Equity and efficiency trade-off in social and employment policy and education, case of South East Europe Countries cases and experiences Regional seminar

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Equity and efficiency trade-off in social and
employment policy and education, case of South
East EuropeCountries cases and experiences
Regional seminar Zagreb, April 2011

• Editors
• Predrag Bejakovic - Institute of Public Finance,
  Zagreb,
• Marc Meinardus - Friedrich Ebert Stiftung, Sofia,
  Bulgaria

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Content of presentation

• Introduction
• The aim of the publication
• Country cases Albania, Bulgaria, Croatia,
  Kosovo, Macedonia, Moldova, Montenegro, Romania
  and Serbia
• Conclusion and recommendation

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Introduction (I)

• Although we are preoccupied or more accurately
  obsessed with our past, we lack a clear idea of
  who we have been. What is more serious, we have
  no desire to know. We live between myth and
  negations we enshrine certain periods, we forget
  others. These exclusions are significant

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Introduction (II)

• South East Europe?
• No, New Spain and Mexico in Octavio Paz For Juana
  
• (Harvard University Press, 1988)

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Introduction (III)

• While it is straightforwardly apparent what
  equity and what efficiency is, the relation
  between those two phenomena is not so obvious.
• The efficiency and equity trade-off is that
  adequate equity enhances the poverty reduction
  agenda and thus, socio-economic efficiency.
• The poor have less influence, less income, and
  less access to services than other better-off
  social groups.

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The aim of the publication

• To analyse and propose measures for alleviating
  the widespread existing conflict between equity
  and efficiency in social policy in the broader
  sense including social welfare, education and
  employment.
• Education, social welfare and the labour market
  are closely intertwined and mutually reinforcing.

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Country case Albania

• Even from its first days of independence in 1912,
  the country was plagued by a host of ills, among
  others, overwhelming illiteracy and epidemics of
  disease.
• Albania was kept Europe's most isolated and
  deprived country overwhelmed by instability and
  poverty.
• It entered a turbulent period of political and
  economic change.

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Erisa Çela about Albania (I)

• Although in the last decade Albania has made
  progress in its social, economic and political
  development, it still faces a number of
  challenges, like
• widespread informal economy,
• various distortions of the labour market,
• inefficient educational system
• huge regional disparities

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Erisa Çela about Albania (II)

• Measures for improvement include
• increase employment particularly women
  participation in the labour market
• a growth of the employment capability of the
  economy, harmonized with a skilled and educated
  human capital
• improve education efficiency and output
  especially secondary education

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Country case Bosnia and Herzegovina

• 15 years after the war, the country is still not
  prosperous and united, but it is poor and divided
  into two entities.
• Welfare system is highly fragmented and comprises
  various almost independent subsystems, with a low
  level of coordination and cooperation between
  them.
• Furthermore, functions are overlapped and
  division of responsibilities is unclear.

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Cenic on Bosnia and Herzegovina (I)

• Analyses relationship between poverty and
  development and underlines
• poverty applies to individuals and households,
  whereas
• development refers to large-scale processes of
  change at societal level.
• Absence of a legal framework at various levels
  results in the exclusion of certain vulnerable
  categories of the population.

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Cenic on Bosnia and Herzegovina (II)

• Improvement could be obtained through
• need that country should finds itself at decisive
  stage in transformation of its socio-political
  and economic structure
• development of more effective system that would
  reduce poverty, inequality and social exclusion
• better coverage of social security and welfare
  particularly among workers employed in the
  informal economy

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Country case Bulgaria

• Supported by more than a decade of consistent
  macroeconomic policies and deep structural
  reforms, joined the EU
• However, country still has to overcome many
  obstacles, including harsh social situation, low
  technological level of economy, significant
  productivity gap and low labour remuneration in
  comparison with the rest of the EU and deeply
  rooted unofficial economy

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Petkov and Vladikov on Bulgaria (I)

• The two central problems
• the demographic crisis (which is accelerated by
  low-cost labour migration and the brain drain)
  and
• economic and social transformation coupled with
  the issue of increasing the standard of living
  and incomes to some acceptable level
• the social security sector is administratively
  regulated top-down and the principles of
  command-administrative decision-making imposition
  are still preserved.

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Petkov and Vladikov on Bulgaria (II)

• Amelioration could be achieved through
• wider introduction and application of modern
  technology in the national economy
• improvements in social effectiveness and social
  equality
• fiscal consolidation and restructure public
  finances, strengthen financial stability, and
  mitigate the social impact of the crisis in the
  short-run.

