Report No. 22677 UA Ukraine: SOCIAL SAFETY NETS AND POVERTY VOLUME 2 June 15, 2001 Human Development (ECSHD) Europe and Central Asia Region Document of the World Bank Currency equivalents (Average as of May, 2000) Currency unit = Ukrainian Hryvna (UAH) 1 UAH = $ 0.1850 $1 = 5.4041 UAH Weights and measures Metric system Fiscal year January 1 - December 31 Abbreviations and acronyms CIS Commonwealth of Independent States CPI Consumer Price Index DEM German Mark GDP Gross Domestic Product ILO International Labor Organization Kcal Kilocalories OECD Organization for Economic Cooperation and Development PADCO Planning and Development Collaborative International PPP Purchasing Power Parity PTSU Primary Territorial Sampling Unit UAH Ukrainian Hryvna USAID United States Agency for International Development Vice President Johannes Linn (ECAVP) Country Director Luca Barbone Sector Manager Michal Rutkowski (ECSHD) Program Team Leader Galina Sotirova (ECSHD) Task Managers Hjalte Sederlof/Emily S. Andrews (ECSHD) 3 Ukraine: Social Safety Nets and Poverty Table of Contents Chapter 1. Survey Methodology ------------------------------------------------------------------------7 1.1. Household Survey-------------------------------------------------------------------------------7 1.2. Measures of Income and Expenditure--------------------------------------------------------8 1.3. Measures of Inequality-------------------------------------------------------------------------10 1.4. PovertyLine-------------------------------------------------------------------------------------l1 Chapter 2. Multivariate Analysis of Poverty Risks in Ukraine-----------------------------------24 Chapter 3. Housing Subsidies and Energy Arrears-------------------------------------------------31 Chapter 4. War Entitlements and Privileges ---------------------------------------------------------33 Chapter 5. Working Group Findings-------------------------------------------------------------------34 List of Tables and Charts Table 1.1. Equivalent household expenditures by decile, I-III Q, 1999--------------8 Chart 1.1. Distribution of equivalent household expenditures by four equivalency scales---------10 Table 1.2. Gini coefficients by different methodologies and equivalence scales, I-III Q, 1999----I 1 Table 1.3. Gini coefficients in 1999 by quarter (unweighted data)-------------------------------------1 1 Table 1.4. Monetary value of different poverty lines-----------------------------------------------------12 Table 3.1. Sources of revenues for housing and utility companies (percentage)----------------------31 Table 3.2. Payments for housing services (million UAH)------------------------------------------------31 Table 3.3. Financial results (balance sheet of financial indicators) of housing and utilities services sector (million UAH) -------------------------------------------------------------------32 Table 4.1. Ukraine: Trends in war entitlements (thousands)---------------------------------------------32 Table 4.2. Veterans in Ukraine, Russia and Belarus, January 1, 1999----------------------------------33 Chapter 1. Annex Tables A. Measures of income and expenditure Table Al. Ukraine: Distribution of households by equivalent expenditures, I-III Q, 1999-----------------------------------------------------------------------14 Table A2. Ukraine: Distribution of households by equivalent incomes, I-III Q, 1999---------------15 Table A3. Ukraine: Incomes and expenditures of households by different equivalence scales, I-III Q, 1999---------------------------------------------------------------16 Table A4. Ukraine: Total equivalent incomes of households, I-II Q, 1999 (percentage and average per month, UAH) ---------------------------------------------------1 7 Table A5. Ukraine: Total equivalent expenditures of households, I-III Q 1999 (percentage and average per month, UAH) ---------------------------------------------------1 7 Table A6. Ukraine: Incomes and expenditures of households with children, UAH per month, I-III Q, 1999 ------------------------------------------------------------------18 B. Measures of Inequality Table B1. Ukraine: Distribution of income and consumption: Summary 4 statistics, I-HI Q, 1999 -------------------------------------------------------------------------- 19 Table B2. Ukraine: Decomposition of expenditure inequality by components, I-III Q, 1999-----------------------------------------------------------------------19 C. Poverty Line Table Cl. Ukraine: Poverty indicators and characteristics of poverty, I-III Q, 1999-----------------20 Table C2. Ukraine: Welfare characteristic of the population, I-III Q, 1999----------------------------21 Table C3. Ukraine: Per capita food consumption of households by decile, I-III Q, 1999------------21 Table C4. Ukraine: Food consumption of households by poverty status, I-HI Q, 1999--------------22 Table C5. Ukraine: Food consumption of households in first and second deciles, I-III Q, 1999, (equivalent expenditures less than UAH 120.85)-------------------------------------22 Table C6. Absolute poverty rates of transition economies in Europe and Central Asia, selected years, 1995-99----------------------------------------------------------23 Chapter 2. Annex Tables Table Dl. Regression of log consumption on household characteristics---------------------------29 Table D2. Relative poverty risk by location of the household, by education of household members, and by socio-economic status of the household head------------------------30 List of Tables and Maps in Appendices 1. Introduction Table l.A.1 Ukraine: Selected macroeconomic indicators--------------------------------------------37 Table 1.A.2 Ukraine: Basic demographic indicators---------------------------------------------------37 2. Poverty Profile 2A. Household Structure Table 2.A.1. Ukraine: Incomes and expenditures by type of household, I-HI Q, 1999------------38 Table 2.A.2. Ukraine: Poverty status by type of household, I-III Q, 1999, %----------------------38 Table 2.A.3. Ukraine: Characteristics of households by type of household (all households), I-HII Q, 1999----------------------------------------------------------------------------------39 Table 2.A.4. Ukraine: Characteristics of households by type of household (poor households), I-El Q, 1999----------------------------------------------------------------------------------40 Table 2.A.5. Ukraine: Characteristics of households by type of household (very poor households) I-HII Q, 1999-------------------------------------------------------------------41 Table 2.A.6. Ukraine: Poverty status by households with children, I-EII Q, 1999------------------42 Table 2.A.7. Ukraine: Poverty status by households with members over working age (women over 55 years, men over 60 years), I-HI Q, 1999-----------------------------42 Table 2.A.8. Ukraine: Poverty rates by households of the elderly, I-III Q, 1999-------------------43 5 2B. Head of Household Table 2.B.1. Ukraine: Poverty status by gender of household head, I-III Q, 1999 (percentage)----44 Table 2.B.2. Ukraine: Poverty in households by employment status of household members, I-III Q, 1999 (percentage)---------------------------------------------------------------------44 2C.Geographic Aspects of Poverty Table 2.C.1. Ukraine: Poverty status by households by place of residence, I-III Q, 1999-----------44 Table 2.C.2. Ukraine: Poverty status by region, I-III Q, 1999 (percentage)---------------------------45 3. Coping Mechanisms Table 3.A.1. Ukraine: Number of people engaged in additional work (1999 labor force survey data)-------------- 46 Table 3.A.2. Ukraine: Number of employed temporarily not at work (1999 labor force survey data), in 1,000)---------------------------------------------------------------------------------47 4. Safety Net Programs 4A. Social Privileges Table 4.A.1. Ukraine: Social privileges retained in the Law "On the state budget of Ukraine for the year 2000"---------------------------------------------------------------48 Table 4.A.2. Ukraine: Dynamics of population having the status of war veterans---------------49 Table 4.A.3. Number of war veterans in some of the CIS states, January 1, 1999---------------49 4B.Housing and Utilities Allowances Table 4.B.1. Ukraine: Main characteristics of the housing subsidy program---------------------49 4C. Family Benefits Table 4.C.1. Ukraine: Recipients of family allowances, I-III Q, 1999---------------------------50 4D. Assistance to Low-Income Families Table 4.D.1. Ukraine: Social assistance programs----------------------------------------------------51 Table 4.D.2. Ukraine: Characteristics of recipients of targeted social assistance----------------51 5. Targeting Effectiveness and Financing 5A. Targeting Effectiveness Table 5.A.1. Ukraine: Total equivalent incomes of households (average per month, UAH, I-E1 Q, 1999, %)------------------------------------------52 Table 5.A.2. Ukraine: Impact of housing allowances and social privileges on poverty 6 measures --------------------------------------------------------------------------------------52 5B. Financing Table 5.B.1. Ukraine: Sources of financing for the social security system, 1999------------------53 Table 5.B.2. Ukraine: Sources of financing for social programs, 1999------------------------------54 Table 5.B.3. Ukraine: Sources of financing for state assistance to families with children in 1999 (UAH, 1000) - --------55 Table 5.B.4. Ukraine: Transfers from the budget for condensed gas and solid fuel purchased by households---------------------------------------------------------------------------------56 Table 5.B.5. Ukraine: Sources of revenues for housing and utility companies (percentage and million of UAH)----------------------------------------------------------56 Table 5.B.6. Ukraine: Budgetary and household payments to housing and utilities companies (million of UAH)------------------------------------------------------------------------------57 Table 5.B.7. Ukraine: Balance sheet of housing and utilities services sector (million UAH)---------------------------------------------------------------------------------57 Table 5.B.8. Ukraine: Revenues and expenditures of the Employment Fund (million UAH) ----------------------------------------------------------------------------------58 Table 5.B.9. Ukraine: Payment of targeted social assistance to low-income families, 1999-------59 6. Conclusions and Recommendations 6.A. Targeting Mechanisms Table 6. A.1. Ukraine: Poverty status and housing conditions, I-HI Q, 1999------------------------60 Table 6. A.2. Ukraine: Poverty status and availability of telephones, I-III Q, 1999-----------------60 Table 6. A.3. Ukraine: Poverty status by access to private plot and size of land plot, I-III Q, 1999 (percentage)--------------------------------------------------------------------60 Maps Map of Ukraine 1. Drop-out rate of participants in household budget survey by oblast, I-HI Q, 1999-------------------------------------------6--------------------61 Map of Ukraine 2. Regional differences in poverty (poverty headcounts by oblast), IOI Q, 1999-------------------------------------------------------------------62 Map of Ukraine 3. Regional differences in extreme poverty (% of very poor by oblast), I-III Q, 1999--------------------------------------------------------------63 Map of Ukraine 4. Regional differences in average per capita equivalent incomes of households (UAH), I-III Q, 1999-----------------------------------------------------64 Map of Ukraine 5. Regional differences in per capita equivalent expenditures of households (UAH), I-III Q, 1999-----------------------------------------------------65 Map of Ukraine 6. Caloric value of consumed foodstuffs by oblasts (daily consumption per capita), Kcal, I-III Q, 1999-------------------------------------------------------------66 References-------------------------------------------------------------------------------------------------------67 7 1. SURVEY METHODOLOGY Findings on poverty are inexorably connected to the statistical procedures used for measurement. This annex provides information on the methodology used to assess poverty in Ukraine in this update. The criteria selected are intended to be those most relevant to the current situation of Ukraine, rather than ones which would best facilitate cross-country comparisons. The basic poverty line is equal to 75 percent of median expenditures and the extreme poverty line is equal to 60 percent. Survey data for 1999 indicate that the distribution of expenditures Ukraine has remained relatively equal even after transition. 1.1. Household Survey The 1999 poverty update is based on the first Ukrainian Survey of Income and Expenditure (SIE) that is conducted quarterly on an ongoing basis by the State Statistics Committee (SSC). It includes over 9,000 households that are representative of the non-institutional population.' Rather than providing separate information for each quarter, survey responses were cumulated throughout the year. This report analyzes the cumulative data for the first three-quarters of 1999. In contrast to sampling procedures in place since 1952, in which the sampling frame was based on enterprises and other workplaces, the 1999 survey is based on residence, following standard practices used in market economies.2 In post-transition economies, with reduced labor force participation rates and open unemployment, workplace surveys are no longer sufficient to capture nationwide trends in income and consumption. Additional survey improvements include: * Regional probability samnpling; * Voluntary respondent participation; * Rotation groups; and - Validity checks for sampling accuracy. Initial sample stratification includes all regions of the country plus the Autonomous Republic of the Crimea, and the cities of Kiev and Sevastopol. Second stage stratification is based on urban and rural classifications in which all self-governing units of 118,100 persons and over are included on a universe basis for subsequent household-level sampling. Smaller towns and rural districts are selected randomly, based on stratification criteria proportional to the population. Changes in territorial sampling are scheduled every 5 years. Households are selected based on election lists in urban areas and domicile registration lists in rural areas. They participate in the survey for a full year before rotation. An initial sample of 12,185 households was selected on the basis of 195 sample towns and 190 rural districts. The actual survey was reduced to 9,435 households (a loss of 23 percent) after residential vacancies and respondent refusals whittled down the sampled population. Refusals were ' The institutional population includes soldiers on active duty, students in boarding schools, workers in dormitories, the prison population and the homeless. 