Poverty, inequality and vulnerability

The primary aim for most social protection programmes is to reduce poverty and vulnerability. As detailed in What is social protection? Analytical concepts, different stakeholders have different conceptual approaches for how different social protection interventions achieve this.

There is strong evidence of the positive effects of social transfers (in particular, cash transfers) on poverty, and evidence of positive effects on inequality and vulnerability.

Poverty

In their 2016 evidence review, Bastagli et al. find a comparatively large evidence base linking cash transfers to reductions in monetary poverty. They looked at impacts on total expenditure, food expenditure and poverty measures. Most of the studies are from Latin America, followed by sub-Saharan Africa, then other regions. Of the 35 studies of cash transfer programmes reporting on the impact on household total expenditure, 26 demonstrate at least one significant impact and 25 an increase in total expenditure, ranging from a 2.8 to 33 percentage point change (ibid.: 7, 87). Studies with insignificant findings point towards design and implementation features as explanations; for example, low level of transfer and delays in disbursement, as well as changes in household behaviour (ibid.: 88). Of the 31 studies reporting impacts on food expenditure, they largely find an increase (23 studies reported a statistically significant increase in food expenditure). Two studies report a decrease in food expenditure ‘due to a decrease in labour supply and possible prioritisation of savings over consumption’ (ibid.: 87).

Nine studies report on Foster–Greer–Thorbecke (FGT) poverty indicators (poverty headcount, poverty gap, squared poverty gap): only two-thirds found a statistically significant impact, but of those, all except one showed a reduction in poverty (ibid.). Bastagli et al. conclude that ‘While cash transfers are shown to mostly increase total and food expenditure, it appears that in many cases this impact is not big enough to have a subsequent effect on aggregate poverty levels. However, with one exception, the studies consistently show decreases in poverty’ (ibid.: 7). Poverty headcount reductions range from four to nine percentage points, and from four (Mexico’s PROGRESA) to eight (Zambia’s Child Grant) percentage points for reductions in the poverty gap (ibid.: 87).

A meta-analysis of safety net programmes (another term for social assistance interventions – see Types of social protection) across Africa also finds significant increase in consumption among beneficiaries, with strong evidence that well-targeted programmes can be effective at reducing inequity and alleviating extreme poverty (Ralston et al., 2017: 3). However, they also highlight that ‘there is substantial heterogeneity in the impacts of different programs, suggesting that implementation and design factors, as well as local contexts, play important roles in determining the outcomes of programs’ (ibid: 2).

Evidence from pilots of the BRAC graduation approach show improvements in household-level outcomes such as consumption, asset holdings and food security. Many of these impacts were sustained one year after the programme had come to an end (Banerjee et al., 2015).

Inequality

Social protection, and social transfers in particular, is viewed as ‘a tool in the fight against inequality, from both a material (income and consumption) and a non-material (such as access to services, social exclusion) perspective’ (Roelen et al., 2016: 231). Social protection investments can ‘affect growth and inequality through a multiplicity of effects at micro, meso and macro level’ (ibid.: 10). Pathways include social protection programmes’ impact on fiscal redistribution, promoting inclusive growth, building human capital, and reducing social exclusion (ESCAP, 2015: 14). For more on economic growth see Economic growth, and for more on human capital and social exclusion see Education; Health; Nutrition; Empowerment; and Social exclusion.

Evidence of the impact of social protection on material inequality in low- and middle-income countries is limited but growing (Roelen et al., 2016: 231). OECD (2019: 11) reports evidence of a ‘strong pro-poor growth effect’ of social assistance programmes, mostly due to better outcomes for children and youths in low-income households. Significant impacts on income inequality are reported from South Africa (through the combination of old-age pension, child support grant and disability grant) (Roelen et al., 2016); Asia (ESCAP, 2015), and Latin America (Ocampo & Gómez-Arteaga, 2016). For example, in Latin America, poverty and income inequality reduced in most countries in the region from 2003 to 2013 (against the trend of rising inequality globally), with innovative social protection programmes (including universal or broad-based pensions, health and child benefits, cash transfer programmes, and expanding contributory social security) a contributory factor (ibid.: 8). UNDP (2016: 19) reports that: ‘a universal child allowance (Asignación universal por hijo) introduced in Argentina in 2009 is estimated to have reduced inequality by approximately 5 per cent’ while the ‘Brazilian Bolsa Familia Programme is estimate10 to be responsible for 16 per cent of income inequality reduction in the country between 1999 and 2009’.

However, coverage and levels of spending on social protection interventions affect their impact on inequality. With typical direct transfers in low-income settings characterised by low benefits and coverage, the benefits can be too small to lift people out of poverty or substantially reduce income inequality, and indirect transfers (such as health and education provision) will have a greater redistributive effect (Ocampo & Gómez-Arteaga, 2016: 9, 15).

