Productive Inclusion: Combining Safety Nets & Economic Inclusion

Inaugural Face-to-Face Meeting2-4 December 2019Bangkok, Thailand Based on Morgandi and Santos (2019) – SPJ Core Course & Leite (2019) –

Productivity Session, Nepal conference

Why focus on productive inclusion?Mutual obligation While most countries feel morally obliged to help the poorest, it

is broadly agreed that government should ‘help people to help themselves’. Beneficiaries also tend to prefer not to depend on the State indefinitely.

Fiscal The benefit of cash transfers is for the most part only transitory. Investing in productive inclusion helps ensure social safety net programs remain fiscally sustainable by reducing dependency.

Instrumental Productive inclusion can help households exit the ‘poverty trap’, establishing themselves on a pathway to sustainable wellbeing.

Risk management Productive inclusion can help individuals cope with transitory and permanent shocks and facilitate policy reform.

Different aspects of productive inclusion

• Activation – encourage those who are not active in the labor market to participate

• Graduation – help SSN program beneficiaries to “exit” temporary assistance

• Productive safety nets – focus on moving out of vulnerability and extreme poverty into resilient livelihoods

Productive inclusion requires coordinated interventions on demand and supply sides

Workers

Product marketEnterprises

Interventions to encourage and enable individuals to work

Reforms to promote competition and open up credit and product markets to small entrepreneurs

Labor market interventions and regulatory reform

Market access and information

Labor market intermediation

Supply side

Demand side

Supply side constraints• Basic cognitive skills (literacy, etc)• Job-specific skills• Behavioral/soft skills

Employability barriers

• Care-taking and home duties• Lack of empowerment• Mobility constraints• Social norms/family expectations

Participation constraints

• Lack of information on opportunities, returns• Stigma or misconceptions about certain jobsLack of information

• Reduction of cash benefits• Tax implicationsIncentive constraints

Demand side constraints• High hiring and firing costs• Costs of compliance with regulations• Structural disincentives to expansion

Labor regulations

• Search costs• Cost of training new workersUpfront costs

• High labor and capital costs• Weak macroeconomic environment• Relative attractiveness of capital over labor

Insufficient economic activity/demand

• Certain groups (e.g. women, disabled) may be disadvantaged• Stigma about certain groups’ abilities (youth, minorities)• Lack of awareness of available workers

Stigma and misinformation

• Demand is often especially deficient in rural areas• Employers may not provide transport or access to workGeographic constraints

Productive inclusion interventions in social safety nets

Three main approaches:• Wage employment• Entrepreneurship• Increased productivity of household-based activities

(subsistence agriculture, self-production);

When the target group is Social Safety Net beneficiaries:• Beneficiaries are by definition vulnerable, with multiple constraints• Profiling is key to understand work-ability and interests• Benefits and services should be coordinated• Coordination between multiple entities is required• Monitoring and evaluation are crucial to track progress, time exit

Urban• Vocational training courses• Internships• Entrepreneurship assistance and

training • Careers counselling• Job search assistance /

intermediation • In-work benefits (childcare support,

transportation allowance, subsidized social insurance, earned income tax credits)

• Subsidized employment (wage/employment subsidies)

The best approach depends on the contextRural

Support to family farming activities:• Extension services to improve

agricultural production and ensure the ready availability of inputs

• Cooperatives or self-help groups• Training on technologies such as

high-yield crops• Access to credit.

Non-farm employment opportunities:• Labor intensive public works (e.g.

road work, embankments, irrigation channels)

• Skills training and access to credit

Entrepreneurship trainingFormal/professional educationLabor market intermediationAccess to credit / insurance

Livelihood supportPublic works / cash transferAsset transfersCommunity infrastructure

Entrepreneurship coachingCooperatives and product market developmentSkills trainingOn-the Job Training

..and may need to evolve based on the individual’s situation

On the demand side, much can be done:• Identification of vacancies in specific industries

• Partnerships with private employers

• Internship programs

• Structured apprenticeships

• Sheltered markets

• Quotas for specific groups (e.g. PWD)

• Subsidized labor demand

• Targeted wage subsidies

Complementary policies are also needed

Macro and fiscal policies Good governance Productivity and

innovation Labor regulations Education and human capital

Active labor market programs and productive

inclusion

FAO summary of 17 impact evaluations:

Joint agricultural and social protection interventions have positive impacts on:

• Wellbeing that go beyond that of any individual intervention

• Savings and access to formal credit

• Investment in assets and land

• Stimulated diversification and more profitable and decent employment• Rural productive inclusion programs perform best when cash and in-

kind transfers are combined with training, mentoring and psycho-social support

Source: Veras Soares, F., Knowles, M., Daidone, S. & Tirivayi, N. 2016. Combined effects and synergies between agricultural and social protection interventions: What is the evidence so far? Rome, FAO

Evidence from Rural Livelihoods Programs

Evidence from Entrepreneurship Programs• Combination of interventions to address main constraints improves

outcomes

• Impacts on labor market and business activity are significantly higher for youth and more educated beneficiaries

• For youth and females, largest effects come from access to credit

• Business training contributes to increased earnings among youth and more educated beneficiaries

• Microcredit plus training works better than other combinations

• Microcredit generally has more impact for existing entrepreneurs

• Delivery through non-government entities (such as NGOs) increases program effects

Source: Cho & Honorati (2013) Entrepreneurship Programs in Developing Countries: A Meta Regression Analysis, World Bank.

Conclusion

To achieve structural change, social protection must go beyond cash transfers

Well-designed productive inclusion programs can have a positive impact on employment, but:

• Technical skills training is not enough. Socio-emotional skills are required for a growing number of jobs. On the job-training and mentoring are also needed

• Not everyone is an entrepreneur. Evidence shows that entrepreneurship programs are most effective for those who already run businesses

• No program or design is effective in all contexts. Solutions need to be tailored to individual circumstances and location

ConclusionSome best practices on the implementation side:

• A case management system that offers individualized service and regular follow-up

• A good assessment tool to identify barriers to work • Various programs to address different needs, circumstances• Referral to other services (for example, training or matching)• Clearly defined roles and responsibilities, at central and local levels• Information on local labor market needs• Involvement of private sector with performance-based contracts

Thank you