MONTENEGRO Social Protection Situational Analysis This project is funded by the European Union MONTENEGRO Social Protection Situational Analysis © 2022 International Bank for This work is a product of the staff of The World Bank with contributions Reconstruction and Development / from the UNICEF Office in Montenegro. The findings, interpretations and The World Bank conclusions expressed in this work do not necessarily reflect the views of UNICEF, The World Bank, its Board of Executive Directors or the govern- 1818 H Street NW, ments they represent. Washington DC 20433 Telephone: 202-473-1000 The World Bank and UNICEF do not guarantee the accuracy, complete- Internet: www.worldbank.org ness or currency of the data included in this work and do not assume responsibility for any errors, omissions or discrepancies in the informa- tion, or liability with respect to the use of or failure to use the informa- Rights and Permissions tion, methods, processes or conclusions set forth. 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The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. ii MONTENEGRO Social Protection Situational Analysis MONTENEGRO Social Protection Situational Analysis Table of Contents: LIST OF FIGURES iv LIST OF TABLES iv ACKNOWLEDGEMENTS v LIST OF ACRONYMS vi 1. Introduction 1 2. Poverty and labor market outcomes 4 3. The social protection system in Montenegro 7 4. Cash transfers to support the poor, vulnerable and persons with disabilities 10 5. Social services 17 6. Pensions 20 7. Employment and ALMPs 22 8. Learning from the COVID-19 response 26 9. Summary and reform priorities 28 REFERENCES 32 iii MONTENEGRO Social Protection Situational Analysis List of Figures: Figure 1: Poverty headcount ratio at $5.50 a day (2011 PPP) (% of 4 population), 2021 estimates Figure 2: Poverty had been decreasing prior to the COVID-19 4 pandemic Figure 3: Labor market indicators, Western Balkans 5 Figure 4: Remittances in the Western Balkans (% of GDP) 6 Figure 5: Remittance trends 2019Q1–2021Q3 (as % of 2019 6 average) Figure 6: Expenditure on social protection programs (% of GDP), 9 ECA countries Figure 7: Historical and projected social protection spending 9 2015–2023 (% of GDP) Figure 8: Beneficiaries by program, December 2021 11 Figure 9: Share of expenditures by program, December 2021 11 Figure 10: Coverage and total cost of disability-related benefits 11 are rising Figure 11: Social assistance spending is expected to double in the 14 coming years (% of GDP) Figure 12: The pension system has a relatively high support ratio 21 Figure 13: Recent pension reforms have led the system into a 21 permanent deficit Figure 14: Montenegro has the highest expenditures on labor 23 market policies in the Western Balkans Figure 15: Montenegro has the lowest replacement rate in the 25 region List of Tables: Table 1: Overview of the social protection in Montenegro 7 Table 2: Pension system parameters in Montenegro 20 List of Boxes: Box 1: What are social protection systems? 2 iv MONTENEGRO Social Protection Situational Analysis Acknowledgements This analysis has been prepared by a team composed of Cornelius von Lenthe (World Bank), Danilo Smolovic (UNICEF), Zoran Anusic, Sarah Coll-Black, Jamele Rigolini and Stefanie Brodmann (all World Bank). The team is grateful to Pamela Dale, Ida Ferdinandi, Milena Karišik, Milan Lakicevic, Nada Djurovic Martinovic, Gordana Matkovic, Alberto Musatti and Stevan Stanisic for their contributions and reviews of earlier drafts and associated materials, as well as to Trang Van Nguyen who peer reviewed the draft report. Special thanks to Darcy Gallucio for editing and providing detailed comments, as well as Elizaveta Tarasova for the cover page and graphic design. The team would like to thank representatives from the Government of Montenegro for sharing data, feedback and views on the findings and recommendations. The team would specifically like to thank representa- tives of the former Ministry of Finance and Social Welfare, the European Union and the United Nations Development Programme for their generous sharing of information that fed into the analysis in this assess- ment and, in many cases, discussions on earlier drafts of the analysis as well as at two constructive consultations of the situational analysis held in August and October 2022. The analysis was made possible due to the generous funding from Europe 2020 Trust Fund by DG NEAR. The note was prepared under the guidance of Linda van Gelder (Country Director for the Western Balkans), Christopher Gilbert Sheldon (Country Manager for Montenegro) and Cem Mete (Practice Manager, Social Protection and Jobs Global Practice, Europe and Central Asia Region). v MONTENEGRO Social Protection Situational Analysis List of acronyms ALMPs Active Labor Market Programs CEE Central and Eastern Europe CIS Commonwealth of Independent States CPI Consumer Price Index CSW Center for Social Work EAM Employment Agency of Montenegro ECA Europe and Central Asia ESPN European Social Policy Network ESSPROS European System of Integrated Social Protection Statistics ETF European Training Fund EU European Union GDP Gross Domestic Product GIP Graduate Internship Program ISCP Institute for Social and Child Protection MO Material Support NEET Neither in Employment, Education or Training NGO Non-Governmental Organization OECD Organization for Economic Co-operation and Develop- ment PAYG Pay-As-You-Go PIO Fund for Pension and Disability Insurance PPP Purchasing Power Parity SDG Sustainable Development Goals SILC Survey on Income and Living Conditions SPEED Social Protection Expenditure and Evaluation Database SWIS Social Welfare Information System UNDP United Nations Development Programme WDI World Development Indicator vi MONTENEGRO Social Protection Situational Analysis Introduction A period of economic growth over the past decade This note presents a situational analysis of the led to a reduction in poverty and improvements in social protection system in Montenegro. It assesses labor market outcomes in Montenegro. The coun- the extent to which the social protection system in try’s prolonged recovery from the global financial Montenegro fulfils its purpose and proposes areas crisis until 2013 was followed by a period of sus- for reform in the short, medium, and long term. To tained positive economic growth until the COVID- this end, this note seeks to assess each category of 19 pandemic-induced recession. On the back of social protection, namely: social assistance, social strong construction, tourism and retail sectors, services, social insurance (specifically pensions) and employment had increased consistently and labor labor market programs, in terms of program cover- force participation rallied. As a result, the employ- age, equity, sustainability and effectiveness. Box 1 ment-to-population rate increased from 39 percent further defines these four categories according to in early 2013 to almost 50 percent in the second World Bank definitions for the sake of comparability quarter of 2019. The poverty rate measured at $5.5 to other countries. Based on this analysis, this note purchasing power parity (PPP) declined substan- proposes policy priorities and future areas of focus. tially by an estimated 8 percentage points in the The note is based on analysis of administrative last decade. data, the most recent Survey on Income and Living Conditions (SILC 2019) and Labor Force Surveys, a Substantial challenges remain, which have been review of relevant literature, and engagement with aggravated by the COVID-19 pandemic, drawing technical experts in relevant ministries and employ- attention to the role that social protection plays ment institutes conducted as part of the Social in reducing poverty and promoting human capital. Protection System Assessment commissioned by Despite the recent reductions in poverty, levels of UNICEF (2021b). poverty remain high relative to European Union (EU) countries. Households in the northern and rural areas The analysis finds that Montenegro’s comprehen- continue to have a higher likelihood of being poor sive social protection system is not used to its full and have worse labor market outcomes than cen- potential. With over 30 programs covering different tral Montenegro and the coastal region. Additional groups of people in need, the system covers more challenges such as high informality, emigration and than half of the population in Montenegro. The high an aging population pose barriers to inclusive and coverage of social protection had, up until recently, sustainable economic growth in the coming years. been almost entirely due to the wide reach of pen- The COVID-19 pandemic has exacerbated these sions (which fall under social insurance), whereas the inequalities. Montenegro saw the largest economic coverage of social assistance has been low. Through decline in the Western Balkans, as real GDP shrunk the introduction of numerous new social assistance by 15 percent. In 2020, poverty is estimated to have programs, the coverage of social assistance is now increased by more than 5 percentage points and rapidly expanding. However, not all new schemes inactivity rates went up 2 percentage points higher have a precise focus on those most in need. The than prior to the COVID-19-induced crisis. In order poverty-targeted material support (MO) has been to again reduce the incidence of poverty, measures shrinking in size, despite its ability to accurately to create more job opportunities must be comple- reach the poorest, while increased funding has been mented by an effective social protection framework, allocated to categorical benefits. Financing of social complementing cash support with access to ade- services has been low and a minimum level of ser- quate services. Securing continued investments in vices cannot be guaranteed, despite the increased human capital will also increase social and economic need and demand, which will only be exacerbated resilience, while simultaneously fostering long-term by an aging population requiring long-term care. growth. Spending on labor market programs has been high Back to table of contents 1 MONTENEGRO Social Protection Situational Analysis Box 1:What are social protection systems? As this note is part of regional work social protection systems are categorized into social assistance, social insurance (pensions), social services and employment and labor market programs as defined below. Social assistance targets the poor and vulnerable. These programs reduce chronic poverty and protect people from falling into poverty, provide support for other vulnerabilities and provide support at certain points in the lifecycle. Assistance includes non-contributory programs such as cash transfers, in-kind support or other forms of targeted consumption assistance as well as family- and child-related cash benefits, synonymous to benefits in the social and child protection system in Montenegro. Social insurance targets the population at large. These programs are intended to help people smooth income across the lifecycle and protect them from shocks. Social insurance programs are contributory and provide benefits to those that contributed to the program, with the level of benefit related to their contri- bution. Examples include old-age pensions or disability pensions. Social services target individuals and families to improve or preserve their quality of life, eliminate and mitigate the risk of adverse life circumstances and create opportunities for independent living. Foster care or elderly care are examples of these services. Social services according to this definition are synonymous to Montenegro’s social and child protection services. Employment and labor market programs improve the inclusiveness and effectiveness of labor markets. They aim to increase and/or improve the quality of labor supply, labor demand and job matching, and protect income against labor market shocks or during life events such as parenthood. They include job-search assistance, skills training, wage subsidies, public works, unemployment benefits and parental benefits. relative to regional peers but is largely targeted of social assistance of children, a particularly vulner- toward well-educated segments of the population able group in Montenegro. A further expansion to rather than those most vulnerable, who have the all children under the age of 18 was passed in the most difficulty (re)entering the labor market. Parliament and started in October 2022. In the last 10 years Montenegro started planning While this commitment to expand access to social and initating substantial reforms in social assis- protection is commendable, the (re)introduction of tance, social services and pensions. The former numerous fragmented and untargeted programs Ministry of Finance and Social Welfare outlined is projected to more than double social assistance a roadmap of reforms for the social protection spending, implying the need to reassess the fiscal system, some aspects of which have already been sustainability of the sector and public expendi- put into practice. The government is reforming ture as a whole. The current parliament has intro- the country’s outdated and fragmented disabil- duced or announced multiple social assistance ity assesment by adopting a human rights based programs. The child allowance has been expanded model of understanding disabilities, which aims to to all children under the age of 18 years, with pay- provide more just and equal access to cash benefits ments having started in October 2022. The recently and social services. The aim of deinstitutionalization abolished mothers’ benefit was re-introduced for drives social service reforms and the much-needed previous beneficiaries in April 2022. Furthermore, transition to family- and community-based services spending on one-off transfers, which can be issued has been progressing, although slowly. In 2020, a at the discretion of any ministry, is quickly expand- pension reform was enacted in Montenegro which, ing and multiple minimum wage hikes are further in the long run, is expected to maintain the ade- increasing the deficits of contributory programs, quacy level of pensions but at the expense of the given that some benefit levels are calibrated to the fiscal sustainability. A recently introduced qua- minimum wage. Given the newly-introduced pro- si-universal child benefit will increase the coverage grams, increases in minimum wages and the expan- Back to table of contents 2 MONTENEGRO Social Protection Situational Analysis sion of the child allowance to all children up to the 3 introduces a framework to consider the perfor- age of 18, spending on social assistance is projected mance of the social protection system and then to more than double from the current equivalent of outlines the broad characteristics of social protec- 1.3 percent of GDP in 2019 to an estimated 3.0 per- tion in Montenegro, by program type and expendi- cent in 2023, which will place Montenegro among ture. The following sections assess the performance the countries with the highest level of spending on of each sub-sector of social protection. Section 4 social assistance in Europe and Central Asia (ECA) looks at non-contributory cash transfers to sup- and above that for middle-income countries. Such port the poor, the vulnerable and persons with dis- substantial increases in untargeted social assistance abilities and assesses recent changes to the child spending risk the fiscal sustainability of the social allowance. Section 5 discusses social services, and and child protection system in an environment of Section 6 discusses the most recent pension reform tightening budget and high public debt. More spe- in 2020. Section 7 then explores employment and cific analysis of announced benefits is provided in active labor market programs. Section 8 considers the text below. the recent social protection response to the COVID- 19 pandemic and Section 9 concludes by offering an Continued commitment to investments and assessment of the main areas for reform. reforms is therefore required to improve the effectiveness and equity of the system. To further advance the balance, effectiveness, efficiency and sustainability of Montenegro’s social protection system, the country will need to further improve its poverty-targeted programs, provide adequate and sufficient services, and invest in the human resource capacity of key implementing institutions. Monte- negro’s highly developed social welfare informa- tion system (SWIS) has the potential to introduce a transparent method for identifying the poorest families for the material support (that is, expanding social assistance while improving targeting accu- racy of social benefits). A strategy and coordinated efforts are needed on increasing the supply and quality of preventive, outreach and support services for children and families, community services for adults with disabilities, and the non-public provi- sion of elderly services. Improved coordination and clearly defined obligations across national and local levels is needed to ensure the financing, provision and referral of a minimum basket of social services. The effectiveness of active labor market programs (ALMPs) could be strengthened by better targeting vulnerable groups and an increased focus on moni- toring and evaluation. Finally, disaster preparedness and response could be strengthened by reassessing the targeting method to allow for the expansion of the program in times of need. In addition, the SWIS could be expanded into a full social registry, by including potential beneficiaries and including dis- aster risk indicators in the SWIS, thus linking disaster risk response and social protection policies. The situational analysis note is structured as fol- lows: the next section reviews the main poverty and labor market outcomes in Montenegro, comparing it with peers and relevant country groups. Section Back to table of contents 3 MONTENEGRO Social Protection Situational Analysis Poverty and labor market outcomes Montenegro experienced significant poverty Children, the uneducated and rural households are reduction until 2019, leading to the lowest poverty particularly vulnerable to poverty.3 One out of three rate in the Western Balkans (Figure 1). Between children was estimated to be at risk of poverty. 