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Country case Croatia

• Although the multidimensional approach and the
  governance of policies and practices have not
  fully become a reality, the assessment can be
  made that a significant progress in cooperation
  and coordination of various bodies and activity
  areas has been achieved in this area.
• No doubt this is a consequence of economic crisis
  and increased number of unemployed and welfare
  beneficiaries.

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Bejakovic on Croatia (I)

• Absolute poverty is low, but this diagnosis is
  only deceptively consolatory
• Poverty is characterized by stagnancy - those
  who become poor take a great deal of time to
  escape from penury
• There is currently a concern that social care
  services are not necessarily targeted to those
  most in need - despite the high percentage of
  social transfers in GDP Croatia has achieved
  little redistribution.

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Bejakovic on Croatia (II)

• Improvement can be achieved through
• better targeting of social assistance programmes
  to most vulnerable
• more attention should be dedicated to
  deinstitutionalisation and half-day or day-care
  centres and provision of services in the users
  home.
• a need to increase the scope and improve the
  efficiency of currently insufficient labour
  market programmes.

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Country case Kosovo

• It is the smallest state in terms of territory
  and the newest state in the SEE, but with very
  old, deep and serious economic and social
  problems.
• During the 1990s, its economy had already
  suffered from poor economic policies, lack of
  domestic institutions, broken external trade and
  financial links, international sanctions,
  underinvestment and ethnic conflict.

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Jeton Mehmet on Kosovo (I)

• Insufficient long-term economic growth, low
  incomes and limited financial possibility are
  factors that cause a large percentage of poverty.
  
• However, economic growth in the past decade has
  been solid but social assistance programmes are
  inadequate.
• Remittances have helped individual families, but
  they are not a source for financing public
  investments in infrastructure and social
  services.

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Jeton Mehmet on Kosovo (II)

• Poverty reduction could be achieved through
  strategies that lead to high employment-generating
  and long term sustainable growth.
• One of the main pillars for growth is export.
• Creating jobs is a major challenge that needs
  immediate solution. It should be the governments
  responsibility to improve the countrys image and
  attract foreign investors.

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Country case Macedonia

• Apart from the typical transition troubles there
  were also other long-term problems which have
  been prevailing before low level of the
  countrys economic development, higher
  unemployment level and low investment level.
• Furthermore, economic emigration and low
  education attainment have aggravated the
  transition process.

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Milevska Kostova Kotevska on Macedonia (I)

• Main characteristic of social policy
• low or limited financial resources and
  insufficient administrative capacity at the
  disposal to the institutions in charge
• consequently, slow or weak implementation of law
  and reforms
• hardly sustainable and equitable social
  protection system
• effectiveness and equity are questionable

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Milevska Kostova Kotevska on Macedonia (II)

• Conclusion and proposals for improvement
• The interconnectedness between the three areas
  is more than evident - measures undertaken in
  each of them reflect upon the others.
• Enhancing the capacity of the administration and
  of the personnel working in the institutions for
  social welfare and unemployment.
• Employment policy still lacks sufficient active
  labour measures.

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Country case Moldova

• Characteristics
• a complex socio-economic situation, primarily
  linked with increase of poverty after the
  proclamation of the independence
• transition process had devastatingly impacted the
  country's social situation
• heavy external debt burden and high dependency on
  migrant remittances
• unfavourable economic situation has been further
  worsened by political instability

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Cornel Ciurea on Moldova (I)

• Poverty reached its peak after the economic
  crisis in Russia in 1998, when over 53 of the
  population were living on an income of less than
  2.15 USD per day.
• A slowed rate of economic growth, accompanied by
  significant disparity between development in
  rural and urban areas and constant growth of
  inequalities.
• A significant segment of persons engaged in the
  informal economy.

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Cornel Ciurea on Moldova (II)

• Proposals for improvements
• an attempt should be made to find the optimum
  ratio between the desired labour market
  flexibility and the required social protection
• primary health care level should be empowered to
  deal with majority of the health care needs
• attention should be given to long-term efficiency
  in education, social and health policy
• The adoption of measures depends on the ability
  of state agencies to undertake ambitious efforts.

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Country case Montenegro

• Achieved independence in 2006, applied for EU
  membership in 2008 and received candidate status
  in 2010.
• Montenegro has recorded remarkable economic
  growth in recent years, which has created
  opportunities and enabled progress in social
  situation and equity.
• There are significant differences in the extent
  of the poverty between the regions.

