Social Policy Responses to Protect Households
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5. During the Asian crisis, the Republic of Korea introduced a job maintenance program, which was essentially a wage subsidy of between 0.33 and 0.66 percent of wages if a firm demonstrates the need for economic adjustment. An assessment of the program found that 22 percent of jobs would have been lost had it not been for the subsidy (Atinc 2003). 6. In May 1999, the Republic of Korea launched a public works program for the unemployed not covered by UI benefits. Around 2.5 times more people benefited from the public works program compared with UI. The wage had to be adjusted downward several times as some workers were leaving their jobs to receive the higher wages available through the program (Blomquist et al. 2002). 7. Germany gained notoriety for its short-time work program called Kurzarbeit. The government provides a subsidy from its UI funds to workers and employers so firms can cut labor costs without layoffs by spreading hourly cuts across all employees. 8. Different types of subsidies have been used widely in postcrisis periods: earlier examples include Argentina, Indonesia, the Republic of Korea, Malaysia, and Thailand (see Atinc 2003; Ramesh 2009). 9. Ongoing research on safety net performance across the Eastern Europe and Central Asia region suggests that errors of exclusion and inclusion persist. 10. Armenia reduced leakage by cross-checking databases of paid dividends by allowing the authorities to identify nearly 17,000 families receiving benefits that would have been ineligible had they fully disclosed their earnings (World Bank 2010a). 11. During 1998, in response to the crisis, the Republic of Korea expanded eligibility by adding a temporary component to the Livelihood Protection Program, for which 75 percent of benefits were covered by the central government (Blomquist et al. 2002). Despite the expanded coverage and increased budget allocation, however, only 7 percent of the new poor benefited from the expanded program, and the overall coverage decreased from 32 percent of the poor in 1997 to 17 percent in 1998 (Fallon and Lucas 2002). 12. World Bank (2009) reviews the crisis-inspired pension reforms. 13. Pensions cover between 40 and 50 percent of all households in a majority of countries in the region. 14. Although pension benefit increases are within the purview of the government, cuts in pensions are sometimes protected by the judicial system and cuts often are politically costly. This makes it difficult to roll back or decrease benefit levels. For example, in June 2010, a top court in Romania ruled out a pension cut demanded by the country’s government as part of a fiscal austerity measure. Similarly, in December 2009, Latvia’s constitutional court struck down pension cuts that were part of the austerity measures.