2013 and 2019 the economy grew on average by 3.7 Members of the Roma and Egyptian community percent and economic growth was accompanied by also continue to face significant barriers and ine- a reduction in poverty, estimated at over 5 percent qualities in access to economic opportunities and over the same time span (Figure 2) and a reduction basic services, such as the labor market, education in inequality. Nevertheless, Montenegro continues and health care. to have the most unequal income distribution in the Western Balkans, as measured by the Gini coeffi- Montenegro’s labor market had improved substan- cient. The Northern and rural areas have significantly tially in the decade leading up to the COVID-19 higher poverty rates: in 2017 they were estimated pandemic. Between 2008 and 2013, the employ- to be around 25 and 27 percent, respectively, rela- ment rate remained around 40 percent. Since then, tive to the national rate of 16 percent (World Bank employment has increased significantly, with 57 2021b). These inequalities reflect persistent gaps in percent of the working-age population employed in access to education, health and economic oppor- the second quarter of 20194. In the same time span, tunities, which disadvantage Roma, women, youth the unemployment rate also decreased by almost 5 and people living in the northern and rural areas.1 percentage points, from 19.5 percent in 2013 to 14.7 percent in the second quarter of 2019 (Figure 3). In However, large parts of the population continue to the decade leading up to the COVID-19 pandemic, be at risk of poverty. In 2021, more than one fifth of inactivity had decreased by more than 10 percent- the population (21.2 percent) was at risk of poverty.2 age points, 3 percentage points lower than the Figure 1: Poverty headcount ratio at $5.50 a day Figure 2: Poverty had been decreasing prior to the (2011 PPP) (% of population), 2021 estimates COVID-19 pandemic 25% 25% 23.6% 10% 22% 20.5% 20.2% 19.4% 19.9% 20% 19% 20% 5% 17% 16.0% 16% 15.6% 14.5% 0% 15% 15% -5% 10% 10% 10% -10% 5% 5% 3% -15% 2% 0% 0% -20% 2012 2013 2014 2015 2016 2017 2018 2019 2020 ro a vo a ia EE EU i ni an rb g (e) (e) so T do ne Se 7S lb Ko e te A ac on Poverty headcount rate at $5.5 US PPP (right axis) M M h t or Real GDP growth (annual %) (left axis) N Source: World Development Indicators using SILC-C data for Source: World Bank (2021b). SRB, MKD, MNE, 7STEE and EU, and HBS data in KSV. Income measures in the SILC and consumption measures in the HBS are not strictly comparable. Note: 7STEE refers to the seven small transition economies of Europe, namely Bulgaria, Croatia, Estonia, Latvia, Lithuania, Slovak Republic, and Slovenia. Back to table of contents 4 1 Montenegro is divided into only three statistical regions: Northern, Central and Coastal. 2 The at-risk poverty rate is set using 60 percent of the median equivalized income after social transfers. Eurostat indicator ILC-LI02 based on the EU-SILC (Accessed January 2022). https://ec.europa.eu/eurostat/databrowser/view/ilc_li02$DV_548/default/table?lang=en 3 World Bank. 2021. Poverty & Equity Brief Europe and Central Asia: Montenegro. October 2021 and October 2019. 4 The situational analysis uses the most up-to-date comparable data. While later data is available for Montenegro, it is not for other countries, or is not comparable due to the COVID-19 pandemic. The analysis and recommendations remain the same even when just taking into account the latest available data. MONTENEGRO Social Protection Situational Analysis Western Balkans’ average but high at 33 percent in Although inequality has been reducing in Mon- second quarter of 2019. Montenegro continues to tenegro, significant discrepancies across regions, struggle with long-term unemployment among the gender and ethnicity remain. Despite having some unemployed. The country has the highest share of of the smallest gender gaps in terms of labor market long-term unemployed in the Western Balkans (80 outcomes in the Western Balkans, women continue percent of total unemployed). Data on informality to be 17 percentage points more likely to be inac- are limited, but 2014 data suggest that informal- tive than men. Gender disparities are especially per- ity makes up significant shares of the economy and sistent among already disadvantaged members of labor force and that it limits government revenues. the Roma community. Economic welfare is concen- At the time, almost a quarter of economic activities trated in the urban and coastal regions, and out- were conducted in informal sectors and a third of migration to the capital Podgorica or the coast is the labor force was working informally (Radulovic high (World Bank 2021b). Labor market outcomes, 2014). In 2018, Montenegro had the lowest share of which are highly correlated with poverty outcomes youth neither in employment, education or training in Montenegro, reflect these inequalities: Six out of (NEET) in the Western Balkans (16.2 percent), nearly ten unemployed individuals are from the Northern 6 percentage points below the average NEET across region. In the second quarter of 2019, the unem- the six Western Balkan countries (22.1 percent) ployment rate of the Northern region as share of (Figure 3). The NEET rate in Montenegro, however, the total labor force was 34.7 percent, more than is estimated to have steeply increased to up to 26.6 double that of the national average (14.3 percent).5 percent in 2020 (European Commission 2021). Furthermore, due to the existing primary resources Figure 3: Labor market indicators, Western Balkans a. Employment rate b. Unemployment rate 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% WB6 ALB BIH MNE MKD SRB KSV WB6 ALB BIH MNE MKD SRB KSV Total 15-64 Male 15-64 Female 15-64 Total 15-64 Male 15-64 Female 15-64 Total 15-24 Male 15-24 Female 15-24 Total 15-24 Male 15-24 Female 15-24 c. Inactivity rate d. NEET rate, ages 15-24 90% 35% 80% 30% 70% 25% 60% 50% 20% 40% 15% 30% 10% 20% 5% 10% 0% 0% WB6 ALB BIH MNE MKD SRB KSV WB6 ALB BIH MNE MKD SRB KSV Total 15-64 Male 15-64 Female 15-64 Total Male Female Total 15-24 Male 15-24 Female 15-24 Source: SEE Jobs Gateway: https://data.wiiw.ac.at/seejobsgateway.html. Note: Data for employment, unemployment and inactivity are for 2019 Q2; data for NEET rate are for 2018. Back to table of contents 5 5 SEE Jobs Gateway. MONTENEGRO Social Protection Situational Analysis in the Northern region, employment has largely access to social insurance mechanisms but also, been conducted in agriculture and forestry, with due to their higher welfare, do not qualify for social much of the population leaving to urban centers assistance (Kolev and La 2021). During the COVID- looking for higher wages (ETF 2021). 19 pandemic, remittances reduced significantly during the second quarter of 2020 relative to the The COVID-19 pandemic wiped out previous gains 2019 average but quickly recovered and has since in employment and poverty reduction. In 2020, been increasing to all-time highs (Figure 5). The flow Montenegro was hit by one of the deepest reces- of remittances has since acted as a complement to sions in Europe, with the economy contracting by cash transfer programs to support families during 15.2 percent, largely as a result of decreased tourism hardship. Public policies focusing on the facilitation due to the pandemic and ensuing ripple effects of such remittances can help support the recovery (World Bank 2021c). An estimated 19.9 percent of from the pandemic.8 the population lived on less than $5.5 PPP per day in 2020, up more than 5 percentage points relative Figure 4: Remittances in the Western Balkans to the previous year (see above Figure 2). Most of (% of GDP), 2021 the employment gains made over the last decade 18% were also wiped out, as the dominant service indus- 16% try, especially tourism, was most severely impacted 14% by the COVID-19 crisis. The number of registered 12% unemployed rose from 37,616 in December 2019 10% to 47,509 in December 2020 (World Bank 2021c). 8% The unemployment rate of 2020’s last quarter 6% was estimated at 21.2 percent, the highest quar- 4% terly estimate since early 2013.6 Simultaneously, 2% already-high-inactivity rates rose further, with the 0% labor force participation decreasing by an estimated o ia ia na ia vo gr on rb an vi so ne 6.3 percentage points.7 The pandemic highlighted Se go lb ed Ko te A ze ac on the unequal burden of domestic work, with inac- er M M H th tivity rates rising 8 percentage points for women d or an N between the first and last quarter of 2020 versus ia sn Bo 4.5 percentage points for men. Source: Global Knowledge Partnership on Migration and Devel- opment (KNOMAD) (2022). The labor market has shown continuous improve- ment since 2021. In 2021, activity rate was at 51 percent, employment rate at 42.5 percent, and Figure 5: Remittance trends 2019Q1–2021Q3 unemployment rate at 16.6 percent. There have (% of 2019 average) been solid gains in 2022: Labor Force Survey data 160% 30% reveal a 30 percent increase in employment in Q2 2022, which equally benefited male and female 140% 20% employees. The activity rate rose to 59.5 percent in 120% 10% Q2 from 46.8 percent a year ago, while in the same 100% 0% period the unemployment rate fell to 14.6 percent from 17.1 percent in Q2 2022. 80% -10% 60% -20% Montenegro relies heavily on remittances, which plunged during the pandemic but have since 40% -30% helped the country recover. As a result of heavy ** 20 ** 2 ** 12 0 4 0 Q 020 Q 020 Q 019 Q 019 Q 019 21 Q 021 Q 019 Q 021 Q 02 Q 02 outmigration of Montenegrins in the past, annual 2 2 2 2 2 2 12 12 4 3 3 3 2 2 2 personal transfers from abroad to households in Q Montenegro are the equivalent of 11.4 percent of Real GDP growth (RH) GDP, the second highest in the Western Balkans only second to Kosovo (Figure 4). Remittances play Remittances as % of 2019 average (LH) an important role in supporting households with Source: WDI and Central Bank of Montenegro (2019-2021). workers in the informal economy who do not have Note: ** indicate that GDP figures are estimates. Back to table of contents 6 6 MONSTAT. 7 ILOSTAT. 8 See, for example, Ratha and Kim (2022) on how to facilitate the flow of remittances. MONTENEGRO Social Protection Situational Analysis The social protection system in Montenegro Social protection is a fundamental pillar of social of the labor market (through employment services), policies. Conceptually, social protection systems to enhance labor supply (through training) and to rest on four main pillars: social assistance, social ser- increase labor demand (through subsidies or public vices, social insurance and labor market programs. works); they also seek to smooth income during Social assistance generally aims to protect people unemployment (through unemployment insurance) from falling into poverty and to provide support at or to protect employment due to childbirth (through certain points in the life cycle or respond to particu- parental benefits). lar vulnerabilities. It encompasses non-contributory programs (that is, government funded), including While each benefit or service addresses a spe- non-contributory pensions (often called social pen- cific need against which its performance is often sions), and family- and child-related cash benefits. assessed, it is also important to analyze whether Social services support individuals and their families the system as a whole fulfills its objectives. Table 1 to improve their living conditions when facing vari- provides an overview of the social protection system ous risks throughout the life cycle, such as children, in Montenegro according to these four broad cat- adolescents, the elderly and persons with disabili- egories of social protection and the benefits and ties. Social insurance aims to smooth income across programs under each. The government has recently, the life cycle and to protect people from shocks or is in the process of, introducing a number of new and typically comprises benefits based on individ- social protection programs, such as a free text-book ual contributions (that is, old-age pensions, disa- program for children in elementary schools, social bility pensions and survivors’ pensions); individuals vouchers, an alimony fund and a new birth grant. who contribute to these programs are entitled to These programs were only be partially considered, benefits, usually based on the length and level of given the limited public information at the time of their contribution. Finally, employment and labor writing. market programs aim to improve the functioning Table 1: Overview of the social protection in Montenegro Category Benefits and programs • Material Support (MO) • Veterans and disability protection9 • Child allowance • Personal Disability Allowance • Care and Support Allowance • Guardian allowance for disability and care benefits Cash transfers to support the • Old-age benefit for farmers poor, the vulnerable and persons with disabilities • Transportation subsidy • Costs of nutrition in kindergarten • Benefit for a newborn child • Paternity benefit for registered unemployed • Mothers’ benefits • Funeral Costs and Electricity Subsidy • One-time cash assistance Back to table of contents 7 9 The Law on Veterans and Disability Protection 2003 defines both the eligible veterans and the benefits for which they are eligible. The analysis of such are, however, outside of the purview of this analysis. MONTENEGRO Social Protection Situational Analysis • Support services such as day care, homecare, personal assistance, interpretation and translation into sign language etc. • Counselling therapy and social-education services Social services • Accommodation services • Services for urgent interventions • Other services Contributory pensions (state budget funds the deficit) • Old-age pension Pensions • Disability pension • Survivor’s pension • Graduate Internship Program • Public Works • Adult learning and training Employment and labor market • Training for work at the employer programs • Training for independent work • Stop the grey economy program • Unemployment Benefit • Maternity / Paternity benefit Montenegro’s social protection system is relatively In 2019, spending on social