Georgia-Reducing Child Poverty - a Dicussion Paper - 2012

Georgia: Reducing Child Poverty

A discussion paper July 2012

Georgia: Reducing Child Poverty A discussion paper

July 2012

The present discussion paper was prepared and produced by Tinatin Baum, Anastasia Mshvidobadze, Aaron Greenberg, Nino Dzotsenidze, Maya Kurtsikidze and Roeland Monasch. This paper draws upon a larger report, The Well-Being of Children and their Families in Georgia - Georgia Welfare Monitoring Survey Second Stage 2011, prepared in co-operation with the University of York, UK, and the Institute of Social Studies and Analysis, Georgia. The paper adds new insights using 2011 survey data.

Cover photo by Giacomo Pirozzi

© United Nations Children’s Fund 2012 UNICEF 9 Eristavi Str. UN House 0179, Tbilisi, Georgia Tel: 995 32 – 2 23 23 88, 2 25 11 30 e-mail: tbilisi@unicef.org www.unicef.org/georgia

Georgia: Reducing Child Poverty

Summary Key Findings •

Between 2009 and 2011 poverty in Georgia has decreased.

•

The number of households below the relative poverty line fell by 2 percentage points from 24% to 22%.

•

The percentage of children living in poor households fell by three percentage points from 28% to 25%.

•

Pensions, health insurance and TSA are important poverty reduction tools.

•

Despite gains, child poverty is higher than that of other groups.

•

Children are not adequately represented in existing social protection schemes.

•

More can be done – additional investments are required to protect the most vulnerable children.

•

The paper considers different policy options to address child poverty in next 3 to 5 years while on-going economic growth becomes more inclusive addressing inequities.

Policy Options to Further Alleviate Poverty – Special Focus on Child Poverty The Government of Georgia has committed to increasing old age pensions in September 2012.

Pensioners below 67 years of age will receive a pension package worth 125 GEL per month and Pensioners 67 years of age and above will receive 140 GEL per month.

Calculations predict that: •

The pension increase will reduce extreme child poverty from 9.4% to 7.7% and relative child poverty will reduce from 25% to 23%.

•

If the government increases the TSA benefit by 50% (together with the pension increase) extreme child poverty will decrease from 9.4% to 6.6% and relative child poverty from 25% to 21%.

•

If the government increases the TSA benefit by 100% (together with the pension increase) extreme child poverty will reduce from 9.4% to 6% and relative child poverty from 25% to 18%.

•

If the government increases the number of TSA beneficiaries (households that applied to the database) by increasing the cut off score (together with the pension increase) extreme child poverty will reduce from 9.4% to 7.1% and relative from 25% to 21%.

•

If the government introduces a universal child benefit of 30 GEL per month per child for ages 0-16 (together with the pension increase): yy Extreme child poverty will fall from 9.4% to 3.9%. yy Relative child poverty will fall from 25 % to 15%. yy 60% of children are estimated to be lifted from extreme poverty. yy Pensioner extreme poverty would reduce from 8.1% to 2%. yy Options for universal child benefits in the amount of 15 and 20 GEL are also discussed in the paper.

A discussion paper

3

Georgia: Reducing Child Poverty

Table of Content Introduction.............................................................................................................................................. 5 Methodology and Data.............................................................................................................................. 5 Welfare Situation ...................................................................................................................................... 6 Income and Consumption....................................................................................................................... 6 Poverty Trends - Consumption Poverty.................................................................................................. 7 Poverty Trends - Multi-Dimensional Poverty.......................................................................................... 8 Access to and Coverage by Social Assistance.......................................................................................... 9 Old Age Pensions.......................................................................................................................... 9 Targeted Social Assistance.......................................................................................................... 10 Health Insurance......................................................................................................................... 11 Child Poverty........................................................................................................................................... 14 Child Poverty and Social Assistance...................................................................................................... 15 Child Poverty Reduction - Scenarios..................................................................................................... 17 Universal Benefits................................................................................................................................. 21 Discussion............................................................................................................................................... 24

4

A discussion paper

Georgia: Reducing Child Poverty

The purpose of this paper is to trigger discussions around child poverty. It aims at fostering dialogue on possible policy actions that could be undertaken in order to provide further improved social protection for children and their families.

Introduction Prompted by the global economic crisis and the risks faced by the most vulnerable children and households in Georgia, UNICEF undertook a nationally representative independent Welfare Monitoring Survey (WMS) in 2009 and again in 2011. The survey tracked the same households over two years. Data collection was conducted by the Institute of Social Studies and Analysis (ISSA), Georgia, and analysis was done by UNICEF and the University of York, UK with the financial support from USAID. The purpose of the panel survey was to provide an in-depth understanding of how the crisis impacts children and their families in Georgia and to inform policy decision-making processes by identifying key opportunities and challenges.

The present paper is based upon the results of the 2011 survey and compares these to the 2009 survey. It examines two-year trends in consumption and other dimensions of poverty and the impact of government social protection policies. The paper concludes with projected impacts of increased spending in different areas of social protection and recommendations around policy options moving forward to achieve the greatest poverty reduction amongst the most vulnerable population.

The first part of the paper briefly summarises findings of a larger report, The Well-Being of Children and their Families in Georgia - Georgia Welfare Monitoring Survey Second Stage 2011. The second part of the paper is based upon an additional analysis of the same data to identify the possible ways to reduce consumption poverty using different social protection interventions.

Methodology and Data Both the 2009 and 2011 surveys were conducted between May and July. Household interviews took three weeks in each survey year. Interviews were carried out simultaneously across the country. The sample in 2009 consisted of 4,808 households and the sample in 2011 consisted of 4,147 households. Both samples were stratified by region, settlement size and their mountain or lowland location.1 Three different measures for consumption poverty were applied to the analysis in both surveys.2 In addition to consumption poverty, other forms of deprivation and social exclusion were assessed. Additionally, the impact of Pensions and Targeted Social Assistance transfers on consumption poverty3 levels were measured and analysed.

As the WMS is being conducted as a panel survey, the non-response rate of 14% is to be expected as people move locations, are deceased or simply refuse to participate in the second round.

