Economics of Public Sector I Chapter 15

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WELFARE
PROGRAMS

JERIC CARVAJAL
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Welfare Programs
OUTLINE
I. Introduction (from the book of Stiglitz and Rosengard)
a. Important Terms
b. Rationale
c. Examples
II. Social Protection Programs in the Philippines (Sicat & Mariano of PIDS)
a. Framework and Implementation Strategy
b. Ph Social Protection Programs Expenditure
c. General Findings
III. Welfare Programs Common Issues (Stiglitz & Rosengard)
a. Effects on Labor Supply
b. Incentive Effects
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Welfare Programs
SOME IMPORTANT TERMS

Matching Programs – programs in which federal outlays depend on state

expenditures

Block Grants – a fixed amount of money – with states given considerable discretion
as to how the money could be spent, including the discretion in determining the legibility
of needy families and the benefits and services those family could receive

Means-tested Programs of assistance – any program whose benefits as income are

targeted to those with low incomes – must reduce benefits as income rises.

Entitlement Programs – Anyone meeting the criteria is entitled to receive benefits

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Welfare Programs
RATIONALE FOR GOVERNMENT

 Markets may produce efficient outcomes (ignoring the market

failure), but they do not necessarily produce a distribution of income
that is socially acceptable.
 Welfare programs focus on one aspect of the distribution of income:
those at the very bottom.
 Government programs as safety net and social insurance programs
 Programs aimed at children have been justified both as a reflection
of basic values and as an investment in the future
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Welfare Programs
SOME EXAMPLES (U.S. CASE)

 Aid to Families with Dependent Children (AFDC) Program

 Temporary Assistance for Needy Families (TANF)
 Supplemental Security Income (SSI)
 Earned Income Tax Credit (EITC)
 Food Stamps/Snap
 Special Supplemental Nutrition Program for Women, Infants, and
Children (WIC)
 Medicaid and Children Health Insurance Program
 Housing Choice Voucher Program/ Low-Income Housing Tax
Credit
 SOCIAL PROTECTION PROGRAMS IN THE PHILIPPINES

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection Programs in the Philippines.
Philippine Institute for Development Studies
 SOCIAL PROTECTION PROGRAMS IN THE PHILIPPINES

How much does the Philippine

government invest in social
protection programs?

How are Build, Build, Build; 4Ps;

Community-based Programs;
TRAIN Law as fiscal policy
efforts in social protection?

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection Programs in the Philippines.
Philippine Institute for Development Studies
 SOCIAL PROTECTION PROGRAMS IN THE PHILIPPINES

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection Programs in the Philippines.
Philippine Institute for Development Studies
 SOCIAL PROTECTION PROGRAMS IN THE PHILIPPINES

Social Insurance

- are contributory programs that seek to

mitigate income risks by pooling resources
and spreading risks across time and income
classes
- beneficiaries pay a premium over a given
period, to cover or protect them from loss of
income and unemployment as a result of
illness, injury disability, retrenchment,
harvest failure, maternity or old age

Examples: GSIS/SSS

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection Programs in the Philippines.
Philippine Institute for Development Studies
 SOCIAL PROTECTION PROGRAMS IN THE PHILIPPINES

Labor Market Interventions

- are government measures that enhance

employment opportunities in the country and
advance Filipino workers’ rights and welfare
- the goal is to address the risks of
underemployment, unemployment, and loss
of income in the country

Examples: Skills development training; labor and

trade policies, and agricultural support; Special
employment program for students; Assistance to
displaced workers (DOLE-AMP)

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection Programs in the Philippines.
Philippine Institute for Development Studies
 SOCIAL PROTECTION PROGRAMS IN THE PHILIPPINES

Social Welfare

- involves preventive and developmental

interventions that seek to support the
minimum basic requirements of the poor and
reduce risks associated with unemployment,
resettlement, marginalization, illness and
disability, old age and loss of family care
- are usually direct assistance in the form of
cash or in-kind transfers to the poorest and
marginalized groups