protection (excluding centralized, especially with respect to financing, spending on health care11) reached 10.7 percent of planning and policy design. The Ministry of Labor Montenegro’s GDP, similar to the average spent and Social Welfare (MLSW) is responsible for policy among countries in the Western Balkans and above design and implementation through the 13 Centers the average for the ECA Region (Figure 6).12 Spend- for Social Work (CSW), some of which are responsible ing on social protection is dominated by social through branch units for multiple of the 24 munic- insurance expenses. Unlike in neighboring countries, ipalities, and a network of public and non-public spending on social insurance as a share of GDP has institutions providing social services.10 The Employ- declined in recent years, following consolidations ment Agency of Montenegro (EAM) is an independ- across pension schemes (see Figure 7 and section ent body under the supervision of the Ministry of IV for more details). Similarly, spending on social Labour and Social Welfare which provides employ- assistance had declined up until 2020 following the ment services and unemployment benefits to removal of a costly mothers’ benefit. Spending on registered unemployed, while also designing and social assistance in 2019 (1.3 percent of GDP) was implementing active labor market policies (ALMPs). well below both the Western Balkan and the ECA The independent Fund for Pension and Disability average (2.2 and 1.75 percent of GDP respectively). Insurance (PIO) administers pension payments and Of this, only a fraction explicitly aims to reach the contributions, and individual information is collected economically deprived: only 0.5 percent of GDP was regularly and efficiently by the Tax Administration spent on means-tested programs in Montenegro for the benefit and use of all other involved agen- according to the European System of integrated cies. The administration of social assistance, as well Social Protection Statistics (ESSPROS) database as the provision of social services, is the responsibil- for 2018 (compared with the average of the 27 EU ity of CSWs. Apart from the state, municipalities can countries of 2.9 percent of GDP). In 2020, during design, implement and finance their own programs the Covid-19 pandemic, nominal spending on social and services such as the provision of free textbooks protection remained almost constant, despite a for children for extremely vulnerable families or stark contraction of the economy. Notwithstanding homecare for elderly. this, the government accessed the equivalent of 3.4 percent of 2020 GDP from its budgetary reserves,13 Montenegro has similar expenditures on social the exact use of which is not apparent from official protection as the average Western Balkan coun- data sources. try, driven mostly by spending on social insurance. Back to table of contents 8 10 In 2020, the Ministry of Finance and the Ministry of Labor and Social Welfare were merged into the Ministry of Finance and Social Welfare. This merger was reversed in May 2022, but this analysis was not revised to reflect that. 11 Unlike the World Bank, the European System of integrated Social Protection Statistics (ESSPROS) reports sickness/health care as part of social protection expenditure data and is hence not comparable. Using the ESSPROS methodology, social protection spending in the EU averaged 26.9 percent of GDP in 2019 and 16.3 percent in Montenegro. 12 The World Bank ECA Region comprises of countries in Central and Eastern Europe (CEE), the Western Balkans and the Commonwealth of Independent States (CIS) sub-regions. 13 This line is referred to as a reserve fund used for unforeseen expenditures, with spending authorized by the Ministry of Finance, but usage of the funds is not documented transparently to the public (OECD 2011). MONTENEGRO Social Protection Situational Analysis Figure 6: Expenditure on social protection programs (% of GDP), ECA countries 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% H Z - 19 KA - 2 7 A -2 7 A -2 7 19 KS - 2 7 V 018 M -2 7 RU - 2 6 TU - 2 7 A -2 6 16 19 17 M -2 7 E 017 M -2 7 BL - 2 6 R 019 BG - 2 7 14 17 PO - 2 7 L 018 RO - 2 2 U - 9 B6 - 17 A era 7 ra * ** ve * 1 1 1 O 01 U 01 S 01 1 G 01 1 H 01 EC Av 01 B 01 A 01 R 01 1 U 01 A ge ge TJ - 20 0 ZE 0 0 ES - 20 RV 0 ZB 0 W KR 20 RM 0 LB 0 CZ - 20 KD 0 0 0 GE - 2 LT - 2 LV - 2 2 H -2 U -2 BI - 2 2 SR - 2 KG - 2 K K Z E A T R SV N D N U Labor market programs (%) Social assistance (%) Social insurance (%) Social care services (%) Total Source: World Bank SPEED Database (Accessed June 2022). Note: ** Indicate an arithmetic average of the total SP spending (%) among all listed ECA countries or the six Western Balkans countries on the chart: Albania, Serbia, Montenegro, North Macedonia, Kosovo and Bosnia and Herzegovina. Social protection spending is estimated to increase to 9.9 percent by 2023. Social assistance spending rapidly in the coming years as part of increases in is estimated to increase from 1.3 percent of GDP in social insurance and social assistance spending. As 2019 to 3 percent in 2023 (Figure 7). This is esti- part of substantial reforms which included multiple mated to lead to total social protection spending minimum wage hikes, tax reforms and the (re)-intro- increasing to up to 13.5 percent of GDP, above the duction of a number of social assistance programs, spending levels of similar countries in the European spending on social protection will likely increase to Union, such as Latvia, Lithuania and Estonia, as seen well beyond the current average of countries in the in Figure 6, and much above the average spending region. Reforms to the pension system conducted of 9.5 percent of GDP among ECA countries (Figure in 2021, as well as changes to the minimum wage, 7).14 Further details on the reforms and simulations are estimated to lead to social insurance spending are provided in the relevant sections below. increases from the equivalent of 8.8 percent of GDP Figure 7: Historical and projected social protection spending 2015–2023 (% of GDP) 16% 14% 12% 1.2% 2.5% 1.6% 3.0% 1.9% 2.3% 10% 1.4% 1.5% 1.3% 2.2% 8% 1.8% 6% 11.1% 10.3% 10.6% 9.7% 9.2% 9.1% 9.4% 9.9% 4% 8.8% 7.9% 7.5% 2% 0% 2015 2016 2017 2018 2019 2020 2021* 2022* 2023* WB ECA average ** average ** Social Insurance (% of GDP) Social Assistance (% of GDP) Social Services (% of GDP) LM Programs (% of GDP) Source: World Bank SPEED Database (Accessed June 2022). Note: * indicates that expenditures are estimated and ** indicates a simple arithmetic average of spending in the latest year available in the relevant countries. The 2019/2020 pension reforms initiated a reversal in the trend of social insurance spending. In nominal terms expenditures, however, only increased marginally in 2020, whereas the large increase recorded here can almost entirely be attributed to the substantial drop in GDP as a result of the COVID-19 pandemic. Back to table of contents 9 14 Using the ESSPROS methodology, Montenegro’s spending is below many of these countries and the EU average. This data are, however, not comparable and lower spending is by in large due to higher spending on pensions. In 2020, the average EU country spent 2 percent of GDP on family and child benefits and 1.1 percent on social exclusion not elsewhere classified. In 2019, prior to the introduction of the named benefits, Montenegro spent 0.6 percent on family and child benefits and 0.4 percent on social exclusion benefits not elsewhere classified. Projected spending for 2023 is compared to current country averages which do not include the potential introductions or increases of spending elsewhere in the future. MONTENEGRO Social Protection Situational Analysis Cash transfers to support the poor, the vulnerable and persons with disabilities Montenegro’s social assistance system relies on strong delivery systems, providing financial assistance to poor families, people with disabilities, children under the age of six, as well as veterans and old-age farm- ers not covered through formal social insurance. While spending on social assistance has recently been low, it is set to increase more than twofold in the coming years, mostly due to the reintroduction of a ben- efit for mothers with three or more children and the expansion of the quasi-universal child allowance to all children below the age of 18. Meanwhile, coverage and adequacy of the poverty-targeted material sup- port has remained low, despite the increased needs brought about with the COVID-19 pandemic. With the introduction and expansion of fragmented social assistance programs and those not necessarily backed up by evidence and cost-benefit analysis, the government risks the deterioration of the cost-effectiveness of social assistance spending. Reforming some of the current and announced categorical eligibility criteria and reassessing the targeting method of the last-resort income support would help reduce some of the existing exclusion errors. A much-needed reform to move from a medical model to a rights-based model of disability assessment is ongoing. Strong government commitment is needed to successfully coordinate the reform which will accelerate the just and equitable provision of disability benefits and integrated services. Social assistance consists of four significant pro- and youth with disabilities. The Ministry of Agricul- grams which are supplemented by multiple smaller ture provides certain elderly farmers who are not benefits. Expenditures on social assistance in Mon- covered by social insurance with a separate means- tenegro were equivalent to around 1.3 percent of tested pension. Lastly, an individual or a family may GDP in 2019, well below the average of the Western receive a one-off cash transfer at the discretion of Balkans (2.2 percent) but similar to the average in the CSW, municipalities or other institutions, usually ECA (1.8 percent).15 Social assistance in Montenegro not more than once per year. Further details on the revolves around four main transfer programs, ben- design of the main programs is provided below. eficiaries of which become eligible for a number of supplemental benefits. Of these four main transfer Currently, social assistance expenditures are dom- programs, two are targeted toward people with inated by the allowances to support persons with disabilities or those in need of care and their fam- disabilities. Among the set of programs that sup- ilies: (i) the personal disability allowance and (ii) the port persons with disabilities, the largest program in care and support allowance. Parents or guardians terms of spending is currently the care and support of recipients of these two allowances can receive an allowance, with EUR 14.4 million, or the equivalent additional allowance.16 The two remaining main pro- of 0.3 percent of GDP, spent in 2019. The personal grams are the poverty-targeted last-resort income disability allowance, a similar, significantly more support, the material support (MO), and the qua- generous allowance only for those deemed severely si-universal child allowance for all children under the disabled by a medical commission, and the allow- age of six years.17 According to the Law on Social ance for their parents or guardians, each account for and Child Protection, all beneficiaries of the two dis- the equivalent of about 0.1 percent of GDP in 2019. ability-related allowances, as well as those on MO, These three allowances for persons with disabilities are eligible to receive an increased child allowance have seen a significant rise in expenditures. In 2015, (higher than the amount allocated to all children the equivalent of 0.33 percent of GDP were spent under the age of six) and until 18 years of age, an on the three allowances. In terms of GDP, these electricity subsidy and subsidized access to health expenditures doubled by 2020 to make up 28 per- insurance. In addition, all material support recipi- cent of total social assistance spending (Figure 8). In ents are eligible to receive support for funeral costs, contrast, MO spending has been relatively consist- a benefit to cover the cost of kindergarten and its ent and small, with the equivalent of 0.21 percent meals, textbooks, holidays (seven days per child) of GDP, or EUR 10.3 million, having been spent on and a subsidy for transportation costs for children transfers for the last-resort income support in 2019. Back to table of contents 10 15 World Bank SPEED Database (2022). 16 Article 39a specifies that the allowance is for parents and guardians of beneficiaries of the personal disability allowance but can also be provided if they are parents or guardians of two or more beneficiaries of the care and support allowance, or to beneficiaries of both the personal disability allowance and the Care and Support Allowance. 17 The child allowance only provides benefits for up to five children and, hence, is not entirely universal. Instead, it partially excludes large families, which particularly affects members of the Roma and Egyptian communities. MONTENEGRO Social Protection Situational Analysis Figure 8: Beneficiaries by program, December Figure 9: Share of expenditures by program, 2021 December 2021 Disability-related benefits 24,879 Material Support (MO) 41% Child Allowance Mothers' Benefit 25,919 50,597 28% Newborn child benefits Other social protection 12% Source: Ministry of Finance and Social Welfare (2022). Note: Disability-related benefits in this graph capture the personal disability allowance, the care and support allowance and the compensation for parents or guardians of beneficiaries. Spending on the child allowance has been small in do not qualify for the personal disability allowance, recent years, in large part due to its limited cate- but who are assessed as having a more mild disa- gorical eligibility, as detailed further in the note. In bility, may receive access to the care and support 2019, around EUR 4.5 million was spent on the child allowance, which amounts to EUR 75.97 per month. allowance, which is the equivalent of 0.09 percent Eligibility to this transfer is defined in a broader of GDP. Figure 8 and Figure 9 present the distribu- sense for persons requiring care and support due tion of beneficiaries across programs and the asso- to bodily, mental, intellectual or sensory disorders. ciated expenditure for 2021. Conditional on not using a public accommodation service, parents or guardians of persons with dis- Expenditures on disability and care are high and abilities can also avail of a caregiving allowance of increasing steadily, and the value of the transfers EUR 224.36 per month. Beneficiary numbers of provided is not based on an assessment of the all three allowances have been rising consistently additional cost of living with a disability. As dis- (Figure 10). Due to a fragmented disability assess- cussed above, there are three main disability-re- ment being the main gateway into these benefits, lated benefits, (i) the personal disability allowance, the exact cause of rising beneficiary numbers is (ii) the care and support allowance and (iii) the unclear. The fragmented assessment also leads to compensation for the parent or guardian of ben- unequitable provision of disability benefits. The car- eficiaries of the previous two allowances. The per- egiving allowance is provided irrespective of bene- sonal disability allowance is paid to all those with ficiaries’ employment or pension status, while also a severe disability and amounts to EUR 207.16 per remaining eligible for a number of other benefits month (details on the means by which disability is such as the increased child allowance or electricity assessed are provided below). Beneficiaries who subsidy.18,19 The care and support allowance cannot Figure 10: Coverage and total cost of disability-related benefits are rising 20,000 3,000,000 Monthly Expenditures (EUR) 18,000 Nr. of beneficiaries 16,000 2,500,000 14,000 2,000,000 12,000 10,000 1,500,000 8,000 6,000 1,000,000 4,000 500,000 2,000 - - 03 7 05 7 07 7 09 17 .17 01 17 .18 05 8 07 8 09 18 .18 01 8 03 9 05 9 07 9 .19 .19 01 .19 03 0 05 0 07 0 09 20 11 0 0 03 1 05 1 07 1 09 21 11 1 1 .2 .2 .2 .2 .2 .1 .1 .1 .1 .1 .1 .1 .1 .1 .2 .2 .2 .2 .2 . . . . 01 11 01 09 11 . 