1

Please see the report The Well-Being of Children and their Families in Georgia - Georgia Welfare Monitoring Survey Second Stage 2011.

2

Consumption is believed to be a better estimate of families’ long-term or “permanent” income. Families with a low level of current income are disproportionately comprised of families with temporary income reductions. Families may “dissave” in order to smooth consumption and, therefore, material well-being, for example, by liquidating savings or by borrowing (see: M. Friedman, A Theory of the Consumption Function, Princeton, NJ: Princeton University Press, 1957). At the same time, the decision of whether or not to use income or consumption for poverty measure depends upon the quality and availability of data supporting the measure. Income is traditionally underreported in Georgia which, therefore, makes consumption a more accurate measure of poverty. The Georgia National Statistical Office uses consumption for measuring poverty and inequality. See: http://geostat.ge/ index.php?action=page&p_id=188&lang=eng

3

A discussion paper

5

Georgia: Reducing Child Poverty

Methodology of the additional analysis in this paper: The present paper uses two different poverty thresholds: a relative poverty threshold at 60% of median consumption4 equalling 109.2 GEL5 per month Per Adult Equivalent6 (PAE); an absolute extreme poverty threshold of 71.7 GEL per month PAE.7

Thresholds

2009

2011

Extreme Poverty

61.1 GEL

71.7 GEL

Relative Poverty

89.7 GEL

109.2 GEL

The models used in the paper incorporate a number of simplified assumptions in order to estimate the effect of different social transfers to the households. For example, it is assumed that the transferred amount will all be spent on consumption (this assumption is particularly true for poor households). This assumption is made since there is no research data readily available at the moment that considers the savings behaviour of households in Georgia. Data used for the analysis is 2011 data and additional transfers are projected future transfers. Since 2011, there have been periods of deflation as well as inflation making it extremely difficult to predict the inflation rate in the future8 and so additional transfers were not converted into 2011 prices. In addition, extreme and relative poverty thresholds are fixed during the analysis at the values given above. Even though this methodology is based upon assumptions that have their own limitations, given the sample size and comprehensiveness of data collected, strong inferences can still be drawn.

Welfare Situation Income and Consumption According to the 2011 survey report,9 average household monthly income in Georgia during 2011 was 374 GEL as compared to 322 GEL in 2009. On average, income increased by 15% from 2009 although when adjusted for inflation, income actually decreased by 2%. The Gini coefficient for income in 2011 was 0.48 which was the same in 2009.10 Consumption figures are higher than reported income. Average monthly household consumption was 441 GEL in 2009 and 542 GEL in 2011. When adjusted for inflation, there was a 5% (from 441 to 462 GEL) increase in average monthly total household consumption in Georgia. Mean consumption PAE was 232 GEL and the median was 182 GEL in 2011. When consumption is adjusted for inflation, there is 4 % increase from the 2009 mean of The relative threshold is calculated based upon the 2011 sample using official methodology of National Statistics Office of Georgia.

See: http://www.geostat.ge

4

For information: As of July 1, 2011, 1 USD = 1.66 GEL (at the time of the survey).

5

The adult equivalents in the household is a weight system that considers how the household is composed. Division of income and expenditure amongst household members is not proportional with the number of individuals in a household. Therefore, they should be adjusted to the per adult equivalency. The Report uses the Geostat scale as follows: children below 8 years of age 0.64, children above 8 and below 16 years of age 1, male population above the age of 16 and below the age of 65 years 1, female population above the age of 16 and below the age of 60 years 0.84, male above the age of 65 years 0.88 and female above the age of 60 years 0.76. To correct for economies of scale in larger households, the number of equivalent adults is then raised to the power of α, where α=1 for a single person household and α=0.8 where the household size is greater than one. See: http://www.geostat.ge.

6

The 2009 report used an absolute poverty threshold: 61.1 GEL a month based upon the 1.25 USD a day used by the World Bank identifying extreme poverty. It is updated reflecting 2011 prices using the CPI to give an extreme poverty threshold of 71.7 GEL a month per adult equivalent (PAE). The relative poverty threshold for 2009 was 89.7 GEL a month PAE.

7

See: http://nbg.gov.ge/uploads/pricesinglisurad/annual_inflationeng.xls

8

The Well-Being of Children and their Families in Georgia - Georgia Welfare Monitoring Survey Second Stage 2011.

9

The Gini coefficient is a measure of the extent to which a distribution (for example, of income) amongst individuals or households deviates from a perfectly equal distribution. The Gini index ranges between 0 (in the case of perfect equality: everyone receives the same income) to 1 (perfect inequality: one person receives all the income). See: http://www.transmonee.org/Downloads/ EN/2012/Glossary_TransMonEE_2012.pdf

10

6

A discussion paper

Georgia: Reducing Child Poverty

190.7 GEL PAE as compared to 197.7 GEL PAE - mean for 2011 (at 2009 prices). The Gini coefficient for consumption was 0.38 in 2011, similar to 2009.

Increases in food prices had an effect upon the change in household consumption patterns (see Figure 1). Food prices have increased significantly since 2009. As a result, food eaten at home increased as a percentage of total household consumption from 40% in 2009 to over 49% in 2011. Overall, the percentage of current non-food consumption11 decreased from 8.6% to 1.9%.

Figure 1: Distribution of Expenditures by Consumption Categories in 2009 and 2011 100% 90% 80%

8.6% 2.6%

1.9% 2.0% 9.3%

10.3%

3.9%

4.0%

70%

34.4%

60%

34.5%

50% 40%

Current Non-Food Consumption

30%

40.0%

20%

48.6%

Expenditure on Eating out of Home Health Care Expenditure Education Expenditure

10%

Long-Term Non-Food Expenditure Eating in the Household

0%

2009

2011

Poverty Trends - Consumption Poverty Poverty rates decreased from 2009 to 2011. The number of households below the relative poverty threshold (109.2 GEL) fell by 2 percentage points from 24% to 22%. The percentage of children12 living in households below relative poverty fell even more, by three percentage points. This is encouraging news. Using the extreme poverty threshold (71.7 GEL), however, 8.3% of households in Georgia and over 9% of the population still lived in extreme poverty in 2011. Whilst the percentage of children living in extremely poor households13 in the period 20092011 declined more than the percentage of other groups in poverty, 9.4% of children still lived in extremely poor households in 2011 (see Figure 2).

