[Extracted from my report: Malo, M.A. (2018) Finding proactive features in labour market policies: A reflection based on the evidence, Research Paper #8, ILO Future of Work Research Paper Series, International Labour Organization, Geneva (Switzerland)]
In developing and emerging countries, the combination of policies has been a distinctive characteristic of the development of social protection floors since the 1990s. The ILO Social Protection Floors Recommendation, 2012 (No. 202) is an important part of this ‘quiet revolution’ in social protection in developing and emerging countries (Barrientos and Hulme, 2009). These policies provide income support as an anti-poverty measure, but also with a view to broadening the labour market opportunities of individuals through the joint implementation of ALMPs. Impact evaluations show that these joint approaches have generally positive results not only in terms of improving employment and earnings, but also in terms of providing effective access to basic services such as health or child education (ILO, 2016).
Since the 1990s there has been increasing interest in implementing anti-poverty policies in low- and middle-income countries, while at the same time finding ways to combat dependency on public income support schemes (Almeida et al., 2011). These goals have helped to shape an approach that combines ALMPs and income support programmes in developing and emerging countries. At the same time, there is an increasing trend in linking income support with a “promotion” function that requires those receiving benefits from social assistance to also participate in education, health and nutrition services, with the goal of improving earnings and opportunities through programmes promoting higher employability (Robalino, Walker and Rawlings, 2012). In other words, the ambition of social protection in developing countries is not restricted to compensating those in poverty for their lack of income, but rather aimed at providing populations with the tools to achieve more sustainable sources of livelihood for the purpose of broader development (Barrientos and Hulme, 2009; Barrientos, 2011). In this context, the ILO adopted in 2012 the Recommendation concerning national floors of social protection, No. 202. In this Recommendation, a social protection floor is defined as a combination of income and health security provided through cash transfers and transfers in kind including in the form of access to essential social services (Cichon, 2014). The ILO strategy promoting social protection floors includes support at country level, contribution to global strategies, policies and debates on social protection floors, and work in knowledge management and sharing experiences (ILO, 2017).
The objective of reducing poverty is only one of the objectives of social protection: beyond providing basic income security, social protection must contribute to increase opportunities of households to access better and higher quality forms of sustainable income generation. The combination of “traditional” or “simple” ALMPs with elements related to income support, small business promotion, or investment has created new policies adapted to the reality of developing and emerging countries.
In different degrees, all these policies are concerned about incentive compatibility and anti-poverty strategies – they focus not only on employment or earnings but mainly on development. Almeida et al. (2011) suggest that there are two different kinds of policies: interventions to improve access to jobs and earnings opportunities, which are complementary to employment-related support services when targeting groups facing multiple barriers to work; and graduation policies with a poverty exit ambition and targeting beneficiaries of social assistance programmes. At first sight, the development of social protection shares with the activation strategies the combination of policies and, sometimes, conditionality. However, there is a key difference: while social protection floors in developing and emerging countries have an explicit anti-poverty objective, activation strategies in developed countries are policies to fight unemployment but they are not part of anti-poverty policies of these countries.
Some policies, such as conditional cash transfers, may be considered as being between each of these categories. These policies consist of an income transfer to targeted households conditional on some requisites, for example children’s school attendance, improving health conditions of the household, etc. A common concern in the design of these income transfers has been the impact on labour force participation. There are different evaluations showing that these programmes do not appear to discourage beneficiaries from participating in the labour market (Almeida et al., 2011) and even that in some cases the programmes create incentives for participants to work or look for work (ILO, 2010).
The impact of conditional transfers and graduation policies on labour market outcomes
Conditional transfers and graduation policies are development policies implemented around the world. The design of both types of policy combine income transfers with other measures. In the case of conditional transfers, income is conditioned on eliminating child labour through school assistance, for example, or conditioned on healthy practices. Although both policies target households in severe poverty, graduation policies (which have a poverty exit ambition) target the poorest members of villages providing income jointly with training, coaching, health information, etc. For this reason, graduation policies are also known as “ultrapoor” policies. They often include specific direct funding to improve the family small business. In other cases, there are also occasional transfers to finance basic goods for household consumption. The objective is always to uplift the low initial endowment base of the household so that it can gain access to other economic and social resources (Halder and Mosley, 2004).
Usually, these policies are evaluated in terms of their impacts on different dimensions of well-being such as consumption, health or empowerment, but also on economic outcomes such as savings, business profits, investment or employment. Kabeer and Waddington (2015) present a meta-analysis of conditional transfers using 46 studies analysing different household impacts in developing countries. As regards the effects on household adult labour supply, they find mixed evidence. The overall impact is an increase of 3 percentage points in the labour participation of household adults, but this effect ranges from an adverse effect of 5 percentage points to a growth of 12 percentage points in the labour participation of adults. This suggests that income transfer has an income effect, but, in general, it is not necessarily enough for a significant increase in labour participation. For the effects on child labour, the evidence strongly suggests a decrease in child labour through increasing school attendance.
Banerjee et al. (2015) evaluate the impact of a multifaceted graduation programme for the very poor in six developing countries. Therefore, their results are a meta-analysis of these programmes, but based on much more homogeneous programme characteristics than usual. They test the impacts on different social and economic outcomes of poor households. Concerning labour outcomes, they find overall positive impacts on total time spent working, with a positive impact on more time working in a micro-enterprise and a negative impact on time spent in paid labour, but neither effect is statistically significant.
There are many evaluations showing that these types of policies, designed as packages of various ALMPs or ALMPs provided jointly with income support, are, in general, effective. Hashemi and Rosenberg (2006) find that a public works programme in Bangladesh increased self-employment among beneficiaries of social protection programmes. Macours, Schady and Vakis (2012) analyse Nicaragua’s “Atención a Crisis” programme and suggest that the integrated approach of the programme promotes reskilling and adaptation to a changing employment situation. Martínez, Puentes and Ruiz-Tagle (2018) find that a Chilean conditional cash transfer programme (“Chile Solidario”) has long-lasting employment effects, increasing labour market participation and earnings.
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Martínez, C.; Puentes, E.; Ruiz-Tagle, J. (2018). “The effects of micro-entrepreneurship on labor market performance: Experimental evidence from Chile”, in American Economic Journal: Applied Economics, Vol. 10, No. 2, pp. 101–124.
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