03 11 Personal Disability Beneficiaries (LH) Care and Support Beneficiaries (LH) Compensation for the parent or guardian beneficiaries (LH) Monthly expenditures (RH) Source: Ministry of Finance and Social Welfare Social Welfare Information System (2022). Back to table of contents 11 18 Parents or guardians are eligible if they provide care to either (i) a beneficiary of the personal disability allowance and one or more recipients of the care and support allowance or (ii) two or more beneficiaries of the right to care and support allowance. The compensation of EUR 193 is provided for each person in care of the parents or guardians. 19 Public accommodation service can refer to family placements, foster care or institutional accommodation, as long as the service is paid for by the government for more than 60 days. MONTENEGRO Social Protection Situational Analysis be allocated to professional caregivers. Allocat- estate or land.22 The Law on Social and Child Pro- ing support to persons with disabilities residing in tection defines 14 additional conditionalities such as households with higher incomes is reasonable if the not owning certain-sized land or none of the family aim is to support their equal participation in society members having terminated employment in the by financing the additional costs arising from their last year, refused employment in the last two years disability; however, the country lacks an assessment or received severance pay in the last six months to of additional costs of living and participation with three years, depending on the severance amount.23 disability, which would in turn inform adequacy of Evidence from other countries shows that the use disability-related benefits and their combination. of these exclusionary criteria and additional con- ditionality limit the ability of the MO to effectively Disability assessments used to access services and reach the poorest households in Montenegro.24 benefits are outdated and fragmented. The first step required for persons with disabilities to be eligi- The material support is inadequate for households ble for any type of benefits or services is to undergo which rely solely on this program as their source of an assessment of a Social and Medical Commission income to meet their basic needs. Benefit amounts on the level of disability. There are 30 commissions of the material support match the income eligibility which assess and determine disability in Monte- threshold (that is, the maximum income an appli- negro and their setup differs depending on which cation unit may receive to not be ineligible for the ministry’s jurisdiction they fall under. However, they program). The eligibility threshold for an individual is generally consist of mostly medical doctors. Most EUR 76.56 (average of the past three months), or 17 assessments are based on the medical model of percent of the current minimum wage of EUR 450 . disability which solely determines whether or not The income threshold gradually increases by family individuals are ‘able-bodied’, although the com- size to up to EUR 145.55 for a family of five or more missions operating in the education and employ- members.25 Benefit amounts are set at the same ment sector apply a more advanced version of a level as the previously-mentioned income threshold socio-medical concept. This leads to some persons and, hence, transfers from the material support by with severe disabilities, in particular persons with itself provide significantly less than what is needed mental health issues, not being eligible for services to meet basic living standards in Montenegro. How- or benefits and instead being deprived of their legal ever, in effect, most families receive a higher level of capacity (UNDP 2021). The government is develop- transfers which somewhat improves the adequacy ing a new disability assessment which is to be based of support, as 83 percent of material support ben- on an ability-based socio-medical model under the eficiaries also receive another benefit such as the Reform of National Disability Determination System child allowance or the electricity subsidy (Raketić Project financed by the EU and implemented by and Višnjic 2021). The value of the combined ben- the Ministry of Labor and Social Welfare and UNDP efits, however, has not been assessed. Still, some (2021).20 rely solely on the material support benefit, often the elderly not capable of working and not eligible for a Spending on the only poverty-targeted cash trans- pension or child allowance. In addition, the means fer has remained constant at low levels. The MO test in its current form (directly and rigidly related benefit is the only social assistance benefit that is to employment status) is likely to act as a disincen- directly allocated to people who are assessed as tive for individuals, notably youth to take up formal being poor and identifies eligible people through employment. This is because formal employment a means-test. However, a number of eligibility cri- would imply the youth’s remaining family losing teria restrict access to those in need: eligibility to the benefit altogether, although the increased child this last-resort income support is conditional on an allowance continues to be paid for one year after individual applicant or a family member being either exit from the MO.26 incapable of working or temporarily incapable of working due to being pregnant or having depend- The lowering of the retirement age has left a gap in ent children.21 All members of the family capable of support for persons of age who are not eligible for working must be registered as unemployed with the pensions. Changes to the pension system in 2020 Employment Agency, and no close relative must be have also created a gap between the retirement age capable of providing financial support. Applicants (now capped at 66) and the age from when individ- that pass these exclusionary criteria must also have uals are deemed ineligible to work and hence eligi- formal income below a certain threshold and not ble for material support (which remained at 67). The be in possession or use of differing amounts of real current legislation needs to be adapted to prevent Back to table of contents 12 20 For a brief project summary, please see: https://www.me.undp.org/content/montenegro/en/home/ 23 The full list is specified in Article 22 of the Law on Social and Child Protection. projects/reform-of-the-national-disability-determination-system.html 24 See, for example, the analysis on similar exclusionary categories in Kosovo: World Bank. 2019. “Kosovo 21 The precise list of conditions under which an individual is eligible even though he/she is capable of Social Assistance Scheme Study: Assessment and Reform Options.” Washington DC. work includes: (i) she is expecting a child; (ii) he/she is a single parent; (iii) a parent maintaining a 25 The average monthly income over three months may not exceed EUR 63.50 for an individual, EUR child or a parent exercising prolonged parental right, in accordance with the law regulating family 65.86 for a family with one member, EUR 76.2 for a family with two members, EUR 91.50 for a family relations; (iv) he/she has completed education in certain special education programs and day care with three members, EUR 108 for a family with four members and EUR 120 for a family with five or centers for people with disabilities; (v) he/she has turned 18, if he/she is attending regular secondary more members. school education, until the end of the time limit prescribed for that education; (vi) a child without 26 In the example given here, another option would be to allow households to restate their family parental care or a person who was a child without parental care, until he/she finds employment for a members so that young people may “exit” the family, become employed and improve their welfare time period longer than six months. independently of the family. While recognizing this option, the disincentives for employment within 22 Given the high minimum wage, the ability to work while receiving the benefit is theoretical, as the the design of the MO remain for other households, as does the requirement that family members number of opportunities to work for an income that would be below the threshold are limited. from other households should be able to provide support. MONTENEGRO Social Protection Situational Analysis retirees who are ineligible for pensions, often sin- around the country to verify applicants' eligibility gle-women households, from retiring without social within minutes and almost completely abolished protection coverage.27 the need of applicants to physically collect docu- ments from multiple agencies for eligibility verifi- Material support coverage is very low because of ex- cation. The SWIS has a host of analytical functions clusionary criteria, which also prevent the program to eliminate duplication of benefits for individuals from expanding during crises. In 2019, a maximum and within a family. All non-automated analyses are of 30,286 individuals received the material support currently outsourced, because the ministry has little monthly, slightly less than 5 percent of the popula- in-house capacity to conduct data analysis, includ- tion, despite around 16 percent living on less than ing to evaluate programme effectiveness, analyse $5.50 PPP. The number of beneficiaries reduced past data to predict support needs, refine support to a four-year low in September 2021, with 26,250 and perform outreach function. Notably, the SWIS beneficiaries covered. The combination of rigid ex- does provide the MLSW with the capacities to clusionary criteria and means testing with a very low introduce a statistical scoring formula which would threshold is preventing poor families from receiving be derived from survey evidence. This would allow the material support benefit (UNICEF 2021a). Ex- for programs to be well-targeted and for coverage plicitly stating the objective of the program is as a to expand. Increased coverage of social protec- last-resort income support for the poor, removing tion can also improve the quality of administrative the exclusionary criteria and relying only on an as- databases which are integrated in the SWIS, which sessment of poverty (such as a means test) would in turn can be used to inform and improve policy help reduce exclusion errors and increase its cover- making, in the event that the SWIS remains an inte- age of the poor. For example, an UNDP analysis of grated beneficiary database. However, expanding rejected applicants showed that a quarter of the ap- this toward a social registry offers other avenues for plications were not eligible due to the strict criteria data collection and analysis, which would need to on landownership (Raketić and Višnjic 2021), giving be supported through revised business processes an indication of the criteria to be reviewed.28 In the within the CSWs. long term, the program’s targeting method should be reassessed to target the poor based on statis- The new child allowance for children under the age tical evidence and to allow for the dynamic expan- of six will significantly reduce poverty, replacing sion of the program during crises, which may require an inadequate previous child allowance with high modifications to the means test or consideration of exclusion errors. According to the 2021 survey on a proxy means test. The SWIS offers the technical income and living conditions (SILC), an estimated capabilities to implement such a reformed benefit. 30.5 percent of children below 18 were at risk of poverty. In May 2021, the Parliament adopted Montenegro’s sophisticated information system changes to the Law on Social and Child Protection enhances the social assistance system and pro- to increase the child allowance coverage to all those vides the technical capacities to reform the mate- children under the age of six. In addition, up to five rial support targeting mechanism. The Social Wel- children per family will now be able to avail of the fare Information System (SWIS), which started child allowance, up from the previous limit of three operating in 2015, is an integrated MIS that com- children. This limit will not apply to children who bines 18 webservices and 9 databases across dif- have no parents to care for them, or children who ferent agencies and ministries and covers almost are beneficiaries of the person disability allowance all social assistance programs. The introduction of or the care and support allowance. Previously, child the SWIS is one of the most significant improve- allowances were only provided to certain parts of ments toward a comprehensive and integrated the population, which mostly included children who social protection system in Montenegro (UNICEF were beneficiaries of other allowances, such as the 2021a). First, it has become a one-stop solution material support, care and support allowance or the for managing and monitoring the beneficiaries of personal disability allowance. In 2019, 14,721 chil- social assistance and services funded by the MLSW. dren received the allowance, around 9.7 percent of Second, it has significantly improved the social pro- the estimated population of children between the tection system's operational efficiency by optimiz- ages of 0 and 19, despite one third of all children of ing the process for confirming eligibility for social that age being at-risk-of-poverty.29 The new qua- assistance. The integration of databases (including si-universal child allowance for all children under six tax information, property and asset ownership data, years of age has now started covering an additional among other) across ministries has enabled CSWs 27,800 households, increasing the share of children Back to table of contents 13 27 More specifically, Article 19 of the Law on Social and Child Protection should reference the official retirement age. 28 Eligibility is solely based on the quantity of land ownership, rather than on its usability. 