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Jadranka Kaludjerovic on Montenegro (I)

• Main problems
• amounts of social benefits are not sufficient and
  only reduce the vulnerability of families
• the timing of social assistance benefits is poor
  and all social assistance benefits are paid to
  beneficiaries with significant delays
• the educational system is still inefficient, as
  the learning outcomes are very low and labour
  market needs are not fulfilled
• financing of education is still fully centralized

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Jadranka Kaludjerovic on Montenegro (II)

• Main proposals for improvement
• significant efforts have been made to increase
  access to education
• actions have to be focused on further enrolment
  of children in pre-primary education institutions
  and an increase of enrolment, attendance rates
  and quality of education
• there is a need to implement planned
  decentralization, in the first line to make
  transfer of the financing on local government

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Country case Romania

• The prospect of becoming an EU member
  constituted, for more than a decade, a solid
  external incentive for the transformation of the
  country.
• Experiences show unrealistic expectation of many
  transitional countries that all social problems
  would be solved with EU accession.
• Romania is in spite of the accession to EU faced
  with serious and overwhelming economic crisis and
  the many difficulties of the integration,
  primarily with many working poor people.

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Gabriela Cretu on Romania (I)

• Despite many difficulties, there was huge support
  for the accession to the EU.
• For Romanians joining the EU was the equivalent
  to a better quality of life, more and better
  jobs, freedom of movement, their expectations
  were high.
• Labour migrations in the short-term palliate
  poverty and remittance improve unfavourable
  social picture, but in the long-run can endanger
  family links.  

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Gabriela Cretu on Romania (II)

• Main proposals for improvement
• investing more in cohesion policies could be a
  balanced solution for achieving higher efficiency
  and a more equitable society
• a generous level of social protection and lower
  inequality do not necessarily lead to lower
  economic results
• broadening social security programmes may enhance
  firms flexibility, facilitating labour mobility
  and social services could become a significant
  source of new jobs

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Country case Serbia

• In Serbia, war, sanctions and economic crisis
  produced the unprecedented GDP drop, huge
  inflation, salaries reduction, unemployment
  rise, poverty and economic collapse.
• The new democratic Government (2000) prepared a
  package of reform proposals whose goal was to
  create a real market economy as well as a strong
  social policy.
• The period after the democratic changes has been
  characterized by the reforms directed toward the
  creation of macro-economic preconditions for a
  sustainable and stable economic development.

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Pavlovic and Arandarenko on Serbia (I)

• By 2008, dynamic economic growth, stability of
  prices and exchange rate were achieved along with
  the constant growth of foreign reserves.
• Mandated the sell-off of the old, loss-making and
  inefficient socially-owned enterprises enabled
  the redistribution of resources, and the assets
  redeployment in trade and services.
• The creation of a large service sector after 2000
  came at a price it was paid by the gradual
  devastation of manufacturing, and agriculture.

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Pavlovic and Arandarenko on Serbia (II)

• Main proposals for improvement
• Increase the relative share of wage tax revenues
  and decrease the relative share of revenues from
  social insurance contributions in the overall
  labour tax revenue
• Reduce the tax burden on labour of low-wage
  workers
• Ensure labour tax progressivity by introducing
  three progressive non-zero tax rates on labour
  income
• Cut the overall combined social insurance
  contributions rate.

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Differences are bigger than similarities

• Due to various socio-economic situations in the
  observed countries and different contributions of
  authors to the book, it is almost impossible to
  perform inter-countries comparisons regarding
  situations, problems and solutions for efficiency
  and equity trade-off, but.

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for all observed countries it is important to

• eliminate (or at least reduce) corruption,
  improve labour regulation and its implementation
  and enhance the business start up regulations
• insure equitable access to quality public
  services
• perform institutional reforms regarding
  transparency, accountability and good governance
• significantly improve weak public administration,
  ineffective oversight of regulatory authorities
  and inefficient judiciary that hinder economic
  and social development.

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Conclusion for all observed countries

• There is no universal model for all countries,
  but there are some indications that SEE countries
  could benefit from establishing a closer
  relationship between employment policy and social
  policy.
• In countries with high (particularly long-term)
  unemployment exposed to poverty and social
  exclusion, the interaction between benefit
  systems and employment policy is significant.
• As countries move to placing an emphasis on
  active jobseekers, the link between policy and
  the delivery of educational, social and
  employment services becomes more important. In
  SEE this link seems to be missing.

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Final message

• Liberalisation of economy and related social
  policy is both an opportunity and a treat.
• It is an opportunity because it set society free
  and breaks with overregulation in economic and
  social life.
• It is a treat because many social groups are
  vulnerable but wit adequate policies and measures
  they can be helped.
• We are the masters of our destiny.

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• THANK YOU FOR YOUR ATTENTION