Celine Peyron Bista ILO 5 December 2013 Estimating the cost of a social protection floor for Mongolia: the ILO Rapid Assessment Protocol Celine Peyron Bista ILO 5 December 2013

Content Converting recommendations into scenarios Costing the SPF : the ILO Rapid Assessment Protocol

Part 1 Converting broad recommendations into specific scenarios

From Step 1 to Step 2 There are 2 types of recommendations Qualitative recommendations on administrative structures and processes, targeting and registration mechanisms, introduction of a social insurance scheme, tax reform, improvement in quality of services We need to conduct further studies We can estimate the cost Recommendations to introduce new SPF benefits, increase benefit levels, extend target group coverage

From recommendations to scenarios Selecting those recommendations that can be converted to scenarios: What is the government’s priority? Is data available for the cost estimation exercise? Can assumptions be made where data is not available or are further studies needed?

Which recommendations to choose? Recommendations for “elderly”: Increase coverage of the voluntary SI scheme by Subsidizing the contribution Developing an adapted and effective awareness raising campaign on the benefits of social insurance Adjusting the periodicity of contribution collection to the herders’ cash flows √

Which recommendations to choose? Recommendations for “working age”: Estimate the cost of introducing an integrated support programme that will combine cash transfers, vocational training and entrepreneurship counselling for herders Develop skill development programmes targeting at young people Create a sound database of working age people to facilitate targeting Strengthen employment promotion services, especially services targeting at the young people √ √

Designing scenarios Scenarios for “elderly”: Recommendation Scenario Recommendation 1: Increase coverage of the voluntary SI scheme among Scenario 1.1: Introduce a subsidized contribution by the government, 25% of contribution paid by the target insured person (all herders, self-employed and informal economy workers, irrespectively of their level of income) Scenario 1.2: Introduce a subsidized contribution by the government, 50% of the contribution paid by the target insured person (idem)

Low and high scenarios Scenarios for “elderly”: Low = 1 Low scenario: combination of scenarios to provide minimum benefits Scenario Scenario 1.1: Introduce a subsidized contribution by the government, 25% of contribution paid by the target insured person (all herders, self-employed and informal economy workers, irrespectively of their level of income) Scenario 1.2: Introduce a subsidized contribution by the government, 50% of the contribution paid by the target insured person (idem) High scenario: combination of scenarios to provide maximum benefits High = 3

Designing scenarios Scenarios for “working age”: Recommendation Recommendation 2: Provide combined package of skills development, cash benefits and entrepreneurship support for young people Scenario 2.1: Provide vocational training to young workers (15-29 years old), for 20 days every 1 year 1 Scenario 2.2: Provide vocational training and entrepreneurship counselling to young herders (15-34 years old), for 30 days every 2 years, along with a subsistence allowance of US$3 per day Scenario 2.2: Provide entrepreneurship counselling and loans (monthly interest rate at 0.2%) to young herders (15-34 years old)

Low and high scenarios Low = 1 Scenarios for “working age”: Scenario 2.1: Provide vocational training to young workers (15-29 years old), for 20 days every 1 year 1 Scenario 2.2: Provide entrepreneurship counselling and loans (monthly interest rate at 0.2%) to young herders (15-34 years old) Scenario 2.3: Provide vocational training and entrepreneurship counselling to young herders (15-34 years old), for 30 days every 2 years, along with a subsistence allowance of US$3 per day Low scenario: combination of scenarios to provide minimum benefits High scenario: combination of scenarios to provide maximum benefits High = 3

Part 1 Rapid Assessment Protocol

Some background information ILO/FACTS Financial, Actuarial, and Statistical Branch - Actuarial valuations of individual social security scheme ILO Social Budget Model (1990’s) - Comprehensive modeling of social expenditure (contributory and non-contributory schemes) - Includes modules for projecting population, labour force, economy, Government revenues/expenditure, and Social Protection schemes costs - Requires comprehensive set of data – not always available. The Rapid Assessment Protocol (RAP) - Was developed to allow for “rapid” costing of SPF benefits scenarios - Compact and flexible format (1 Excel file) ILO has a long history assisting member countries on actuarial valuations of social security schemes. The Financial, Actuarial, and Statistical branch at ILO HQ comprises several actuaries and has accumulated a lot of expertise in this field, and is in charge of developing the models used for costing. Initially the models were focused on individual schemes, but there was a push during the 1990’s to develop a more comprehensive national models, this mainly to support social policy reform in transition countries where trade-offs between different schemes or programmes were often required. This led to the development of the Social Budget Model, which aims at a comprehensive modeling of social expenditure including all contributory and non-contributory schemes. However, the model is quite tedious to complete and requires a lot of data that is often not available. In Cambodia for instance we were not able to complete the social budget due to missing data. The Rapid Assessment protocol was developed after the launch of the Social Protection Floor Initiative. It is more compact but allows for a relatively quick costing of SPF policy scenarios.

The ILO Rapid Assessment Protocol (RAP) RAP Model Structure MACROECONOMIC MODEL DEMOGRAPHIC FRAMEWORK GENERAL GOVERNMENT OPERATIONS MODEL LABOUR MARKET MODEL BENEFIT COSTING EXERCISE SUMMARY AND RESULTS

What data are needed? Data requirements Population projection by age, sex Labour force by age, sex (base year) Labour force by economic sector National average wage (base year) National poverty line Consumer price inflation rate (base year) Real GDP by economic sector (base year) GDP deflator by economic sector (base year) Government revenues and expenditure Other (depending on scenarios): Poverty headcount rates Age-specific fertility rates Per capita cost of in-kind benefits, etc.

NATIONAL PROJECTIONS 2012-2022 DEMOGRAPHIC FRAMEWORK NATIONAL PROJECTIONS 2012-2022 HISTORICAL DATA 2005-2011

NATIONAL PROJECTIONS 2012-2022 LABOUR MARKET MODEL Male/Female participation rates * Population per age group  Economically active population NATIONAL PROJECTIONS 2012-2022 HISTORICAL DATA 2005-2011

Poverty line, minimum wage MACROECONOMIC MODEL NATIONAL PROJECTIONS 2011-2020 HISTORICAL DATA 2005-2010 Poverty line, minimum wage GDP at current price Inflation GDP: The value of a country's overall output of goods and services (typically during one fiscal year) at market prices, excluding net income from abroad.

GENERAL GOVERNMENT OPERATIONS MODEL  GENERAL GOVERNMENT OPERATIONS MODEL WE NEED THE DATA!!!

By 2020, the first scenario would cost 0.07 % of GDP BENEFIT COSTING SHEET By 2020, the first scenario would cost 0.07 % of GDP

SUMMARY AND RESULTS Low scenario High scenario

Take away message The RAP gives a first idea of “how much it would cost” to complete the SPF It tells us whether this is affordable or not It helps the social dialogue to decide on key priorities It can/should be completed by: - a fiscal space analysis - a poverty impact analysis, - a employment impact analysis for some of the measures for working age population, a comprehensive feasibility studies and, and actuarial assessment.

Thank you!