29 MONSTAT estimated 152,077 children between the ages 0 and 19 to live in Montenegro in the year 2019. MONTENEGRO Social Protection Situational Analysis between the ages of 0 and 19 covered by the child Recent policy changes allowance to around 33 percent of the population. The quasi-universal benefit will be set at EUR 30 A number of policy changes are set to more than per child per month and beneficiaries of other social double social assistance spending by 2023. In May assistance programs and children without parental 2021, the Government of Montenegro decided to care will continue to have higher, differing allow- introduce a quasi-universal child allowance for all ance, considerably higher than was previously the children under the age of six to tackle high rates of case (ESPN 2021). Children in families receiving the child poverty, as discussed in the section above. By material support or unemployment benefit receive the end of 2021, this will be extended to all children EUR 48.6 up from 24.41 per month, beneficiaries of under the age of 18, with payments having started the care and support allowance receive EUR 57.4 in October 2022. The government also reinstated and children receiving the personal disability allow- a previously-abolished benefit for mothers of three ance or those without parental care receive EUR and more children, the so-called mothers’ benefit.31 66.2. The quasi-universal allowance for children Around 14,500 former beneficiaries have applied under the age of six is estimated to have reduced to have their benefit reinstated starting in April the relative poverty headcount by 1.3 percentage 2022.32 In addition, in an attempt to increase fertility points relative to the previous child allowance. rates, the Ministry of Economic Development has announced the introduction of an additional birth Elderly farmers can benefit from a means tested grant with the benefit amount being determined cash transfer provided by the Ministry of Agricul- by the birth rates of the municipality in which the ture. In Montenegro, many rural households whose applicant resides. In municipalities with positive members are engaged in agriculture as their main natural growth rates, families will receive a one-off occupation do not qualify for the regular old-age payment of EUR 500, while families in municipali- pension. The old-age allowance provided under the ties with negative natural growth rates will receive Law on Agriculture and Rural Development is a sub- EUR 1,000. Further increases in social assistance stitute for such a pension. It is paid to men over 65 spending are expected from the introduction of years of age and women over 60 years of age if they an alimony fund and so-called social vouchers, the reside in the countryside, are engaged in agricul- increased use of one-off transfers distributed at the tural activities and have no other sources of income. discretion of any ministry and the growing number It is determined as 70 percent of the lowest pen- of beneficiaries of disability-related allowances. In sion in Montenegro and, following the retrospective total, social assistance spending is estimated to increase of the minimum pension since Septem- increase to the equivalent of more than 3 percent of ber 2022, amounts to 177 EUR per month which is GDP, up from the equivalent of 1.27 percent of GDP around half of the 2022 average old-age pension.30 in 2019 (Figure 11). Figure 11: Social assistance spending is expected to double in the coming years (% of GDP) 3.5% 0,07% Expenditure (% of GDP) 3.0% 0,11% 0,13% 2.5% 0,09% 0,90% 2.0% 1.5% 0,95% 1.0% 0,19% 0.5% 0,59% 0.0% 2017 2018 2019 2020 2021* 2022* 2023* Disability-related benefits Material Support (MO) Child Allowance Mothers' Benefit Newborn child benefits One-o transfers Veteran-disability protection Other social protection Source: World Bank SPEED Database (Accessed June 2022). Note: Other social protection includes expenditures on costs of nutrition in kindergarten, the transportation subsidies and funeral costs. An asterisk indicates that expenditures are estimated based on the proposed 2022 budget, SWIS data and information provided by the government on the newly introduced programs. The estimates do not yet account for the newly announced alimony fund, social vouchers and expected increases in benefit levels due to increases in cost of living. All other benefits are assumed to remain constant in nominal terms, which leads to a reduction in spending relative to GDP due to assumed GDP growth. GDP is calculated using the IMF’s projected growth rates (2022). Back to table of contents 14 30 The average old-age pension amounted to EUR 362 in November 2022 according to the PIO Fund. https://www.fondpio.me/statistika/ 31 The lifetime benefit, which was introduced in 2016 and again abolished in 2017, entitled mothers of three and more children to a monthly benefit equivalent to 70 percent (40 percent in case of unemployed mothers) of the average net wage in Montenegro in the previous year. The Constitutional Court had ruled to abolish the mothers’ benefit, as it had deemed it discriminatory. 32 Ministry of Finance and Social Welfare. 2022. Centri dobili 14.575 zahtjeva za naknade. Accessed at https://www.gov.me/clanak/centri-dobili-14575-zahtjeva-za-naknade MONTENEGRO Social Protection Situational Analysis Despite the significant increase in spending, these Increased investment in services to ensure all combined policy efforts are unlikely to achieve the children’s good health, education and protection government’s objectives in an effective manner. would be more effective, as these would improve In an effort to (i) reduce poverty among vulnera- the productivity of the population. With the newly ble groups and (ii) increase the productive working announced programs, social assistance spending population through higher fertility rates, the gov- is estimated to increase to the equivalent of 3 per- ernment has set to vastly accelerate spending on cent of GDP, among the highest in the ECA Region. procreational programs. Evidence suggests that Meanwhile, 2019 expenditures on education (3.9 financial incentives to increase fertility only do so percent) and health (5 percent) were well below marginally, and mostly in the short term through average spending in similar EU countries. Although a “tempo effect”, as it encourages people to have early childhood education has been increasing, children earlier, rather than more (Wilmoth 2004). gaps persist: the gross enrollment rate in preschool Additional evidence suggests that in countries with enrollment is 35 percent of rural children (62 percent more equal gender relationships, fertility rates are in urban areas), 18 percent of the poorest children higher.33 Supporting women to achieve educational (65 percent of the richest), and 15 percent of Roma and career aspirations, while also achieving work- children (World Bank 2021b). Similar gaps pertain life balance, through the provision of adequate across other levels of education and other crucial paternity benefits and childcare, are also likely to human capital developing services. In regions char- be a vehicle for increasing fertility rates. Moreo- acterized with strong outward migration, such as in ver, financial support should only be the first step; the Northern region of Montenegro, citizens have support to children and youth, especially poor and access to inferior infrastructure and worse access to vulnerable ones, should also be provided in terms social services. Minimum packages of social services, of their education and health, to ensure that every including for children, are not guaranteed. Further- youth will become a productive member of society. more, women continue to face significant barriers Without adequate education and services which to work, the compatibility of which with family for- support children and parents throughout their mation has been a critical determinant in all coun- entire upbringing and lifecycle, pure financial incen- tries that have achieved a rebound in fertility rates tives are likely to be ineffective in achieving the gov- (Bussolo, Koettl and Sinnott 2015). Given the limited ernment’s objectives of improving the productivity fiscal space, making health, education, access to the of the population. labor market and social protection services more inclusive and efficient will provide better opportu- The recently re-introduced mother’s benefit is, nities for all Montenegrins to become healthy and similarly, unlikely to achieve its fertility objective. productive individuals and to share the benefits of In 2017, a Constitutional Court had proclaimed the economic growth. mothers’ benefit unconstitutional on the grounds of discrimination against other groups. Since then, Reforming the last-resort income support would the Law on Execution of the Constitutional Court be an equitable and cost-effective way to tackle Decision outlined three compensatory measures to poverty in Montenegro. The high rates of poverty, replace the mothers’ benefit; however, the moth- including child poverty, cannot be tackled with the ers’ benefit was restored in 2022. This benefit was current rigid last-resort income support, the mate- provided to women with three and more children, rial support, as the program’s current exclusion- but only to those who also had certain work experi- ary eligibility criteria limit its expansion. Programs ence or who were registered as unemployed. Due to such as the mothers’ benefit or birth grants based this combination of criteria, the average age among on population growth rate are unlikely to present previous beneficiaries was around 55 years (World a more effective path to tackling poverty, which is Bank 2017). The benefit cannot be combined with central to ensuring childhood wellbeing. Instead, a a pension and has effectively been an alternative more cost-effective way of improving the welfare of to a pension for these women; in addition, a signif- families with children in need would be to remove icant number of working-age women left the labor the exclusionary categorical criteria and, in the market. In April 2022, EUR 3.59 million was spent on medium-term, to reassess the material support’s the benefit, reaching close to 15,000 beneficiaries. targeting mechanism. The targeting mechanism This alone is likely to amount to around EUR 43 mil- could use a means or proxy means test to identify lion per year, or more than 0.9 percent of estimated households that are poor in a scientific, transparent GDP in 2023. and objective manner. Back to table of contents 15 33 Population Policy Options, Report of a Scoping Mission, Prepared by United Nations Population Fund with contributions from UNDP and UNICEF, 4-5 February 2020. MONTENEGRO Social Protection Situational Analysis Although the anticipated expansion of the child allowance to those under 19 years will reduce pov- erty, less than an estimated 40 percent of the budget will be spent on the poorest quintile. The child allowance expansion to all children up to the age of 18 is expected to decrease general poverty by 3.8 percentage points, and child poverty by as much as 6.7 percentage points, thus likely reducing child poverty below 30 percent for the first time since it started to be measured. Beyond the immediate poverty reduction effect, the universal child allow- ance offers the opportunity to help build a compre- hensive social protection system across the lifecy- cle, although important gaps remain as discussed in the sections above. The universal child benefit can be an incentive for families to stay in contact with the state and services, if designed to encour- age such interactions; it can also provide a vehicle to reach eligible households with additional support in response to a shock (ILO 2021). In an effort to bal- ance (i) the aims of investing in children, (ii) system strengthening and (iii) incentives to use services, with broader poverty-reduction goals, some coun- tries have opted to means test, age test (restrict to lower age groups) or tax universal child benefits for the richest households, which effectively requires these households to repay to the state an amount equivalent to the benefit they have received, all of which require investments in delivery systems to achieve balanced goals.34 Back to table of contents 16 34 Taxing a universal benefit is most common among countries with robust taxation systems and very high rates of tax compliance. MONTENEGRO Social Protection Situational Analysis Social services Social and child protection services have undergone significant reforms in the last decade, focusing, like in many other countries, on decentralization, deinstitutionalization and the development of family- and community-based services. Montenegro has progressed quickly on reducing the number of children in public institutions, but specialized foster care for children with disabilities and emergency foster care for children without proper parental care is missing in practice to prevent further institutionalization. Respon- sibility lines for financing social services between central and local levels are blurred, leading to inequities in the provision and quality of services. The provision of social services is defined in the innovative services. Last but not least, very few ser- Law on Social and Child Protection. Social services vices are being evaluated for their effectiveness and in Montenegro are regulated by the 2013 Law on cost-effectiveness. Social and Child Protection and supplemented with several other laws.35 The current strategic frame- Legislation on social services is not clear on finan- work for the development of social services is the cial obligations and the degree of centralization. 2018–2022 Strategy for the Development of the According to the relevant legislation, social services Social and Child Protection System, which puts sig- can be financed from the municipal budget and nificant focus on furthering analysis on the current funding gaps for services shall be financed from the state of social services. The Law on Social and national budget. This vague definition surrounding Child Protection defines social and child protection financing has caused uncertainties around the obli- as those activities provided and implemented to gations of the central and municipal governments. support “a family in unfavorable personal or family Further, no minimum basket of services to be pro- circumstances”. The law foresees the provision of vided at the local level is prescribed by any law. Due four types of services: (i) support services for com- to the high administrative burden and oftentimes munity-based living such as day care, homecare, high fixed costs associated with social service pro- personal assistance, interpretation and translation vision, municipalities often resort to providing fami- into sign language, among other, (ii) counselling lies with one-off monetary support (UNICEF 2021b). therapy and social-education services, (iii) accom- Responsibility for financing accommodation ser- modation and (iv) services for urgent interventions vices, however, are clearly defined as being from such as responses to domestic violence or child the central level, with additional services provided abuse. Finally, the law allows for the provision of by some municipalities and relying on cost-shar- other new innovative services, although case man- ing. Most services are managed and referred to by agers’ understanding of when to use this clause the 13 CSWs under the mandate of the MLSW. This is limited (Institute for Social and Child Protection confusion in financing and responsibility for service 2021a). Bylaws tend to be vague on the target provision causes problems for non-public service groups of certain social services causing uncertainty providers who invest in attaining the necessary and delays in their provision despite the impor- licenses while rules and financing are vague and no tance of their timeliness. Especially in the realm of multi-year contracts are provided (UNICEF 2021a). counselling and therapy, this vagueness has led to difficulties during the licensing of service provid- Service providers face a strict licensing process, ers as target groups, standards and purpose of the but there is little quality assurance thereafter. Non- services are unclear (Institute for Social and Child governmental organizations (NGOs) play an impor- Protection 2021b). In addition, the process of devel- tant role in service provision in addition to the public oping standards is often slow and insufficiently institutions. Service providers are contracted for up flexible, which can be an obstacle for new service to one year using a tendering process. Individual providers and hinder the development of new and licenses are required for different types of services Back to table of contents 17 35 Such as the Family Law, the Law on Travel Benefits for Persons with Disabilities or the Law on Protection against Domestic Violence. MONTENEGRO Social Protection Situational Analysis and often have strict human resource and structure strengthened but still lacks emergency and foster requirements. In addition to those service providers care with intensive and additional support. The officially procured with full licenses, 59 additional government has piloted a ‘Family Outreach Worker’ NGOs are able to provide services with a limited service, which provides families with a profession- license for three years, due to the fact they fulfil basic al’s support at the initiative of the CSW who con- requirements and no other service providers meet ducts three activities: (i) counselling the family the strict criteria outlined for a full license (Kaludjer- with an individual service plan revised every three ovic and Boskovic 2021). The Institute for Social and months (ii) empowering the family with practical Child Protection (ISCP) is in charge of assuring the organizational advice and (iii) providing information quality and standards of services providers, but it is on how to access and use local resources such as limited in its ability to monitor all service providers existing support programs or local health centers. by financing and human capacity constraints (Insti- The service was discontinued on January 1st 2021 tute for Social and Child Protection 2021b; Euro- but the ISCP recognized its relevance and recom- pean Commission 2021). There is no general provi- mended the service to be standardized. Children sion in Montenegro`s legislation that persons having are, however, still being institutionalized