8. Welfare Provisions
8.4 Social Assistance
Social assistance measures (cash benefits based on selection) and safety net programs are decisive elements of different types of social policy regimes. The transition process in the CEE countries from the command-based to a market-based economy took place during a period in which both political and economic forces argued for the advantages of neo-liberal solutions. Thus, the new CEE states simultaneously had to lay the basis for their social protection systems (by creating independent social insurance funds and organiza-tional bodies, and designing legislative frameworks for social policy), and dismantle the existing welfare institutions that were declared to be too costly. These countries therefore fell into the trap of creating a welfare system while making cuts in social expenditures in order to mitigate budgetary crises. Furthermore, these processes took place during a period of high unemployment, increasing poverty and social inequalities, an aging population crisis, and other difficult challenges. The new social policy sector was charged with finding an answer to these problems. It was hoped that this sector could help to improve the quality of life of millions of people, to prevent the impoverishment of the middle classes, and to provide assistance to meet the basic needs of those living in extreme poverty.
The legacy of the past, especially in the case of Ukraine and to a lesser extent Latvia and Hungary, resulted in special difficulties for the creation of new welfare systems. As a consequence of the central role played by the army during the Communist period, the importance of certain branches of the economy (such as mining), and the large number
of people affected by the Chernobyl disaster, a huge (especially in Ukraine) system of targeted benefits and services or, in other words, of privileges was established.
The moral and humanitarian foundation of these provisions is based on a historical political compromise made between the norms of the Soviet past and those of the newly independent states. The granting of any kind of privileges, however, contradicts the principle of equal treatment—the basic political right in any democratic system. Moreover, it is impossible to compare factors contributing to low labor market participation and low incomes (disability due to war, structural unemployment, etc.). The legacy of the past places a great burden on the new social protection systems because any move away from previously instituted norms becomes highly sensitive politically.
One could easily arrive at the conclusion that any kind of income-based cash benefit scheme would be more democratic and equitable than this current compromise. There are other factors, however, that contradict this assumption. For example, all three countries have been hard hit by the problems related to the “shadow” (informal) economy, making any kind of income test unrealistic. (In Ukraine, its proportion is the largest relative to the normal economy. According to World Bank estimates, the informal economy accounts for 47% of its total GDP.)
Selection based social assistance programs may be founded on normative selection (eligibility criteria formulated in legal regulations) and may be exercised according to the discretion of certain organizational units or that of the bureaucracy. In the latter case the risk of infringing upon rights of the beneficiaries is stronger.
Social assistance systems—whatever other kinds of factors are taken into consideration when deciding on the eligibility criteria—are primarily based on means testing. In all three countries, selection is based on income, property, work, and behavior tests.
The purpose of means testing is partly to relate the recipient’s income to a certain
“official” standard, the administrative poverty line. In this respect the three countries exercise different practices. In Hungary, the minimum old-age pension is considered the appropriate indicator, or relating point. In Latvia the consumer’s basket is used for means testing, and in Ukraine the Parliament sets the poverty line and all the basic social payments are calculated on the basis of the minimum wage. The three countries use the per capita household income as the “basic measuring unit” of income when deciding on social assistance entitlements.
The most relevant forms of income-tested social assistance in the three countries are some form of regular social assistance for low-income families and housing allowances.
Targeted assistance to poor families became available in Ukraine beginning in April 1999. This benefit aimed at providing certain types of low-income families with a minimum guaranteed income. According to statistical data from January 2000, more than 30,000 families applied for the benefit, of which 7,165 families (23%) were provided with it—
a figure that definitely does not reflect the number of those living in extreme poverty.
(The average sum of the grantee benefit was UAH 12 per month.)
In Latvia, low-income family assistance is paid if family income is below LVL 12 per family member per month or if it is less than 75% of the crisis subsistence minimum per family member established by the Cabinet of Ministers. The amount of benefit is calculated as the difference between LVL 12 per family member and the total income of the poor family. Additionally, a family is recognized to be poor if: (1) it does not have fiscal resources exceeding LVL 200 per month, (2) it does not own any property whose value is greater than LVL 3,000, or (3) it has no providers who are able to provide food and it has not entered into agreements on the supply of food.