Looking at cash transfers in low- and middle-income countries from 2000 to 2015, Bastagli et al. (2016: 95) found seven studies reporting on the squared poverty gap – also known as poverty severity, a measure of the inequality among poor households. Of those, five had a significant result, of which four found a reduction in the squared poverty gap (ibid.: 88).

The impact of social protection on non-material inequalities is more complex. Roelen et al. (2016: 235) find that ‘sensitively designed social protection interventions have some potential to help poor people overcome social exclusion and access barriers’, with SDG 5 viewing social protection as a tool for achieving gender equality. For more on the evidence on how social protection can support improved gender equality, see Women and girls. However, social protection alone cannot transform complex ‘intersecting inequalities’ affecting poor and marginalised people (ibid.).

Vulnerability

Social protection programmes also aim to reduce people’s vulnerability to risks and shocks, preventing them from falling below a critical threshold of wellbeing by building resilience through building and protecting human and productive capital (UNDP, 2016: 19), increasing savings, and reducing the need to resort to negative coping strategies. Social assistance schemes can reduce vulnerability through impacts on education, health, nutrition, empowerment, social inclusion, asset accumulation, productive investment and employment (see evidence summarised in Education; Health; Nutrition; Empowerment; Social exclusion; Economic growth; and Employment).

Looking at child labour – one negative coping strategy – Bastagli et al. (2016: 10) report that out of 19 studies looking at impacts of cash transfers on child labour force participation, eight found a statistically significant impact, all showing a decrease in child labour. More significant effects are found for reducing intensity (hours worked) than for prevalence (whether working/not working) (ibid.: 175). These significant results are from programmes in Latin America (plus one programme in Indonesia and one in Morocco). No cash transfer programme in sub-Saharan Africa finds a significant impact (ibid.). This finding is corroborated by Ralston et al.’s (2017: 3) meta-analysis of social assistance programmes in Africa, which found insignificant impacts of social assistance on negative coping strategies such as the use of child labour or temporary low wage work.

On assets and savings, Bastagli et al. (2016: 8) found that five of 10 studies found statistically significant increases in the share of households reporting savings (ranging from seven to 24 percentage points) or the amount of savings accumulated. Eight studies reported on households’ accumulation of agricultural productive assets for crop production, three found ‘a positive and significant impact’ while five found no significant impact (ibid.). For possible causes of these findings, other evidence and a recommendation for further research on the impact of social protection on resilience, see Economic growth – micro level.

However, Ralston et al. (2017: 3) highlight the need for stronger evidence on social protection and household resilience. Their meta-analysis of social assistance programmes in Africa finds impacts on asset accumulation (particularly livestock ownership) and weakly significant impacts on monetary saving (ibid.).

Key texts

OECD. (2019). Can social protection be an engine for inclusive growth? (Development Centre Studies). Paris: OECD Publishing.
This report reviews the literature and identifies how social assistance (excluding public works programmes) and social insurance can affect growth and inequality through micro-, meso- and macro-level effects. Focusing on ‘the micro determinants of inclusive growth’, it summarises the impact of different types of social protection programmes on the micro drivers of growth across different income groups. It presents evidence from 11 new impact evaluations of social protection programmes implemented in Brazil, Ghana, Germany and Indonesia.

Ralston, L., Andrews, C., & Hsiao, A. (2017). The impacts of safety nets in Africa: What are we learning? (Policy Research Working Paper 8255). Washington, DC: World Bank.
This meta-analysis reviews the results across 55 impact evaluation studies on key outcomes of safety net programmes in 14 different African countries. The study finds on average significant positive impacts on total and food consumption, and promising results on asset accumulation, such as livestock ownership.

Bastagli, F., Hagen-Zanker, J., Harman, L., Barca, V., Sturge, G., & Schmidt, T. (2016). Cash transfers: What does the evidence say? A rigorous review of programme impact and of the role of design and implementation features. London: ODI.
This review examines the evidence on the effects of 56 cash transfer programmes on individuals and households: 55% were conditional cash transfers, mostly in Latin America; 25% unconditional cash transfers mostly in sub-Saharan Africa; 9% a combination of CCTs and UCTs; 7% social pensions; and 4% enterprise grants. It examines the evidence of (1) the impact of cash transfers on a range of individual- or household-level outcomes; (2) the links between variations in programme design and implementation features and cash transfer outcomes; and (3) the impacts of cash transfers, and of variations in their design and implementation components, on women and girls. The overall conclusion is that ‘the evidence reflects how powerful a policy instrument cash transfers can be, and highlights the range of potential benefits for beneficiaries’ (p. 12).