2 The redesign itself was supported by technical assistance from World Bank and USAID. 8 highest in Kiev (42 percent), Odessa (27 percent) and Sevastopol (23 percent). The low level of payment, 20 UAH per quarter, may have discouraged survey participation in higher income areas, as households in regions with lower cash incomes appeared more likely to participate. (Zakarpatya had a 2.2 percent refusal rate, Ivano-Frankivsk, a 2.6 percent refusal rate, and Volyn, a 5.9 percent refusal rate.)3 In regions with higher incomes, households appear less likely to participate. Information was gathered on household composition, living conditions, the use of land plots, education, and employment of household members. Changes in household composition are updated quarterly. Income and expenditures are tracked through weekly diaries and a quarterly questionnaire. In the weekly diary, current expenditures are registered in detail for two weeks out of the quarter. Home production and gifts of food consumed are also recorded. Quarterly consumption patterns are estimated using the diary data multiplied by a factor of 6.5 (the number of average weeks in a quarter divided by the number of record keeping weeks). By contrast, large- quantity food purchases are included quarterly, as are data on income and major household expenditures. Quarterly expenditures are recorded separately at the time the purchase is made. 1.2. Measures of Income and Expenditure In theory, either income or expenditure can be used to measure household wellbeing. In many countries, expenditure turns out to be the more accurate measure because households either draw down assets during periods of cyclical downturn, or because the measurement of income is less accurate than the measurement of consumption. In part, the design of the Ukrainian STE is better geared to measure expenditures because of the use of the diary method. However, in transition countries such as Ukraine, the measurement of income is generally made more difficult due to the substantial growth that has taken place in the informal sector and one-time payments for occasional labor.4 As a result, individuals are likely to forget to report income and/or to conceal informal-sector income from the tax authorities, the SSC, and other public agents including the Employment Service and social assistance offices. In Ukraine, the difference between reported income and reported expenditures is considerable with expenditures averaging 37 percent more than income (Table 1.1). Households in both the lowest and highest income and expenditure deciles underreport income. In general, the difference between income and expenditure is greatest among the highest deciles (when measured by expenditures). In other words, households that hide their incomes move up from a lower income category to a higher expenditure category when the decile distribution is based on expenditure rather than income. Of course, households with low "real" incomes (including hidden income) will be less able to spend beyond their means. Lastly, at this point in the transition, families are unlikely to support consumption by significant dissaving - the other standard way for consumption to outpace income in household surveys. For these reasons, household expenditures are used to measure poverty and well-being. 3 See Appendices Map 1. 4 In developed market economies, such as the United States, labor income is generally well reported covering the bulk of the population. Income from assets is generally subject to the greatest measurement error. 9 Table 1.1. Equivalent Household Expenditure and Income by Decile, I-Er Q, 1999 Deciles by Ratio of equivalent Average Average expenditures expenditures expenditures incomes to incomes 1 78.9 76.0 1.04 2 110.4 98.9 1.12 3 131.1 108.9 1.20 4 150.0 123.2 1.22 5 168.8 131.9 1.28 6 189.7 145.4 1.30 7 214.1 160.8 1.33 8 246.8 176.2 1.40 9 296.0 197.3 1.50 10 458.3 270.2 1.70 1Oth/Ist 5.8 3.6 9th/Ist 3.8 2.6 Average 204.5 148.9 1.37 Equivalency Scales. The measurement of well-being across households of different sizes and ages is incomplete without information on the assumptions made about family member equivalency and economies of scale. Equivalency measures adjust for the greater consumption needs of some family members relative to others. For example, the caloric needs of children under age 15 are generally agreed to be less than the needs of working-age men. Economy-of-scale adjustments take into consideration the effect of family size on shared goods such as housing and heating, in which the cost of each additional family member is marginally less or negligible. The selection of adjustment criteria is a matter of art rather than science. In Ukraine, the law "On Subsistence Minimum" and the regulation "On Provision of Targeted Social Assistance to Low Income Families" stipulate the following equivalency scale: * First adult (and Group I and II disabled) - 1.0 * Second and subsequent adults - 0.7 * Children (regardless of age) - 0.5 Except for the designation of persons with disabilities, these criteria are equivalent to the OECD scale, which is used in this report to analyze household consumption and to measure poverty.5 S The only exception in this report is in the calculation of the energy value of the food basket. In this case, food consumption is calculated per household member. 10 Different equivalency scales have been used in other transition countries and in various World Bank poverty assessments. Several equivalency scales were investigated for Ukraine as alternatives to the one selected. For example, British consultants recommended a scale in which subsequent adults and children received a weight of 0.7. In an Estonian poverty study by the UNDP, subsequent adults and children were assigned a weight of 0.8. The scale traditionally used in Ukraine gave each individual a weight of 1.0 regardless of age. In general, the lower the weight used for additional household members, the lower the median of equivalent incomes (Chart 1.1). These differences can have a substantial impact on the relative poverty rates of children and adults. In the World Bank's Latvia Poverty Assessment, when poverty rates without scale economies were used, children were much more likely to be in poverty than pensioners were. However, with scale economies of 0.65, poverty among pensioners was about equal to that of children.6 equialeny scle. kraie trats he urchaesof lcarges qatte ffodtfssmwa 2 _ n ___ _ _ 2 X ~~ - 1.3. Measures of Inequality One of the most widely used measures of income inequality is the Gini coefficient that provides a concise indicator of inequality for income or expenditures based on a specified equivalency scale. Ukraine treats the purchases of large quantities of foodstuffs somewhat differently than the standard measurement of large purchases, however, and this affects the calculation of Gini coefficients using the SEE data. Fortunately, the differences are minimal and do not affect the general outcome of the analysis (Table 1.2). 6 See, World Bank, 2000a. Latvia: Poverty Assessment, Volume 1: Main Report. World Bank, 1998. Kazakhstan, Living Standards during the Transition. 11 Table 1.2. Gini Coefficients by Different Methodologies and Equivalence Scales, 1999 I-III Q Ukrainian Method Standard Aggregate incomes 1.0 - 1.0 - 1.0 0.282 0.289 1.0 - 0.7 - 0.5 0.267 0.283 Aggregate expenditures 1.0 - 1.0- 1.0 0.291 0.306 1.0 - 0.7 - 0.5 0.270 0.295 Gini coefficients for Ukraine also vary little by measurement scale, with the OECD scale (based on expenditures) leading to a Gini of 0.27 and the per-capita scale a Gini of 0.29 (in which each household member is assigned an equal weight). These figures indicate relatively little income inequality in Ukraine. Income inequality appears to be lower than that measured in the 1995 poverty assessment, which is likely explained by differences in survey methodology. Both the measurement period and the inclusion of in-kind income and expenditure affect the Gini coefficient. For example, significant in-kind income in 1999 III Q may have smoothed the income and expenditure distribution between quarters. Quarterly data tend to have higher Gini coefficients than data averaged across quarters. One of the strong innovations of the Ukrainian SIE is the inclusion of both cash and in-kind income and expenditures. These include the value of social privileges and subsidies using information on discounts for housing, fuel, public transportation and telephones. Two conclusions are apparent (Table 1.3). First, there is relatively little difference in Gini coefficients using aggregated quarterly data. Second, income inequality is far greater when only money incomes and expenditures are counted. Table 1.3. Gini Coefficients in 1999 by Quarter (unweighted data) Indicators I-II Q I - III Q III Q Aggregate incomes 0.285 0.281 0.321 Aggregate expenditures 0.292 0.289 0.332 Money incomes 0.380 0.351 0.372 Money expenditures 0.366 0.359 0.390 1.4. Poverty Line Just as income inequality can be measured using a variety of equivalency scales, a number of options can be selected in the development of poverty lines. A number of poverty lines were examined according to relative, absolute, caloric, and food share criteria.7 Since there is no correct or "scientific" method of measuring poverty, decisions on which measure to use are ultimately 7 The food share method is based on Engel's law that postulates the share of a family's budget devoted to food decreases with income. A standard caloric line for all types of households uses 2,150 calories per day as the amount of income required for subsistence. (Caloric measures also can be expanded to reflect particular climatic, cultural, or demographic conditions.) 12 subjective (Table 1.4). Nevertheless, certain standards of measurement are recognized as methodologically sound.8 For this study, two relative poverty lines were selected which are based on a set of commonly used measures of poverty. The first, the basic measure of poverty, is equal to 75 percent of median expenditures in Ukraine (the poor). The second, defining extreme poverty, is equal to 60 percent of median expenditures (the very poor). Based on these criteria, during the first three-quarters of 1999, 26.7 percent of Ukrainian households were poor and 13.5 percent were very poor. In monetary terms, the poverty line is set at 134.3 UAH per month and the extreme poverty line at 107.5 UAH in terms of equivalent expenditures. Table 1.4. Monetary Value of Different Poverty Lines Official poverty line (pre-1999 for non-working adults 118.3 Cost of minimum consumption basket calculated for the bottom-two deciles 88.0 50% of median expenditures 89.5 60% of median expenditures 107.5 2/3 of median expenditures 119.4 75% of median expenditures 134.3 Average expenditures of the bottom three deciles 106.5 Threshold of the 3rd expenditure decile 140.7 60% of average incomes 89.3 2/3 of average incomes 99.2 2/3 of median incomes 88.0 75% of average incomes 111.6 75% of median incomes 99.0 Average incomes of the bottom three deciles 77.8 Threshold of the 3"d income decile 103.5 Poverty incidence, using PPP-based poverty lines of US$2.15 and US$4.30, was also examined. In 1999 (QI-mI), the poverty rate using the first figure was a miniscule 3.0 percent and the rate using the second figure was 29.4 percent. These data indicate that Ukraine ranks above Lithuania, where comparable rates were 3.1 percent and 22.5 percent, and just below Estonia, where comparable rates were 2.1 and 19.3 percent. (Annex Table C.6). Nonetheless, comparisons based 8 There are three standard measures of material poverty (Ravallion 1992). First, the incidence of poverty, or headcount index (P0), is the percentage of individuals who are poor (that is, live in households with monthly equivalent income or expenditure below the poverty line). The headcount index is the most widely used poverty measure, but it does not provide any information on the extent to which the welfare of individuals falls below the poverty line. Second, the depth of poverty is measured by the poverty gap index (PI) or the difference between the poverty line and the mean income (or expenditure) of the poor, expressed as a percentage of the poverty line. The poverty gap index is not sensitive to the distribution of welfare among poor households; if a household just below the poverty line were to make a transfer to a much poorer household there would be no change in the poverty gap index. Third, the severity of poverty, or poverty status in terms of the depth and duration of poverty episodes, is measured using the Foster-Greer- Thornbecke index. This measure puts more weight on the welfare levels of very poor households relative to households with equivalent income (expenditure) near the poverty line (Foster, Greer, and Thorbecke 1984). The three poverty measures can be calculated using the following formula: p = I I (%z Y- Y) in which a = 0, 1, or 2, N= number of individuals, q = number of poor individuals, z = poverty line, and Yi = consumption of i'th individual below the poverty line. 13 on PPP measures are inherently difficult to make. Further, as poverty rates in middle and high- income countries are most useful for policy makers when analyzed relative to the rest of the community, cross-country measures are less useful to policymakers than within country comparisons. The 1999 law "On Subsistence Minimum" provides a new official minimum consumption basket for Ukraine that is more generous than the earlier one.9 At the end of 1999, the cost of this basket was 232.5 UAH per month, above the average wage. This was considerably higher than the cost of the earlier consumption basket that had been 118.3 UAH for non-working individuals. The cost of the new consumption baskets for each age group exceeded the median expenditures of the population (Annex Table I.5). For this reason, the new minimum consumption basket is not a practical alternative for this study. While the new basket may reflect standards that Ukrainians would like to reach, it does not identify the poorest members of the community for whom assistance is needed. 