In Hungary, long-term unemployed people and elderly citizens not entitled to pensions are generally the beneficiaries of regular social assistance. (The new name of the provision or elderly citizens is “old-age benefit.”)
In Latvia, if a person earns an amount below the minimum subsistence income that in itself entitles them to financial support. In Ukraine and Hungary, certain low-income groups are provided with supplementary benefits.
In Latvia and Ukraine, the tone of the regulations is more suspicious than in Hungary.
The benefit is granted for a period of three months if the family has a member who is able to work, and for six months if the family members are incapable of working.
In each country, numerous documents are required to prove the eligibility of a family for financial support. In all three countries, the authorities have the right to make home visits and to collect information on the financial situation of the applicant family.
Concerning income, in Ukraine the size of the land of the potential recipient and in Latvia the property and the family structure as well as data at the disposal of other legal and natural persons—are taken into consideration. In Latvia, the benefit is granted to ensure that after the settlement of rent and utility payments the family is still left with not less than 75% of the subsistence minimum per family member for the purchase of food.
The majority of the activities of the Department of Welfare are focused on administration. The staff is enormously overloaded, one official in charge deals with 1,800 files on average annually.
In a city of 113,000 inhabitants the Department of Welfare made decisions in more than 37,000 cases, and (in 1997) accepted more than 27,000 applications.
SOURCE: Case study, city of Nyíregyháza, Hungary.
In Latvia and Hungary the decision is made at the local level, whereas in Ukraine the middle level of governance provides the cash benefit from a given rayon and out of the rayon‘s budget.
... the fact that Shchyrets has the biggest population size in Pustomyty rayon does not mean that the population of the particular sector deserves special attention. On the contrary. Both in the course of collecting quantitative information and during the personal interviews with the key figures of the sector (in the sphere of social policy) it was discovered that all the information
concerning the performance of social policy in Pustomyty rayon is concentrated in the rayon center—Pustomyty city, which is a kind of organizational center of rayon social policy.
At the same time, the local self-government in Shchyrets does not pay any social benefits out of the town budget. In 1999 the only type of social assistance provided by the local self-government to the citizens was the cash allowance in case of death (because of their status these citizens could not obtain the cash allowance from the Employment Fund or from the Social Insurance Fund of Ukraine). Nevertheless there are two people among the eight workers of the town council that specialize in drawing up documents on the compensation of expenses for communal services (subsidies). The main expense item of the town budget is concentrated on the support of three schools, two pre-school institutions, and a medical/obstetrics station SOURCE: Case study, Ukraine.
In Latvia, the Ministry of Welfare has prepared the concept “On Minimum Income Guarantees to Poor People” providing suggestions on how to ensure, for people who are unable to earn a living by themselves, a guaranteed and uniform minimum level of income for the whole state. In this respect, plans have been made to set the guaranteed minimum level of income at a national level, to define the obligations of local governments to ensure this minimum income, and for state participation in financing of such support. This concept will be the basis for amending the law On Social Assistance.
In all three countries housing costs have increased considerably, resulting in payment problems for a significant portion of the population. Several government measures have been created to assist debt management, including housing allowance.
In Ukraine, the housing subsidies program was introduced in 1995. This is a monthly-targeted benefit for citizens that reimburses expenses paid on rent and rates (communal services). The eligibility criteria are centrally determined: the level of income, the percentage of the housing costs relative to the disposable income of the family (15–20%), the housing
“norm” (21sq.m per-capita). The decision-making body operates at district level.
In Hungry, although the Social Act defines the framework of the eligibility criteria, local governments are entitled to set the housing “norms” according to the standard housing stock within their constituencies.
In Latvia, the housing allowance—similar to low income family allowance—is granted in order to ensure that after the settlement of rent and utility payments the family is still left with not less than 75% of the subsistence minimum per family member for the purchase of food. In order to be granted the benefit, families must file a statement about the necessity of the social assistance and a proposal concerning the size of the benefit.