Despite the positive trends in poverty reduction and the considerable drop in child poverty, the percentage of children living in poor households remains higher for every threshold than the poverty headcount for the whole population and that for pensioners.

Current non-food consumption – any current consumption including buying clothes, utility charges, hygiene goods, etc.

11

Children are defined as individuals falling into the age group of 0-16. This is the age group used for the Welfare Monitoring Survey.

12

Hereafter referred to as child poverty; that is, children living in poor households as the percentage of the total number of children.

13

A discussion paper

7

Georgia: Reducing Child Poverty

Figure 2: Trends in Poverty 2009-2011 Extreme Poverty Rate

Relative Poverty Rate 30%

30% 25%

25%

28% 26% 24%

20%

21%

15% 11.5% 9.4%

9.9% 9.1%

8.9% 8.3%

10%

7.3% 8.1%

5% 0%

22%

20%

15% 10%

25%

24%

22%

5%

Households

Population

2009 (61.1 GEL)

Children

0%

Pensioners

2011 (71.7 GEL)

Households

Population

Children

Pensioners

2011 (109.2 GEL)

2009 (89.7 GEL)

Poverty Trends - Multi-Dimensional Poverty For measuring poverty, it is critical to measure and examine other dimensions of well-being in addition to consumption. For this purpose, material deprivation, housing deprivation, subjective poverty and social exclusion14 were included into the survey and subsequent analysis. As in consumption poverty, material deprivation, housing deprivation, subjective poverty and social exclusion have also fallen across all groups (see Figure 3).

Figure 3: The Proportion of Population, Pensioners and Children Experiencing Different Types of Poverty 100%

Population 2009&2011

Pensioners 2009&2011

Children 2009&2011

80%

60% 45% 40%

33% 22%

20%

37% 27%

20%

21% 12%

29% 28% 24%

35%

42%

36% 31%

28% 22%

9%

8%

6%

8%

5%

9%

7%

0%

Material Deprivation

Housing Deprivation

Subjective Poverty

Social Exclusion

Material Deprivation – Households that lack any five or more of the following seven items: car, mobile telephone, washing machine, television, refrigerator, vacuum cleaner and clothes iron. Housing Deprivation – Households experiencing at least two of the following problems – Damaged or leaking roof, damaged floor or walls, earth floor, damp dwelling, broken windows, insufficient light, noise and too small dwelling, as well interviewer confirming dwelling is in bad shape; Subjective Poverty – Households stating that they cannot provide themselves with enough food or that they feed themselves so poorly that their health is endangered. Social Exclusion – Households experienced at least three of the following five aspects of social exclusion: exclusion from education, employment, health care, credit or social assistance.

14

8

A discussion paper

Georgia: Reducing Child Poverty

Access to and Coverage by Social Assistance To analyse how government social protection programmes have contributed to reductions in consumption poverty, the paper looks specifically at the effect of Pensions, Targeted Social Assistance and Health Insurance upon the poverty rates of the children and their families in Georgia.

Old Age Pensions Old Age Pensions are the most significant social transfers in terms of the number of population covered and amount disbursed. Pensions are available to all men over the age of 65 years and all women over the age of 60 years. The share of old age pensions as a total expenditure in social transfers in Georgia in 2011 was 56%. Pensions have a strong effect upon household poverty, particularly when pensioners live alone or in small households. The percentage of households with at least one pensioner member is more or less similarly distributed across different wealth groups15 (see Figure 4).

There is a slight, but statistically significant difference between poorest and richest quintiles in terms of pension take up, most likely because pensioners in the richest groups have fewer incentives to seek out old age pension income.

Over half (52%) of all households include at least one pensioner and 41% of households with children include one or more pensioner. At the same time only in 16 % of all households there are both – children and pensioners.

Figure 4: The Proportion of Households with at least One Old Age Pension Recipient by consumption groups, 2011 100%

Households with Old Age Pensioners

Households with at Least One Old Age Pension Recipient

% of households

80%

60%

59%

57%

53%

53%

56%

51%

60% 56%

58% 55%

59% 55%

57% 52% 54%

49%

47%

40%

43%

48% 44%

20%

0%

1

2

Poorest

3

4

5

6

Consumption Decile

7

8

9

10 Richest

Over a fifth of pensioners (21%) live in households below the relative poverty threshold. If pensions were removed, this figure would rise to 50% in 2011. Pensions, therefore, have a significant impact upon poverty in Georgia although pensions have less of an impact upon child poverty. Approximately 8% of all children are lifted from both extreme and relative poverty as a result of pensions (see Figure 5).

In this analysis, the population is divided into ten wealth groups based upon their household consumption PAE level. Each group is called a decile and represents 10% of the total population.

15

A discussion paper

9

Georgia: Reducing Child Poverty

Figure 5: Estimated Effect of Pension Income upon Consumption Poverty: Percent of Households, Children and Pensioners Living in Poverty Before and After Deduction of Pension Income, 2011 100%

With Pensions

Excluding Pensions

80%

Relative Poverty Rate

Extreme Poverty Rate 60%

50%

24% 20%

38%

37%

40%

22%

17% 9.4%

8.3%

34% 25%

21%

8.2%

0%

Households

Children

Pensioners

Households

Children

Pensioners

Targeted Social Assistance Targeted social assistance (TSA) is the main cash benefit available for families with financial/material hardship. To qualify, a family submits application to the office of the Social Services Agency. This is processed and entered into a database of socially vulnerable families. A social agent visits the applicant household to record data on indicators of its socio-economic situation which are then entered into the database ranking the assessed households.

Households with a score below 57,001 are entitled to cash assistance and health insurance.16 The cash benefit is 30 GEL for the first member of the household and extra 24 GEL for each additional household member.