9 In the new official minimum consumption basket, the caloric value of the food basket for the working age population was 2,791 calories per day, 2,009 calories for retirees, 1,540 calories for children up to age 3, and 2,905 for children age 14-17. 14 CHAPTER 1. ANNEX TABLES A. MEASURES OF INCOME AND EXPENDITURE Table Al. Ukraine: Distribution of households by equivalent expenditures, I-III Q, 1999 Deciles by Average Average Ratio of Food % of Albumen gr. Fat, gr. % of households % of households with equivalent expendi- incomes expendi- consump- expendi- with food separate flat expendi- tures tures and tion, tures on consump-tion less tures incomes Kcal per foodstuffs than 2,100 Kcal expendi- per day ture decile 1 78.9 76.0 1.0 1716.5 72.6 47.2 54.2 76.3 46.9 2 110.4 98.9 0.9 2214.0 71.5 60.8 74.9 52.3 42.2 3 131.1 108.9 0.8 2442.3 69.6 67.6 84.1 37.2 45.3 4 150.0 123.2 0.8 2702.8 68.4 75.4 95.1 25.9 44.0 5 168.8 131.9 0.8 2981.5 68.0 83.6 106.3 20.1 42.0 6 189.7 145.4 0.8 3250.6 67.7 91.0 117.9 13.2 41.6 7 214.1 160.8 0.8 3494.3 66.0 97.9 128.9 11.5 41.1 8 246.8 176.2 0.7 3840.4 65.3 108.7 145.5 7.3 44.1 9 296.0 197.3 0.7 4346.6 63.5 121.8 167.1 6.2 47.9 10 458.3 270.2 0.6 5406.7 58.8 152.7 216.4 4.5 54.1 lOth/ist 5.8 3.6 3.1 0.81 3.2 4.0 1.2 9th/1is 3.8 2.6 2.5 0.87 2.6 3.1 1.0 Average 204.5 148.9 0.7 3239.8 67.1 90.7 119.1 25.5 44.9 15 Table A2. Ukraine: Distribution of households by equivalent incomes, I-III Q, 1999 Deciles by Average Average Ratio of Food % of Albumen, Fat, gr. % of % of equivalent incomes expendi- expendi- consump- expendi- gr. households households incomes tures tures and tion, tures on with food with incomes Kcal per foodstuffs consump- separate flat expenditure tion less decile than 2,100 Kcal per day 1 48.5 111.5 2.3 2335.7 72.0 60.7 78.6 34.3 50.5 2 71.5 131.7 1.8 2663.8 70.2 70.3 92.6 28.5 48.3 3 85.8 142.7 1.7 2779.2 69.1 73.9 98.7 29.1 52.2 4 98.6 156.4 1.6 2908.8 68.4 78.5 103.2 30.2 46.3 5 110.9 163.0 1.5 2888.0 68.6 79.6 102.9 27.7 46.9 6 124.0 179.7 1.4 3121.4 68.2 85.5 112.9 24.8 46.6 7 138.8 192.8 1.4 3202.9 67.8 90.0 115.9 23.7 40.7 8 160.0 215.0 1.3 3419.8 67.0 96.5 126.5 22.6 39.7 9 191.2 241.1 1.3 3575.2 65.7 103.0 134.7 18.3 39.5 10 290.7 347.1 1.2 4203.2 61.1 124.0 164.7 15.5 45.9 lOth/Ist 6.0 3.1 1.8 2.0 2.1 0.9 9th/lst 3.9 2.2 1.5 1.7 1.7 0.8 Average 148.9 204.5 1.4 3239.8 67.1 90.7 119.1 25.5 44.9 16 Table A3. Ukraine: Incomes and expenditures of households by different equivalence scales, I-III Q, 1999 Decile number Scale 1 (1;0,7;0,5) Scale 2 (1;0,7;0,7) Scale 3 (1;0,8;0,8) Scale 4 (1) Average Average Expenditure Average Average decile Expenditure Average Average Expenditure Average Average Expendi- decile decile to income decile expenditures to income decile decile to income decile decile ture to incomes expenditures ratio incomes ratio incomes expenditures ratio incomes expenditures income ratio 1 48,55 78,90 1,63 51,86 73,78 1,42 48,51 68,64 1,41 41,87 59,18 1,41 2 71,50 110,42 1,54 77,04 104,34 1,35 72,49 97,23 1,34 63,37 84,92 1,34 3 85,75 131,06 1,53 92,05 124,22 1,35 86,50 115,48 1,34 76,08 102,06 1,34 4 98,60 149,98 1,52 105,49 142,96 1,36 98,99 133,13 1,34 87,95 118,19 1,34 5 110,94 168,82 1,52 119,15 161,41 1,35 111,46 151,34 1,36 100,01 135,54 1,36 6 124,01 189,74 1,53 133,77 181,88 1,36 125,89 171,10 1,36 113,03 153,55 1,36 7 138,83 214,06 1,54 151,43 205,98 1,36 142,44 194,58 1,37 128,35 176,08 1,37 8 160,05 246,79 1,54 174,00 237,05 1,36 164,12 223,74 1,36 148,60 202,57 1,36 9 191,19 295,99 1,55 207,51 285,10 1,37 195,63 270,03 1,38 177,69 246,80 1,39 10 290,67 458,28 1,58 315,79 445,39 1,41 299,44 424,13 1,42 276,93 393,55 1,42 Total 148,90 204,46 1,37 142,79 196,13 1,37 134,54 185,08 1,38 121,32 167,35 1,38 9th decile to It 3.93 3.75 4.00 3.86 4.03 3.93 4.24 4.17 decile lO'i decile to 5.99 6.09 6.04 6.17 6.18 6.61 6.65 It decile 5.80 Gini coefficient 0.267 0.270 0.272 0.275 0.274 0.280 0.282 0.291 17 Table A.4. Ukraine: Total equivalent incomes of households, 1-111 Q, 1999 (percentage and average per month, UAH), Total Poor Very poor Non-poor Total income 100 100 100 100 including: Money income Wage income 34.15 31.53 31.36 34.75 Pensions 15.04 18.98 20.18 14.14 Stipend 0.10 0.15 0.15 0.09 Social assistance 1.47 2.26 2.70 1.29 Income from entrepreneurship 2.69 2.05 2.61 2.83 Sales of personal belongings and real estate 0.50 0.43 0.18 0.52 Stock and property incomne (dividends and rent) 0.16 0.10 0.10 0.18 Non-cash income Net income from subsidiary plots 24.74 25.05 23.67 24.67 Subsidies 2.01 2.32 2.12 1.94 Social privileges 2.80 1.88 1.61 3.01 Private transfers 6.02 5.41 5.41 6.16 Other 10.31 9.84 9.91 10.43 Table A.5. Ukraine: Total equivalent expenditures of households, I-III Q 1999 (percentage and average per month, UAH) Total Poor Very poor Non-poor Total expenditures 100 100 100 100 including: Money expenditures: Foodstuffs 39.86 41.71 42.78 39.53 Eating out 1.01 0.42 0.41 1.11 Alcohol and tobacco 2.81 2.46 2.41 2.88 Consumer goods including clothing and 8.52 6.52 5.93 8.88 miscellaneous purchases Durable consumer goods 2.54 0.81 0.67 2.85 Services 0.95 0.40 0.30 1.05 Housing costs and utilities 6.07 7.73 8.19 5.7 Transport and communication 2.75 2.45 2.55 2.81 Culture, recreation, leisure and entertainment 0.22 0.08 0.07 0.24 Education and pre-school education 0.90 0.65 0.62 0.94 Health care and services 2.98 1.89 1.64 3.18 Non-cash expenditures Net consumption of home produced goods (gross 18.38 22.67 22.45 17.60 consumption minus inputs or investments into household production) Imputed value of housing allowance 1.49 2.10 2.01 1.39 Imputed value of received privileges 2.08 1.70 1.53 2.15 Irnputed value of in-kind gifts (private transfers) 4.50 4.90 5.13 4.40 Loan repayment 0.44 0.14 0.20 0.49 Other expenditures 4.50 3.39 3.12 4.73 18 Table A.6. Ukraine: Income and expenditures of households with children, UAH per month, 1-HII Q, 1999 Type of household with children Equivalent per Equivalent per Equivalent capita capita income per capita expenditures cash income Households with children receiving benefit 123.8 95.0 59.2 Households with children who do not receive benefit 138.7 101.2 67.9 Households with children aged 3 years and less and 116.0 90.3 57.3 receiving benefit Households with children aged 3 years and less who 124.9 88.1 58.0 do not receive benefit Households with 3 or more children receiving benefit 84.1 69.0 32.1 Households with 3 or more children who do not 101.4 78.3 42.2 receive benefit 19 B. MEASURES OF INEQUALITY Table B1. Ukraine: Distribution of income and consumption: Summary statistics, 1-111 Q, 1999 OECD Equivalent adult Individuals, per equivalence scale (theta=0.75) capita (theta=l) (theta=0.5) Summary inequality for total income Decile ratio: (90/10) 3.60 3.49 3.70 of which: (50110) 1.97 1.93 2.00 (90/50) 1.83 1.81 1.85 Gini coefficient 0.28 0.27 0.29 Theil entropy measure 0.13 0.13 0.14 Mean log deviation measure 0.13 0.13 0.14 Summary inequality for total expenditure Decile ratio: (90/10) 3.35 3.39 3.68 of which: (50/10) 1.85 1.82 1.89 (90/50) 1.82 1.86 1.94 Gini coefficient 0.27 0.28 0.29 Theil entropy measure 0.13 0.13 0.15 Mean log deviation measure 0.12 0.13 0.15 Table B2. Ukraine: Decomposition of expenditure inequality by components, 1-111 Q, 1999 Expenditures per equivalent adult (0.75): structure and inequality All households: Concentration Points of Gini structure of total coefficients expenditures, % Cash household expenditures* 73.8 0.314 0.232 In-kind net income from farming 17.7 0.144 0.025 Subsidies (fuel and housing) 1.9 0.117 0.002 Privileges (monetary value as 1.8 0.297 0.005 reported) Gifts given 4.0 0.172 0.007 Repayments of credits, debts and 0.8 0.563 0.005 savings Total expenditures 100 0.276 0.276 * - own Gini is 0.355 20 C. POVERTY LINE Table Cl. Ukraine: Poverty indicators and characteristics of poverty, I-IHT Q, 1999 Poverty Number of Average Share of Poverty Poverty Equivalent Food line, poor size of foodstuffs headcount, gap incomes/ consumption UAH households, households in total % equivalent per capita per (1000) expenditures expenditures day, Kcal per household, All households 17,771.5 2.78 67.1 148.9 3,239.8 Official poverty line, equivalent incomes, UAH 118.3 7,222.5 2.87 69.5 40.64 0.269 86.5 2744.6 Official poverty line, equivalent expenditures, 118.3 3,364.0 3.17 72.2 18.93 0.214 93.0 1944.8 UAH Equivalent expenditures less than cost of 134.9 4,787.3 3.15 71.5 26.94 0.236 103.1 2067.3 minimnum consumption basket calculated for the first two deciles, UAH Consumption of 2,100 Kcal or less on average 4,524.6 3.59 62.5 25.46 134.3 1611.9 per capita per day 50% tnedian expenditures 89.5 119.2 3.29 73.0 6.71 0.207 71.0 1579.9 60% median expenditures 107.5 2,399.3 3.23 72.7 13.50 0.209 85.1 1819.2 2/3 median equivalent expenditures 119.4 3,438.3 3.17 72.2 19.35 0.216 93.6 1953.5 75% median expenditures 134.3 4,741.0 3.15 71.6 26.68 0.235 102.7 2064.2 3rd expenditure decile 140.7 5,325.8 3.12 71.2 29.97 0.243 106.6 2121.5 60%expendituresonfoodconsumptionintotal 12,649.6 2.82 74.1 71.18 188.9 3450.1 expenditures of household 80% or nore expenditures on foodstuffs 3,281.5 2.82 86.0 18.47 171.3 3710.4 Note: the poverty gap for the very poor of 20.9 percent is the difference between the extreme poverty line and the mean expenditure of the very poor. The extreme poverty gap index, or the difference between the poverty line and the mean expenditure of the very poor was 36.7 percent. 21 Table C2. Ukraine: Welfare characteristic of the population, I-III Q, 1999. Indicator Households Very poor Poor Non-poor All Number of households, 1000 2,399.3 4,741.0 13,030.5 17,771.5 Average size of households, people 3.23 3.15 2.64 2.78 Share of households with children, % 53.7 51.7 41.5 44.2 Share of households with many (3+) children, % 5.3 5.0 1.7 2.6 Share of households without able-bodied members, % 34.9 34.6 32.9 33.3 Share of citizens living in a big city, % 35.6 35.4 37.7 37.1 Share citizens living in a smnall city, % 29.7 28.7 27.5 27.8 Share citizens living in rural areas, % 34.8 35.8 34.9 35.1 Average equivalent expenditures, UAH 85.1 102.7 241.5 204.5 Average equivalent incomes, UAH 80.3 92.2 169.5 148.9 Ratio of reported expenditures to incomes, % 1.1 1.1 1.4 1.4 Expenditures over incomes, UAH 4.8 10.5 72.0 55.6 Ratio of foodstuffs in total expenditures, % 72.7 72.7 65.5 67.1 Share of households with food consumption less than 71.3 57.9 13.6 25.5 2,100 Kcal per day Energy value of food consumption, Kcal per day 1819.2 2064.2 3667.5 3239.8 Albumen, gr. 50.1 57.0 102.9 90.7 Fat, gr. 58.7 68.7 137.4 119.1 Table C3. Ukraine: Per capita food consumption of households by decile, I-III Q Expenditure deciles Kcal per % of total Albumen per Fat per capita per Food capita per expenditures capita per day, day, gr. consumption day on food gr. less than 2100 consumption Kcal per capita per day 1 1716.5 72.6 47.2 54.2 76.3 2 2214.0 71.5 60.8 74.9 52.3 3 2442.3 69.6 67.6 84.1 37.2 4 2702.8 68.4 75.4 95.1 25.9 5 2981.5 68.0 83.6 106.3 20.1 6 3250.6 67.7 91.0 117.9 13.2 7 3494.3 66.0 97.9 128.9 11.5 8 3840.4 65.3 108.7 145.5 7.3 9 4346.6 63.5 121.8 167.1 6.2 10 5406.7 58.8 152.7 216.4 4.5 Total 3239.8 67.1 90.7 119.1 25.5 lO"idecileto lI"decile 3.15 - 3.24 3.99 22 Table C4. Ukraine: Food consumption of households by poverty status, I-III Q, 1999 Very poor Poor Non-poor All Share of foodstuffs in total expenditures, % 72.7 71.6 65.5 67.1 Share of households with food consumption 71.3 57.9 13.6 25.5 less than 2,100 Kcal per day Energy value of food consumption per 1,819.2 2,064.2 3,667.5 3,239.8 capita, Kcal per day Albumen, gr. 50.1 57.0 102.9 90.7 Fat, gr. 58.8 68.7 134.4 119.1 Table C5. Ukraine: Food consumption of households in first and second deciles, I-III Q, 1999 (equivalent expenditures less than UAH 120.85) Foodstuffs Per capita per month, UAH Meat of all kinds and sub-products 4.95 Meat products and canned meat 2.69 Lard and animal fat 2.80 Fish, fish and sea products 2.23 Milk and milk products 5.93 Butter and margarine 1.70 Bread and related products 6.61 Flour and related products 1.89 Grouts, bean and macaroni products 3.00 Eggs 2.37 Vegetable oil 3.25 Sugar, candy, chocolate, honey 3.27 Jam 1.23 Potato and pota.o products 7.08 Vegetables and related products 7.18 Mushrooms 1.52 Fruits, berries, gourd crops 2.25 Other products 1.66 Total 61.63 23 Table C6. Absolute Poverty Rates of Transition Economies in Europe and Central Asia, Selected Years, 1995-99 Survey Headcount index, % 1998 GNP