Social Safety Nets in Asia
Regardless of its title—alms, gifts, handouts, welfare, aid—the true meaning of social safety nets is not universally accepted in the developing world. As a useful form of poverty reduction, there are several purported reasons as to why “charity” is regarded as wasteful spending. One is the belief that social assistance programs diminish incentives to work and create dependency on the program’s benefits into the foreseeable future.

The Issues with Social Safety Nets in Asia

The myth of “crutch economies” being the bane of current work ethic and the cause of further, more established and resilient poverty, appears to be losing its already slippery empirical footing. Recent studies conducted by the World Bank in countries such as Mexico, Indonesia and the Philippines have found no evidence that workers who receive assistance go on to work less. Instead, social safety nets routinely form a stable barrier for further slides into economic degradation in developing countries.

But spending on them still appears to be minimal. Although the levels of spending as a percentage of GDP varies across countries, spending on social safety nets in Asia, South and East Asia especially, is relatively low. The developing world on average spends 1.5 percent of its GDP on some form of welfare programs. South Asia, meanwhile, spends only 0.9 percent of GDP on social safety nets.

In lieu of more conventional welfare programs, the region has relied instead on more customary and time-tested economic assistance programs. A mix of ample growth, a youthful population and a devoted and helping family has filled the void of official government social safety nets in Asia.

While an admirable economic support system, there are more modern social safety net programs that do not become victim to the “crutch economy” fears. A unique pension plan in Mexico is disproving both the myth of diminishing work ethic and future drags on the economy due to dependency.

The Older Adults Program in Mexico

Pension plans provide better well-being later in life, as they allow people to project their current earnings into the future. But the regency of informal labor in developing countries has made large-scale worker contribution plans rather toothless in practice. Instead, Latin American countries are trying a pension program that targets age and income and does not rely on the contributions of workers. This form of social security could encourage Asian countries to provide a more substantial safety net at home.

Removing the fear of falling into abject poverty, or burdening close relatives once workers are removed from the labor market, is the goal of the Older Adults Program (OAP) in Mexico. The OAP is a noncontributory universal pension system for elderly Mexicans living in small towns. Initiated in 2007, the program took only four years to cover 2.1 million elderly people in 76,000 communities in Mexico. A recent study of the OAP by the International Development Bank (IDB) helps dispel the myth of crutch economies.

One concern of social safety nets in Asia is that they instill a sense of complacency in the younger population. Expecting to receive future income from the program’s benefits, the pension warps the savings and work ethic of the younger generations. The IDB’s study, however, found no evidence of such dependence. These “anticipation effects” that are widely feared and cited by critics of social safety nets were not backed up with any empirical findings. Negative labor supply effects of working age citizens was not a side effect of the pension plan for the elderly.

Work ethic among the elderly was not negatively affected either. Although beneficiaries working for pay in the official labor force dropped, this was more than compensated for by the rise in informal, unpaid family business employment. Rather than sapping their willingness to work, the pension program transferred those efforts to where families deemed most urgent.

The Coming of Age in Asia

But despite the lack of spending, there is hope that social safety nets in Asia will soon grow in usage and acceptance. This is already the case in Indonesia and the Philippines, even if they are outliers in the region.

A cash-transfer scheme in the Philippines, having covered four percent of the population in 2009, increased coverage to 20 percent in 2015. A similar scheme in Indonesia has grown in coverage from two percent of the population in 2009 to nine percent in 2016 with help from the World Bank.

In Indonesia, the payments from the Family Hope Program provide benefits to those in the bottom 10 percent of income distribution. Benefits are available to households with a pregnant mother or a child between the ages of zero to 18. Assistance focuses on promoting education and health of the family. The cash payments are made only if beneficiary households keep children enrolled in school and respond to health issues by taking children to clinics.

As promising as the Family Hope Program is, other countries in Asia have yet to adequately address welfare programs relative to other regions of the world. A fear of diminishing labor supply motivation and perpetual dependency on benefits should not deter the acceptance and administration of social safety nets.

Other than evidence-based research, there is one persuasive reason for adopting more widespread social safety nets in Asia: human kindness. Harry Truman, commenting in 1946, said, “The word ‘charity’ has regained its old, true meaning—that of goodwill toward one’s fellowman; of brotherhood, of mutual help, of love.” Until that is realized, the world will have to rely on empirical arguments to persuade decision makers that social safety nets are necessary.