Coverage by TSA of the poorest 10% of all households increased from 2009 to 2011 although nearly half of the poorest households still do not receive TSA. Whilst there are continued improvements in targeting the poorest, the TSA system is still not reaching a large share of its intended beneficiaries (see Figure 6).

Figure 6: The Proportion of Population Receiving Targeted Social Assistance, by consumption decile 100%

2009

2011

% of Households

80%

54%

60% 40%

39%

16%

20%

20%

17% 7%

7%

10%

6% 9%

4% 7%

5% 8%

2% 5%

1% 3%

1% 2%

5

6

7

8

9

10

0% 1 Poorest

2

3

4

Pre TSA Consumption Decile

Richest

TSA has a significant impact upon consumption poverty - however different impact than pensions. This can partially be explained by the lower amount of cash distributed to families qualifying for TSA as compared to old age pensions. Additionally, pensions are universal and they are not affected by the possible flaws in the targeting Households scoring between 57 000 and 70,001 receive free health insurance only.

16

10

A discussion paper

Georgia: Reducing Child Poverty

mechanism. If TSA were removed, poverty rates would rise for everyone, especially for children. Without TSA, extreme child poverty would rise by more than 65% (see Figure 7).

Figure 7: Estimated Effect of TSA Income upon Consumption Poverty: Percentage of Households, Children and Pensioners under Poverty Before and After Deduction of TSA Income, 2011 100%

With TSA

Excluding TSA

80%

Relative Poverty Rate

Extreme Poverty Rate 60%

40%

22% 24%

15%

20%

8% 12%

9%

25% 27%

21% 24%

8% 11%

0%

Households

Children

Pensioners

Households

Children

Pensioners

Health Insurance In 2006, the Government of Georgia created the Medical Assistance Programme (MAP) for the most vulnerable families to ensure their access to health care services. This type of assistance is linked to the rating score (below 70,001) of the households under the TSA system (see page 9).

In 2011, 42% of households in Georgia had at least one member with some kind of health insurance. The overall percentage of people with health insurance increased from 23% to 30% and percentage of children with health insurance increased from 24% to 28% in the period from 2009 to 2011, respectively (see Figure 8).

Figure 8: Households with at least One Family Member Insured, Children and Population with Health Insurance Coverage in 2009 and 2011 100%

2009

2011

80% 60%

42% 40%

23%

30%

24%

28%

34%

20% 0% Population

Children

At Least One Member in Household Insured

The positive change in the insurance coverage can be partly attributed to the expansion of knowledge about the MAP programme and its utilisation. The reach of the MAP programme in 2011 as compared to 2009 has increased significantly in the poorest quintile; that is, from 21% coverage to 40% coverage. If there were no MAP insurance, A discussion paper

11

Georgia: Reducing Child Poverty

only 6% of the population would have some sort of health insurance in the poorest quintile as compared to 19% of the population with health insurance in the richest quintile for 2011 (see Figure 9). Overall, health insurance coverage of poor households has improved.

Figure 9: Percentage of Population with Different Types of Health Insurance, by consumption quintile, 2011 100% 80% % of population

Map

Other State Subsidised

Private Only

60% 40%

2% 4%

20%

40%

4% 3% 25%

6% 4% 16%

9% 3% 11%

3

4

0%

1

2

5 Richest

Consumption Quintile

Poorest

17% 2% 5%

Both surveys showed that the inability to pay for health services was the biggest barrier to accessing health care.

Almost half of the households surveyed in 2011 had at least one member who did not receive needed medical services because the household could not afford them. Put in another way, over 30% of the population reported that they needed medical services but could not receive them. From those who could not get needed medical services, 85% reported financial reasons as the barrier (see Figure 10).

Figure 10: Percentage of Population Reporting Different Reasons for not Receiving Needed Health Care, 2011

Could not aord; 85%

No need/Received; 69.5%

Needed/Not Received, 30.5%

Self treatment; 8.5% Other; 6.5%

Health insurance has a positive impact upon health care utilisation. In the period of 30 days prior to the 2011 survey date, 17% of the insured population used outpatient care as compared to 13% in the uninsured group.

12

A discussion paper

Georgia: Reducing Child Poverty

No matter how wealthy the household is, health insurance improves access to basic health services. In all quintiles, there is a statistically significant difference in the inability to get needed medical services on financial grounds between those who had health insurance and those did not have the coverage (see Figure 11).

Figure 11: Percentage of Population Reporting Need of Health Care and Inability to Pay for it, by insurance status and consumption quintile, 2011 100%

With Health Insurance

Without Health Insurance

% of population

80%

60%

37%

36%

40%

24%

23%

26%

22%

24%

22%

20%

22% 12%

0% 1 Poorest

A discussion paper

2

3 Consumption Quintile

4

5 Richest

13

Georgia: Reducing Child Poverty

Child Poverty A child born into poverty is deprived in many ways. Poor families with children cannot afford to buy food, school books or medicine, amongst other things. They may consider putting their children to work at an early age to help the family survive. Child poverty often persists throughout the life cycle: a child born into poverty will likely stay there for his/her entire life. Poverty in early childhood can cause lifelong cognitive and physical impairments and put children at a permanent disadvantage.17 Investing in children, therefore, is critical to achieving equitable and sustainable human development.

Child poverty decreased in Georgia over the two years from 2009 to 2011. Despite these positive gains, however, children in Georgia were still more likely to be in poverty in 2011 as compared to other groups (see Figure 2 above).

Poverty rates rise significantly in those households with more children. For the relative poverty threshold, 24% of households with one or two children lived in poverty. This figure increases considerably up to 30% for households with three or more children (see Table 1).

Table 1: Variation in Relative Poverty for Households with Different Numbers of Children in 2009 and in 201118 Poverty Rate (% households)

Type of Household

Poverty Rate (% households)

χ2 Sig.18

2009

χ2 Sig.