in dollars per year capita $2.15/day $430/day Atlas 1996 PPP method Tajilistan 1999 68.3 95.8 370 1040 Moldova 1999 55.4 84.6 380 1995 Kyrgyz Republic 1998 49.1 84.1 380 2247 Amnenia 1999 43.5 86.2 460 2074 Azerbaijan 1999 23.5 64.2 480 2168 Georgia 1999 18.9 54.2 970 3429 Russia 1998 18.8 50.3 2260 6186 Albania* 1996 11.5 58.6 810 2864 Turknenistan 1998 7.0 34.4 502 2875 Romania 1998 6.8 44.5 1360 5571 Macedonia, FYR 1996 6.7 43.9 1290 4224 Latvia 1998 6.6 34.8 2420 5777 Kazakhstan 1996 5.7 30.9 1340 4317 Bulgaria 1995 3.1 18.2 1220 4683 Lithuania 1999 3.1 22.5 2540 6283 Ukraine 1999 3.0 29.4 980 3130 Slovakia 1997 2.6 8.6 3700 9624 Estonia 1998 2.1 19.3 3360 7563 Hungary 1997 1.3 15.4 4510 9832 Poland 1998 1.2 18.4 3910 7543 Belarus 1999 1.0 10.5 2180 6318 Croatia 1998 0.2 4.0 4620 6698 Czech Republic 1996 0.0 0.8 5150 12197 Slovenia 1997/98 0.0 0.7 9780 14399 *The survey did not cover the capital city Tirana. GDP per capita (first half 1999) are used for Ukraine. The poverty headcount numbers are based on the international poverty lines of $ 2.15 and $4.30 per person per day. Recent household survey data are not available for Bosnia and Herzogovina and Uzbekistan. Source: World Bank (2000). Making Transition Work for Everyone: Poverty and Inequality in Europe and Central Asia. Washington, DC. 24 2. Multivariate Analysis of Poverty Risks in Ukraine One of the main objectives of poverty analysis is to find factors related to social, demographic, and geographic stratification that are associated with poverty. In other words, an important part of poverty analysis is identification and assessment of socioeconomic correlates to poverty. While it is known which demographic, social and geographic factors are related to poverty, each of these factors, and combinations there of, can have dissimilar effects on poverty risk in different countries, regions of a country, or for different social groups. For example, poverty risk might be higher in some areas of a country due to unfavorable economic or political conditions. At the same time, it can be higher for less educated people who are more likely to be unemployed or to have low salaries. It is possible that less educated groups are concentrated in certain areas of a country. As a result of a combined effect of all or some of these factors, we can observe higher poverty risk in certain geographic areas. The task of this poverty analysis is to separate causal effects (education in the example above) from non-causal correlation (location in the example above). The econometric techniques applied in poverty analysis for this type of tasks include linear robust clusterl° regressions with a large dummy- variable set as well as estimates of poverty risks with controls for partial effects of different poverty factors. We use both techniques in our analysis."1 At the first step of the analysis, we use linear robust cluster regressions to estimate effects of several social characteristics of individuals and households on poverty. Poverty (the outcome variable) is a binary variable, and as such can not be used in an ordinary least-squares regression. For this reason, we substitute for poverty variable its underlying variable, the one that was used to create it - equivalent per capita consumption. We estimate effects of several characteristics - labor force participation, child and elderly dependency ratios, size and location of the household, education and type of employment of household head, education of household members - on log equivalent per capita consumption. Because the regression uses log equivalent consumption as dependent variable, the coefficients of the regression can be interpreted as partial effects measured in percentage terms. For example, the first coefficient for variable "own education" (which relates to the value "higher school diploma" of this variable) in Table 1, 0.092, means that, holding all variables constant, on the average someone with higher education has 9.2% higher level of consumption than a child age 15 or less. 10 Robust duster regression is commonly used to measure the effect of a set of dummy variables on dependent variable. Robust duster regression allows observations that are not independent within dusters but requires that observations are independent between dusters. 1" We are using the same approach that was applied in Crva&x Ecoxomic Vmnxrabih4e and Wefarr Si*dj. VoL II: Technical Papers, pp. 9-18 25 At the second step, we use the outcomes of the regression to estimate relative importance of three socioeconomic factors - location of the household and socioeconomic status and education of household members - on poverty risk.. "Relative" risk in this context means percentage difference between poverty risk that the average representative of a particular group (for example, group of people with college education) faces as compared with the average person in Ukraine. Step 1. Our analysis shows that there are three types of socioeconomic factors significantly affecting the level of consumption and hence poverty (see Table Dl below): 1. Demographic factors: Household size affects the level of consumption more that any other factor of poverty included in the analysis. The bigger the household, the lower the consumption level. A household with thirteen members on average consumes 124% less per equivalent adult than a single-family household. A four- member household consumes 27.7% less per equivalent adult than a single-family household. This can be explained by high child dependency ratios (number of children/family size) of big households - our analysis rates this factor among most important determinants of consumption level. Another explanation is that poor families have worse housing conditions when several nuclear families have to share one dwelling. In this case large household size can be a consequence and not a cause of poverty. 2. Education and type of employment of household head: Education of household head is the next significant factor of household per capita equivalent consumption. Families in which the household head's last education certificate is that of primary school have 23.8% lower per capita equivalent consumption than families where the household head has college or graduate degree. Labor force participation (number of income eamers/number of adults) also affects consumption level significantly. Household's consumption substantially decreases if the head of household is unemployed and significantly increases when he/she is a business owner. Business owners on the average have 27.9% higher per capita equivalent consumption level than employees of private or public enterprises. 3. Location of the household: Households located in agricultural areas have 11% lower level of consumption than in large cities, this difference is bigger if they are compared with households located in the capital. Consumption level in Kiev is 32.3% higher then average consumption level in the country. 26 Step 2. To examine the relative importance of different socioeconomic factors and to understand which of them are underlying causes and which are non-causal correlation effects, we analyze relative poverty risk controlling for partial effects of each of the factors separately and for the combined effect (see Table D2 below). Poverty risk is percentage of poor in a group and thus the likelihood for the average member of the group to be poor. Relative poverty risk is calculated as percentage difference of poverty risk for a particular group and the whole sample. The factors that we use in our analysis to controlfor partial effects are: * Demographic factors: household size, child dependency ratio (number of children/family size), elderly dependency ratio (number of elderly/family size); D Location of the household (oblast, type of settlement); a Education of household head and of family members; * Employment status of household head and of family members (socioeconomic status"2, form of economic activity' 3). The analysis suggests these causalfactors ofpoverty in Ukraine: 1. Education is the most significant factor ofpoverty According to our analysis, education is the strongest factor of poverty in Ukraine. When controlling for education, all other variables lose their significance to a certain extent. This is particularly important for location in a large city, especially Kiev. When controlling location in a large city for education, relative poverty risk for people living in large cities increases from 93.7% to 162.0%. In Kiev, the relative poverty risk changes from 34% to 128% when we control for education. This means that the difference in poverty in large cities and in the rest of the country can be explained to a big extent by the difference in education levels between those who live in large cities and elsewhere. The causal variable here is education level, and poverty is explained by low education level. It is higher in small towns and agricultural areas because the proportion of less educated population is higher there than in big cities. 12 Employee, business owner, member of a cooperative, family member working for a family enterprise, self-employed, pensioner, student, unemployed, housewife, child 13 Employed at an enterprise, member of a cooperative, business owner with employees, business owner with no employees, family member working for a family enterprise 27 Socioeconomic status influences poverty to a large extent via education as well. For business owners the relative risk of poverty increases from 42.8% to 198.9% when we control for education. For employees of private or public enterprises the relative poverty risk changes from 81.6% to 164.9% when control for education is used. Here again, the causal variable is education level. Socioeconomic status is a factor of poverty because to a large extent it depends on education level. 2. Demographic characteristics of households are causalfactors ofpoverty in some cases Size of households and child and elderly dependency ratios are causal factors of poverty in some cases. The relative risk of poverty is substantially reduced for most of socioeconomic status groups when demographic factors are used as controls. For our analysis this means that if the average person in this group lived in a single-family household with no dependants, the relative likelihood of poverty for this person would be significantly reduced. For business owners it would change from 42.8% to 0%, for employees - from 81.6% to 29.3%, for family members working at a family enterprise - from 112.0% to 0%, for students - from 121.6% to 1.9%. Poor people who belong to these socioeconomic groups mostly live either in large households or in households with high dependency ratios, and those demographic factors are causal reasons for high risk of poverty that they face. Pensioners, vice versa, are much more likely to be poorer than other socioeconomic groups if they live in single-family households - the relative poverty risk increases from 81.3% to 358.2% if demographic controls are used. 3. Employment status can be a causalfactor because it reflects level of education There is evidence that employment status correlates with education level and thus can be substituted for it in some cases. Our analysis shows that relative poverty risk is reduced for people at the far ends of the "level of education" scale - those with college/graduate degrees and those with primary school or less education - when control for employment status is used. At the same time, relative poverty risk for groups with other levels of education does not change significantly when we control for employment. Since education comes before employment in the life-cycle (we usually find jobs after we receive certain degrees and not vice versa), we can assume that the causal link goes in the direction from education to employment, and the observed correlation doesn't indicate causal effect. 