– Nathan Ghelli
Photo: Flickr

Five Myths about Social Safety Nets-Debunked!
When it comes to social safety nets, many myths and half-truths about the efficacy of these programs exist among citizens and political leaders. Social safety nets are programs that aid the poor by increasing their incomes, improve school attendance, provide access to basic health care and implement employment opportunities.

Even though some of these myths are inoffensive, they do have the potential to harm people who rely on governmental assistance programs. The New York Times reports, “One billion people in developing countries participate in a social safety net. At least one type of unconditional cash assistance is used in 119 countries.” Here are some of the top myths about social safety nets debunked:

Myth #1: The economy will do better if social programs are cut.
When governments decide to cut their social safety nets, many sectors within the economy begin to suffer. Governments inadvertently increase the unemployment rates within their countries when social programs are cut.

In 1981, President Ronald Reagan signed the Recovery Act, which cut social programs such as payments for individuals with disabilities and school-lunch programs. As a result, the largest projected deficit in U.S. history occurred leading the U.S. economy to its worst recession since the Great Depression. The American economy struggled to combat the resulting 14 percent inflation rate as well as the increased interest rates of the Federal Reserve Board.

With less citizens being able to afford goods and services, overall manufacturing decreased while layoffs and unpaid taxes increased. It is recorded that in 1982, those unemployed reached a staggering nine million, 17,000 businesses had failed, farmers across the nation began to lose land and the poor, elderly and sick became homeless.

Instead of aiding the economy, social budget cuts on social safety nets result in a decrease in the overall finical health of a country’s economy.

Myth #2: Reducing government assistance benefits will make people get a job.
This myth is usually perpetrated by those who do not understand the demographics within social safety nets. Over half of all people who are enrolled in government assistance programs are those who cannot physically or mentally work such as the elderly and people with disabilities. Even if governments were to reduce benefits for those who can work, it still would not make a significant difference in employment rates.

According to the Housing Alliance of Pennsylvania, many people who are working and receive housing assistance still live in homeless shelters simply because they still do not make enough currency to afford a place to live. The Wall Street Journal further states that the four largest welfare recipients are those who labor as fast-food workers, home-care workers, child-care workers and part-time college faculty.

Reducing government assistance will not make people get a job simply because those who receive these benefits are either unable to work or are currently working in a low-paying occupation.

Myth #3: Welfare makes people lazier.
Though the majority of persons benefiting from welfare are employed, surveys show that individuals from around the globe believe that social safety nets waste revenue and make people lazy. However, in 2014, The World Bank reported that contrary to public opinion, individuals on financial assistance in countries such as Asia, Latin America and Africa rarely wasted money on alcohol and tobacco.

In addition, Abhijit Banerjee, the director of the Poverty Action Lab at the Massachusetts Institute of Technology, released a scholarly paper that tracked and documented the cash-transfer programs in seven countries. The results from this paper determined that out of the seven countries, Mexico, Nicaragua, Morocco, Honduras, Indonesia and the Philippines, these programs did not discourage people from working.

Moreover, people who receive benefits from social safety nets do not become lazy. Rather, people who did receive these benefits continued to work diligently while also not wasting funds on items such as tobacco and alcohol.

Myth #4: People can benefit from social safety nets for as long as they want.
Most government assistance programs have a limited amount of time that someone can use unemployment benefits. For instance, the U.S. used to allow people 99 weeks of unemployment assistance.

In recent years states have limited the amount of time that citizens can use unemployment benefits to around 26-30 weeks. Currently, the only state that gives citizens 30 weeks of unemployment benefits is Massachusetts.

Myth #5: Certain demographics make social safety nets benefit one group and disadvantage the rest.
A majority of people believe that social safety nets benefit a particular kind of demographic while disadvantaging other groups within a society. Particularly, U.S. citizens feel that groups, comparatively liberals, benefited the most from social assistance programs.

Yet, details from a 2012 survey from the Pew Research Center show that in regard to politics, liberals and conservatives used governmental assistance programs almost equally. With 42 percent of liberals and 40 percent of conservatives using at least one governmental assistance program.

Despite these myths being detrimental to those who rely on social safety nets, it is worth noting that the U.S. economy is slowing improving. As of August 2016, unemployment rates in the U.S. are as low as 4.9 percent. Additionally, average hourly wages have increased between five cents and $25.59, with average weekly wages at around $880.30.

However, the best way to eradicate these myths about social safety nets is to advocate for legislation that protects these programs. Pay attention to laws that pertain to social safety nets and meet with local representatives about how social safety nets benefit society. Information about U.S. elected officials can be found on Common Cause.

Shannon Warren

Photo: Flickr