12369 Human Resources Development and Operations Policy The World Bank September 1993 HROWP 10 PROTECTING POOR JAMAICANS FROM CURRENCY DEVALUATION Margaret E. s rosh Judy L. Baker Papisnthis aedesarcnalfomap.bimfoteWcdRBmk lbCprs5p1 y8duanpoisdresef analyis iradad to encourage disust sad cnml utaion and the use of such apaer should tke acunt na iopvisitl dhrce. Ibe findings. _neqstainJ andcodusiana eupred in dtis pper ae eniey those of the audw(s) and shold not be anbhed iany manner to the Wor Bank to its affiliad organizati, or to manbe of is Bod of Bxcutive Disrecoe or the ountis ty epresat HRO Dissemination Notes Contact for Tide Date noe No. 1 Tbbacco Death Toll February 19, 1993 L Maica 37720 No. 2 The Benefks of Education for Women March 8. 1993 L Malca 37720 No. 3 Poverty and Income Distribution In Latin March 29. 1893 L Malca America 37720 No. 4 BIAS Is Herel April 12, 1993 L Malca (Committee on Business Innovation and 37720 Simplification) No. 5 Acute Respiratory Infections April 26, 1993 L Malca 37720 No. 6 FrCm Manpower Planning to Labor Market May 10, 1993 L Malca Analysis 37720 No. 7 Enhancing Investments in Education Through May 24,1993 L Malca Better Nutrition and Health 37720 No 8 Indigenous People in Latin America June 7. 1993 L Malca 37720 No. 9 Developing Effective Employment Services June 28, 1993 L Malca 37720 No. 10 Social Security: Promise & Pitfalls in July 12, 1993 L Malca Privatization: Expefience from Latin America 37720 No. 11 Making Motherhood Save August 2, 1993 L Malca 37720 No. 12 Indigenous People and Socioeconomic August 30, 1993 L Malca Development in Latin America: The Case of 37720 Bolivia No. 13 Participatory Povey Assessment September 20, 1993 L Makca 37720 Protecting Poor Jamaicans from Currency Devaluation: Some Guidance for the Safety Net from the Survey of Living Conditions by Margaret E. Grosh Judy L. Baker ABSTRACT Ihis paper provides a valuable example of how the analys of recent household survey data and a detailed kmowledge of a country's economy and its specific progms can produo powerful policy conclusions. 'Me work was carried out based on an immediate need from policy-makers to evaluate te Government of Jamaica's short-term options for improving its safety net in light of a sudden, severe cunrency devaluation. The paper presents a brief background on how the devaluadon may make its effects felt, on who the poor are, the extent to which they may be affected, and tieir possible coping mochanisms. Among the findings, the authors detrmine that inflaton will be more of a concern than the dislocation of labor, with the most significant impact on food prices. Incres in the cost of pheuticals, housing, and school fees will not have as big an effect on the poor. The paper then looks at the incidence and coverage of seveal pgrams relevant to the safety net. These conclusions have important implications for guiding policy. With modest analytic effort, smch work should be replicable in other countries with a comprehensive household data set and an active policy dialogue. The information presented is by no means intended to be comprehensive, but rather aimed at highlighfting the value of simple analysis of quality household data in carrying out policy-oriented operational work. Contents Secton : Devaluadon andEnsuingChanges ........................... I YheP robebam ...... ................................. I Mem,hanisms of TrAnsmit ................................. 1 Section I: Who Are the Poor? .................................... 3 Section m: Vulnerability to Employment Changes ........................ 6 Whoare the Unemployed in General? ........................... 6 WhoMayLose TherJobs andWereWmlW heyFindNew WorW ......... 6 Recourse to Secondary Workers . .......... .. ....... . . . . 8 SectonIV: VulnerabilitytoInflati on ofKeyPrices ....................... 8 FoodPrims ............................., 8 Exam Fees ............................. 10 Phannaceutical Costs ....... .............. ......... 11 Transport Costs. . ................ . . .... . 12 Housing ............ ? ....*o...o..*o.. ...13 SectonV: Targeting andCCovegeofSelectd SocialPrograms ............... 13 PowStamps ................................... ...... *. 13 School Feeding .......................................... .15 Exam Fee Waivers ............................ S S *SS**S ...... 15 Bus Token Subsidies ....................................... . 15 Section VI: Conclusions ........................................ . 18 Where the P will be Felt ........................... .. .... 18 ProgramIndications ... .................................... 18 References ........ ........................................ 