSA adjustment – Scenario 1
2009 2010 2011 2012
GMI 65 65 65 65
MinWage 240 240 250 290
MinWage growth 100% 100% 104% 121%
Adjusted GMI 65.00 65.00 67.71 78.54
Simulation based on SILC augmented by National SILC Adjust the GMI level to reflect the change in minimum wage
level Higher than inflation – 10% accumulated for 2010-2012 (adjusted
GMI=71.45 BGN)
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MSA adjustment – Scenario 2
Adjust the GMI level to reflect the poverty threshold Which thresholds? Different types of households
so a variety of options Our initial choice – threshold level for 4-persons
family: 2 adults + 2 children below age 14 (the “modal” demographic type for the period of low-rate sustainable growth of population in the period 1960s, 1970s, and 1980s
Adjusted to 2012 nominal income level: about 150 BGN /77 EUR/ (to be enhanced as an estimate…)
MSA simulation resultsPoverty & Inequality
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2012 Baseline Scen.I Scen.II 2012 Baseline Scen.I Scen.II
40% median HDI InequalityTotal 7.4 5.8 2.7 Gini 33.3 31.6 30.0Males 7.2 5.8 2.5 S80/S20 5.56 5.00 4.39Females 7.5 5.9 2.950% median HDITotal 13.0 10.6 6.5Males 12.5 10.7 6.6 60% median HDIFemales 13.5 10.6 6.4 0-17 years 26.9 25.3 18.560% median HDI 18-24 years 21.3 19.8 16.9Total 19.9 17.7 13.8 25-49 years 17.3 15.8 13.0Males 18.5 16.5 13.3 50-64 years 15.0 14.0 11.2Females 21.1 18.7 14.2 65+ years 23.6 17.4 12.2
MSA simulation resultsRelative and absolute changes
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2012 Baseline Scen.I Rel.Ch. Abs.Ch.
Recipients (thousand)MSA allowance 26 63 2.41 +37Targeted benefit for heating 183 274 1.50 +91Amount (millon BGN)MSA allowance 44 113 2.57 +69Targeted benefit for heating 60 90 1.50 +30
2012 Baseline Scen.II Rel.Ch. Abs.Ch.
Recipients (thousand) MSA allowance 26 147 5.63 120.8Targeted benefit for heating 183 1 057 5.78 874.2Amount (millon BGN)MSA allowance 44 438 9.97 394.2Targeted benefit for heating 60 347 5.78 287.2
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MSA allowance at micro-levelDMI for 4-person /2-children family
2012 DMI Baseline Scen.I Scen.II
Adult 1 66% 42.90 51.84 99.00
Adult 2 66% 42.90 51.84 99.00
Child 1 (age 0-16) 81% 52.65 63.62 121.50
Child 2 (age 0-16) 81% 52.65 63.62 121.50
Total family: 294% 191.10 230.91 441.00
Ratio to Min.Wage 0.68 0.82 1.56
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Outlines for enhancement
Improvement of uprating and validation Improvement of data source (re-base on EU SILC 2010 /2009 income/) Scenario choices
1) about GMI level2) about target groups for MSA
Caution! Compensations for a possible boost in social spending coordination with Child Benefit policies – more
complicated /social reactions!/, but better grounded coordination with Unemployment and Disability
benefits
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Thank youfor your attention!