4. Allfour factors - demographic, location, education, and employment - are causes ofpoverty for the groups with the least risk ofpoverty. We can observe that for the groups that suffer from poverty the least, causal effect of all four factors of poverty that are used as controls is the strongest. Namely, when controlled for the combined effect of all three factors, poverty risk increases for business owners from 42.8% to 426.1%. This change for Kiev residents is even bigger - from 34.0% to 499.8%. For people with college or graduate degrees it changes from 63.0% to 245.2%. It is an interesting outcome that can be interpreted in the 28 following way: when combined, the factors examined are to a large extent causes of lack of poverty rather than causes of poverty. In other words, if an individual has high level of education, preferable employment status, lives in a small family with low dependency ratios located in a big city, it is almost guaranteed that he/she will not be poor. 29 Table Dl. Regression of Log Consumption on Household Characteristics Dependent variable: Log equivalent household consumption Coef. Sid. Err. t P>Itl [95% Conf.lnterval] Labor force participation: number of income eamers I number of adults 0.185 0.020 9.086 0.000 0.145 0.225 Dependency ratios: number of children / family size -0.318 0.035 -9.145 0.000 -0.386 -0.250 number of elderly / family size 0.059 0.022 2.620 0.009 0.015 0.102 Location: Autonomous Republic of Krim omitted Vinnitskaya oblast 0.035 0.034 1.030 0.303 -0.032 0.102 Volinskaya oblast 0.038 0.039 0.953 0.340 -0.040 0.115 Dnipropetrovskaya oblast 0.014 0.032 0.437 0.662 -0.049 0.077 Donetskaya oblast 0.013 0.030 0.431 0.667 -0.045 0.071 Zhitomirskaya oblast 0.020 0.041 0.479 0.632 -0.061 0.100 Zakarpatskaya oblast 0.131 0.036 3.665 0.000 0.061 0.202 Zaporzhskaya oblast 0.023 0.038 0.610 0.542 -0.051 0.098 Ivano-Frankivskaya oblast 0.082 0.036 2.247 0.025 0.010 0.153 Kiivskaya (exduding Kiiv) oblast 0.088 0.038 2.316 0.021 0.013 0.162 Kirovogradskaya oblast 0.037 0.040 0.935 0.350 -0.041 0.115 Luganskaya oblast -0.125 0.036 -3.485 0.000 -0.196 -0.055 Lvivskaya oblast 0.087 0.032 2.698 0.007 0.024 0.150 Mikolayevskaya oblast -0.101 0.036 -2.805 0.005 -0.172 -0.030 Odeskaya oblast 0.094 0.035 2.678 0.007 0.025 0.163 Poltavskaya oblast -0.009 0.035 -0.265 0.791 -0.077 0.058 Rivnenskaya oblast 0.054 0.039 1.394 0.163 -0.022 0.130 Sumskaya oblast 0.065 0.039 1.678 0.093 -0.011 0.141 Temopilskaya oblast 0.048 0.041 1.183 0.237 -0.032 0.128 Kharkivskaya oblast 0.091 0.033 2.762 0.006 0.026 0.155 Khersonskaya oblast 0.058 0.040 1.429 0.153 -0.021 0.136 Khmelnitskaya oblast 0.008 0.041 0.207 0.836 -0.071 0.088 Cherkaskaya oblast 0.037 0.037 1.008 0.313 -0.035 0.110 Chernivetskaya oblast 0.047 0.044 1.085 0.278 -0.038 0.133 Chemigivskaya oblast 0.169 0.036 4.746 0.000 0.099 0.238 City of Kiiv 0.373 0.040 9.382 0.000 0.295 0.450 City of Sevastopol -0.070 0.070 -0.997 0.319 -0.207 0.068 Type of Settlement: large city omitted small town 0.047 0.014 3.368 0.001 0.020 0.074 agricultural area 0.110 0.015 7.349 0.000 0.081 0.140 Own education: Age under 15 omitted college orgraduate degree 0.092 0.015 6.212 0.000 0.063 0.121 college, not finished 0.100 0.024 4.131 0.000 0.052 0.147 basic part of college program completed 0.083 0.031 2.626 0.009 0.021 0.144 trade school -0.003 0.014 -0.192 0.847 -0.030 0.025 technical school 0.035 0.013 2.762 0.006 0.010 0.059 high school diploma 0.000 0.013 -0.028 0.978 -0.026 0.025 middle school -0.005 0.014 -0.325 0.745 -0.032 0.023 primary school 0.019 0.014 1.420 0.156 -0.007 0.046 no primary school 0.011 0.016 0.702 0.483 -0.020 0.042 can't read, write -0.052 0.032 -1.627 0.104 -0.115 0.011 DK,noanswer -0.111 0.119 -0.929 0.353 -0.344 0.123 Education of household heed: college or graduate degree omitted college, not finished -0.048 0.053 -0.905 0.365 -0.151 0.055 basic part of college program completed -0.099 0.051 -1.963 0.050 -0.198 0.000 trade school -0.183 0.021 -8.606 0.000 -0.225 -0.142 technical school -0.106 0.018 -5.743 0.000 -0.142 -0.070 high school diploma -0.196 0.019 -10.336 0.000 -0.233 -0.158 middle school -0.208 0.022 -9.322 0.000 -0.252 -0.165 primary school -0.238 0.026 -9.214 0.000 -0.288 -0.187 no primary school -0.291 0.035 -8.388 0.000 -0.359 -0.223 cant read, write -0.246 0.075 -3.291 0.001 -0.393 -0.099 DK, no answer 0.457 0.260 1.758 0.079 -0.052 0.967 Household size: one member omitted two members -0.038 0.015 -2.568 0.010 -0.067 -0.009 three members -0.181 0.019 -9.737 0.000 -0.218 -0.145 30 Table D2. Relative* Poverty Risk by Location of the Household, by Education of Household Members, and by Socio-Economic Status of the Household Head poverty risk after controllIna for the pardal effect of: demographic, location. employment, observed demographic location education employment education Location: Autonomous Republic of Krm 116.1% 87.3% 87.2% 132.5% 97.4% 67.2% Vinnitskaya oblast 100.9% 114.6% 106.7% 61.9% 103.1% 48.7% Volinskaya oblast 133.4% 71.1% 109.9% 47.8% 102.7% 23.5% Dnipropetrovskaya oblast 99.5% 124.9% 69.0% 135.7% 102.4% 59.3% Donetskaya oblast 100.3% 130.6% 65.9% 105.4% 107.6% 67.5% Zhitomirskaya oblast 118.2% 126.3% 100.3% 56.9% 99.1% 39.6% Zakarpatskays oblast 77.5% 42.1% 143.1% 47.4% 98.1% 132.1% Zaporlzhskaya oblast 107.9% 92.5% 75.4% 113.5% 105.1% 46.3% Ivano-Frankivskaya oblast 94.4% 47.4% 135.8% 107.2% 102.8% 90.5% Kiivskaya (excluding Kliv) oblast 91.6% 79.6% 134.9% 77.1% 92.3% 142.5% Kirovogradskaya oblast 88.2% 88.6% 97.6% 91.5% 95.2% 78.8% Luganskaya oblast 149.0% 197.2% 20.5% 128.2% 99.7% 18.3% Lvivskaya oblast 107.8% 82.4% 131.6% 97.9% 104.4% 97.9% Mikolayevskaya oblast 151.0% 108.3% 39.6% 93.6% 106.1% 22.2% Odeskaya oblast 92.7% 80.5% 125.3% 105.3% 99.0% 144.0% Poltavskaya oblast 97.3% 139.7% 101.3% 79.0% 101.0% 75.0% Rivnenskaya oblast 115.9% 72.7% 108.5% 75.1% 102.2% 47.7% Sumskaya oblast 92.4% 89.2% 89.7% 85.6% 95.9% 67.1% Temopllskaya oblast 106.4% 100.6% 109.6% 58.6% 97.6% 46.4% Kharkivskaya oblast 69.5% 75.5% 128.7% 155.2% 95.0% 136.1% Khersonskaya oblast 103.9% 91.2% 90.7% 88.3% 107.5% 55.7% Khmelnitskayaoblast 116.5% 116.6% 102.3% 84.1% 100.8% 55.0% Cherkaskaya oblast 108.8% 159.4% 103.7% 68.2% 94.7% 54.9% Chemivetskaya oblast 119.0% 94.7% 107.3% 71.5% 94.2% 44.2% Chemigivskaya oblast 57.9% 78.9% 143.3% 82.9% 87.9% 212.1% City of Kliv 34.0% 50.2% 143.8% 128.9% 94.8% 499.8% City of Sevastopol 121.9% 108.8% 56.1% 248.3% 107.2% 72.5% All locations 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Type of Seftlement: large city 93.7% 986.5% 71.2% 162.0% 103.6% 144.0% small town 101.6% 94.1% 93.8% 99.7% 102.2% 78.4% agricultural area 104.9% 107.9% 132.7% 39.9% 94.8% 73.5% All types of settlemnts 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Soclo-economk status of household had: employee 81.6% 29.3% 89.8% 164.9% 120.1% 151.9% business owner 42.8% 0.0% 87.5% 198.9% 125.2% 428.1% memberofa cooperative 100.8% 18.7% 111.4% 57.0% 119.1% 99.0% family member working for a family enterpnsd412.0% 0.0% 122.4% 0.0% 100.6% 88.2% self-employed 88.6% 23.1% 88.7% 175.4% 113.0% 171.9% pensioner 81.3% 358.2% 97.4% 72.9% 55.2% 107.7% student (college, graduate) 97.1% 9.7% 98.9% 149.7% 103.1% 104.9% student (before college) 121.6% 1.9% 105.2% 51.6% 118.2% 37.1% unemployed 135.1% 45.1% 107.3% 105.6% 94.9% 76.3% housewife 107.9% 3.4% 109.1% 109.0% 106.2% 62.7% ciid, pre-school age 120.2% 0.0% 108.4% 38.8% 117.4% 39.6% DK, no answer 108.3% 100.8% 125.4% 142.2% 94.8% 169.1% All soclo-economic groups 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Own education: school-age children 47.3% 55.5% 80.5% 557.6% 114.0% 309.2% college or graduate school 83.0% 23.5% 91.6% 470.1% 100.5% 245.2% college, not finished 58.6% 62.3% 77.4% 179.0% 94.5% 214.8% basic part of college program completed 114.6% 45.8% 98.4% 22.3% 97.8% 60.6% trade school 88.2% 70.7% 92.8% 72.2% 109.4% 126.5% technical school 106.5% 77.0% 102.3% 18.9% 102.6% 73.9% high school diploma 109.9% 154.9% 105.0% 22.8% 105.1% 61.5% middle school 107.8% 187.5% 108.4% 28.0% 91.9% 47.8% primaryschool 114.5% 146.7% 111.9% 41.0% 89.4% 34.6 no primaryschool 130.7% 293.0% 111.8% 17.4% 98.8% 60.2% canl read, write 0.0% 418.9% 113.1% 0.0% 86.2% 148.4% 31 3. Housing Subsidies and Energy Arrears While the share of housing subsidies in total revenues of housing and utility companies increased from 8.5 percent in 1996 to 24 percent in 1999, the percentage of payments made by households also grew from 53 percent to 58 percent (Table 3.1). Table 3.1. Sources of Revenue for Housing and Utility Companies (percentage) 1996 1997 1998 1999 Total: 100 100 100 100 Local budgets 47.4 47.1 42.2 41.9 including subsidies 8.5 16.9 19.7 24.4 Households 52.6 52.9 57.8 58.1 Nonetheless, by 1999, arrears of UAH 5.4 billion had accumulated. In 1999, payments for public housing included UAH 4.9 billion in cash and UAH 1.1 billion through housing allowance transfers. Household debt increased to UAH 5.0 billion while local budget arrears declined. As a result, by 2000, total back payments for housing services amounted to UAH 6.2 billion, or 56 percent of total operating costs (Table 3.2) Table 3.2: Payments for Housing Services (million UAH) 1996 1997 1998 1999 1. The total costs of consumed housing and utilities services for households (including indebtedness of 4,450.9 7,445.6 9,030.1 11,079.9 the previous years) * - the current year costs in particular ... 5,417.4 5,307.6 5,216.3 2. Funds actually paid by households for housing and communal services 2,605.7 4,051.7 4,386.1 4,922.5 Including: - subsidies transferred 256.9 865.4 1,026.4 1,125.2 - money paid by the households 2,348.8 3,186.3 3,359.7 3,797.3 3. Budget and households' indebtedness for housing 1,845.2 3,393.9 4,644.0 6,157.4 and communal services Including: - local budget debt on subsidies ... 500.3 1,163.9 1,108.3 - household debt ... 2,893.6 3,480.1 5,049.1 - household debt in % to the previous year ... ... 120.3 145.1 - household debt in % to money paid for ... 90.8 103.6 132.0 services * the total cost does not include the cost of housing and communal services for households with privileges 32 Housing service providers experienced financial losses in both 1998 and 1999 for UAH 216 million and UAH 450 million respectively. (Table 3.3) In addition, tariffs and rents in Ukraine do not fully reflect depreciation, land taxes, and other related costs. However, some UAH I ni million has been included in the state budget to renovate housing stock. Housing depreciation has been rapid and regular maintenance has not been performed due to payment arrears. Table 3.3. Financial Results (Balance sheet of financial indicators) of Housing and Utilities Services Sector (million UAH) 1996 1997 1998 1999 1. Revenues (Gross income) of sector 4,808.3 6,553.6 7,603.2 a)Including :value added tax 723.5 1,009.6 1,243.8 b) excise-duty 0.6 2.3 7.8 c) Other 2.4 2.7 9.8 2. State regulation of prices 576.2 628.5 719.5 3. Inputs (Expenses on production) 4,415.4 5,969.4 7,081.7 4. Other expenses (comrnercial) ... 18.3 21.9 5. Net profit (5)=(l)-a)-b)-c)+(2)-(3)-(4) 242.6 179.8 - 42.3 -275.0* Total profit/losses ** 310.4 304.5 -216.0 450.0* * Expected ** Net profit including profits/losses of other years Cost recovery is also inefficient, as the actual consumption at metered household is 22 to 29 percent below the standards upon which the subsidy is based. The USAID contractor calculated that if all subsidy recipients had gas meters, the total subsidy for housing and communal services would have been reduced by UAH 11 million to UAH 138 million for the 1998-1999 heating season. This calls for the accelerated introduction of gas and water meters. 33 4. War Entitlements and Privileges In Ukraine, the number of persons entitled to privileges due to wars increased substantially. By January 1995, there were 5.2 million war veterans or one in every ten persons as entitlements were extended to any number of individuals who were affected by wartime experiences but were not necessarily soldiers (Table 4.1). Table 4.1: Ukraine: Trends in War Entitlements (thousands) Jan.1, Jan. 1, Jan. 1, Jan. 1, Jan. 1, Jan. 1, 1994 1995 1996 1997 1998 1999 Total 3,110 5,239 5,370 5,326 5,080 4,868* Invalids of war 227 248 271 282 289 298 Participants of military actions 692 697 554 537 492 446 Participants of war 1,891 3931 4,155 4,098 3,882 3,697 Famnily members of perished participants 299 362 390 408 416 426 of war Individuals with special merits 1.0 1.0 0.8 0.7 0.6 0.4 * Excluding veterans of the Ministry of Defense, Ministry of Interior, and Security Service Source: Ministry of Labor and Social Policy Compared to other CIS states, at 36.5 percent, Ukraine has the highest share of retired war 'veterans'. In Russia and Belarus, veterans make up only 5 percent of pensioners. In Ukraine 'veterans of war' (and labor14) are the most numerous recipients of social privileges with 17.9 million eligible for transportation privileges, 7.1 million eligible for natural gas subsidies, 5.4 million for electricity subsidies, and 1.4 million for telephone payments. Table 4.2: Veterans in Ukraine, Russia and Belarus, January 1, 1999 Population Number of Percentage of Number of percentage of (1000) pensioners population veterans pensioners (1000) (1000) Ukraine 50,245.2 14,535 28.9 5,300 36.5 Russia 146,739.4 39,000 26.6 1,992 5.1 Belarus 10,203.8 2,665 26.1 143.6 5.4 Source: Ministry of Labor and Social Policy 14'Labor veterans' include those with long years of service, pensioners in certain occupational groupings allowing for early retirement, and disabled pensioners in Groups I and II. 34 5. Working Group Findings This annex summarizes proposals and conclusions made by the social assistance working groups initiated by the MLSP and the World Bank to assess social assistance programs in the light of household survey findings. The findings include combined recommendations by the working groups, World Bank experts, the IMF country team; PADCO/USAID, and other stakeholders.'5 A. Basic Government Objectives These working groups operated within the context of the Cabinet of Ministers' Action Plan, which focuses on restoring economic growth by: 16 + ensuring productive employment of the population and the creation of new jobs in the economy, raising labor productivity, and enhancing opportunities for earning an income; * developing human capital by raising labor force competencies and improving public health and education, and * ensuring efficient social protection, including (i) repayment of arrears on wages, pensions and other social benefits, and the prevention of subsequent arrears; (ii) replacement of the current system of benefits with targeted support for the poor, and (iii) improvements in social support for the elderly, veterans of war and persons with disabilities, large families, single mothers, orphans, and children deprived of parental care. B. Major Issues to Be Addressed The working groups identified five key issues that will need to be resolved in the context of social assistance reform. These are (i) the coherence of the system; (ii) the scope of social privileges; (iii) the adequacy of poverty data; (iv) the capacity for targeting; and (v) the strengthening of administration. 1. The system of social privileges needs to be revised. Any meaningful reform will have to begin with reducing further the number of privileges and the number of people who are entitled to benefits by targeting benefits at truly needy families; 2. The social protection system needs greater coherence. The current social protection system, with its array of often overlapping benefits and privileges, different income eligibility thresholds and varying criteria, is unwieldy and inefficient in its use of resources. It requires thorough examination to rationalize and consolidate programs; and it requires better definition of the roles, tasks and functions of responsible agencies at central, regional and local levels; 3. Targeting needs to be improved. Currently, targeting is largely based on income reporting by households. Income-based targeting needs to be extended to social privileges, and consideration should be given to mechanisms that will reduce the scope for error, while keeping the costs of targeting reasonable; '3 See Gupta et aL (2000); PADCO 1999a, 1999c, 2000. 