Extending the social safety net — social responses to COVID-19 in the developing world
A recent report highlights the important steps that need to be taken to protect jobs and livelihoods during the public health response to COVID-19 in low- and middle-income countries.
At the time of writing, there have been more than 11 million cases of COVID-19 worldwide, killing over half a million people. Although the number of cases is declining in the UK and other European countries, the pandemic is only just emerging in Latin America and Africa. We are now starting to see a spike in the number of cases being reported in a huge number of low- and middle-income countries (LMICs), with Brazil, India and Peru now in the top five countries with the highest number of confirmed cases.
Aside from the obvious public health crisis that COVID-19 has created, there is a huge amount of social and economic disruption that is likely to last long after the pandemic recedes. In order to prevent the uncontrolled spread of COVID-19, governments around the world had to put in place unprecedented sanctions on people’s daily lives, including limiting travel and social interaction. These emergency measures limited mobility and the capacity of billions of people around the world from going to work. As a result, governments now need to adapt and provide emergency economic and social measures to mitigate the huge losses to household incomes due to COVID-19-related closures. A recent policy brief, published on the Economics for Inclusive Prosperity website, has highlighted both the need for a substantial social response to the pandemic, but also some of its early successes .
Difficulties in LMICs
In high-income countries (HICs), where a large proportion of the population work white-collar jobs, many people were able to work from home, so the losses to income during lockdown were less widespread. However, this is a completely different story in LMICs, who have been hit disproportionately hard by COVID-19 restrictions. A huge factor in this is the form that most work takes — in HICs, most people are employed in formal jobs — that is, jobs that have contracts, salaries and set working hours. However, in LMICs, it is estimated that 80 to 90% of employment is informal , working jobs such as cleaners, market sellers or independent producers. This means that while the workers are neither registered as working or paying taxes, they also have no safety net when they can no longer work. Moreover, even formal jobs in developing economies are much less compatible with social distancing, with the major markets focused on labour, construction and retail. Hence, if your job required you to go house-to-house, or work in a crowded market factory, the emergency response to the coronavirus crisis has completely cut off your source of income.
These issues are only compounded by other social factors. For example, many people in LMICs have limited access to savings or credit, meaning they have nothing to fall back on in times of unemployment. Whereas normally you’d turn to your social network, at times of crisis, your friends and family also can’t work and thus are in the exact same situation. And on top of a simple loss of income, following public health guidelines may also produce out-of-pocket costs, for example buying water in an urban slum, that will take up whatever income remains. The crisis that is currently developing in LMICs is therefore not just a health one, but one with enormous social and economic implications.
Social responses to COVID-19
Although, of course, lockdowns and quarantines were the only way to prevent the spread of COVID-19, many believe that if the government imposed these restrictive measures, it is also their responsibility to create policies that help people through the crisis. Several social safety nets will need to be put in place, both during the lockdown and after, as the population recovers from the disruption.
There are a number of different social responses a government can adopt, that broadly fall under the categories of social insurance, social assistance and local measures. Social insurance systems are those most likely to be used where formal employment is high, as in HICs. These include programmes such as job retention schemes and unemployment insurance, to help prevent job losses but also assist those that have been laid off. But these measures rarely benefit people outside of formal employment, so social assistance measures can also be used, for example, direct cash handouts or food subsidies. Nonetheless, there will always be people that these approaches cannot reach, for example, migrant workers and those with volatile employment. For these people, it will fall to local communities and governments to identify their needs and ensure that they are not forgotten at a time when they are most vulnerable
And there have been some incredible examples of rapidly implemented policies that have benefited huge numbers of people in LMICs. Across the world, job retention schemes, such as the one in the UK, have prevented the loss of millions of jobs, as the government pays a proportion of wages while businesses are shutdown. Thailand, Brazil, Morocco and South Africa have also implemented such schemes. For example, in Brazil and South Africa, the government is subsidising wages, but are paying a greater proportion of the wages of low-income workers compared to high-income workers, to target the people most affected by the lockdowns . These programmes have also been extended to self-employed people — for example, the Brazilian government is paying up to 60% of monthly income for self-employed people for the next 3 months , as well as making emergency low-credit loans available.
But social insurance measures go far beyond simply paying people’s wages. Many countries are also using tax relief and suspensions to mandatory payments such as rent to keep companies afloat to prevent future job losses and speed up economic recovery after the lockdown. In India, workers have been allowed to withdraw up to 75% of 3 months of wages from their Employee Provident Fund, aimed to support you through illness or retirement, that can easily be topped up when they go back to work .
There have also been major successes for programmes aimed at workers in informal employment, or not covered by the social insurance schemes. South Africa has implemented a child support grant, specifically for families not included in the job retention scheme , with Kenya also increasing grants for vulnerable children . Direct cash transfers are another approach to tackle the inevitable poverty COVID-19 will create. In Indonesia, existing cash transfer programmes have been adapted and now pay out monthly rather than quarterly , and in other countries, conditional cash transfers — that are normally given on completion of a certain condition; for example, parents sending their children to school — have been made temporarily unconditional.