2011

With no children

21.5

***

19.9

With children

26.8

With no children

21.5

With 1 or 2 children

25.4

23.7

With 3+ children

36.7

30.1

Total

23.7

21.8

***

24.5 ***

19.9

***

For each threshold, the percentage of children living in poor households is higher than the poverty headcount for the whole population and is higher than that of pensioners (see Table 2).

Table 2: Poverty Rates in 2009 and 201119 Poverty Threshold Extreme 2009

Extreme 2011

Relative 2009

Relative 2011

Households Children Pensioners

8.9 11.5 7.3

8.3 9.4 8.219

23.7 28.4 22.2

21.8 25.2 21.3

Population

9.9

9.1

25.7

23.5

% poor

In 2009, poverty rates were significantly higher in households that had children than in households without and this difference persisted in 2011 (see Figure 12). The percentage of households with children living in extreme poverty are by 3 percentage points higher than that of households without children both in 2009 and 2011 surveys.

World Bank, Georgia Poverty Assessment 2008

17

*** p < 0.001 (99.9% significance level).

18

During the 2011 survey the old age pension income amount was the same as in 2009.

19

14

A discussion paper

Georgia: Reducing Child Poverty

Figure 12: Percentage of Households with and without Children Living in Poverty 100%

Without Children

With Children

80%

Relative Poverty Rate

% of households

Extreme Poverty Rate 60%

40%

22% 20%

8%

11%

7%

27% 20%

25%

10%

0% 2009

2011

2009

2011

Child Poverty and Social Assistance There are no child specific social assistance (financial) benefits in the country aside from the reintegration package for children living in institutional care (described in the box to the right).

The two main tools that are used to mitigate poverty risks are pensions and Targeted Social Assistance.

Many households in Georgia are multi-generational which helps to reduce child poverty. The likelihood of a child benefiting from state provided pensions, however, depends largely upon whether or not a pensioner lives in the household.

In 2011, coverage by Targeted Social Assistance (TSA) cash benefits which provides support to the most vulnerable families in Georgia increased in the poorest 20% of households. This improvement was due to the refinement of the TSA formula in 2010 along with the introduction of new administrative arrangements for maintaining the TSA database.20 When comparing TSA coverage by households with and without children, however, it is evident that in the poorest households, those with children were less likely to be receiving cash benefits in 2011. 12% of households with children were receiving TSA in 2011 compared to 15% of households without children. In 2009, 35% of households without children in the poorest wealth group were covered

by TSA cash benefits as compared to 56% of similar households covered in 2011. As for households with children in the same consumption group, the increase was from 43% to 53% in the same time period. Even though coverage of TSA cash benefits

The Link between Child Protection and Poverty The most vulnerable children in Georgia include children living in poor families, children in state care, children living or working on the street. National studies have shown that family separation and the subsequent institutionalisation or placement of children in foster care or small group homes is mainly driven by poverty. The Government of Georgia has shown a strong commitment towards closing down large institutions (orphanages) and reintegrating children into their families or, if family reunification is not safe or in the childâ&#x20AC;&#x2122;s best interest, placing them in foster care and small group homes. The Government has introduced reintegration benefits for children returning to their families from large institutions, including 90 GEL per month per child, health insurance for the child and a day care voucher. This reintegration benefit does not affect eligibility for any other benefits that the child or the family may be receiving. The existing benefits, however, are available to the children and their families post factum when family separation has already happened. The Government of Georgia is planning to introduce health insurance for children from 0-6 years of age from September 2012. This is a positive step towards alleviating child poverty and assisting families with access to health care.

United Database of Socially Vulnerable Households in Georgia maintained by SSA.

20

A discussion paper

15

Georgia: Reducing Child Poverty

increased, this positive change is more evident for households without children (see figures 13a and 13b). The government is placing a strong emphasis upon highly vulnerable children and child care reform. Yet, household poverty is a major contributor to family separation and family breakdown and so social benefits for households with children should be expanded.

Moreover, data for 2011 shows that 47% of the households in the first decile with children were not covered by cash benefits under the existing targeting system.

Figure 13a: TSA Coverage in Deciles for Households with and without Children 2009 100%

Without Children

With Children

% of households

80%

60%

43% 40%

35% 17%

20%

15%

9%

5%

10% 3%

8%

3%

5%

2%

8%

2%

3% 0%

2% 0%

1% 1%

8

9

10

0%

1

2

3

4

5

Poorest

6

7

Pre TSA Consumption Decile

Richest

Figure 13b: TSA Coverage in Deciles for Households with and without Children 2011 100%

Without Children

With Children

% of households

80%

60%

56%

53%

40%

18%

20%

22%

21% 12% 13%

5%

11%

6%

9%

11% 3%

2%

8%

2%

4% 2%

3% 2%

0% 1 Poorest

16

2

3

4

5

6

Pre TSA Consumption Decile

7

8

9

10 Richest

A discussion paper

Georgia: Reducing Child Poverty

Child Poverty Reduction - Scenarios The Government of Georgia has an effective poverty alleviation system in the form of pensions and TSA although there is a need to scale up impact of the programmes. The government is committed to increasing pensions from September 2012.21 Pensioners22 below the age of 67 years will receive a pension package worth of 125 GEL per month and pensioners of the age of 67 years and above will receive 140 GEL per month. The government is also introducing health insurance for pensioners. The cost of health insurance is announced to be 15 GEL per month which will be included in the pension package.23 This section explores how the raise in pensions will impact poverty alleviation. The monetary amount the pensioners are said to receive from September 2012 will be 110 GEL and 125 GEL, respectively.

As we have seen in the previous section, TSA has a more powerful potential impact upon reducing child poverty than pensions (figures 5 and 7). At the same time, cash benefits under TSA are means tested whilst old-age pensions are flat, universal monetary disbursements. Pension receipt depends upon whether or not there is a pensioner in the household. TSA receipt depends upon whether or not the head of household decides to apply for the TSA benefit, on the one hand, and whether or not the state decides that a household qualifies for the TSA benefit, on the other. The realisation of the right of a child to be socially protected, therefore, depends heavily upon the decisions of others not necessarily acting in the best interest of a child. The paper also introduces the universal child benefits option as an alternative tool for better protecting children and their families from the risks of poverty.