presumably committed criminal acts and specific acts, such as due to lack of services to prevent family separation violence against children, gender-based violence and foster care services. This leads to residential and sexual violence, among other, cannot work with institutions often being the only alternative in emer- children and/or other beneficiaries of social services. gency situations. Expanding support for the devel- opment of professional care as well as establishing Human capacity constraints in CSWs lead to reac- a robust foster care system with different types of tive rather than proactive provision of services. foster care to respond to different needs are neces- Despite admission procedures envisioning the sary to proceed with the steady progress on dein- determination of a level of risk and procedural pri- stitutionalization (Center for Social Policy 2021). In ority, most services are only referred to when bene- addition, clear vision for expansion and sustainable ficiaries approach the CSWs for specific services or if financing of prevention, outreach and child, family they were referred by other institutions such as the and victim support services is needed to meet the police or the judiciary. This is largely due to the low basic/essential needs of those most at risk. number of case managers in CSWs and the admin- istrative burden of providing cash benefits which Day care for children with disabilities is increasingly could be further reduced. CSWs use disproportion- being provided but the unclear financing of com- ately more resources on cash benefit related affairs munity-based services is limiting progress. Most than on case management, which weakens the role municipalities have functional day care centers for of the CSWs as social and child protection agencies. children and youth with disabilities, 17 of which Less than half the staff are engaged in direct work were established by 2020. Such day care is co-fi- with beneficiaries (UNICEF 2019). Evidence from nanced by municipalities and the Ministry of Labor focus groups suggests that members of the public and Social Welfare. The supply of community-based are not aware of the CSWs responsibility to refer cit- services such as assisted living for adults with dis- izens to social services, but rather see them only as abilities continues to be non-existent. A number of a provider of cash benefits (UNICEF 2019). In addi- day care facilities have been established and from tion, linkages between the CSWs and the Employ- March 2020 a home help service was financed from ment Agency, as well as between CSWs and munic- the national level. One of the main constraints, aside ipalities, are sporadic at best, leading to activation from the supply of professional staff, is the impre- activities not being carried out effectively. cise definition of financing of such services in the Law on Social and Child Protection. Significant efforts have been made in the deinsti- tutionalization of childcare, but prevention, out- The capacity for elderly care is increasing through reach and child, family and victim support services the construction of residential institutions rather are scarce. In the last decade, the share of children than community-based services. In Montenegro, residing in residential institutions has been decreas- much like in other countries, the elderly population ing to the point where no more children under the is growing rapidly.36 In order to meet this increas- age of three lived in institutions in 2019 (European ing demand, the government has been investing Commission 2019). To support the deinstitution- in building residential institutions for the elderly, alization process, the foster care system has been doubling its capacities in the last four years (Center Back to table of contents 18 36 The share of people aged 65+ is expected to grow from 15.1% in 2018 to between 23 and 27% in 2016 (Kaludjerovic and Boskovic 2021). MONTENEGRO Social Protection Situational Analysis for Social Policy 2021). This focus on the expansion of residential institutions not only acts counter to the government’s strategy of deinstitutionalization but will likely come with a significant fiscal burden in the coming years. In addition, NGOs are playing an expanding role in the provision of services for the elderly but donor dependency and the lack of multiyear financing means their financing is often unsustainable (Kaludjerovic and Boskovic 2021). That being said, the number of users of communi- ty-based services for the elderly is still significantly higher than the number of residential services for the elderly (1,979 users of community-based ser- vices in 2019 versus 474 users of residential insti- tutions in 2018). In September 2020, the Public Institution Home for the Elderly "Podgorica" and the Public Institution Home for the Elderly "Nikšić" were established with a total capacity of 478 users, further increasing the supply of residential elderly care. Back to table of contents 19 MONTENEGRO Social Protection Situational Analysis Pensions Recent reforms have rolled back fiscal consolidation efforts from previous years but are estimated to ensure adequate pensions in the long term. A number of outdated hazardous occupations remain eligible for early retirement despite the 2020 reform aiming to tackle the issue. A firm institutional framework has been occasionally politically intervened on, disrupting the system’s consistency and finances. Montenegro initiated significant pension reforms pension point formula, the value of which is indexed in 2020, rolling back recent reforms that aimed at by a “rotational indexation.” The two parameters fiscally consolidating the social insurance system. used are the Consumer Price Index (CPI) rate of Multiple parameters of Montenegro’s pay-as- change and the average gross wage growth. The you-Go (PAYG) system were reformed in recent value of the benefit will be indexed to 75 percent years, such as the retirement age, the indexation of the higher of these two parameter and 25 per- formula, the calculation period and the pension cent of the lower (ESPN 2020). Furthermore, a points formula (See Table 2 for current parameters). number of hazardous occupations remain eligible In 2020, the retirement age was capped at 66 years for early retirement, including professions which are for men and the gradual increase of the retirement no longer included in most EU countries. Finally, the age for women was reduced from 67 by 2041 to 64 2020 Law closes the ad hoc early retirement option by 2028. The pensionable base was increased by for metal workers by end 2022 but reintroduces the reducing the calculation period from the full career eligible pensionable service to military conscription, to only three quarters of the career, with the lowest closed more than a decade ago. Furthermore, the quarter of contributing years being excluded. This parliament increased the minimum pension from window of a more favorable calculation period will EUR 149 in December 2021 to EUR 254 in Septem- close in 2030. Pension benefits are determined by a ber 2022. Table 2: Pension system parameters in Montenegro Retirement age: Current pensionable age: 66 years for men and 61 years 9 months for women with 15 years of Old-age pension eligibility contributions. Capped to 66 years for men and 64 years for women (to be reached by 2028); or 40 years of service with 61 years of age. 63 years with 15 years of contributions; Old age pension is reduced by 0.35 percent for every Early retirement month of retirement prior to full retirement age. One quarter of all contributing years with lowest earnings are excluded until 2030. Full period Pensionable base afterwards. Point formula. Annual points (share of individual to average wage) summed up and multiplied by point value. Point value is revalued with a “rotating formula,” increasing by 75 percent of the Pension formula higher of average gross wage growth or CPI rate of change and 25 percent of the lower. Point value in 2022 equaled EUR 8.51. Minimum average point 0.5 per year, minimum pension amount of EUR 253.61, which was Minimum pension extraordinarily indexed in January and September 2022. Pensions will be indexed by 75 percent of the higher parameter of either the gross wage rate Indexation change or CPI, plus 25 percent of the lower of these two parameters. Professional incapacity and injury at work: at least 75 percent reduced work capacity, regardless of contribution period. Eligibility for disability pension General incapacity: at least 75 percent incapacity, no length of service requirement prior to 20 years of age (23 years for tertiary education), at least one year of contribution between 20 and 30 years of age, and at least of one third of contribution period for others Old-age pension for 40 years of service, for full incapacity in case of work injury and professional illness; in case of illness or injury outside work: actual points plus supplementary Level of disability pension points depending on age; for partial general incapacity, 75 percent of old-age pension for general disability pension Back to table of contents 20 MONTENEGRO Social Protection Situational Analysis Age 52 for both widows and widowers. Eligibility for survivor pension Children age 0–19 years, 0–25 years if a student or lifetime if incapacitated. Actual old-age pension at death for 20 years of service or actual service; 70 percent of Level of survivor’s pension contributor’s entitlement if one person; 80 percent to be divided by two people; 90 percent to be divided by three people; and 100 percent to be divided if four or more people. Contribution rate 20.5 percent, 15 percent by employer and 5.5 percent by employee. Overall, Montenegro's pension system rests on a on pensions than most of the EU or any Western well-developed and reliable institutional framework. Balkan countries. This is largely due to Montene- These firm rules have occasionally been intervened gro’s declining, but higher than average, support on politically, disrupting the system’s consistency ratio37 and fiscal consolidation reforms before 2020 and finances. For example, in 2015, 2017 and 2019, (Figure 12). In the long run, pension policy meas- a temporary early retirement window was opened ures introduced in 2020 are expected to main- for selected occupations, companies or groups; in tain the adequacy level, unlike previously, but at 2016, all pensions were indexed above the stand- the expense of the fiscal sustainability even as the ard formula and a lifetime benefit (pension) was number of contributors restores to pre-pandemic introduced for mothers with three or more children levels (Figure 13). As a consequence of the 2020 law (Mothers’ benefit, see cash transfer section above). and the declining support ratio, the share of pen- sion expenditures in GDP in 2020 increased to 11 The 2020 pension reform responded to previous percent, with almost 40 percent being financed adequacy concerns but likely at the cost of fiscal from the central budget. Finding a right balance sustainability. Between 2012 and 2020, pension between pension adequacy and fiscal sustainability expenditures in Montenegro had been declining. At will be the main challenge for the government in the 8.5 percent of GDP in 2019, the country spent less next stage of reforming the pension system. Figure 12: The pension system has a relatively high support ratio 350 Contributors per 100 300 250 pensioners 200 150 100 50 0 8) K U (2 R R S BG ) SR (2 R (2 ) 8) FR SI PT IT EE FI EU E 27 K BE T LV U EL CZ (2 L 8) ES L T LU SE IE CY 8 B 018 P N A M D D SV IH H RO H 01 01 01 01 (2 KD E N FB M M Sources: EU Aging Report 2018, EU Adequacy Report 2018, pension agencies in Western Balkans countries. Figure 13: Recent pension reforms have led the system into a permanent deficit 3% Deficit as a % of GDP 2% 1% 0% -1% -2% Baseline Old Baseline -3% 2021 2026 2031 2036 2041 2046 2051 2056 2061 2066 2071 2076 Source: World Bank staff estimates using the World Bank PROST Model. Note: Baseline refers to the current policy of point values being calculated using the “rotational formula” and the old baseline refers to the previous policy of the value of points valorized with wage growth, where pensions were indexed 75 percent to CPI inflation and 25 percent to nominal wages. Back to table of contents 21 37 The support ratio is a ratio between contributors and pensioners. MONTENEGRO Social Protection Situational Analysis Employment and ALMPs Montenegro has the highest expenditures on labor market policies in the Western Balkans. Despite this, coverage of active labor market policies is relatively low and few programs reach the most vulnerable. The largest program, the Graduate Internship Program, is outside of the purview of the Employment Agency of Montenegro (EAM), absorbing high spending toward a relatively privileged share of the population. Passive labor market policies (that is, unemployment benefits) have relatively high coverage, but adequacy is low and disproportional to previous income. Statistical profiling and an increased use of existing data for monitoring and evaluation could increase the efficiency and effectiveness of the EAM’s services. Montenegro’s employment policies are outlined categories and the largest ALMP in Montenegro, in its new National Employment Strategy, which a graduate internship program (GIP), is not imple- is supplemented by annual action plans. The final mented by the EAM but by the Human Resource report on the implementation of the previous Management Authority, an independent body for National Strategy for Employment and Human public personnel management. Resources identified the high unemployment of youth and women, long-term unemployment and The EAM offers five core ALMPs focused on public informal employment as some of the main chal- works, vocational training and on-the-job train- lenges, coupled with high regional differences in ing. In 2019, a total of 2,192 registered jobseekers labor market outcomes. The new National Employ- benefitted from ALMPs offered by the EAM, which ment Strategy 2021–2025, adopted in December is the equivalent of 6 percent of the total number 2021, aims to address these shortcomings of the of registered jobseekers.39 In both 2019 and 2020, labor market by setting objectives such as increasing more than one third of expenditures toward ALMPs employment growth through tax reforms, improv- was channeled into providing public works. In 2019, ing competencies through education reforms or 29 percent of the agency’s ALMP beneficiaries, 629 reducing unemployment through a youth guaran- registered jobseekers, were placed into temporary tee. Annual action plans provide detailed statistical employment of up to four months. The second monitoring of the activities conducted by the rele- program (Stop the Grey Economy) is effectively vant stakeholders, although this remains descriptive another public works program, which places unem- in nature without much analysis or evaluation of the ployed individuals into jobs combating informality, success or effectiveness of the activities. such as the tax or police administration. An addi- tional 190 jobseekers were placed into this program Labor market policies are coordinated by the in 2019. The largest program in terms of benefi- Employment Agency of Montenegro (EAM) ciaries is the adult learning and training program, although the largest ALMP is outside its purview. although it was suspended in 2020 and 2021 due The EAM is responsible for providing public employ- to the COVID-19 pandemic. In 2019, the program ment services in Montenegro, as designated by the accounted for 41 percent of all ALMP recipients, in updated 2019 Law on Employment Mediation and total 896 individuals. It provides jobseekers with the Rights during Unemployment.38 Per this law, the opportunity to attend a course at licensed educa- four main responsibilities of the agency are to (i) tion institutes to either acquire a skill or a qualifica- prepare registered jobseekers for employment, (ii) tion. Popular qualifications chosen and acquired are conduct intermediation with employers, (iii) imple- in the service industry, catering and construction, ment ALMPs and (iv) provide cash benefits to the while popular skills are language and IT skills. The unemployed. There are four ALMP categories: adult last two programs are the Training for Independent education and training, wage subsidies, public Work and the Training for Work at the Employer pro- works and self-employment. However, employment grams. The latter is an on-the-job training which has offices may implement other measures as they see reached around 230 individuals in the past couple fit. In practice, ALMPs only partly align to these of years. Beneficiaries receive a monthly stipend of Back to table of contents 22 38 Official Gazette of Montenegro No 024/19 of April 22, 2019. 