Examples: cash transfers such as 4Ps

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection Programs in the Philippines.
Philippine Institute for Development Studies
 SOCIAL PROTECTION PROGRAMS IN THE PHILIPPINES

Social Safety Net

- are contributory programs, stop-gap

mechanisms or urgent responses that
address effects of economic shocks,
disaster and calamities on specific
vulnerable groups
- are measures that target groups with the
specific objective of providing relief and
transition
Examples: emergency assistance; price subsidies;
employment programs; retraining programs and
emergency loans; SocPen

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection Programs in the Philippines.
Philippine Institute for Development Studies
 National Government Social Protection Programs

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection
Labor Market Interventions National Government Agency (NGA)
PH Social Protection Programs Special Employment Program for Students DOLE

Programs in the Philippines. Philippine Institute for Development Studies

Education Assistance Program NCIP
Social Welfare Programs/Long-Term Programs
Livelihood and Self-employment Programs DSWD
4Ps DSWD
KALAHI-CIDS DSWD
Malusog na Simula, Mayaman na Bansa DSWD
Supplemental Feeding Program DSWD
School Based Feeding Program DSWD
Rice Price Subsidy NFA
Seed and Fertilizer Subsidy DA
Family Welfare Program/Workers with Special Concerns DOLE
Assistance to Displaced Workers - AMP DOLE
Implicit Subsidy NFA
Social Safety Net (Emergency Response/Short-Term Programs
Core Shelter Programs DSWD
Assistance to Individuals in Crisis Situation DWSD
Katas ng VAT para kay Lolo at Lola; Social Pension for Indigent Sr. Citizens DSWD
Katas ng VAT Pantawid Kuryente DSWD
Emergency (Calamity) Loan GSIS
Social Insurance
PhilHealth Indigent Program PhilHealth
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PH Social Protection Programs
EXPENDITURE
• From 2009-2017, NG social
protection expenditures have
been following an increasing
trend, averaging 9% of GDP
or approximately 5.9% of NG
expenditures;
• Social welfare programs
received the largest portion
with an average of 73% of
total NG social protection
expenditures

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection Programs in the Philippines.
Philippine Institute for Development Studies
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PH Social Protection Programs
EXPENDITURE

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection Programs in the Philippines.
Philippine Institute for Development Studies
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PH Social Protection Programs
EXPENDITURE

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection Programs in the Philippines.
Philippine Institute for Development Studies
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PH Social Protection Programs
GENERAL FINDINGS
The bulk of social protection spending goes to social welfare programs with the top
three programs being the 4Ps, KALAHI-CIDDS and Livelihood and Self-employed
Programs (SLP).
Social safety net expenditures were dominated by the DSWD’s SocPen program
owing largely to increased coverage.

For social insurance, though it has been receiving increasing budgetary support,
there is still a need to increase relatively low coverage rates.

Labor market interventions contribute the smallest to social protection expenditures

due to focusing programs on means for Filipinos to finish schooling

Source: Sicat & Mariano (2018). A Public Expenditure Review of Social Protection Programs in the Philippines.
Philippine Institute for Development Studies
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Welfare Programs
COMMON ISSUES

Welfare programs
discourage work

Causes dependency and

encouraging out-of-wedlock
Possibility of effective transition births?
from welfare to work

Adverse incentives effects of

noncash programs
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Welfare Programs
EFFECT ON LABOR SUPPLY

Stylized version of
welfare program when
payments were reduced
as the individual earned
more. Both the income
and substitution effects
led to reduced work
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Welfare Programs
INCENTIVE EFFECTS

1. The EITC provides positive incentives to participate in the labor

force
2. Welfare programs provide disincentives to work longer hours;
effectively, there is a high marginal tax rate on working longer
hours;
3. Benefits with thresholds – which suddenly disappear when
incomes exceeds a certain level – have particulary adverse
incentives effects near the cutoff level