This section explores the impact upon poverty of the hypothetical interventions described below: 1) Increase of the TSA cash benefit by 50%.

2) Increase of the TSA cash benefit by 100%.

3) Increase of the number of beneficiaries by increasing cut-off score for TSA cash benefits up to 100,000 points.

4) Introduction of Universal Child Benefits in the amounts of 15, 20 and 30 GEL per child aged 0-16 years.

The models are based upon the assumptions discussed earlier in the paper and the results are valid for the poverty threshold used. Despite the fact that total household consumption is adjusted to Per Adult Equivalent, the real effect of interventions upon child poverty in each household may still be over or under estimated since the distribution of consumption in each household is not homogenous. The overall effect of the interventions, however, is realistic.

During the time of the survey, the government was spending approximately 55 million GEL per month for old age pensions. The last pension reform took place in September 2011 increasing old age pension premium from 80 to 100 GEL per person (please see the estimated effect of this increase in pensions on poverty rates in tables 5 and 6). Government expenditure on pensions increased and amounted to approximately 67 million GEL a month since September 2011. With the planned increase in September 2012, monthly governmental spending for old age pensions will increase by more than 14 million GEL (an additional 10 million GEL a month will be spent on health insurance for the elderly). The total government spending on old age pensions is estimated to be equal to 80 million GEL per month (plus 10 million GEL a month for health insurance).24 When analysing new poverty rates with the planned increase in pensions for 2012, the paper considers the difference in pension income of the household. This difference is calculated by subtracting the reported pension income during the survey from the planned pension amount to be received in September 2012. This difference is then added to household consumption and adjusted for Per Adult Equivalent. This was done to account for the 2011 pension increase as well as the future one.

Law of Georgia on State Budget for 2012, Article 39, Paragraph 6.

21

Pensioner â&#x20AC;&#x201C; By definition, a person receiving pension. According to the Georgian Law on State Pensions, the pension age in Georgia is 65 years although women can enjoy the right to pension from the age of 60 years.

22

Law on State budget for 2012 stipulates that the distribution of the pension package into monetary and non-monetary components shall be defined by a Governmental decree. As for plans, it is agreed that the amount of monthly health insurance premium will be set based upon the results of relevant tender and by no means will exceed 15 GEL per month. Should it happen that the monthly health insurance premium will be set at the level less than 15 GEL, the difference between 15 GEL and the monthly premium will also be given to a pensioner in the form of monetary income. No account has been made for the possible discrepancy in pension monetary income.

23

http://ssa.gov.ge/files/01_GEO/statistika/EXCEL/1/2012/1.9.xlsx

24

A discussion paper

17

Georgia: Reducing Child Poverty

To estimate new poverty rates with the planned increase in pensions in September 2012 and holding everything else constant, the planned increase in pensions would reduce extreme child poverty from 9.4% to 7.7% and relative child poverty from 25% to 23% (see Figure 14). This intervention will cost the Government 26 Million GEL per month.25

Figure 14: Estimated Effect of a Planned Old-Age Pension Increase on Child Poverty 100%

Original Child Poverty Rate

Child Poverty Rate after Pension Increase

80% 60% 40% 20%

25% 9.4%

23%

7.7%

0%

Extreme

Relative

The current TSA cash benefit is 30 GEL for the first family member and 24 GEL for each additional family member.

The government currently spends approximately 11 million GEL per month on the TSA cash benefit. In the first scenario (a 50% increase), the cash benefit amounts will rise to 45 GEL for the first family member and 36 GEL for each additional family member. With the existing coverage, this increase will cost the government approximately 5.5 million GEL more per month, bringing the total monthly TSA commitment to roughly 16.5 million GEL. The estimated effect upon child poverty in this scenario is almost the same as the estimated effect of the planned pension increase. Holding everything else constant, extreme child poverty under this scenario is estimated to go down from 9.4% to 8% and relative child poverty from 25% to 23%. In the second scenario, the level of TSA cash benefit increases by 100% to 60 GEL for the first family member and 48 GEL for each additional family member.

With the present coverage levels, this increase would cost the government approximately 11 million GEL per month more, bringing the total monthly cost of TSA to 22 million GEL. Holding everything else constant, this increase would decrease relative child poverty by 5 percentage points. With a 100% increase, every fifth child would be lifted out of extreme poverty. In the third scenario, the cut-off score is set at 100,00026 points. Such an approach will increase the number of TSA beneficiaries receiving the current level of monetary cash assistance by 140 %. This increase would cost the government an additional approximately 18.5 million GEL per month, bringing the total monthly cost of TSA to 29.5 million GEL. Holding everything else constant, this increase would reduce child poverty from 9.4% to 7.1% (see Figure 15).

From the total 26 Million GEL per month, 12 Million GEL per month has been spent on old-age pensions since September 2011; extra 14 Million GEL per month will be spent on old-age pensions from September 2012.

25

TSA cash benefits are available to the household with the score less than 57,001 points.

26

18

A discussion paper

Georgia: Reducing Child Poverty

Figure 15: Estimated Effect of Adjusted TSA upon Consumption Poverty of Children 100%

100%

Effect of 100% Increase ofTSA TSA

Effect of 50% Increase of TSA 80%

Original Poverty Rate Poverty Rate with Adjusted TSA

60% 40% 20%

25% 23%

80% 60% 40% 20%

9.4% 8.0%

0%

Original Poverty Rate Poverty Rate with Adjusted TSA

25%

20%

9.4% 7.5%

0% Extreme

Relative

Extreme

Relative

100%

Effect of Increase of the TSA Cut-Off Score to 100,000 Points 80%

Original Poverty Rate

Poverty rate with Increase in TSA cut off score

60% 40%

25% 20%

9.4%

21%

7.1%

0% Extreme

Relative

It is worth mentioning that the poverty rates are decreased in the first two scenarios by the effect of lifting out the existing TSA recipient families from poverty. In the third scenario, the poverty rates are decreased by introducing new TSA beneficiaries, thus increasing the number of children benefitting from TSA. Due to the exclusion error from the system, however, the poorest non-applicants will still not be benefitting.