6 The report was prepared pursuant to the provisions of the Presidential Address to the Verkhovna Rada of February 22, 2000 "Ukraine: Entry in the XXXI Century Strategy of Economic and Social Development for 2000-2004." 35 4. Administration needs to be strengthened. The system has developed in a piecemeal way, and consequently responsibilities for financing and administration are often not well delineated. Administrative capacity needs to be refined. Administrative procedures should be issued defining the roles and functions of social assistance program managers. Further standard procedures need to be implemented to monitor program effectiveness 5. Information on living standards and poverty needs to be strengthened. Analyzing living standards, knowing the nature and extent of the poverty problem is essential to developing cost-effective policies and strategies to reduce poverty. At the least this will require an evaluation of existing social data bases and statistical capacity to develop key indicators for analysis of living standards, tracking poverty, and for the elaboration of accurate targeting; C. Specific Measures to be Taken Specific measures were recommended in the following areas: (i) redesigning programs; (ii) reforming financing (iii) redesigning administrative procedures; (iv) measuring poverty, and (v) informing the public. 1. Redesigning Programs * Realistic and unified benefit eligibility criteria should be developed for all social assistance programs, which would coverage eligible beneficiaries within available resources. Program eligibility criteria could be differentiated according to regional subsistence minimums, family size, and structure. * A new methodology for calculating the family income for social assistance needs to be introduced (despite difficulties in identifying the poor) since strong correlates to poverty are absent (except for a few demographic indicators). In particular, methodology is needed to improve the measurement of income from land plots (shares). The current way of assessing potential income based on an assumed income of UAH 40 per hectare per year is inadequate. * Pensions and basic social benefits should be raised to compensate for increases in housing costs, rather than relying on the incremental expansion of privileges to help the elderly. Social pensions also should be raised and/or social assistance targeted towards low-income pensioners in place of the continued expansion of a myriad of small, supplemental benefits (Initially, privileges could be capped rather than rescinded.) * Currently, different programs use the family, the individual, or the household as the unit for assistance. A unified approach should be applied, using, as the rule, the household, as the unit for targeted social assistance. 2. Reforming Financing * Expenditure responsibilities and sources of financing for social assistance programs appear to be mismatched. Commitments for social assistance expenditures should be consistent with revenues to avoid further accumulation of arrears. Revenue and expenditure responsibilities should be 36 transparent and appropriate to the level of government involved. Social assistance payments that do not represent social insurance should be paid by state and local budgets and not paid out of social insurance funds. 3. Redesigning Administrative Procedures * A unified program of targeted assistance under the Ministry of Labor and Social Policy (presumably consolidated under the existing housing allowance program) should replace the current fragmented social assistance system creating a comprehensive means-tested social safety net. * A single focal point ("one-stop" services) for the distribution of benefits should be established. This approach was successfully tested in the Mykolayiv oblast. It would also shift responsibility for social protection programs away from enterprises. * Oblasts should accelerate the mandated transfer of responsibility for the calculation and distribution of child allowances from enterprises to local social assistance offices. * A unified database of recipients of social assistance should be created to reduce administrative costs of checking applications. Such a unified database was established on a pilot basis in Mykolayiv oblast. * A nationwide audit of targeted social assistance benefits and social privileges should be conducted to reduce fraud and abuse in the award of social benefits. Penalties for unlawful housing allowance claims and presenting incorrect data on housing conditions and incomes should be established (as in case of housing allowances). 4. Measuring Poverty * Poverty measurement requires ongoing estimates of a minimum consumption basket (MCB) and differentiated by individuals and families This MCB, or subsistence minimum, should be realistic, based on established consumption patterns, and adapted for different regions, and localities. * The MLSP has proposed to assess the value of social privileges and add their inputted value into the aggregate household incomes. This may also be productive in evaluating the real living standards of needy households. * In addition to the ongoing household survey, existing regularly collected social data should be evaluated to determine whether key indicators for tracking poverty could be developed. This would include an assessment of data quality based on an evaluation of collection methodology and reporting timeliness. 5. Informing the Public * Open public debate is necessary if policy decisions are to be sustainable. To stimulate such debate, a public education campaign is needed to imbue a better understanding of poverty issues and options for reform. 37 APPENDICES 1. INTRODUCTION Table 1.A.1 Ukraine: Selected Macroeconomic Indicators Indicators 1995 1996 1997 1998 1999 Real GDP growth, % -12.2 -10.0 -3.0 -1.7 -0.4 GDP in current prices (UAH billions) 54.5 81.5 93.4 103.9 127.1 GDP, US$ billions (PPP terms) 124.2 113.1 110.0 108.1 107.0 GDP, US$ billions (at market exchange rate) 37.0 44.6 50.2 42.7 31.9 GDP per capita based on market exchange rate (US$) 718 872 989 849 637 Atlas GNP per capita ($) 1,350 1,210 1,040 850 800 Money supply (M3) growth, % 113 35 34 25 36 Monetization ratio (M3/GDP), % 13 11 13 15 16 Exchange rate (UAHIUS$, year end) 1.79 1.89 1.90 3.43 4.60 CPI change, December on Decemnber 181.7 39.7 10.1 20.0 19.2 Accrual budget deficit (% of GDP) -8.2 -8.4 -5.2 -3.0 0.6 Total public debt (US$ billion) 8.2 10.1 14.2 15.2 15.0 Total wage arrears (UAH billion) 0.6 3.7 4.9 6.5 5.5 including budget sphere 0 1.0 0.7 1.0 0.5 Pension arrears (UAH billion) 0.1 1.1 1.3 2.0 1.7 Table 1.A.2. Ukraine: Basic Demographic Indicators 1992 1993 1994 1995 1996 1997 1998 1999 Total population ((1000)) 51802 51989 51860 51474 51079 50639 50245 49851 Total employed population, average for a year ((1000)) 24505 23945 23025 23725 23232 22598 22349 21800 Under working age, % 22.6 22.4 22.2 21.9 21.5 21.1 20.7 20.1 Working age, % 55.7 55.6 56.6 55.7 55.8 56.0 56.1 56.6 Over working age, % 21.7 22.0 22.2 22.4 22.6 22.9 23.2 23.3 Share of pensioners in total population, % 26.0 27.3 27.9 28.2 28.4 28.6 28.9 27.9 Over working age/working age population, % 38.9 39.5 39.8 40.2 40.5 40.9 41.3 41.2 Pensioners/employed population 54.2 57.9 60.5 63.0 61.1 62.4 64.3 62.5 Crude birth rates (per (1000) population) 11.4 10.7 10.0 9.6 9.1 8.7 8.3 7.8 Crude death rates (per (1000) population) 13.4 14.2 14.7 15.4 15.2 14.9 14.3 14.8 Natural increase (per (1000) population) -2.0 -3.5 4.7 -5.8 -6.1 -6.2 -6.0 -7.0 Infant mortality (per (1000) births) 14.0 14.9 14.3 14.7 14.3 14.0 12.8 12.6 Source: State Statistics Committee of Ukraine. 38 2. THE POVERTY PROFILE 2.A. HOUSEHOLD STRUCTURE Table 2.A.1. Ukraine: Incomes and expenditures by type of household, I-I11 Q, 1999 Type of households Number (1000) % of total Total equivalent Total equivalent incomes expenditures 1 pensioner 2.843 16.00 142.9 207.3 including: 70 years and older 1.A28 8.03 132.3 190.7 2 pensioners 2.125 11.96 155.8 209.0 2 adults and 1 child 2.080 11.70 154.8 219.1 2 adults and 2 children 1.641 9.23 145.9 194.6 2 adults 1.264 7.11 174.4 246.5 1 adult and 1 pensioner 926.8 5.21 156.5 209.1 1 adult 761.7 4.29 177.9 271.2 3 adults and 1 child 737.5 4.15 129.7 167.5 3 adults 725.6 4.08 152.7 203.3 1 adult and I child 493.0 2.77 148.6 230.2 Household with 3 children 350.9 1.97 123.4 160.1 Household with 4 children 61.8 0.35 112.4 132.3 Household with 5 and more children 44.4 0.25 111.1 98.4 Total 17771.5 100 148.9 204.5 Table 2.A.2. Ukraine: Poverty status by type of household, I-HI Q, 1999, % Type of households Very poor Poor Non-poor All households 1 pensioner 14.77 14.46 16.00 16.00 2 pensioners 7.70 9.31 8.03 11.96 2 adults and I child 10.36 10.02 11.96 11.70 2 adults and 2 children 9.08 8.97 11.70 9.23 2 adults 3.56 4.08 9.23 7.11 1 adult and 1 pensioner 5.08 4.90 7.11 5.21 1 adult 2.25 2.50 5.21 4.29 3 adults and 1 child 6.28 5.96 4.29 4.15 3 adults 4.33 3.97 4.15 4.08 1 adult and I child 1.53 2.03 4.08 2.77 Household with 3 children 3.08 3.33 2.77 1.97 Household with 4 children 1.18 0.83 1.97 0.35 Household with S and more children 1.08 0.81 0.35 0.25 Total 100.00 100.00 100.00 100.00 39 Table 2.A.3. Ukraine: Characteristics of households by type of household ( all households), I-III Q, 1999 Household Number of % of total Equivalent Equivalent Ratio between % of total Kcal per capita Albumen per Fat per capita type households, number incomes, UAH expenditures, incomes and expenditures per day capita per day, per day, gr. (1000) UAH expenditures on food gr. consumption I pensioner 2842.9 16.0 142.9 207.3 1.5 68.4 4530.7 125.4 162.2 including 1427.7 8.0 132.3 190.7 1.4 69.1 4266.1 118.7 150.6 pensioner 70 years and older 2 pensioners 2124.7 12.0 155.8 209.0 1.3 69.4 3838.6 107.9 139.5 2adultsand 2079.7 11.7 154.8 219.1 1.4 63.2 2630.3 73.2 99.9 Ichild 2 adults and 2 1640.7 9.2 145.9 194.6 1.3 65.3 2280.4 65.5 83.7 children 2 adults 1263.9 7.1 174.4 246.5 1.4 64.6 3575.5 100.7 137.6 I adult and 1 926.8 5.2 156.5 209.1 1.3 69.0 3668.9 102.0 135.3 pensioner I adult 761.7 4.3 177.9 271.2 1.5 63.9 4466.7 124.3 168.7 3 adults and 1 737.5 4.2 129.7 167.5 1.3 65.9 2300.4 64.5 83.3 child 3adults 725.6 4.1 152.7 203.3 1.3 65.1 2929.7 81.7 111.8 1 adult and 1 493.0 2.8 148.6 230.2 1.5 64.1 2992.1 82.2 110.8 child Households 350.9 2.0 123.4 160.1 1.3 71.7 2304.4 65.0 77.0 with 3 children Households 61.8 0.4 112.4 132.3 1.2 77.9 2096.8 62.1 70.1 with 4 children Households 44.4 111.1 98.4 0.9 76.4 1553.9 46.7 42.7 with 5 and more children Total 17771.5 100.0 148.9 204.5 1.4 67.1 3239.8 90.7 119.1 40 Table 2.A.4. Ukraine: Characteristics of households by type of household (poor households), I-III Q, 1999 Household type Number of % of total Equivalent Equivalent Ratio between % of total Kcal per Albumen Fat per Poverty households, number incomes, expenditures, incomes and expenditures capita per per capita capita per headcount, (1000) UAH UAH expenditures on food day per day, gr. day, gr. % consumption 1 pensioner 685.6 14.46 89.7 102.8 1.1 72.9 2886.5 77.8 97.0 24.1 including pensioner 70 405.2 8.55 89.9 101.7 1.1 73.6 2860.4 77.2 96.8 28.4 years and older 2 pensioners 441.3 9.31 101.9 107.6 1.1 71.4 2452.9 68.5 80.4 20.8 2 adults and lchild 474.9 10.02 86.4 102.4 1.2 68.1 1694.0 46.6 57.4 22.8 2 adults and 2 children 425.5 8.97 90.9 103.0 1.1 70.3 1638.0 46.9 53.9 25.9 2 adults 193.4 4.08 83.9 103.9 1.2 70.4 2207.3 57.5 74.7 15.3 1 adult and 1 pensioner 232.4 4.90 97.7 100.9 1.0 71.7 2287.3 62.0 73.9 25.1 1 adult 118.7 2.50 93.4 102.5 1.1 73.2 2663.1 72.7 85.2 15.6 3 adults and 1 child 282.8 5.96 85.8 100.3 1.2 69.4 1724.4 47.4 58.7 38.3 3 adults 188.3 3.97 98.3 101.7 1.0 68.1 1873.0 52.3 62.8 26.0 1 adult and 1 child 96.1 2.03 89.1 109.2 1.2 69.0 1967.6 52.0 60.1 19.5 Household with 3 children 157.9 3.33 89.5 102.9 1.2 76.0 1689.8 48.3 54.5 45.0 Household with 4 children 39.4 0.83 94.2 94.9 1.0 81.7 1746.5 53.6 58.2 63.8 Household with 5 and more 38.6 0.81 101.7 86.5 0.9 79.0 1518.4 46.7 40.6 87.0 children Total 4741.0 100.00 92.2 102.7 1.1 71.6 2064.2 57.0 68.7 26.7 41 Table 2.A.5. Ukraine: Characteristics of households by type of household (very poor households), I-III Q, 1999 household type Number of % of total Equivalent Equivalent Ratio % of total Kcal per Albumen Fat per Headcount households, number incomes, expenditure between expenditure capita per per capita capita per of very (1000) UAH s, UAH incomes s on food day per day, gr. day, gr. poor, % and consumptio expenditu n res 1 pensioner 354.3 14.77 82.1 86.7 1.1 74.1 2590.2 69.3 84.2 12.5 including 212.0 8.83 81.8 84.6 1.0 75.0 2591.2 69.4 83.7 14.8 pensioner 70 years and older 2 pensioners 184.7 7.70 93.9 88.5 0.9 73.5 2191.1 60.8 71.4 8.7 2 adults and 248.6 10.36 76.5 84.9 1.1 68.8 1502.7 41.0 48.5 12.0 Ichild 2 adults and 2 217.9 9.08 76.1 86.3 1.1 70.0 1458.2 41.6 46.5 13.3 children 2 adults 85.4 3.56 72.7 83.1 1.1 72.9 2016.6 52.5 65.9 6.8 1 adult and 1 121.9 5.08 86.0 83.3 1.0 74.0 2035.3 54.7 65.5 13.2 pensioner I adult 54.1 2.25 73.0 80.9 1.1 73.9 2176.5 58.8 65.2 7.1 3 adults and 1 150.8 6.28 73.0 81.0 1.1 68.9 1493.3 41.4 48.7 20.4 child 3 adults 104.0 4.33 81.5 85.6 1.0 69.6 1696.8 48.0 54.3 14.3 1 adult and 1 child 36.7 1.53 66.4 87.1 1.3 68.5 1723.4 44.8 48.2 7.4 Households with 