The welfare dilemma
Aren’t social programmes supposed to get people “off” welfare rather than “on” it? Or at the very minimum, shouldn’t it be temporary rather than permanent?
According to the Inter-American Development Bank, “Trinidad and Tobago has an extensive social protection system with more than 120 programmes”. Some are public assistance, school feeding, economic rehabilitation, old age pension, housing subsidised by preferential rates, agriculture incentives, education, emergency housing repair, school supplies, uniform, clothing, emergency cases fund, funeral grants, hardship relief programme, house rent subsidy, legal aid, medical equipment, pharmaceuticals, conditional cash transfers, disability assistance, special child grant and a myriad of other social programmes. There are also social employment programmes such as URP and CEPEP. In addition to individual social contributions we have corporate social programmes which are just as many.
T&T has essentially been booming from riches primarily of the energy sector. Since 1990 T&T’s budget has increased almost ten-fold from around $6 billion in 1990 to close to $61 billion in 2013-14. In many instances the increased prices of oil and gas has outstripped inflation, but the increase in welfare has also increased substantially.
According to the Central Bank website, in 1991 Central Government Transfers & Subsidies (T&S) was $1.31 billion (2011: $19.72 billion) and Central Government Expenditure on Wages & Salaries (W&S) was $2.22 billion (2011: $7.27 billion). In 1991 T&S was 60% of W&S but in 2011 T&S surpassed W&S by approximately 280 per cent.
In the main these T&S have been directed to both the non-working and working population such that low, middle and upper classes are benefitting primarily as a result of the energy sector’s earnings. The allocation to social contributions has outstripped productive work.
A large chunk of T&S funding has exceeded the wages and salaries of productive work and can lend credence to the argument that social welfare programmes, subsidies and other forms of assistance to the citizenry do not, in the main, work to get people off of welfare. They only encourage more welfare. It is also clear that T&T is not as competitive as it should be. Evidence of this is seen in the 2013/14 Global Competitiveness Index which indicates that T&T ranked 92 out of 148 countries.
One indicator of whether or not our social programmes get people off welfare rather than on welfare is the poverty rate. Various reports using arguable methods of poverty assessment indicate that poverty averages around 20 per cent to 25 per cent. I submit that as long as people are kept on welfare, rather than taken off it, poverty will either remain the same or likely be worse in times of economic hardship. The more incentives placed to encourage social dependency over productive work, the higher the probability that poverty will remain.
T&T’s social system has taken a further detrimental path, in that the over 1,500 per cent increase between 1991 and 2011 in T&S have been directed to even persons who are into productive work. The problem with this is that the poverty — welfare vicious cycle is now embedded within the middle income group. It is argued that the redistribution takes place within the income categories of middle to lower classes which, in effect means that the poor middle class are indirectly forced to pay for other poor which is supported by the broader increase in T&S over W&S.
According to the World Bank “the duplication in benefits gained by some provides them with a strong disincentive to leave the welfare system, while the absence of benefits for others leaves them destitute”.
There is no question that the social welfare programmes and associated funds are misdirected. A phased approach such as the one which is being used in the fuel subsidy is an appropriate response. However, other social contributions would require a different approach.
If the average low-income family earns, let’s say, $4,000 per month but out of that has to pay for travel and other expenses to get to and from work. Another family receives social contributions either by cash or other direct programmes averaging $2,000-3,000 per month. At some point the worker will rationalise that it is better for his family to be on welfare and get off productive work. This may not be as far-fetched as it may seem. If we go a bit further, persons who earn $6,000- $8,000 may consider that his/her taxes and expenses, when deducted, will be basically the same as the family on social contributions and therefore be “incentivised” to go on welfare.
A different formula must be developed, the central objective of which should be to get persons off welfare and on to more of self-sufficient productive work. Not only must individual subsidies be withdrawn on a phased basis but attention should be placed on withdrawal of corporate subsidies.
Singapore has a concept of workfare in which a combination of productive work and welfare grants are both used so that the balance of non-productive funds (welfare) can be balanced with productive work (workfare) coupled with an element of savings. Also these programmes should focus on those who need them most. Canada has a strong social welfare programme, but equally they have a strong revenue collecting architecture, corruption is low, and significant attention is paid to the “underground” cash economy.
• Anand Heeraman is a certified fraud examiner, doctoral candidate in political economy and works
regionally and internationally