Kalanidhi Subbarao Human Development Network (Social Protection) The World Bank March 23, 2011

 Public workfare programs (also known as public works programs) provide temporary employment at low-wage rates mostly to unskilled and semi-skilled workers on labor- intensive projects such as road construction and maintenance, rural and urban infrastructure, sanitation and irrigation infrastructure, soil conservation, environmental protection, and more…

Objectives varied by country:  Mitigation of covariate one-time shock affecting the entire country or regions (e.g.drought/floods/macro-economic shocks)  Mitigation of idiosyncratic shocks (temporary job losses)  Poverty relief – employment guarantee schemes  As a bridge to formal employment (training)  Complementary objective: create public goods

Quite effective in consumption-smoothing,  Can perform an insurance function,  Can be rendered complementary to growth (via infrastructure building),  Potential for self-targeting,  Potential for regional targeting,  World-wide experience, including OECD, Africa, Latin America, South and East Asian countries

 Benefits  Transfer benefits = wage rate, net of ◦ transaction costs  Second round benefits from assets  Costs to the government  Administrative costs+wage cost+non-wage cost  Costs to participants: transaction costs

Design issues: critical for success

 The level of the wage rate is critical for determining distributional outcomes,  To ensure program reaches the poorest, keep program wage no higher than the ruling market wage for unskilled labor  Not all countries succeeded in this design; varied experience

 Typically in both middle income and low- income countries, it varied between 0.3 to 0.6  Depends on the nature of the asset being created, and the agency executing the program  Useful practice: assess labor content of various projects, and pick highest, in line with community preferences – Korea’s is good practice  Labor intensity in Korea was 70%

 Choice of assets: community involvement  Seasonality – best to run when seasonal unemployment is highest  Gender aspects: program design can be adjusted to make it acceptable to women  Public/private/NGO/Donor participation

Actual Experience: Korea’s Case

l The main challenge: Restoring macroeconomic stability while limiting costs to real economy and adverse impacts on the vulnerable. l Korea’s financial crisis has dramatically reversed the impressive record in poverty reduction achieved since K. Subbarao - Household Risks and Safety Nets

l Likewise, the unemployment rate increased four-fold... K. Subbarao - Household Risks and Safety Nets

l A combination of Ministry- (supply-)driven and community-(demand-)driven projects l Careful selection of projects with highest labor intensity…estimated labor coefficients for several activities and picked the ones with highest labor intensity l Exceptional attention to quality of assets l Institutional detail: a director of public works supervised the entire operation K. Subbarao - Household Risks and Safety Nets

Evaluation results

India: Nation-wide program: % of participants belonged to poor households.  MEGS: The program contributed to a fall in the severity of poverty from 5.0% to 3.2% (Datt/Ravallion, 1992)  Argentina: 50% of beneficiaries came from the bottom 10%, and 80% from the bottom 20% of the income distribution. 15

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 The potential of the PWP is enormous both in countries that have experiences with these programs and especially in countries that never used them  Particularly helpful to address short term crisis-induced high unemployment  However, adapting PW programs in varying country situations is important 17

 The various steps involved in the launching of PW program were presented in a Toolkit  Toolkit is all about implementation  You can download the Toolkit from the safety nets website:  sources/ / /PWToolkitFinalVersion.pdf sources/ / /PWToolkitFinalVersion.pdf  THANK YOU