The government will introduce its planned pension increase in September 2012. This increase is already reflected in the state budget for 2012. Holding everything else constant, if the government introduces the pension increase and also increases the TSA benefit by 50% (scenario 1), extreme child poverty is estimated to decrease from 9.4% to 6.6% and relative child poverty from 25% to 21%. If the TSA cash benefit is increased by 100%, this increase together with the planned pension increase would reduce extreme child poverty from 9.4% to 6% and relative child poverty from 25% to 18%. If the TSA cut-off score were increased to 100,000 points, this increase together with the planned pension increase would reduce extreme child poverty to 5.9% and relative child poverty to 19%. With the last two models, every third child will be lifted out from extreme poverty (see Figure 16).

A discussion paper

19

Georgia: Reducing Child Poverty

Figure 16: Estimated Effect of Dual Increase in Transfers – Increased TSA and Pension upon Consumption Poverty of Children 100%

100%

50% Increase of TSA+Increased Pensions 80%

100% Increase of TSA+Increased Pensions 80%

Original Poverty Rate 60% 40% 20%

Original Poverty Rate 60%

Poverty Rate with Planned Increase in Pensions and 50% Increase in TSA

25%

Poverty Rate with Planned Increase in Pensions and 100% Increase in TSA

40%

25%

21% 20%

9.4% 6.6%

0%

9.4%

18% 6.0%

0% Extreme

Relative

Extreme

Relative

100%

Increase of Cut-Off Score for TSA up to 100,000+Increased Pensions 80% Original Child Poverty Rate 60%

Poverty Rate with Planned increase in Pensions and Increase in TSA cut off score

40%

25%

20%

9.4%

19%

5.9%

0% Extreme

Relative

Table 3 below shows the effect of interventions and the size of overlap between pensions and other interventions when reducing child poverty.

Table 3: Extreme Child Poverty - Net Effects of Interventions Original Extreme Poverty Rate 9.4%

Poverty Rates with Interventions

Poverty Rates with Interventions and Pensions

Decrease from Original Poverty (9.4-P1)

Decrease from Poverty Rates with Pension Effect (9.4-P2)

Decrease from Poverty Rates with Pension Intervention Only (7.7-P2)

Overlap of Pension Effect with Effects of Other Interventions (1.7+P3-P4)

P1

P2

P3

P4

P5

P6

Pensions

7.7%

-

1.7%

-

-

-

TSA 50

8%

6.6%

1.4%

2.8%

1.1%

0.3%

TSA 100

7.5%

6.%

1.9%

3.4%

1.7%

0.2%

TSA 100K

7.1%

5.9%

2.3%

3.5%

1.8%

0.5%

Universal

5.3%

3.9%

3.9%

5.5%

3.8%

0.1%

20

A discussion paper

Georgia: Reducing Child Poverty

Universal Benefits Within the framework of Georgiaâ&#x20AC;&#x2122;s current social protection system, most of the cash benefits as well as services are linked to the household poverty level as captured and compared within the database of socially unprotected families. The government believes that linking benefits to household poverty will allow for more effective and efficient use of limited resources. On the other hand, the government is committed to recognising that a large sub-set of the population experience specific and overarching vulnerabilities that are best addressed through a universal approach, i.e. old age pensions and the provision of universal primary and secondary education. Building upon this experience, the paper explores the possibility of introducing a universal cash benefit for children aged 0-16 years.27 In this hypothetical model, the level of the monthly benefit has been set to the amount of the current TSA cash benefit for the first family member (30 GEL)28 which is the same as one GEL per day per child. This benefit would cost the government approximately 25 million GEL per month.29 Holding everything else constant, if this universal child benefit were introduced, extreme child poverty is estimated to fall from 9.4% to 5.3% and relative child poverty from 25% to 17% (see Figure 17).

When the planned pension increase is added to the introduction of the child benefit, holding everything else constant, extreme child poverty is estimated to fall from 9.4% to 3.9% and relative child poverty from 25% to 15% (see Figure 17). In this scenario, almost 60% of children are estimated to be lifted from extreme poverty.

Figure 17: Estimated Effect Universal Child benefits (30 GEL) on Consumption Poverty of Children and Dual Effect of Pensions and Universal Benefits 100%

100% 80%

Original Poverty Rate

80%

Poverty Rates with Universal Child BeneďŹ ts

Original Poverty Rate Poverty Rates with Universal Child BeneďŹ ts and Increased Pensions

60%

60%

40%

40% 25%

25% 20%

17% 9.4%

20%

5.3%

0%

9.4%

15% 3.9%

0% Extreme

Relative

Extreme

Relative

Introducing universal child benefits would have a very strong impact upon extreme poverty for all other groups as well. The universal child benefit would decrease poverty in all households from 8.3% to 4.5% and decreases poverty in the general population from 9.1% to 4.5%. The universal child benefit would also dramatically decreases pensioner poverty from 8.1% to 2% (see Table 4).

0-16 is used as this is the age group used for the Welfare Monitoring Survey and for calculating Adult Equivalency.

27

16% of median consumption in 2011 (182 GEL).

28

30 GEL multiplied by the number of 0-16 population (approximately 820 thousand).

29

A discussion paper

21

Georgia: Reducing Child Poverty

Table 4: Estimated Dual Effect of Universal Child Benefits together with Planned Pension Increase Â

Households Population Children Pensioners

Extreme Poverty

Relative Poverty

Original Poverty Rate

Modelled Poverty Rate

Original Poverty Rate

Modelled Poverty Rate

8.3% 9.1% 9.4% 8.1%

4.5% 4.5% 3.9% 2.0%

22% 24% 25% 21%

15% 16% 15% 11%

Since the fiscal space for additional social protection expenditures is limited, this paper also explores the possible effect of 15 GEL and 20 GEL30 universal benefits per child. The introduction of last two benefits will cost the government less than in the case of introducing the 30 GEL Universal Child Benefits. The estimated effects will also be less although as compared to other possible interventions (100% increase of TSA cash benefit or the increase of the cut-off score for TSA benefit), the cost of these programmes are similar but the effects upon the poverty rates are higher.

