33369 World Bank Social Safety Nets Primer Notes 2005 No. 19 Aging and Poverty in Africa and the Role of Social Pensions In many low income African countries, three factors support system and household coping strategies in are placing an undue burden on the elderly. First, the wake of covariate shocks and the HIV-AIDS pan- the burden on the elderly has enormously increased demic. However, the proportion of the single elderly with the increase in mortality of prime age adults isstillverysmallinmostcountries. Ahouseholdtype duetotheHIV-AIDSpandemicandregionalconflicts. "elderly and children" or what is known as "skipped Second, the traditional safety net of the extended generationhousehold"hasemergedasanimportant family has become ineffective and unreliable for structure in some countries. In addition, "house- the elderly. Third, in a few countries, the elderly are holds headed by the elderly"has also emerged as a called upon to shoulder the responsibility of the significant household type in several countries. family as they became the principal breadwinners and caregivers for young children. While a number The analysis shows that the poverty situation, and of studies have examined the welfare consequences especially the poverty gap ratio, for the household of these developments on children, few studies have types the "elderly only", the "elderly with children" systematically analyzed the poverty situation among and the"elderly-headed households"is much higher the elderly (relative to other groups) in low income than the average in several countries and the dif- countries in Africa, and the role of social pensions. ferences are statistically significant. For example, in This study aims to fill this gap. Malawi, Uganda and Zambia, the poverty gap ratio for various household types in which the elderly are Drawingonhouseholdsurveyinformation,thestudy livingis6to20percentagepointshigherthantheav- hasdelineatedtheprofileoftheelderlyfor15African erage (national) ratio. Likewise the poverty gap ratio countries which include both East and West African among the"elderly-headed households"in 11 coun- countries, and countries with a high and low preva- tries is higher than the national average. Such differ- lence of the HIV-AIDS pandemic. ences are particularly large in rural areas. However, it is worth stressing that the elderly are not always The findings show much heterogeneity across coun- over-represented among the poor in every country: tries with respect to the proportion of the elderly on the other hand, the study finds, for example, chil- population, the living arrangements and the com- dren in Madagascar, Mozambique and Nigeria are position of households, and household headship. in a much worse situation than the elderly. Careful The variations in household types and living ar- identification of which particular group is in a dire rangements presumably reflect the variations in, situation requiring immediate social assistance calls and changing character of, the traditional family for a critical analysis of the risk and vulnerability ____________________________________________________________________________________ Kalanidhi Subbarao prepared this note based on Kakwani, Nanak and Subbarao, Kalanidhi. 2005."Aging and Poverty in Africa and the Role of Social Pensions."Social Protection Discussion Paper No. 0521.TheWorld Bank.Washington, D.C. situation in each country, and a relative ranking of While categorical targeting of a pension for the groups by risk and vulnerability ­ an analysis be- above groups yields the maximum poverty reduc- yond the scope of this paper. While the study finds tion impacts, and is also fiscally sustainable even in the case for an universal social pension for all of the low income countries, its operational feasibility is elderly to be weak, it does point to the need to con- considered to be weak. Moreover, targeting a social sider a non-contributory social pension targeted to pension for such specific groups among the elderly certain groups of the elderly. is most likely to lead to adverse incentive effects and possible induced changes in household types The study then examines the impacts on group-spe- in order to claim a pension. Bearing this in mind, cific and national incidence of head count poverty two other simulations were done: impacts of a social and poverty gap ratios of providing a social pension pension for"all elderly,"i.e., universal social pension, for various categories of the elderly and explores its and "poor elderly," i.e., a targeted social pension, re- fiscal implications. The analysis shows that the fiscal gardless of whichever household type they live in. cost of providing a universal non-contributory social The simulation also assumes the realistic scenario pension to all of the elderly will be quite high ­ 2% that the pension is shared within households. to 3% of GDP, a level comparable to, or even higher, than the levels of total public spending on health Taking all things into account ­ the need to keep the care in some countries. The study also notes that fiscal cost low, minimize adverse incentive effects, the case for such an universal social pension also ap- and maximize the poverty reduction impacts both pears to be weak even on welfare grounds inasmuch at the national level and at the level of the targeted as there are other competing groups and claims on group, and bearing in mind the fact that there are scarce safety net resources in some countries (such other groups among whom the incidence of poverty as families with many children) whose incidence of is about the same or much worse than that of the poverty is much higher than that of the elderly. elderly ­ the study concludes that the case for a uni- versal approach is weak. The best option appears to Since such a universal social pension program is be to target the pension only to the poor among the fiscally unaffordable and also cannot be defended elderly, keeping the benefit level low (say at about on welfare grounds in some countries, the study ex- one-third of the poverty threshold), and eligible age plored the options for a targeted social pension with limit at 65+. The study underscores the need for a fixed budget constraint (0.5% of GDP), and with more country-specific work to explore the feasibility a fixed benefit level (70% and 35% of the poverty of the recommended option in diverse country set- threshold) for the elderly defined as persons 60+ tings. The availability of credible household survey and 65+. First, two household types, the"elder living informationshouldenableonetoassessthebenefits with children" and the "elderly-headed households" and costs of various targeting approaches (simple were considered. A program of social pension tar- means tests, proxy means tests, community target- geted to these groups yields considerable reduction ing, self-selection, conditional cash transfers, etc.) in the incidence of poverty and poverty gap ratio, for in a given country situation, and help policymakers the particular groups targeted, and also at the na- decide on an appropriate approach to targeting to tional level. The case for covering the "elderly only" identify the poor among the elderly for purposes of also under the pension program appears strong eligibility to a social pension. because the impact of a pension for this group leads to significant reduction in the poverty gap ratio of the group. TheWorld Bank Social Safety Nets Primer series is intended to provide a practical resource for those engaged in the design and implementation of safety net programs around the world. Readers will find information on good practices for a variety of types of interventions, country contexts, themes and target groups, as well as current thinking on the role of social safety nets in the broader development agenda. World Bank, Human Development Network Social Protection, Social Safety Nets http://www.worldbank.org/safetynets