20 Section I: Devaluation and Ensuing Changes The Problem The Government of Jamaica has embarkec on an ambitious progam to progressively librit its economy. Following other reforms spaced over everl years,, the govremment fully liberlized the exchange rate in October 1991. The result has been a sharp depreciation in the Jamaican dollar - from J$10:US$1 in August 1991 to over J$22:US$1 at present.1 With such a large movement in the exchange rate, the Government has expressed concern over its effects on the population's living standards, especially on the poor, and a desire to expand its safety net programs. This paper is written as a very quick attempt to assess how the poor may be affected by the devaluation and how they might be helped with the safety net. It was drafted as part of the preparation for an 'emergency" mission in January 1992 to aid the govemnment in thinldng about these issues. As such, the emphasis is on providing a quick but broad oveiew of the issues rather than an in-depth treatment of a few programs. The paper provides some background on how the devaluation may make its effects felt, on who the poor are, the extent to which they may be affected, and their possible private coping mechanisms. A brief analysis of who might be reached and who might be left out of several alternate programs is given here. The paper serves to orient more in-depth examination of alternate programs which will lead to recommendations for their improvement, expansion, or abandonment. Mechanisms of TransmItt The devaluation can act through three channels to affect living standards - through changes in prices faced by consumers, through changes in employment and wages faced by workers, and by changes in the government budget and the aDility of the state to provide some services, esecly soci services. Inflation. The effect of an exchange rate change on inflation was immediate in this small, open economy. In 1990, inflation was approximately 30 percent, while the 12 month rate from November 1990 to November 1991 was 72 perent. The annualized rate from September to November 1990 was 123 percent. We focus on the effect of these inflationary rises on access to food, pharmaceuticals, fees of secondary school leaving exams, bus fees, and housing. All five items are important fom a basic human needs perspecve. The first four goods have a high import content and are thus likely to have inflation rates even higher han the general consumer price index. In the Consumer Price Index (CPI), food has a weight of 55 percent, making it by far the most important part of the household's consumption bundle. The food portion of the CPI has moved in parallel with the whole CPI (see Table 1). From June to November 1991, the 'Tis paper was written in Januay 1992. It has not been updated for tbis publication. Thus although the papea uses the preen tense, it refers to Januay 1992. 2 genemd CPI rose by 34 percent, and the food sub-index by 33 percent. An alternate source of information, the low cost food basket tracked by the Ministry of Health (MOH), has followed the CPI less closely, with larger increases in food prices shown In the last half of 1991. The low cost food basket contains fewer goods, so its cost is more volatile. It will tend to exaggeate how badly family budgets arn squeezed by inflation because it does not allow for the subsdtution among goods that wil be prompted by the price changes. Nonetheless, the changes are alarming, a 65 pecent inase betwen June and December 1991. Table 1: Jamaican Devaluation and Inflation June Dec June Nov 1990 1990 1991 1991 Exchange Rate J$ - US$1 6.95 8.04 10.13 19.50 CPI- All Goods Index 138.0 165.8 208.1 278.9 % change _______ 20 26 34 CPI - Food & Drink Index 145.8 174.7 227.8 304.1 (Weight in total - 56%) % change 20 30 33 MOH Food Basket 226.6 253.3 382.1 629.2' (Cost in js) % change __ __ _ 12 51 65 CPI - Healthcare & Personal 128.7 149.2 201.3 268.0 Exp. (Weight in total - 7%) % change _ 16 35 33 CPI- Housing 133.3 169.7 156.6 205.8 (Weight in total - 8%) % change _ _ 20 -03 31 CPI - Transportation 137.3 164.2 179.5 214.9 (Weight in total - 6%) % change 20 9 20 Sources: CPI - STATIN; Food Basket - Ministry of Health Information Unit; Exchange Rate - IMF International Financial Statistics. 'This value is for December 1991. 3 Pharmaceuticals are a portion of the "Healthcare and Personal Expensese sub-index of the CPI Tis sub-index has a weight of 7 percent in the CPI. It has moved in close parallel to the total. Housing costs have a weight of 8 percent in the CPI. In the last five months their increase paralleled the CPI, but in the prior six months housing costs did not rise, although the CPI did. Tansportation has a weight oi 6 percent in the CPI. In the last five months transport prices increased less than the CPI as a whole. Imploynent. On the issue of changes in employment and wages, we give limited trament to who may be affected. We a-sume that the past changes in the labor market stemming from previous structural adjustment and liberalization measures as analyzed in Anderson and Witter (1991) and Witter and Anderson (1991) for the period 1977-1989 will provide some insight into the future. When more specific analysis of which industi and skls might be affected by the recent devaluation, and what the magnitude of changes may be is made available, the consideration of employment effects may be revised. Budgct. In this assessment, we ignore the possible changes in public social services. While the pressure on the budget of a trebling of the local currency cost of the debt service (which in 1988/89 stood at 40 percent of public expenditure) is obvious, we leave the issue aside until information on how the budget will evolve becomes available. Section I: Who Are the Poor? Gordon (1989) calculates an absolute poverty line based on the cost of a low cost diet, scaled up by its share in the poor's total budget. He provides separate rural and urban poverty lines of J$3816 (US$587) and J$4151 (US$639) in November 1989, respectively. Using this poverty line, about one third of Jamaicans are poor. For this paper, we provide information on the whole income distribution rather dan just compare the poor to the non-poor (since no extra analytical effort is required, but more information is forthcoming). The first quintile can be interpreted as the very poor, and the first two quintiles together as the poor. We divide the population of individuals into quintiles, where the first quindle contains the poorest 20 percent of individuals. The fifth quintile contains the richest 20 percent of individuals. Note that because poor households tend to be larger, the number of households per quintile is lower at the poor end of the income distribution than at the upper end. Table 2 shows the basic description of who is poor.2 Poor households are found in rual areas more than in urban areas. Of the poorest quintile 84 percent of its members live in rual 'Most of the analysis of this paper is basod on data from the November 1989 Survey of Living Conditions. When dk. data from the 1990 or 1991 survey rounds a fully ready for use, soma chocks on calculatios could be made. Lite substantve cbange is expected, however, because the shock of devaluation occrred anly one mouth before the field work for the 1991 suvey. Households would have had litde chance to adjust thir behavior. Ih woe area whero real change may be noticeable is in the food damp proram results. In 1989, the progm had not fuly reovered fom its hiatus in opertions. Use is dso made of STATIN's Labor Porce Survey tie series. 4 are. The policy implicadon of this is ta poverty programs, to be effecdve, must reach nual areas. I Poor households are somewhat likelier to be headed by females an by males. This should not be weighed heavily as the extensive analysis of the link between poverty and female- headship in Lourt, Grosh, and van der Oaag (1993) shows tbat the link is somewhat tenuous and not strong enough to serve as a good targetng indicator. Differences in location, household composition, and the human capital endowment of the head of household are more strongsy linked to household welfare than the gender of the head. The heads of households in all quintiles average six years of primary education. The number of years of secondary education for the heads of household in the poorest quintile is one quarter of that found in the richest quintle. Three quarters of household heads are in their productive years, from age 24-64. Poor households are somewhat more likely to be headed bv persons over age 64, when withdrawal from the labor force is common. Poor households are not more likely to be headed by persons under age 24, a group which suffers from high unemployment. The worldng status of household heads is congruent with the age profile just developed. Seventy percent work. Eight percent are unemployed. Eleven percent are retred, and eleven percent are out of the labor force for other reasons. This pattern varies little over the income distribution. The bottom section of Table 2 reports the heads' sector of employment by the classificadon used by Anderson and Witter (1991)3. Employment in agriculture is clearly linked to poverty, both for wage agriculture and self-employment. In contrast, the non-agricultural informal sector has a mean welfare level equivalent to that of the government/social services sector, and twice that of self-employed agriculture. The government/social services sector is the best off. The formal sector refers to wage work for an employer. The prmary/secondary classification is based on average skill requirements for whole industries, with the primary sub- sector requiring higher sklfl levels thasn the secondary sub-sector. The primary formal sector provides mean welfare levels almost as high as the government/social service sector. The formal secondary sector is slightly worse off. 3Ye coded households as clsey as we could with tie geea docutation provided in Anderson and Witter. We may not have duplicated On e odings exady, so while the results here are indicaive, they may differ in detail from dhose in thior paper. S Table 2: Who are the Jamican Poor? I AM QuintU Mman P.C. 1 2 3 4 S ismumiea1989 Kington I T27. [.