When planned pension increase is introduced together with the 15 GEL Universal Child Benefit, the extreme poverty rates go down from 9.4% to 5.2% in children and relative poverty rate from 25% to 19%. The approximate cost of this intervention is 12.5 million GEL per month. This benefit also positively affects other groups (see tables 5 and 6).

If the Universal Child Benefits are set at 20 GEL per child, the extreme poverty rates go down from 9.4% to 4.6% in children and relative poverty from 25% to 11%. This intervention costs approximately 18.5 million GEL per month.

The Universal Child Benefit, in the amount of 20 GEL, also significantly reduces the poverty rates of other groups (see tables 5 and 6).

The analysis of the different models has shown that universal child benefits together with increased pensions are the most effective social protection tools for reducing child poverty as well as poverty of other groups. It is very important to ensure that the child benefits are available for everyone based upon self-selection and the issuance of the benefit can be subject to registration.

Tables 5 and 6 represent summarised results of the above discussed scenarios on poverty rates of different groups.

8% and 11% of median consumption in 2011 (182GEL).

30

22

A discussion paper

A discussion paper

6.9%

7.7%

8.5%

5.5%

8.3%

9.1%

9.4%

8.1%

Households

Population

Children

Pensioners

3.3%

7.7%

6.6%

5.8%

Planned Pension Increase only - from survey period to September 2012 (26 Mill per Month)

September 2011 increase in Pensions (12 Mill per Month)

19%

21%

23%

16%

Original Poverty Rate in 2011

22%

24%

25%

21%

Households

Population

Children

Pensioners

Â

13%

23%

20%

18%

Planned Pension Increase only - from survey period to September 2012 (26 Mill per Month)

Table 6: Estimated Effects of Models on Relative Poverty Rates

September 2011 increase in Pensions(12 Mill per Month)

Original Poverty Rate in 2011

Â

Table 5: Estimated Effects of Models on Extreme Poverty Rates

12%

21%

18%

16%

TSA 50% Increase and Pension Increase (Additional 5.5 Mill per Month)

2.8%

6.6%

5.9%

5.1%

TSA 50% Increase and Pension Increase (Additional 5.5 Mill per Month)

10%

18%

16%

14%

TSA 100% Increase and Pension Increase (Additional 11 Mill per Month)

2.7%

6.0%

5.3%

4.7%

TSA 100% Increase and Pension Increase (Additional 11 Mill per Month)

10%

19%

16%

15%

TSA CutOff Score Increase and Pension Increase (Additional 18.5 Mill per Month)

2.7%

5.9%

5.2%

4.8%

TSA CutOff Score Increase and Pension Increase (Additional 18.5 Mill per Month)

12%

19%

18%

16%

Universal Child Benefits and Pension Increase (Additional 12.5 Mill 15 GEL per Child)

2.5%

5.2%

5.2%

4.9%

Universal Child Benefits and Pension Increase (Additional 12.5 Mill 15 GEL per Child)

12%

17%

17%

16%

Universal Child Benefits and Pension Increase (Additional 18.5 Mill 20 GEL per Child)

2.3%

4.6%

4.9%

4.7%

Universal Child Benefits and Pension Increase (Additional 18.5 Mill 20 GEL per Child)

11%

15%

16%

15%

Universal Child Benefits and Pension Increase (Additional 25 Mill per Month 30 GEL per Child)

2.0%

3.9%

4.5%

4.5%

Universal Child Benefits and Pension Increase (Additional 25 Mill per Month 30 GEL per Child)

Georgia: Reducing Child Poverty

23

Georgia: Reducing Child Poverty

Discussion •

Even though reforms in Georgia have triggered rapid economic growth in recent years, the benefits of growth are not necessarily equally distributed across all wealth groups. A critical issue for Georgia as a lower middle income country is how to deal with existing disparities and inequities.

•

The primary way to address poverty is to further expand the economy with equal opportunities for all, invest in early childhood development and education, create equitable employment opportunities, and protect households from economic shocks and reinforce economic sectors showing promise. Such an economic growth needs to be inclusive to positively impact children and their families.

•

The government recognises that whilst progress has been commendable, economic expansion takes time and there must be a social protection package in place for households in poverty.

•

The current social protection mechanisms (TSA, old age pensions and MAP health insurance) clearly contribute to reducing extreme and relative consumption poverty and the Welfare Monitoring Survey (2009 and 2011) confirmed that poverty indeed has decreased in Georgia.

•

At the same time, the evidence presented in this paper demonstrates that households with children are more likely to be poor and less likely to benefit from the social protection welfares than other households. Evidence in this study shows that additional social protection for children is needed in the short-term.

•

International studies show that a child born into poverty is most likely to stay there through his/her lifecycle.

This hinders a proper development of a child and has future negative effects on labour force participation in the accumulation of wealth in the economy. The future of the economy is dependent, in large part, upon the well-being of children today.

•

This paper presents a range of policy options (increase of TSA benefit, increase of number of TSA beneficiaries, and introduction of universal child benefits) that, whilst not by any means exhaustive, capture potential ways forward to reduce child poverty.

•

This paper takes the position that any future increases in social protection must take children into account. This is both an investment in the future of Georgia as well as an investment in the prevention of family breakdown and unnecessary family separation.

•

In addition, even though these different monetary interventions will have a positive impact on reducing child poverty, in some circumstances additional non-monetary support will be necessary to ensure more durable solutions for children and their families. Since social agents31 visit the large majority of poor households, these visits are a unique opportunity to assess whether there are any specific needs in the households with children that have not been actually referred to a social worker. Creating a link between social agents and social workers thus is instrumental.

•

UNICEF believes that Georgia cannot afford not to take action. Therefore, UNICEF suggests considering one of the policy options discussed in this paper for a period of at least three years during which time economic growth and social protection interventions will be more inclusive and closely monitored to gauge the impact upon poverty.

SSA agents assess families that applied to the database for socially vulnerable population.

31

24

A discussion paper