Another approach is to provide people with basic necessities, such as food parcels. These are particularly useful where supplies are running short — being given money to buy food won’t do much good if there’s no food on the shelves! India has been a shining example of how this measure can benefit people at a time of crisis. In April, it was announced that the government would provide a free basic ration for a month for families living below the poverty line. They doubled their normal grain allowance, as well as adding pulses to the ration. The local government in Kerala also went a step further by distributing food parcels to every household, regardless of their income. This parcel included 17 food items, such as sugar, tea, beans and oil, to help people through the extremely strict initial lockdown restrictions . Aside from the social benefit of these policies, they also increased compliance with the public health measures — if you have food delivered to your house, there is much less need to go out shopping or to have to work regardless of the danger to your health in order to feed your family.
Despite the extensive nature of many of these social assistance schemes around the world, there will always be people that fall through the cracks. Many of these policies require you to have a registered address, be accessible for deliveries, or simply identify yourself to the relevant authorities. One way to identify others that need help is to harness the influence of the local community or local government to identify the people and needs of an area and to channel information upwards to national governments. This has already been developed in countries including Malawi and Ethiopia, where food is often scarce — local representatives inform local governments on current food supplies or prices during droughts and famines so the relevant aid can be provided to those who need it . A similar system has been deployed in Rwanda during the pandemic, using local representatives to identify people in need of food packages .
Challenges and limitations
While these social responses will, of course, benefit the populations of LMICs hit the hardest by the COVID-19 pandemic, there are some substantial challenges that will need to be overcome. Firstly, there is an enormous difference between a policy and the implementation of a policy, something that the current report touches on but does not fully address. An example of where a good policy was not translated into successful implementation is in Peru. The Peruvian government acted extremely quickly to the pandemic, rapidly going into lockdown. One of their social responses was direct money transfers — however, this required people to have bank accounts, as well as access to online banking. Globally, only 69% of adults have a bank account, with only 30% being paid wages or receiving direct government . This meant it was extremely difficult to get the money to a large proportion of the population, with the added complication of not having a pre-existing database from which to enroll people onto the programme. This resulted in people queuing into banks to receive money, decreasing social distancing and hence increasing the spread of the virus. Pakistan faced a different issue — their financial assistance packages for their poor required people in need to identify themselves to the relevant authorities, but this involves texting the existing social programme with their national identification number. This programme falls apart when you consider poverty may prevent people from having access to phones, or migrant workers may not have an identification number. Hence, a good policy in theory is only beneficial in practice if it can be successfully implemented.
Another challenge is the enormous scale these measures must be implemented on. Unlike other public health issues, the COVID-19 pandemic affects the entire population, and hence governments need programmes that help everyone but mainly target those most at need — it will be critical to avoid corruption at a time when resources are so scarce. One way to selectively target the most vulnerable is to harness existing anti-poverty schemes, and expanding existing infrastructure is a key recommendation of the current report. But even these measures have their complications — people that before the pandemic were not considered to be poor fell into poverty overnight due to the loss of jobs. Identifying those in need is going to be an ongoing challenge. We need to change the definition of poverty at this difficult time.
We will also face an inevitable recession and public finance crisis. The global shutdown to commerce and production has had an unprecedented impact on the global economy — even in the UK, GDP fell by 20.4% in April , the most dramatic monthly fall on record. And with fewer people working, tax income has also fallen, further limiting the money available to fund vital public works programmes. Even international aid is limited at this time, with HICs struggling to finance their own social responses. The capacity of different countries to respond to the crisis also varies immensely — in January, two countries may look very similar in terms of their economic and developmental level. However, countries hit harder by the virus, or those with governments less focused on the wellbeing of its population may have very different responses to the crisis, creating further disparities between nations for years to come. Different political economies may require very different social responses.
And finally, who knows how long these emergency measures will need to be in place. Many countries face the issue of sustaining programmes, handouts or insurance schemes for many months to come, and with limited funds, this will be a serious challenge. Even when lockdowns end the economy will not just return to normal — a substantial effort will be needed to restart the economy and get people back to work, relying on further government input. Planning for the sustainability of social responses will be almost impossible without an end date.
With no end in sight for the current pandemic that is yet to peak in many LMICs, the social response to the crisis is something we will undoubtedly be considering for many months to come. The recent policy brief considers a host of different measures that can be taken to ensure that anyone in a country, no matter their employment status or location, can be helped through these difficult times. However, as early responses have shown, it’s not just as simple as handing out money to those in need. There needs to be a collective effort from both national and international governments to identify vulnerable people and successfully deliver support to them, without breaking many of the public health restrictions. The social safety net is in serious need of expansion, but we can only wait and see how this will play out on a global scale.
This article was written following the webinar: ‘Social Protection Response to the COVID-19 Crisis: Options for Low-and Middle-Income Countries’, presented by Centre for the Study of African Economies director Stefan Dercon with Clément Imbert (University of Warwick), François Gerard (Queen Mary University) and Kate Orkin (University of Oxford), hosted by Mind & Behaviour Research Group on 18th June 2020. The policy brief this presentation was based on can be found here.
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