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PUBLIC WORKFARE: Overview of International Experience

PUBLIC WORKFARE: Overview of International Experience. Kalanidhi Subbarao Human Development Network (Social Protection) The World Bank March 23, 2011. What is Public Workfare?.

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PUBLIC WORKFARE: Overview of International Experience

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  1. PUBLIC WORKFARE: Overview of International Experience KalanidhiSubbarao Human Development Network (Social Protection) The World Bank March 23, 2011

  2. What is Public Workfare? • Public workfare programs (also known as public works programs) provide temporary employment at low-wage rates mostly to unskilled and semi-skilled workers on labor-intensive projects such as road construction and maintenance, rural and urban infrastructure, sanitation and irrigation infrastructure, soil conservation, environmental protection, and more…

  3. Objectives…… Objectives varied by country: • Mitigation of covariate one-time shock affecting the entire country or regions (e.g.drought/floods/macro-economic shocks) • Mitigation of idiosyncratic shocks (temporary job losses) • Poverty relief – employment guarantee schemes • As a bridge to formal employment (training) • Complementary objective: create public goods

  4. Rationale…. • Quite effective in consumption-smoothing, • Can perform an insurance function , • Can be rendered complementary to growth (via infrastructure building), • Potential for self-targeting, • Potential for regional targeting, • World-wide experience, including OECD, Africa, Latin America, South and East Asian countries

  5. Benefits and Costs • Benefits • Transfer benefits = wage rate, net of • transaction costs • Second round benefits from assets • Costs to the government • Administrative costs+wagecost+non-wage cost • Costs to participants: transaction costs

  6. Design issues: critical for success

  7. Design parameters (a) Wage rate….. • The level of the wage rate is critical for determining distributional outcomes, • To ensure program reaches the poorest, keep program wage no higher than the ruling market wage for unskilled labor • Not all countries succeeded in this design; varied experience

  8. Share of wages/Labor intensity. • Typically in both middle income and low-income countries, it varied between 0.3 to 0.6 • Depends on the nature of the asset being created, and the agency executing the program • Useful practice: assess labor content of various projects, and pick highest, in line with community preferences – Korea’s is good practice • Labor intensity in Korea was 70%

  9. Other design features • Choice of assets: community involvement • Seasonality – best to run when seasonal unemployment is highest • Gender aspects: program design can be adjusted to make it acceptable to women • Public/private/NGO/Donor participation

  10. Actual Experience: Korea’s Case

  11. Korea’s economic reform and Safety Nets: The Context • The main challenge: Restoring macroeconomic stability while limiting costs to real economy and adverse impacts on the vulnerable. • Korea’s financial crisis has dramatically reversed the impressive record in poverty reduction achieved since 1990. K. Subbarao - Household Risks and Safety Nets

  12. Impact of the crisis….. • Likewise, the unemployment rate increased four-fold... K. Subbarao - Household Risks and Safety Nets

  13. Getting the design right…..….. • A combination of Ministry- (supply-)driven and community-(demand-)driven projects • Careful selection of projects with highest labor intensity…estimated labor coefficients for several activities and picked the ones with highest labor intensity • Exceptional attention to quality of assets • Institutional detail: a director of public works supervised the entire operation K. Subbarao - Household Risks and Safety Nets

  14. Evaluation results

  15. Evaluation Results: Some examples India: Nation-wide program: 60 - 70% of participants belonged to poor households. • MEGS: The program contributed to a fall in the severity of poverty from 5.0% to 3.2% (Datt/Ravallion, 1992) • Argentina: 50% of beneficiaries came from the bottom 10%, and 80% from the bottom 20% of the income distribution.

  16. Argentina: HH income with and without PW transfer

  17. PW potential • The potential of the PWP is enormous both in countries that have experiences with these programs and especially in countries that never used them • Particularly helpful to address short term crisis-induced high unemployment • However, adapting PW programs in varying country situations is important

  18. PW Implementation: Toolkit….. • The various steps involved in the launching of PW program were presented in a Toolkit • Toolkit is all about implementation • You can download the Toolkit from the safety nets website: • http://siteresources.worldbank.org/SAFETYNETSANDTRANSFERS/Resources/281945-1131468287118/1876750-1274296604081/PWToolkitFinalVersion.pdf • THANK YOU

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