39 The following information is based on the EAM’s statistical reports and action plans published each year and accessible at www.zzzcg.me MONTENEGRO Social Protection Situational Analysis EUR 222 (previously the minimum wage level) for a Program was introduced in 2012 and has since pro- period of three months. The Training for Independ- vided individuals who graduated from higher edu- ent Work program also collaborates with employers, cation institutions with the opportunity of being who support jobseekers at an educational institu- matched to interested employers with vacancies tion with mentoring or technical resources, prepar- and receiving an allowance for nine months. In 2019, ing them for a professional exam. a total of 3,009 graduates received an allowance of 50 percent of the average net salary, with total The limited available evidence indicates mixed per- expenditures of EUR 7.5 million, or the equivalent formance of the agency’s ALMPs. Qualitative eval- of 0.14 percent of GDP. In 2022, the allowance was uations have largely been used to assess the perfor- increased to the level of the new minimum wage of mance of the different ALMPs offered by the EAM. EUR 450. Around one half of beneficiaries end up The lack of data on the timing of employment of employed in the capital, Podgorica, and around 45 jobseekers significantly limits the ability to conduct percent work in the public sector. The type of sectors quantitative evaluations, as the tax administration within which graduates are hired have remained rel- provides information on whether or not an indi- atively constant, with economics and law being the vidual is employed but not at what point in time. A most popular areas of work. A recent evaluation by recent evaluation concluded that the impact of the the ILO found no direct gains in labor market out- adult learning and training program is likely limited, comes for participants of the program, which each as training curricula are not adapted and instead year represent almost 90 percent of each year’s repeated from year to year, not resulting in employ- cohort of graduate students (ILO 2022). ment, and trainings suffer from a lack of qualified and accredited staff in charge of the training (Bejaković Expenditures on labor market policies are high rel- 2021). The on-the-job training program appears to ative to other countries in the Western Balkans. be effective in jobseekers receiving employment In 2019, Montenegro spent the equivalent of 0.48 offers thereafter. However, feedback by employ- percent of GDP on all labor market policies, more than ers and jobseekers indicates that the three-month any other country in the Western Balkans. Although duration is often too short to gain the necessary spending on active labor market policies is relatively experience. Lastly, most programs are implemented high at 0.18 percent of GDP, this is almost entirely through annual public tenders, preventing timely made up of spending on the Internship Graduate and on-demand provision of programs. Instead, Program, whereas the EAM only spent the equiva- potential participants may change their mind, and lent of 0.048 percent of GDP on remaining ALMPs, employers are not able to plan as appropriately as significantly less than most employment agencies in they could with planned multi-annual public calls. the Western Balkans. Spending on unemployment benefits makes up the equivalent of 0.29 percent of The largest ALMP in terms of funding is the Grad- GDP due to its high coverage, despite the relatively uate Internship Program. The Graduate Internship low benefit, as elaborated on below. Figure 14: Montenegro has the highest expenditures on labor market policies in the Western Balkans 1.4% Total LMP (incl. administration, placement and related services) 1.19% 1.2% 2018 Expenditures (% of GDP) Active LMP (including Vocational Training) 1.0% Passive LMP (unemployment benefits) 0.8% 0.65% 0.6% 0.48% 0.43% 0.42% 0.4% 0.36% 0.2% 0.10% 0.08% 0% EU-27 7STEE Montenegro BiH North Serbia Kosovo Albania (2019) Macedonia Sources: EU-27/7STEE: Eurostat; North Macedonia: Administrative Data; Kosovo: Paun Jarallah et al., 2019; Albania: Administrative Data NAES. Montenegro: MONSTAT and ZZZCG. Note: 7STEE refers to the seven small transition economies of Europe, namely Bulgaria, Croatia, Estonia, Latvia, Lithuania, Slovak Republic and Slovenia. Back to table of contents 23 MONTENEGRO Social Protection Situational Analysis The share of jobseekers participating in the EAM’s assessing a jobseeker’s distance from the labor active labor market programs has been decreasing, market. The EAM applies a profiling methodol- and the programs do not reach the most vulnerable. ogy to assign participants in different labor market Despite a relatively constant number of registered interventions based on face-to face interviews. jobseekers, the share participating in ALMPs has Since the EAM offers several types of services and been decreasing substantially in the last couple of programs, it needs to establish which services are years. While in 2018, 3,745 jobseekers participated more appropriate to each client, based on the initial in ALMPs representing 8.6 percent of registered interview with a case worker. An individual action jobseekers, this decreased to 6 percent in 2019 and plan is drafted, and the case worker follows up on to 3.4 percent in 2020. More significantly, the popu- plan progress regularly. It appears that the assign- lation of recipients is often made up of the relatively ment to different measures does not utilize admin- well-educated, rather than those most removed istrative data or other sources of to inform the deci- from the labor market. The Stop the Grey Economy sion, beyond what is collected in the initial interview. Program and Graduate Internship Program only Introducing a methodology of statistical profiling, target jobseekers with tertiary education, whereas which complements the assessment made by the those targeting the long-term unemployed, such as case worker, could be a suitable tool to maximize the on-the-job training program, still largely reach the impact of the EAM’s scarce resources. those with secondary (72 percent of participants in 2019) and higher education (12 percent). Regis- Unemployment benefits cover a relatively large tered jobseekers with an education level lower than share of registered jobseekers despite a minor secondary education made up 36 percent of reg- share of social security contributions being ear- istered jobseekers at the end of 2019. Of the total marked for it. In 2019, there were 14,000 recipients beneficiaries of ALMPs offered by the EAM in 2019, of unemployment benefits, which is the equivalent 2 percent were members of the Roma and Egyp- of 36 percent of the average 39,000 registered tian community, only 1.2 percent were long-term jobseekers during that year. This is despite only 0.5 unemployed and less than 1 percent were recipients percentage points of the 10.3 percent social security of the material support, likely also due to the pro- contributions being earmarked for unemployment gram’s low coverage. Given the currently large share benefits. The replacement rate is accordingly the of registered jobseekers who are long-term unem- lowest among its neighboring countries and com- ployed, the EAM must increase their efforts to acti- parable countries in the European Union (Figure 15). vate those furthest removed from the labor market. 41 Despite being collected as a progressive tax, ben- efits are not paid according to the size of previous Strategic targets set in the new employment strat- income. According to the 2019 Law on Employment egy are modest, but donor programs are being Mediation and Unemployment Benefits, all recipi- piloted. The new National Employment Strategy ents receive a benefit equivalent to 120 percent of acknowledges the need to increase the coverage of a coefficient determined by law (most recently EUR ALMPs, improving the activation of material support 108 net) for between 3 and 12 months depending beneficiaries as well as increasing the participation on the length of previous employment. Recipients of the Roma and Egyptians in the labor market. must have worked a minimum of 9 months consec- However, the targets set up until the year 2025 utively or intermittently in the last 18 months.42 are not robust. The number of Roma and Egyp- tians participating in ALMPs is set to increase from Both formal workers and the registered unem- 28 to 60, for beneficiaries of the material support ployed are provided with paid parental leave. from 33 to 70 individuals and the total number of Employees are entitled to up to 12 months of ALMP beneficiaries is only to increase to 2,500 by parental leave following the birth of a child and a 2025. The average number of beneficiaries over the share of the previous income is received as a wage last five years was 2,321. This is despite significant compensation, capped at double the average wage, donor funding having been committed to activation unless the employee had worked for less than 12 efforts under the Activate! Program coordinated months without interruption, then it is capped at among the Ministry of Finance and Social Welfare the average. Parental leave benefits are paid by and a colloquium of UN agencies under a joint SDG employers, who are refunded from the government fund.40 Pilot programs designed specifically around budget. CSWs are also responsible for administer- activating women were conducted in 2021. ing this benefit, falling under employment policy, adding to the workload for the already overbur- Statistical profiling could assist counselors in dened case managers. There is no dedicated Back to table of contents 24 40 Joint funding totals almost US$2.7 million (Joint SDG Fund, 2021). 41 The replacement rate measures the unemployment benefit share relative to the beneficiary’s previous income. 42 Official Gazette of Montenegro 24/19. MONTENEGRO Social Protection Situational Analysis Figure 15: Montenegro has the lowest replacement rate in the region 100% 3.0% 90% 2.5% 80% Replacement Rate Contributions 70% Social Seurity 2.0% 60% 50% 1.5% 40% 1.0% 30% 20% 0.5% 10% 0% 0% ro a ia ia H E ia ria a tia ia a a ni ni ni vi TE Bi on rb en ak eg a oa t a ua to lg La Se ov 7S lb ov ed n Cr Es th Bu te A Sl Sl ac Li on M M th or N Minimum Wage 67% Average Wage 100% Average Wage Employer + Employee Contribution Rate (right axis) Sources: Montenegro: MONSTAT, Albania: INSTAT, Serbia: Statistical Office of the Republic of Serbia, BiH: Federal Bureau of Statistics Bosnia and Herzegovina, North Macedonia: MAKSTAT and OECD for the remaining countries; For contribution rates: Social Security Programs Throughout the World, Europe, 2018. Note: Replacement rates are given in terms of gross wage for single individuals without additional housing or social assistance benefits. The contributions for Latvia are collected combined with other social insurances, hence those for unemployment insurance cannot be isolated. social security contribution for parental leave and expenditures amounted to EUR 16.3 million in 2019 or the equivalent of 0.3 percent of GDP. Shifting the paid parental leave to social insurance and admin- istering it either through the functional PIO Fund or the Health Insurance Fund would be in line with the prevailing models worldwide and would allevi- ate some of the burden of the CSWs. In the case of no parent having been in formal employment, those registered as unemployed at the EAM and students are eligible to receive a monthly compensation of EUR 63.50 per month up until the child is one year old. Back to table of contents 25 MONTENEGRO Social Protection Situational Analysis Learning from the COVID-19 response The government reacted quickly to the COVID-19 pandemic with multiple social protection support packages. However, the support mostly consisted of one-off transfers to existing beneficiaries because existing programs were unable to expand horizontally. All registered unemployed were provided with one-off benefits. Additional wage subsidies supported the creation of new jobs and the retention of employees. Social and child protection services suffered from serious disruptions, while the benefit level of pensioners remained stable due to indexation. The government of Montenegro swiftly responded sion filters. In addition to reforming the program’s to the crisis through five packages. In 2020, the targeting mechanism, establishing triggers in the government provided social protection support social protection and disaster risk response laws can through three different packages, the first one on facilitate timely vertical and horizontal expansion to April 9, only three weeks after the first confirmed reach newly vulnerable populations in a crisis. Covid-19 case was reported in the country. Two sub- sequent packages followed in April and July 2020, The government provided one-off benefits to all both providing social protection support of around registered unemployed and created wage sub- EUR 35 million. In January and April 2021, the gov- sidies to protect jobs. As the government was ernment adopted new packages which included unable to expand the last-resort income support additional and renewed measures. program to protect the newly poor, it instead pro- vided one-off support to all those registered with Montenegro’s social assistance system was able the EAM. The second package provided a one-time to rapidly support existing beneficiaries but was benefit of EUR 50 and a second benefit in January unable to expand social assistance support to the 2021 of over EUR 100 to all those registered who newly poor and vulnerable. Recipients of the MO (at the time) did not receive material support. In received a one-time benefit of EUR 50 as part of the order to incentivize the creation of new jobs and to first support package in 2020, and EUR 200 in the protect employment, wage subsidies of between third package. Support through the fourth package 50 and100 percent of employees’ wages were in January 2021 varied by family size; families with introduced as part of the first package and sub- one- or two-members receiving EUR 50 and larger sequently renewed. As part of the third economic families receiving EUR 100. Beneficiaries of the per- package, the government extended wage subsidies sonal disability allowance were allocated EUR 50. for the months of July, August and September to Furthermore, all families receiving some type of firms, companies and entrepreneurs operating in social assistance support and an electricity subsidy, the area of tourism, catering and public transport. saw those doubled as part of the first support It was estimated that this initiative implied a budget package. Due to the existing SWIS, the government of EUR 4 million monthly (that is, EUR 12 million for was able to rapidly identify eligible beneficiaries and the duration of the measure. In January 2021, wage to process payments within three days. However, subsidies were increased to unanimously provide the material support was unable to expand in cov- 100 percent of the minimum gross salary and the erage due to strict categorical eligibility criteria. number of sectors listed as endangered by the pan- In order to modify these criteria during the crisis, demic was broadened using turnover data from the the government would have needed to secure the tax administration. approval of parliament, which it was unable to do in an election year. The crisis has highlighted the need Pension benefit levels remained stable during for carefully analyzing the effectiveness of