The applicant for the benefit submits an application, a reference from his/her place of residence, a declaration on the means of livelihood of his/her family, a record-book on rent payments, and presents a document that confirms expenses on the purchase of fuel at the time that the benefit is granted.
In all three countries, the benefits, except in certain cases, are paid directly to the communal service companies.
Child protection benefit is a very important additional form of means-tested regular social assistance in Hungary, and is given to families with children.
In Latvia and Hungary, local authorities may create, within their budgetary means, additional forms of social assistance. In Latvia, the most frequently granted benefits are:
benefits for the payment for medical bills, benefits for meals and food, and benefits for the upbringing and education of children.
Freedom of choice is limited if cash benefits can be transferred into in-kind benefits.
In Hungary, for example, it is legally possible to give part of the child protection benefit in the form of free school meals. In all three countries, housing allowances are a special type of in-kind benefit, as the financial resources are directed to the service providers instead of the consumers.
There are 16 divisions providing in-kind and cash assistance including “clothes banks.” In 1999 they provided clothes, shoes, means of rehabilitation, etc., for a total of about 69,000 low income pensioners, the disabled, people living alone who are unable to work and families with children.
SOURCE: Case study, Kyiv, Ukraine.
When evaluating systems of social assistance the maintenance of the real value of benefits is a key issue. Indexing may occur according to a legally regulated mechanism, or may be dependent on the will of the existing political elite, which is the case in all three countries.
In each country, “workfare” (or, as it is expressed euphemistically in the scientific literature, “activation”) is a dominant ideology. In interviews, local politicians repeatedly advocated the notion that people have to work for public assistance.
Various co-participation activities have been introduced for clients of social assistance. Employees themselves use the term “to work for social benefits.” These are various activities involving tidying up the town. “A man comes. If we see that he can work, then we use the situation.”
SOURCE: Focus group discussion, Dagda, Latvia.
In Latvia, if a person who is able to work and is a potential recipient for poor family social assistance, they must register with the Employment State Service and, prior to granting of the benefit, the local government may request that they participate in com-munity jobs or activities that help develop employment skills.
In Latvia, poor family social assistance benefits are not granted to a person who:
• has been dismissed from work at their own request or is blameworthy thus leading to their dismissal. In this case, the person may request benefits six months after dismissal;
• has refused the job offer or community job, except cases when the offered job or community job would not allow them to take care of a disabled child or a child who does not yet attend school;
• has refused to take part in activities leading toward the development of occupational skills and employment, except in cases when the activities would not allow them to take care of a disabled child or a child who does not yet attend school;
• has refused social and medical rehabilitation.
Unemployment results in lack of incomes; people have nothing to do. Dagda has a high unemployment rate—14%. One of the causes of the high unemployment rate might be the fact that people are interested in registering as unemployed as they then have the opportunity of participating in paid temporary community jobs which, though payment is small, still provide a source of income. When granting benefits, account is taken of the participation of the inhabitants in activities for tidying up the civil parish, which are organized every Friday. For their school lunches children work in the school fields.
SOURCE: Focus group discussion, Dagda, Latvia.
The more the number of preconditions to gain entitlement, the more vulnerable are the low-income families and individuals.
Means testing is often accompanied by procedures designed to control the reliability of the applicants, such as home visits, endangering even the first generational rights of the future beneficiaries. If the means tests become “character-tests” (as often happens), paternalistic, and discriminatory practices may occur.
Often, social workers carry out means testing for determining cash-benefit entitlements.
This practice is absurd because this kind of control cannot be in line with the philosophy of the helping professions. Moreover, it makes the programs extremely expensive as a considerable portion of the expenses go to paying the wages of the “testers.” Further, it is bizarre to imagine that trained social workers and social work agencies are better able to measure incomes than tax officers.
A significant part in granting assistance is played by the fact that inhabitants of the town know each other very well. Often the social worker already has his/her opinion about the client and whether he/she deserves or does not deserve assistance—“we know all of them.” One of the traditional ways to achieve changes is control, respect, and fear. It was particularly stressed by the representative of the Custody Court working with high-risk families where parents do not take care of their children—“we control them.” It works as people have a respect for the representative of the Custody Court and the social worker and it motivates them to be better.