3 73.9 3.08 74.9 81.7 1.1 78.8 1409.5 41.0 43.8 21.1 children Households with 4 28.3 1.18 86.4 83.8 1.0 81.7 1566.3 49.2 52.5 45.8 children Households with 5 26.0 1.08 73.0 71.3 1.0 76.6 1323.8 40.7 33.2 58.6 and more children Total 2399.3 100.00 80.3 85.1 1.1 72.7 1819.2 50.1 58.7 13.5 42 Table 2.A.6. Ukraine: Poverty status by households with children, I-III Q, 1999 (percentage) Number of children Very Poor Non- Total Poverty Headcount poor poor headcount of very poor 1 28.89 28.23 25.76 26.42 28.51 14.76 2 19.49 18.51 14.04 15.23 32.41 17.28 3 3.08 3.33 1.48 1.97 45.01 21.07 4 1.18 0.83 0.17 0.35 63.76 45.79 5 and more 1.08 0.81 0.04 0.25 87.01 58.58 Households with children, total 53.73 51.71 41.49 44.22 31.20 16.40 Households without children 46.27 48.29 58.51 55.78 23.09 11.20 All households 100.00 100.00 100.00 100.00 26.68 13.50 Table 2.A.7. Ukraine: Poverty status by households with members over working age (women over 55 years, men over 60 years), 1-111 Q, 1999 (percentage) Number of people over working age Very Poor Non- Total Poverty Headcoun poor poor headcount t of very poor 1 35.24 33.40 30.48 31.26 28.50 15.22 2 14.86 16.38 17.83 17.44 25.06 11.50 3 0.47 0.80 0.72 0.74 28.86 8.68 4 0.00 0.00 0.04 0.03 0.00 0.00 6 0.00 0.00 0.01 0.01 0.00 0.00 Households with members over 50.57 50.58 49.08 49.48 27.27 13.80 working age, total Households having no members 49.43 49.42 50.92 50.52 26.09 13.21 over working age, total All households 100.00 100.0 100.00 100.00 26.68 13.50 0 43 Table 2.A.8. Ukraine: Poverty rates by households of the elderly, I-III Q, 1999 Types of households Very poor Poor Non-poor Average expenditures per capita, UAH Households of pensioners 10.7 22.6 77.4 207.8 including: Over70years 14.4 28.1 71.9 194.3 Over 75 years 18.5 33.4 66.6 183.6 Single pensioners 12.5 24.1 85.9 207.3 including Over 70 years 14.8 28.4 71.6 190.7 Over 75 years 18.6 33.2 66.8 176.3 Households without pensioners 13.5 26.1 73.9 210.9 Households without dependents 9.3 19.6 80.4 237.6 44 2.B. HEAD OF HOUSEHOLD Table 2.B.1 Ukraine: Poverty status by gender of household head, I-III Q, 1999 (percentage) Head of household Very poor Poor Non-poor Total Poverty Headcount of headcount very poor Male 43.28 43.79 47.42 46.45 25.15 12.58 Female 56.72 56.21 52.58 53.55 28.00 14.30 All households 100.00 100.00 100.00 100.00 26.68 13.50 Table 2.B.2 Ukraine: Poverty in households by employment status of household members, I-HI Q, 1999 (percentage) Very poor Poor Non-poor Total Poverty Headcount of headcount very poor Households made 34.93 34.64 32.88 33.35 27.71 14.14 up of unernployed Other households 65.04 65.36 67.12 66.65 26.16 13.18 Total 100.00 100.00 100.00 100.00 26.68 13.50 2.C. GEOGRAPHiC ASPECTS OF POVERTY Table 2.C.1 Ukraine: Poverty status by households by place of residence, I-III Q, 1999 (percentage) Type of settlement Very poor Poor Non-poor Total Poverty Headcount of very headcount poor Big city 35.58 35.44 37.65 37.06 25.51 12.96 Small city 29.66 28.72 27.48 27.81 27.55 14.40 Rural areas 34.75 35.84 34.87 35.13 27.22 13.36 All households 100.00 100.00 100.00 100.00 26.68 13.50 45 Table 2.C.2 Ukraine: Poverty status by region, I-III Q, 1999 (percentage) Region Very poor Poor Non-poor Total Poverty Headcount headcount of very poor Autonomous Republic of Crimea 5.21 5.39 4.60 4.81 29.88 14.62 Vinnitsa 4.18 4.02 4.00 4.00 26.76 14.10 Volyn' 2.69 2.60 1.70 1.94 35.76 18.74 Dnipropetrovs'k 7.50 7.62 7.33 7.41 27.44 13.67 Donetsk 9.84 9.96 9.15 9.36 28.37 14.19 Zhytomyr 4.06 3.46 2.76 2.94 31.33 18.61 Transcarpathia 0.97 1.31 2.33 2.06 16.96 6.35 Zaporizhya 4.74 4.81 3.75 4.03 31.80 15.85 Ivano-Frankivs'k 1.89 2.54 2.83 2.75 24.67 9.29 Kievregion(excludingcityofKiev) 3.20 3.13 4.14 3.87 21.54 11.15 Kirovohrad 1.59 2.08 2.62 2.48 22.37 8.66 Luhansk 9.21 8.63 4.23 5.41 42.58 22.99 L'viv 4.68 4.97 4.67 4.75 27.89 13.29 Mykolayiv 3.85 4.00 2.08 2.59 41.14 20.03 Odesa 5.26 4.32 5.41 5.12 22.51 13.87 Poltava 3.93 3.71 3.53 3.57 27.66 14.85 Rivne 2.17 1.95 1.91 1.92 27.06 15.26 Sumy 2.35 2.52 2.87 2.78 24.23 11.44 Temopil' 2.13 2.26 1.96 2.04 29.50 14.11 Kharkiv 4.27 4.05 6.87 6.12 17.64 9.42 Kherson 2.61 2.43 2.57 2.53 25.62 13.93 Klnelnitsky 4.59 3.44 2.63 2.85 32.26 21.78 Cherkasy 2.92 4.17 3.66 3.79 29.34 10.40 Chermivtsi 2.36 2.14 1.78 1.87 30.43 17.02 Chemihiv 1.44 1.61 3.37 2.90 14.83 6.69 CityofKiev 1.44 2.29 6.64 5.48 11.15 3.56 City of Sevastopol 0.93 0.62 0.62 0.62 26.81 20.30 Total 100.00 100.00 100.00 100.00 26.68 13.50 46 3. COPING MECHANISMS Table 3.A.1 Ukraine: Number of people engaged in additional work (1999 labor force survey data) March June September December Average for 1999 (1000) (1000) (1000) (1000) Total including: (1000) Females Males Urban Rural Ermployed population at 19415.8 20240.2 20661.0 19875.9 20048.2 9750.1 10298.1 14049.9 5998.3 age 15-70, total including: Employed in additional 642.4 812.9 1036.3 652 785.9 392.1 393.8 132.3 653.6 work including in 508.0 692.4 920.8 566.9 671.9 339.6 332.3 38. 633.2 subsidiary household plots Individuals engaged in additional work, % Total 100 100 100 100 100 including: hired 10.8 8.6 6.2 7.7 8.2 employers 0.2 0.2 0.2 0.2 0.2 members of collective 1.2 1.7 0.4 0.3 0.7 enterprises self-ernployed 65.3 65.3 66.2 64.7 65.5 unpaid family workers 22.5 24.2 27.0 27.1 25.4 47 Table 3.A.2. Ukraine: Number of employed temporarily not at work (1999 labor force survey data), in 1,000 March June September Average for 1999 Total including: Females Males Urban Rural Employed 1615.3 1471.6 1136.1 1337.5 902.2 435.3 910.6 426.9 temnporarily not at work, (1000) including by reasons, % Paid leave 6.8 29.3 17.7 15.9 12.1 23.7 17.4 12.6 Maternity leave 34.9 34.7 41.0 37.3 54.6 1.5 36.3 39.3 Unpaid 32.1 22.7 24.9 23.5 17.2 36.7 25.2 20.0 administrative leave Sick leave 11.9 6.2 8.6 8.7 6.1 14.0 8.8 8.3 Seasonal work 7.2 2.3 2.5 5.7 4.1 9.1 2.8 12.0 Other reasons 7.1 4.8 5.3 8.9 5.9 15.0 9.5 7.8 48 4. SAFETY NET PROGRAMS 4. A. SOCIAL PRIVILEGES Table 4.A.1. Ukraine: Social privileges retained in the Law "On the State Budget of Ukraine for the Year 2000" Types of benefits For whom the right to use benefits has been reserved 1. Right to have telephones installed at no charge Invalids, group I and group II; Participants of combat operations; and on preferential terms Family members of participants of comnbat operations who died in action; Persons who suffered in consequence of the accident at the Chernobyl Nuclear Power Plant (NPP), Category I; Families with an invalid child with established disability due to the consequences of the accident at the Chemobyl NPP. In case payment for local telephone calls is effected by the minute, benefits are enjoyed by the following groups: Invalids, Group I and Group II; Families, two or more members of which are invalids. 2. Exemption from or reduction of payment for War veterans; Persecuted persons; rent and utility services, electricity, gas, fuel Family members of participants of combat operations who died in action; Persons who suffered in consequence of the accident at the Chernobyl NPP. 3. Medical treatment at sanatoriums and resorts at Chemobyl NPP accident cleanup operators, Category I and Category II; no charge or on preferential terms Persons who after a grave illness are in need of treatment at sanatoriums and resorts at the expense of resources of the Social Security Fund of Ukraine. 4. Disbursement of compensations for nonuse of War veterans, Group I and Group II; the right to mnedical treatment at sanatoriums and Citizens who suffered in consequence of the accident at the Chernobyl Nuclear Power Plant (NPP), Category I, resorts on preferential terms and children. 5. Provision of cars at no charge or on preferential Invalids of Category I and Category H with affected locomotive system, in exceptional cases by petition of the terms Ministry of Labor and Social Policy of Ukraine 6. Free travel by all types of city and suburban Participants of combat operations; Invalids; Pensioners; passenger transport Family members of participants of combat operations who died in action; Chemobyl NPP accident cleanup operators, Category I and Category II. 7. Free travel by all types of inter-city transport Participants of cornbat operations; Family meWbers of participants of corbat operations who died in action; Invalids, Group I and Group II; For whom the right to use beneflts has been reserved Persons accornpanying invalids of Group I; Persons to which applies the effect of the Inter-State Agreement on Reciprocal Right to Travel on Preferential Terrns for Invalicls and Participants of the Great Patriotic War, as well as to persons equated with them; Chernobyl NPP accident cleanup operators, Category I and Category II; People's Deputies of Ukraine in the perfornance of their duties. Persons who rendered distinguished labor services to the country (Article 8, Law of Ukraine On the Basic Principles of Social Protection of Labor Veterans and Other Elderly Citizens of Ukraine): Heroes of Socialist Labor and holders of the Order of Labor Glory, first, second and third Class. Persons who rendered distinguished services to the country (Article 11, Law of Ukraine On the Status of War Veterans, Guarantees of their Social Protection): Heroes of the Soviet Union, persons decorated with the Order of Glory, first, second and third class, and Heroes of Socialist Labor awarded this title during the Great Patriotic War of 1941-1945 49 Table 4.A.2. Ukraine: Dynamics of population having the status of war veterans Jan.l, 1994 Jan. 1, Jan. 1, Jan. 1, Jan. 1, Jan. 1, 1995 1996 1997 1998 1999 War veterans - total 3110.0 5239.0 5370.8 5325.7 5079.6 4867.4* Invalids of war 227 248 271 282 289 298 Participants of military actions 692 697 554 537 492 446 Participants of war 1891 3931 4155 4098 3882 3697 Family members of perished 299 362 390 408 416 426 participants of war Individuals with special merits 1.0 1.0 0.8 0.7 0.6 0.4 Table 4.A.3. Number of war veterans in some of the CIS states, January 1, 1999 Population Number of % of total Number of war % of the number of (1000) pensioners (1000) population veterans (1000) pensioners Ukraine 50,245.2 14,535 28.9 5,300 36.5 Russia 146,739.4 39,000 26.6 1,992 5.1 Belarus 10,203.8 2,665 26.1 143.6 5.4 Source: Ministry of Labor and Social Policy 4.B. HOUSING AND UTILITIES ALLOWANCES Table 4.B.1. Ukraine: Main characteristics of the housing subsidy program Years 1996 1997 1998 1999 1. Number of households that applied for a housing 6,738,188 7,435,551 5,739,078 5,213,977 subsidy (Number of households-applicants for a housing subsidy) 2. Number of households that applied for housing 5,702,993 7,225,609 5,457,918 4,953,379 subsidy and were granted the subsidy 3. Average number of recipients of housing subsidy per ... ... 2,991,074 ,2674,671 month * * 4. Total sum of approved housing subsidies (thousands 220,952.2 300,653.2 213,890.0 206,490.5 UAH)*** 5. An average amount of housing subsidy per month 38.6 42.0 39.2 41.8 (UAH) (5)=(4)/(2) * for those households who are eligible for housing subsidy the subsidy is granted for 6 months. If one assume that the household was granted housing subsidy in January, then it is registered as housing subsidy recipient twice per year. Thus the number of households who applied for the housing program and became eligible for housing subsidy during the year is almost twice the average number of recipient ** include arrears of previous years *** this sum is calculated according to the following procedure: the flow of households who were granted the housing subsidy is multiplied by the monthly 50 amount of calculated subsidy and then summed. This number is used by housing subsidies offices for their own purposes. 4.C. FAMILY BENEFITS Table 4.C.1. Ukraine: Recipients of family allowances, I-III Q, 1999 Household type Number of relevant Number of households Percentage of Average households, 1000 receiving allowances beneficiaries out of allowance size, total households of a UAH relevant type All families with dependent 7858.6 1266.3 16.0 10.3 children Families having 3 children 457.1 294.9 64.5 19.3 and/ or more Families with children aged 1015.2 529.4 52.1 17.7 under 3 51 4.D. ASSISTANCE FOR LOW INCOME FAMILIES Table 4.D.1. Ukraine: Social assistance programs Type of social assistance Eligibility criteria Source of Financing Cash benefit to individuals Based on individual's income Pension Fund unable to work and with low incomes 2. State cash benefit to some Based on family's total Pension Fund, with further categories of pensioners income reimbursement from the state budget 3. Supplementary monthly benefit Based on individual's income Local budget (based on the for living decision of local authorities) Table 4.D.2. Ukraine: Characteristics of recipients of targeted social assistance Families Number of families Total amount of assistance, UAH (1000) Urban Rural areas Urban areas Rural areas areas Applied first time 15294 14560 x x Applied repeatedly 1166 225 x x Assigned first time 3548 2871 395.8 291.7 Assigned repeatedly 448 308 51.0 27.5 Composition of families receiving allowance size of the family: 2 members 991 449 116.7 46.4 3 members 919 522 98.3 53.2 4 members 755 754 95.2 79.0 5 and more members 1322 1453 135.5 140.6 including: A pensioner 1044 797 x x A disabled child 359 253 x x Child(ren) less than 16 (18) 2966 2174 x x Able-bodied members 2171 1506 x x Including: Taking care of 3 and more 738 700 x x children Taking care of disabled 266 22 x x child at age less than 16 Taking care of a disabled 280 193 x x (1st group) or elderly (over 80) 52 5. TARGETING EFFECTIVENESS AND FINANCING 5.A. TARGETING EFFECTIVENESS Table 5.A.1. Ukraine: Total equivalent incomes of households Average per month, UAH, 1-III Q, 1999, %) Total Poor Very Non-poor poor Average equivalent incomes, UAH 148.9 92.2 80.3 169.5 Average equivalent