social the pandemic as a consequence of the rotational assistance as a crisis response mechanism and the indexation. In 2020, the contributor coverage rates rigidities imposed by the current social protection of Montenegro's pension system had strongly system, in particular the MO’s categorical exclu- declined to 62 percent of the labor force as a con- Back to table of contents 26 MONTENEGRO Social Protection Situational Analysis sequence of shrinking employment due to the pan- demic and the contributors dropped by almost 20 percent. In 2021, as employment rebounded with the economy revival, the number of contributors was restored to the pre-pandemic level. Nominal, real and relative pensions remained stable during 2020 and 2021, with the replacement rate hovering around 55 percent,43 in part as a consequence of the introduced rotational indexation. However, together with a retroactive increase of the minimum pension from EUR 149 to EUR 253.61, the policy will impose strong fiscal pressure on public finances. Social insurance systems were leveraged through one-off payments to minimum pension recipients and by subsidizing social security contributions. Within the first economic package, the government implemented an extraordinary payment of EUR 50 to those receiving the minimum pension. The total number of pensioners who received this benefit was 12,012, totaling the cost to EUR 628,700. The benefit was extended for a second one-off cash transfer of the same amount in January 2021. As part measures to incentivize new employment, the government also subsidized social security con- tributions. In the second economic package, the government paid for six months of social security contributions of farmers who were regular contribu- tors. Furthermore, the government announced that newly employed who had been registered with the EAM for more than three months would be exempt from paying personal income tax, as well as con- tributions for pension and disability insurance for the year 2021 and partly thereafter, as long as the employer had increased their employees relative to the end of 2020 when hiring. Back to table of contents 27 43 The replacement rate indicates the level of the first new pensions relative to the average wage. MONTENEGRO Social Protection Situational Analysis Summary and reform priorities The analysis finds that the cost effectiveness of The area of social and child protection services Montenegro’s social and child protection system has undergone significant reforms but a minimum is at risk of deteriorating. The government is intro- package of services is not provided nor defined. ducing or expanding a set of untargeted and frag- The availability and coverage of services is low, par- mented social assistance programs which are esti- ticularly of essential services for children and fami- mated to double social assistance spending by lies. The country has progressed quickly on reduc- 2023. While the proposal to increase coverage of ing the number of children in public institutions but the system is commendable, not all the proposed foster care with intensive and additional support reforms are likely to be cost-effective and some are for children with disabilities and emergency care for not likely in achieving the government’s objectives children without proper parental care is missing to at all. Investing more in services that support invest- prevent further institutionalization. Responsibility ments in human capital and an expansion of the lines for financing social services between central last-resort income support would improve effec- and local levels are blurred, leading to inequities - tiveness in reducing poverty and in increasing the for example in the provision and quality of services. productive of all members of society. The expansion in access, scope, geographical dis- tribution, quality and sustainability of child, family Social assistance spending targeted toward the support and victim support services as well as min- poor has remained low, even though many people imum package of services to be provided at local continue to live in poverty. Despite a sustained level needs to be clearly defined by relevant legisla- period of economic growth up until 2020, poverty tion and properly budgeted. Given the aging popu- in Montenegro has remained substantial. Never- lation and the aim of deinstitutionalization, a strat- theless, coverage of the material support (MO) has egy is needed on increasing the supply and quality been low, leading to some of the most vulnerable of non-public provision of elderly services. Quality members of society being excluded from social pro- assurance and monitoring of all services (regardless tection. Reforming the current exclusionary criteria of the funding source) needs to be improved. In this and reassessing the targeting method toward one regard, capacities of the MLSW and the Institute for more correlated with poverty status would help Social and Child Protection, but also Social Inspec- reduce some of the existing exclusion errors. tion, need to be strengthened to ensure quality assurance in the social protection system. An outdated disability model is leading to inequi- table and inefficient provision of disability benefits More analysis is needed on the long-term fiscal and services. Currently, more than 30 commissions impact and sustainability of the 2020 pension assess and determine disability in Montenegro and reforms. Recent reforms have rolled back fiscal con- mostly apply the outdated medical model of assess- solidation efforts from previous years but are esti- ing disability. This leads to some persons with severe mated to ensure adequate pensions in the long- disabilities not being eligible for services or benefits, term. Finding the right balance between pension and the size of cash transfers not being based on adequacy and fiscal sustainability will be the main an assessment of additional cost of living and par- challenge for the Government in the next stage ticipating with disabilities. A much-needed reform of reforming the pension system. This will require to move from a medical model to a rights-based further detailed analysis on the long-term con- model of disability assessment is ongoing. Strong sequences of different reform scenarios such as government commitment is needed to successfully changes to the indexation pattern, retirement age, coordinate the reform which will accelerate the just social security contributions or early retirement win- and equitable provision of disability benefits and dows. Furthermore, a number of outdated hazard- integrated services, as well as facilitate their contact ous occupations remain eligible for early retirement with and access to the social protection system. despite the 2020 reform aiming to tackle the issue. Back to table of contents 28 MONTENEGRO Social Protection Situational Analysis ALMP coverage is low and few programs reach The government responded quickly to the COVID- the most vulnerable. Montenegro has the highest 19 pandemic but missing shock-responsive mecha- expenditures on labor market policies in the West- nisms prevented a horizontal expansion of support ern Balkans, in large part due to high spending on and essential services were interrupted. Finally, the graduate internship program. Although unem- lessons from the COVID-19 pandemic draw atten- ployment benefits have relatively high coverage, tion to the need to build flexibility into the social adequacy is low, in part as it is not paid out in pro- protection system, particularly the social assistance portion to previous income. The largest program is system, to enable it to expand coverage to addi- the Graduate Internship Program, which is targeted tional poor households during periods of crisis and toward a relatively privileged share of the popula- in response to shocks. The SWIS provides the basis tion. Coverage of ALMPs implemented by the EAM for building such a shock-responsive system and which are targeted toward the most vulnerable for analyses which could inform early response to is low. Statistical profiling and an increased use of risks and outreach to affected communities. Miss- existing data for monitoring and evaluation could ing investments in crucial social services led to an increase the efficiency and effectiveness of the inadequate provision of essential support during EAM’s services. the peak of the pandemic, in particular for women and children, including those with disabilities. Short-term Medium-term Long-term Cash transfers to support the poor, the vulnerable and persons with disabilities • Reassess social assistance eligibility • Reassess the effectiveness and • Use the finalized disability assess- criteria with the aim of improved compatibility of different targeting ment reform to streamline the poverty targeting (e.g. by removing methods for the material support to number of cash transfers for disa- exclusionary criteria such as land transparently and objectively iden- bility and integrate the provision ownership and unemployment tify households that are poor. of services, with benefit amounts status). • Expand coverage of the material and guaranteed services varying • Improve the adequacy of the mate- support. on the level of support needed. rial support for all beneficiaries. • Assess the feasibility of an income • Reassess the adequacy of combined disregard to reduce disincentives to benefits, in-kind support and cost work for recipients of the material deductions in relation to decent support.44 living, participation and activation • Finalize the disability assessment agenda. reform to move from medical to an • Refocus spending to support chil- ability-based socio-medical model dren to fulfill their full potential by centralized in one commission, but investing into health, education and which is easy and access for persons child services. with disabilities. • Develop evidence-based alternative solutions for the mothers’ benefit based on cost-benefit analysis and which would gradually replace the current benefit. • Review the effectiveness and rationale of the procreational, and other cash benefits, such as the birth grant; consider options for ensuring benefits reach the poorest and most vulnerable through proac- tive outreach to eligible populations, assessing options to introduce means testing or taxing high-in- come earners. Back to table of contents 29 44 Income disregard is the part of earning that is the excluded during a defined period from the income calculation used to define the eligibility for a benefit and the benefit amount. MONTENEGRO Social Protection Situational Analysis Short-term Medium-term Long-term Social services • Ensure the delivery of a minimum • Introduce/review the necessary • Build capacities of the system package of services within each legislation to monitor and evaluate to ensure quality in services municipality or as shared provision social service providers and ensure provision, including the quality of across multiple municipalities. adequate human resources for their services providers’ professional • Establish or scale up preventative implementation. work. services such as family outreach • Ensure that service delivery is • Build capacity of the system services, foster care including financially predictable for public and to monitor and evaluate social specialized and emergency foster non-public service providers and services. care or SOS helpline to prevent that costs of service delivery are • Implement a long-term plan for institutionalization of young chil- adequately covered. the development and scale-up of dren, evaluate the services so that • Strengthen capacities of ISCP for services. effective evidence based services research, data analysis and eval- are financed as a priority. uation so they are able to provide • Strengthen the ISCP’s quality assur- to the system tangible evidence ance role (i.e. develop indicators on why certain service need to be for monitoring the services quality, scaled up or not. including the services providers’ • Strengthen the human and profes- professional work). sional capacities of case managers • Develop a national long-term plan at the CSWs to fully implement case with adequate budget for the management and referrals systems. development, scale up and provision • Reform organization of work in of services for all relevant groups CSWs to reduce administrative and needs, including child, family workload and increase time for and victim support services. expert social work. • Develop a register of persons with disabilities in the Institute of Public Health. • Implement a long-term plan for the development and scale-up of services. Pensions • Determine and rank the pension • Consider pension valorization and • Introduce a fully funded manda- system objectives (fiscal sustaina- indexation pattern that would tory or quasi-mandatory pension bility; adequacy; intergenerational value past incomes and protect pillar (add on in case of narrowed equity, horizontal equity). pensioners against inflation better fiscal space). • Introduce pension measures to (wage valorization and price index- prolong labor market activity such ation). as extending the retirement age, eliminating long service eligibility (61 years of age and 40 years of service), narrow the general early retirement window. • Introduce full work period as calcu- lation period for pension. Employment and ALMPs • Create clear and transparent moni- • Explore the introduction of statis- • Reform the size of unemploy- toring and evaluation framework tical profiling of jobseekers to ment benefits and carry-out which includes conducting and increase efficiency of counselling. detailed analysis of unemploy- distributing the results of regular • Explore ways to transform the ment benefits to inform the rigorous evaluations of ALMPs. call-based application system for revision of parameters such as: (i) • Create formal linkages between ALMPs into open programs that are duration of benefits; (ii) period of the databases of the Employment continuously available. contributions, with flexibility to Agency and the Tax Administration. accommodate; and (iii) contribu- • Further develop and strengthen the tion rate. social protection and employment sector activation agenda, beyond formal requirements. Back to table of contents 30 MONTENEGRO Social Protection Situational Analysis Short-term Medium-term Long-term Disaster preparedness and response • Introduce the legal basis to allow • Consider expanding the SWIS • Consider disaster risk financing the MO or other relevant benefits to to include additional potential linked to established triggers that expand to additional poor house- beneficiaries that can be targeted would allocate funding to expand holds in response to shocks. for support in a crisis (move towards the coverage of social protection a social registry) programs in response to a shock. • Strengthen the outreach of the CSWs to support the “on-demand” nature of the MO, child benefits, among other programs. • Reform the material support to allow for the program to be horizontally expanded during crises (i.e., new beneficiary intake), • Analyze the vulnerability of Montenegro, the main source of risk45 to inform options for future crises response, including setting out in advance eligibility criteria, type of support, targeting and delivery methods. • Develop comprehensive cooperation framework with the humanitarian and disaster-risk response. Back to table of contents 31 45 For example, historic crises in Montenegro include, COVID-19 in 2020, Global Economic Crisis in 2008, Yugoslav War in the 1990s, and the 1979 earthquake. MONTENEGRO Social Protection Situational Analysis Resources Bejaković, Predrag. 2021. “The Evaluation of Active Na Nivou Zajednice Za Biološke Porodice.” Labour Market Policy in Montenegro.” ———. 2021b. “Analiza Primjene Zakona o Socijalnoj Bussolo, Maurizio, Johannes Koettl, and Emily i Dječijoj Zaštiti.” Sinnott. 2015. Golden Aging: Prospects for Healthy, Active, and Prosperous Aging in Kaludjerovic, Jadranka, and Branko Boskovic. 2021. 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Back to table of contents 33 © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This project is funded by the European Union