PUBLIC WORKFARE: Overview of International

Experience

Kalanidhi SubbaraoHuman Development Network (Social Protection)

The World BankMarch 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…

What is Public Workfare?

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

Objectives……

• 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

Rationale….

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

Benefits and 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

Design parameters (a) Wage rate…..

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%

Share of wages/Labor intensity.

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

Other design features

Actual Experience: Korea’s Case

The main challenge: Restoring macroeconomic stability while limiting costs to real economy and adverse impacts on the vulnerable.

Korea’s financial crisis has dramatically reversed the impressive record in poverty reduction achieved since 1990.

K. Subbarao - Household Risks and Safety Nets

Korea’s economic reform and Safety Nets: The Context

Likewise, the unemployment rate increased four-fold...

K. Subbarao - Household Risks and Safety Nets

Impact of the crisis…..

Figure 2. Unemployment Rate in Korea: Actual Rates vs. Seasonally Adjusted Rates

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Time Period

Actual RateSeasonally Adjusted Rate

Source: Ministry of Labor

A combination of Ministry- (supply-)driven and community-(demand-)driven projects

Careful selection of projects with highest labor intensity…estimated labor coefficients for several activities and picked the ones with highest labor intensity

Exceptional attention to quality of assets Institutional detail: a director of public

works supervised the entire operation

K. Subbarao - Household Risks and Safety Nets

Getting the design right…..…..

Evaluation results

India: Nation-wide program: 60 - 70% 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.

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Evaluation Results: Some examples

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Argentina: HH income with and without PW transfer

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

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PW potential

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:

http://siteresources.worldbank.org/SAFETYNETSANDTRANSFERS/Resources/281945-1131468287118/1876750-1274296604081/PWToolkitFinalVersion.pdf

THANK YOU

PW Implementation: Toolkit…..