Impact Of Social Benefits On Poverty

Social benefits have an important role in supporting the vulnerable. The analysis of official data shows that pension increases reduced poverty in Moldova by 12 percentage points. Still, these increases are insufficient for a sizeable part of the population, including retirees. The income of about four in 10 retirees is insufficient for avoiding poverty. Another at-risk category is households with children. Social benefits represent one of the income sources of these families. On average, they contribute 7.2 percent to the incomes of the households with children, the most important social benefits being the social insurance payments, especially pensions (5.0 percent). Based on the welfare of families with children, it has been assessed that social benefits, including pensions, contribute a greater share of the income of the least prosperous households. This fact shows that poor households are more dependent on social insurance payments.

Studies show that social assistance has an insignificant effect on poverty. Poverty rates in the case of households receiving social assistance payments (child care benefits and individual allowances), differ by less than one percentage point before and after the payment. From the perspective of the efficiency of social benefits distribution, it should be pointed out that only 26 percent of the poor­est households benefited from individual allowances in the amount of 26.2 percent of the total sum in 2008, while more prosperous households were granted 14.3 percent of the total amount for this type of benefits. It is forecast that the introduction of social aid will improve the distribution of social benefits and will contribute even more to the reduction of poverty. Besides the provision of different social services, the current system for social protection of children offers two types of social benefits for children, based on the principles of social insur­ance and social assistance: i) child care benefits for children under 1.5/3, independent of income; ii) child care benefits for children aged between 1.5/3 and 16, depending on the income of the parents. These two types of benefits are granted according to categories, so that the propor­tion of households with children benefiting from these social payments practically does not differ depending on the welfare of the household. An analysis of the way childcare benefits for children under 1.5/3 cover households, shows that that there are certain flaws, like the inclusion in the system of prosperous households, the main reason being the gaps in the criteria applied when assessing the real level of the household's welfare. In 2008, some 35 percent of the poorest families received child care benefits amounting to 38 percent of their income, while 6.6 percent of prosperous families received child care benefits, with the sums covering 5.3 percent of their total income. At the same time, once social aid based on an assessment of households' incomes was introduced, the Government took the decision to annul child care benefits for children aged between 1.5/3 and 16.

Targeting child care benefits towards the most vulnerable categories is an effective way of using the resources allocated to children. At the same time, the creation of an equitable child support system can contribute to the reduction of child poverty only if the payments are substantial. Over recent years, child care benefits have increased; their size, however, is still insignificant. In this way, childcare benefits for children aged under 1.5/3 contributed to the reduction of poverty rate in 2008 by 0.5 percentage points, while child care benefits for children aged between 1.5/3 and 16 contributed a 0.2 percentage point reduction. Benefits paid by category have a greater impact on child poverty in urban areas, since salaries are higher in cities and therefore the child care benefits for children aged under 1.5/3 are more significant.
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