SOURCE: Focus group discussion, Dagda, Latvia.
The application of these kinds of tests is not only extremely stigmatizing but may discriminate against the most needy. One cannot properly evaluate the effectiveness and efficiency of the Ukrainian social assistance system, but information is available on the
consequences of mistargeting in the Hungarian and Latvian means-tested income support schemes. In one interview conducted in Latvia, the interviewee stated: “It can be said that the most active applicants for assistance are well informed about all types of assistance. However there are also people who are entitled to assistance but they are incompetent and socially inactive.”
Only in the case of target benefits can the social worker examine the living conditions of the applicant. All other benefits are provided on the basis of various certificates, which are very often faked. If a person possesses two apartments he or she cannot receive a subsidy on either of them.
Also if a person has bought an apartment then he or she cannot apply for the subsidy for one year. In other cases a person is not responsible for submitting inadequate information to the Social Protection Bodies. Our Ministry tries to resolve this problem in co-operation with the TACIS project. We have now introduced such a position as a social inspector. Inspectors carry out on-the-spot checks of the living conditions of applicants for social assistance. Nevertheless, apart from the Act on the introduction of the post of social inspector there are no other regulations that would provide the inspector with the authority to carry out the examination and on the basis of this examination to refuse the provision of social assistance.
SOURCE: Representative of the Main Department of Social Protection of Kyiv City State Administration.
When analyzing any kind of social security system, the first question to be asked is what are the legal bases of the system. In all three countries, the legal bases of social assistance are established through various acts, and in Latvia and in Hungary local self-governments have the right or the duty to adopt these in local regulations. Legal regulations, however, only create the conditions for social support in principle. In reality, the everyday practice—particularly in Ukraine—may differ significantly.
There are two types of social assistance concerning the means of regulation in Hungary. Even though fewer people are provided with financial support in a normative way and more are based on discretion, only in the cases of housing benefit, crisis assistance, and funeral benefit can the local self-government enforce its own ideas. Determination of the eligibility criteria in the various government acts neglects the local conditions and special local needs. This phenomenon can be interpreted as a form of centralization. On the other hand, the eligibility criteria of financial support based on discretion are not connected to needs’ assessment, but they largely depend on the local power relations, the financial resources, and the professional skills of the responsible people even in a city as big as Nyíregyháza—the county seat. Efficiency and effectiveness have never been analyzed.
SOURCE: Case study, Szabolcs–Szatmár–Bereg County, Hungary.
In order to make any schemes rights-based, an additional problem must be solved, viz. the granting of the possibility and the appropriate mechanisms to appeal against the entitlement decisions made by the authorities.
In all three countries, the first level of the appeals process is the same organizational unit that decides on the entitlements of the applicants.
Article 40 of the Ukrainian Constitution and the Law of Ukraine On Citizens’ Appeals (1996) regulate the Ukrainian appeals process. In order to protect their social rights, citizens may appeal to the District Administration, to the executive bodies of city and district councils, and to the court.
In Latvia, if the local government decides against providing social assistance to an individual, its duty is to issue a comprehensive written refusal to the applicant. Complaints on the decisions taken by the local government about the eligibility of a given family to be considered as a poor family, the granting of benefits, or the assessment of the provider’s options are reviewed by the council of the local government concerned. If the decision of the local government council does not satisfy the individual, they have the right to submit a complaint to the court. A complaint may be submitted to the Social Assistance Fund concerning the decision of the council if the social assistance is financed from public resources. Disputes on the exercise of rights prescribed by the above law are re-viewed by the court under the procedure prescribed by law.
In Hungary, it is necessary to differentiate the locally regulated forms of social assistance and those regulated in an Act. In the latter case, the refusal of an application may be contested in court whereas in the former case legal control may be requested only from the office of the County Government Commissioner. This practice reflects one of the most important controversies of decentralized governance—the principle of legal security is facing the requirement of local autonomy.