expenditures, UAH 204.5 102.7 85.1 241.5 Total income 100 100 100 100 including: Social assistance 1.47 2.26 2.70 1.29 Subsidies 2.01 2.32 2.12 1.94 Social privileges 2.80 1.88 1.61 3.01 Social assistance programs - total 6.28 6.46 6.43 6.24 Total social assistance per capita (income-based), UAH Total social assistance per capita (expenditure-based), UAH Percentage of households in the group 100 26.7 13.5 73.3 Table 5.A.2. Ukraine: Impact of housing allowances and social privileges on poverty measures Poverty line (75% of median expenditures) 1. Poverty headcount, %, Ex ante 30.4 2. Poverty headcount, %, Ex post 26.7 3. Equivalent expenditures per household, UAH, Ex ante 101.4 4. Equivalent expenditures per household, UAH, Ex post 102.7 5. Poverty gap of extremely poor households, Ex ante, UAH per month 410.94 6. Poverty gap of extremely poor households, Ex post, million UAH per month 355.83 Extreme poverty line (60% of median expenditures) 7. Poverty headcount, %, Ex ante 16.5 8. Poverty headcount, %, Ex post 13.5 9. Equivalent expenditures per household, UAH, Ex ante 84.5 10. Equivalent expenditures per household, UAH, Ex post 85.1 11. Poverty gap of extremely poor households, Ex ante, million UAH per month 154.89 12. Poverty gap of extremely poor households, Ex post, million UAH per month 130.36 Ex ante - before receiving housing allowances and privileges; Ex post - after receiving housing allowances and privileges; 53 5.B. FINANCING Table 5.B.1. Ukraine: Sources of financing for the social security system, 1999 Sources of financing Share in total expenditures Total expenditures 100.0 1. Consolidated budget 53.5 including: State budget 13.3 Local budgets 33.7 State Employment Fund 1.8 Social Insurance Fund 4.6 Social Security Fund for the Disabled 0.1 2. Pension Fund 46.5 54 Table 5.B.2. Ukraine: Sources of financing for social programs, 1999 Types of expenditure State Local Pension Social Employment Social budget budgets Fund Insurance Fund Security Fund Fund for the Disabled Birth grant X Maternity benefit X Social assistance to families having children according the Law X X X "State Assistance to Families with Children" Pensions X X X State assistance to some categories of pensioners X Special cash assistance to the disabled with low income X Social assistance to low income families X Housing allowance X Cash assistance to refugees X Funeral benefit X X X X Unemployment benefit, training stipend and material assistance X to the unemployed Assistance paid according to the Law "On the Status and Social X Security of Citizens Who Suffered From Chemobyl Disaster" Locally provided social assistance X Health care X X Assistance to those temporarily incapable for work X Privileged medical treatment at health resorts X X X X Social aid given at social care institutions and home care X State allowance to invalids X Privileges granted to some categories of population according to X X the legislation 55 Table 5.B.3. Ukraine: Sources of financing for state assistance to families with children in 1999 (UAH, 0000) Types of state assistance Local Pension Social State Total budgets fund Insurance Fund budget Total assistance 379265.7' 31724.9 93403.0 77.2 504470.3 Including: 1. Maternity allowance 82763.0 82763.0 2. Birth grant 10640.0 10640.0 3. Childcare allowance for children aged 2 (3) years and 139382.02 31724.9 171106.9 less 4. Childcare allowance for mothers (fathers) with 3 or 26418.8 26418.8 more children under 16 5. Allowance for care of disabled children 8982.4 8982.4 6. Cbildcare allowance to a parent temporarily unable to work and looking after a sick child 7. Child allowance for children under 16 (students under 166040.1 166040.1 18) 8. Childcare allowance for single parent 33637.6 33637.1 9. Childcare allowance for servicemen on active duty 77.2 77.2 10. Childcare allowance for children under guardianship 2780.0 2780.0 11. Temporary allowance for children whose fathers 2024.8 2024.8 evade alimony including funds spent debts paymnent for the previous years - UAH 80290,4 thousand. 2) including funds transferred to the Pension Fund - UAH 53607,1 thousand. 56 Table 5.B.4. Ukraine: Transfers from the budget for condensed gas and solid fuel purchased by households Years 1996 1997 1998 1999 (1) Number of households that applied for a 1061608 898713 740464 666133 subsidy for condensed gas and solid fuel (Number of households-applicants for a housing subsidy) (2) Number of households that applied for subsidy 956925 852337 705344 628304 and were granted subsidy (3) Total sum of approved subsidies for condensed 103441.1 105119.9 87092.6 95679.0 gas and solid fuel (thousands UAH) (4) Calculated amount of funds for reimbursement of purchases of condensed gas and solid fuel 103221.6 90887.3 50400 60949.8 (thousands UAH) (5) The amount of actual transfers to companies that sell gas and solid fuel (thousands UAH) 32259.6 64983.2 50546.3 50433.5 (6) Average amount of subsidy per month (UAH) 108.1 123.3 123.5 152.3 (6)=(3)/(2) (7) Local budget arrears on subsidies to companies ... ... 35247.7* 39938.1* that sell gas and solid fuel (thousands UAH) i including arrears of previous years Table 5.B.5. Ukraine: Sources of revenues for housing and utility companies (percentage and million of UAH) Years 1996 1997 1998 1999 Total: 100 100 100 100 Local budgets 47.4 47.1 42.2 41.9 including subsidies 8.5 16.9 19.7 24.4 Households 52.6 52.9 57.8 58.1 (in million of UAH) 1. The total costs of consumed housing and utilities services for households (including 4,450.9 7,445.6 9,030.1 11,079.9 indebtedness of the previous years) * - the current year costs in particular ... 5,417.4 5,307.6 5,216.3 2. Funds actually paid by households for housing and communal services 2,605.7 4,051.7 4,386.1 4,922.5 Including: - subsidies transferred 256.9 865.4 1,026.4 1,125.2 - money paid by the households 2,348.8 3,186.3 3,359.7 3,797.3 3. Budget and households' indebtedness for 1,845.2 3,393.9 4,644.0 6,157.4 housing and conmnunal services Including: - local budget debt on subsidies ... 500.3 1,163.9 1,108.3 - household debt ... 2,893.6 3,480.1 5,049.1 - household debt in % to the previous year ... ... 120.3 145.1 - household debt in % to money paid for ... 90.8 103.6 132.0 services * the total cost does not include the cost of housing and communal services for households with privileges 57 Table 5.B.6. Ukraine: Budgetary and household payments to housing and utilities companies (million of UAH) 1996 1997 1998 1999 1. Budget financing of housing and utilities 2,119.6 2,835.7 2,456.2 2,741.0 branch including state measures to regulate the prices 1,286.7 1,298.5 - - housing subsidy program 378.5 1,016.6 1,146.1 1,597.2 other 454.4 520.6 1,310.1 1,143.8 2. The actual sum paid by households for housing and utilities services (without housing 2,348.8 3,186.3 3,359.7 3,797.3 subsidy) Total: 4,468.4 6,022.0 5,815.9 6,538.3 Table 5.B.7. Ukraine: Balance sheet of housing and utilities services sector (million UAH) 1996 1997 1998 1999 1. Revenues (Gross income) of sector 4,808.3 6,553.6 7,603.2 a)Including :value added tax 723.5 1,009.6 1,243.8 b) excise-duty 0.6 2.3 7.8 c) Other 2.4 2.7 9.8 2. State regulation of prices 576.2 628.5 719.5 3. Inputs (Expenses on production) 4,415.4 5,969.4 7,081.7 4. Other expenses (commercial) ... 18.3 21.9 5. Net profit (5)=(1)-a)-b)-c)+(2)-(3)-(4) 242.6 179.8 - 42.3 -275.0* Total profit/losses ** 310.4 304.5 -216.0 450.0* * Expected ** Net profit including profits/losses of other years 58 Table 5.B.8. Ukraine: Revenues and expenditures of the Employment Fund (million UAH) 1997 1998 1999 2000 forecast Revenues 215.0 457.0 550.8 596.8 Expenditures - total 198.9 331.8 521.1 596.8 Uneniployment benefits 126.8 210 335.0* 370.8 Professional retraining programs 16.6 28.9 45.5 44.2 Pubic works 0.6 3.2 6.4 13.2 Transfers to the Pension Fund for early - - 27.9 44.4 retirements schemes Resettlement of families to rural areas 0 0 0.12 2.1 Oshchadbank services for unemployed 1.8 1.4 - - benefits payments Credits granted ... 2 11.4 - Office maintenance for State Employment 3.2 15.6 17 18 Service Offices Establishment and maintenance of 0.9 13 16 20 information system Research, information search and other 5.3 2.8 3 3.9 expenses of employment programs Retraining of State Employment Service 0.3 0.03 0.2 0.1 office employees Administrative costs 43.4 54.8 58.6 80.1 *Fund arrears for unemployment benefits payments on February 1, 2000 - 43,7 million UAH 59 Table 5.B.9. Ukraine: Payment of targeted social assistance to low-income families, 1999 Number of families Total amount of assistance, UAH (1000) Region Applied for Assistance Total sum of Actually paid Payments in arrears assistance assigned assistance Autonomous Republic of Crimea 347 101 13.00 1.20 11.80 Vinnitsa 1427 214 17.26 11.67 5.59 Volyn' 500 184 24.00 15.60 8.40 Dnipropetrovs'k 2597 465 63.40 0.00 63.40 Donetsk 1018 388 48.20 7.90 40.30 Zhytomyr 1409 269 25.00 7.00 18.00 Transcarpathia 958 292 20.90 0.00 20.90 Zaporizhya 570 132 15.39 15.39 0.00 Ivano-Frankivs'k 805 88 11.35 3.60 7.75 Kiev region (excl.city of Kiev) 361 48 2.70 1.30 1.40 Kirovohrad 471 272 18.50 4.90 13.60 Luhansk 1761 663 95.90 77.50 18.40 L'viv 3012 1289 79.37 49.10 30.27 Mykolayiv 5106 77 8.80 8.80 0.00 Odesa 867 330 68.30 31.30 37.00 Poltava 702 393 30.90 10.80 20.10 Rivne 562 31 1.50 0.06 1.44 Sumy 425 302 36.30 30.20 6.10 Temopil' 224 43 4.80 0.10 4.70 Kharkiv 3990 328 49.60 19.50 30.10 Kherson 233 86 14.50 0.20 14.30 Khmelnitsky 1006 306 31.50 12.80 18.70 Cherkasy 1267 237 26.00 19.90 6.10 Chemivtsi 574 282 11.00 0.70 10.30 Chernihiv 465 227 31.80 16.50 15.30 CityofKiev 499 112 14.10 14.10 0.00 City of Sevastopol 89 6 0.80 0.60 0.20 Total 31245 7165 764.90 360.70 404.20 60 6. CONCLUSIONS AND RECOMMENDATIONS 6.A. TARGETING MECHANISMS Table 6.A.1. Ukraine: Poverty status and housing conditions, I-I1I Q, 1999 (percentage) Floor space per household Very poor Poor Non- Total Poverty Headcount member, sq. m poor headcount of very poor Under 6 14.21 12.46 6.52 8.10 41.02 23.67 6-8 14.41 13.37 8.41 9.73 36.67 19.99 8-10 17.83 15.65 12.41 13.28 31.45 18.13 10-15 23.97 26.55 25.33 25.66 27.61 12.61 15-20 12.94 13.37 17.91 16.70 21.36 10.46 Over 20 16.64 18.59 29.42 26.53 18.69 8.47 All households 100.00 100.00 100.00 100.00 26.68 13.50 Table 6.A.2. Ukraine: Poverty status and availability of telephones, I-III Q, 1999 (percentage) Very poor Poor Non-poor Total Poverty Headcount of headcount very poor With phone 27.78 30.82 44.26 40.68 20.22 9.22 Without phone 72.22 69.18 55.74 59.32 31.11 16.44 All households 100.00 100.00 100.00 100.00 26.68 13.50 Table 6.A.3. Ukraine: Poverty status by access to private plot and size of land plot, I- III Q, 1999 (percentage) Land plots, sq. m Very poor Poor Non-poor Total Poverty Headcount headcount of very poor Under 500 12.45 12.57 11.86 12.05 27.82 13.94 500-1,000 14.20 14.80 15.12 15.04 26.25 12.75 1,000-2,000 9.52 10.36 11.79 11.40 24.23 11.27 2,000-4,000 13.19 13.09 12.92 12.97 26.92 13.73 4,000-6,000 8.63 8.69 10.11 9.73 23.81 11.97 Over 6,000 4.35 5.26 6.67 6.29 22.30 9.32 Total 62.33 64.76 68.48 67.48 25.60 12.47 Householdswithoutplotof 37.67 35.24 31.52 32.52 28.91 15.64 land All households 100.00 100.00 100.00 100.0 26.68 13.50 61 Map of Ukraine 1. Drop-out rate of participants in household budget survey by oblast, I-Ill Q, 1999 Za tz_ka - Drop out rate by oblast *25,8 to 53,4 19,4 to 25,8 *15,7 to 19,4 * 10,6 to 15,7 7 * 6,2 to 10,6 Sevastopo 62 Map of Ukraine 2. Regional differences in poverty (poverty headcounts by oblast), I-Ill Q, 1999 F-~_ % of poor households * 22,5 to 27,1 I 1 to225 Sevastopol 63 Map of Ukraine 3. Regional differences in extreme poverty (% of very poor by oblast), I-Ill Q, 1999 -)IvjlAa( //¸hvu)nIIv,.-ka Ahmnclnit-k(I vetzka. yklaviwk % of extrimely poor households *18,6 to 23 14,6 to 18,6 *14,1 to 14,6 *10,4 to 14,1 4 - 3,5 to10 Sevastopol - 64 Map of Ukraine 4. Regional differences in average per capita equivalent incomes of households (UAH)J I-1ll Q, 1999 Average per capita income *1548 to 1614 138,8 to 1503 El 122_4 to 138,8 S 1 1 i | _ evitop 65 Map of Ukraine 5. Regional differences in per capita equivalent expenditures of households (UAH), I-l1l Q, 1999 --'an -- Zak,p ..ve e D j Average per capita expendutures *208 to 284 l l * ~201 to 208 _ : ~~~198 to 2129 Eil195 to 198 F71 167 to 195Sevastopolv 66 Map of Ukraine 6. Caloric value of consumed foodstuffs by oblast (daily consumption per capita), Kcal, I-Ill Q, 1999 i Za _jE * 3 444 to 3 887 kkal * 3 370 to 3 444 kkal * 3 267 to 3 370 kkal * 3 122 to 3 267 kkal m 2 919 to 3122 kkal _ ~~~~~~~~~Sevastopo 67 REFERENCES Braithwaite, J., Grootaert, C, and B. Milanovic (1998). Determinants of Poverty and Targeting of Social Assistance in Eastern Europe and the Former Soviet Union. World Bank, Washington, DC. Financial Markets International (1999) Ukraine: Employmnent. No 2 (2). May. Gupta, S., Gillingham, R., Craig, J, Vandycke, N., Platais, J., and M. Marion (2000). Ulkaine: Implementing Public Expenditure Reforms. IMF, Washington, DC. International Labor Organization 1997. Bulletin of Labour Statistics, No. 4. Geneva. Interstate Statistical Committee of the Commonwealth of Independent States (1999). Statistical Yearbook 1999. Moscow. Kuddo, A. (1998). Social Transition: Social and Employment Policies in the Former Soviet Union. 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Kazakhstan: Living Standards during the Transition. March. Washington DC. World Bank (1999a). Ukraine. Restoring Growth with Equity: A Participatory Country Economic Memorandum. A World Bank Country Study. Washington DC. World Bank (2000a). Latvia: Poverty Assessment. Volume 1: Main Report. Washington DC. World Bank (2000b). Russia: Poverty in 1998. Main Report. Draft. Washington DC. WB97893 L:\ukraine.2001 \Ukraine.safetynets.Vol.2.f.doc August 27, 2001 3:46 PM