± .8 26.4 38.5 51.6 924S Or Town 16.8 1 10.1| 14.1 20.9 38.S 20.5 7262 Rual T .s 83.9 J 70.1 52.7 43.0 27.9 4715 malte [ 57.8 52.7 51.1 51.0 60.4 66.0 9156 Femals j 42.2 47.3j 48.9 49.0 39.6 34.0 2 7092 liAuSfiQ of Hoa Meons # of yea in: _ __ -_ - _ Pth=*r 6.4 6.03 6.32 6.47 6.5 6.5 _______ SecondarY 1.1 J.IS .13 I .71 1.02119I _ __ _ %Wimdmegei 1.0 0 0 0 .S 2.9 ' AztiLlm ___ 14-24 3.7 2.6 2.9 3.5 4.4 4.3 8830 24-64 74.4 68.3 71.5 73.4 75.5 78.7 I639 65 and over 21.9 29.1 25.6 23.2 20.1 17.0 6987 Labr Pros Stt ofHad _ Working 70.S 72.3 67.0 66.3 71.3 72.9 8654 Unemployed 7.8 5.4 9.3 8.6 8.2 7.4 7940 Rifi&od | 11.1 12.6 11.9 12.7 10.8 9.S 7493 ___f__ 10.7 9.8 11.7 12.4 9.7 10.2 7701 S0oc Qtb21 mnyt 9Lo Head GOVniSOd SWrvAMuI 8.2 1.4 3.5 9.7 5 .0 13.0 10763 Formal- Pimary 24.0 11.0 18.0 2i.0 25.0 35.0 10475 Pomnia-Secanduy" 22.7 17.2 19.4 18.9 27.3 24.3 8917 bIormal 5.8 5.1 3.3 4.7 6.7 7.6 10023 SeRf-Employed 11.0 16.0 15.0 10.0 8.5 6.5 S973 AgricUltm _ _ __ __ __ _ _ _ _ Wage4griouluuem, 29.0 49.0 1 41.0 34.0 23.0 14.0 5307 Sourw November 1989 SLC. 6 Setion mS Vulnenablity to Employment Change. Who are te Unemployed In General? Unemployment has ben failing gradually since 1982. By 1990 it stood at about half of its peak levd. If all those who report themaelves willing to accept work are counted as unemployed (the deflnltion that Jamaica policy-makers favor), the unemployment rate In October 1990 was 15.7 percent (160,100 persons). If only those who actually sought a job durlng the week preceding the survey are counted as uneemployed (the more usual international definition), the unemployment rate was 6.9 percent (66,400 persons). The steady Improvement in unemployment corresponds with the period of structural adjustment. If the new devaluation firters such a trend, the long-term effect on employment at least, would seem favorable. Although the overall unemployment rate has fallen, there does remain a significant problem of high unemploymen among youth, and among women. Forty percent of the 14-19 age group, and 27 pecent of the 20-24 age group were unemployed In October 1990. For women rates are about twice as hibg as for men. Women age 4-19, for example, had an unemployment rate of 60 percent and women age 20-24 an unemployment rate of 41 percent. Of all unemployed persons In Jamaica, 60 percent are under age 24 (see Table 3). The share of the youth unemployed has grown as the overal level of unemployment has declined. In 1987, for example, 54 percent of all unemployed were under age 24. Of the unemployed youth, over half are supported by parents or guardians. Over half are non-job seekers, meaning that though they say they are wiling to accept work, they have not made an active effort to find work in the week preceding the survey. Over half of the unemployed have not yet held a job. Who May Lose Their Jobs and Where WIU ITey Find New Work? Anderson and Witter (1991) show that the greatest sectoral drop in employment between 1977 and 1989 was for the government/social services sector, which shrunk by a third (see Table 4). Employment in wage agriculture shnmk by 15 percent, and in peasant agricultural stayed about the same. Employment in the fonnal primary sector grew by 21 percent, in the formal secondary sector grew 93 percent and In the non-agricultural infonnal sector employment grew by 66 percent. Coupling the Information on the distribution of welfare by the sector of employment, and the changes in sectoral structure that resulted from previous adjustment measures gives us some notion of how the new devaluation may affect workers. If past trends prevail, the government/social services workers ae those most likely to have to find new jobs. But the growing sectors provide comparable, or nearly comparable, average standards of living. In the past a small number of workers moved from agriculure into the fonral sectors, where mean welfare is higher. 7 Table 3: Composition of Jamaican Unemployment by SeX and Age October 1990 Age Male Female Total Percent Share 14-19 10.7 16.7 27.4 20-24 8.8 23.5 32.3 24+ 12.2 28.1 40.3 Number 14-19 18,000 27,800 45,800 20-24 14,700 39,200 53,900 24+ 20,100 46,800 112,700 Source: STATIN, Labor Force Statistics, 1990. lhis leads to the conclusion that the impact on real wages across the board due to inflation will be the more troublr- - 4ffect of the devaluation than a large downward dislocation of specific groups of workers. This conclusion is shared by Witter and Anderson (1991) "7he unbridled movement of basic food prices and mn-food expenses contributed far more to the deterioration in purchasing power thon did the labor market movements over the period (1977-891 (P. 93) In assessing the usefulness of special public works projects under the Social and Economic Support Program (SESP) to generate employment, it will be important to consider whether the workers hat typically show up for such work belong to either of the two important risk groups revealed by this analysis - i.e. the youth, especially women, who are not without support, have no work experience, and are not actively seeldng work, or the government/social services workers in the sector that has shrunk the most during adjustment to date. Table 4: Sectoral Distribution of Jamaican Employment Employment Levels % Change Employ ent Share 1977 1989 1977/1989 1977 1989 - -. m = Govt/Social Services 83,300 55,300 -34 17.8 9.8 Pdmary Formal 18,200 22,000 +21 3.9 3.9 Secondary Formal 85,700 165,200 +93 18.3 29.3 Informal 87,100 144,200 +66 18.6 25.5 Peasant Agriculture 150,700 149,000 - 1 32.1 26.4 Wage Agriculture 34J, 22 00 15 LI 51 TOTAL 469,000 564,700 +20 100.0 100.0 Sour. Calculated from Anderson and Witter (1991) Table 4.10, p. 7S. Recourse to Secondar Workes The classic solution to low wages for the head of household is for other members of the household to work as well. In Jamaica, poor households already have more workers tha wealthier households (see Table 5). In the poorest quintile only 38 percent of households have a single worker, as opposed to 48 percent for the country as a whole. Because they are larger, poor households also have more adult members not in the labor force. Theoretically these persons could move into the labor force in response to a fall in the real wages of the households workers. Seventy-two percent of poor households have members ages 1464 not in the labor force, who might be pressed Into the labor force by tightening household budgets. Their chances of finding employment, however, are relatively low. Just over half of these potential secondary workers are women. In the poorest quiuile, nearly two thirds are between age 14-24. lhus potential secondary workers in poor households tend to fall ino the groups with chronically high unemployment rates. Even if these persons join the labor force, it is not clear that they can kind work. Section IV: Vulnerabilty to Inflation of Key Priem Food Prices As shown in Table 1, the cost of the basic food basket grew by 65 percent from June to December 1991. The CPI for food rose by 33 percent from June to November, 1991. Most of this is the effect of devaluation. The final phase of the removal of general food subsidies, however, was also carried out during 1991, contibuting to increases in the prices of a few items. Food is the largest part of the consumption bundle for Jamaican families. Overall, the food budget accounts for 40 percent of the total budget. For the poor the share is higher - 50 percent (see Table 6). In confronting the higher prices of food, families may change the composition of what they buy to lower cost sources of nutrients read rather than meat), food at early stages of processing (flour rather than bread), or local foods rather than imports (yams rather than maize). About this we can say littie at present. The Jamaican diet is relatively diversified and heavy in animal products and in imports so there is more scope for these substitutions than in much poorer countries. 9 Table S: Secondary Workers Jamaica 4 Share of Households by Number of Current Workers in Household (%:. One 48 38 43 44 54 53 TWo 32 31 30 35 30 32 Three a 21 22 21 21 '00 100 100 100 100 100 Shae of Households by Number of Working-Age Persons Not in Labor Force Per Household (%): None 44 28 33 36 44 60 One 27 29 30 28 31 20 Two 16 19 18 20 15 12 Three 1A 2a 12 16 IQ I 100 100 100 100 100 100 Characteistics of Working-Age Persons Not in Labor Force (%): Male 46 44 44 45 47 52 Female XV X X1 M a 100 100 100 100 100 100 Ag 14-18 37 42 38 37 37 31 19-24 21 21 19 22 22 19 24-64 42 32 43 I41 .1 100 100 100 100 100 100 Source: November 1989 SLC Use of food produced at home or received as gift rather than purchased, and teceipt of inrnaol remittances may also help to atenae the blow of higher food prices. Food produced at home will be the most important cushion, as it is the most prevalent. In the poorest quintile, 69 percent of household produce food for their own consumption. Among these households, the food produced accounts for 22 percent of their food consumption. There is no reason to assume that this should decline. Indeed, it may incase. If families have room to garden bigger plots or more intensively, the rising price of food may prompt greater reliance on home produced foods. Food received as gifts are less common. Nonetheess, 32 perct of households in the poorest quintile receive gifks, which amouns to 13 percent of food consumption In those households. Without knowing more about where the gifts come from, it is difficult to say whether they may be curtailed as the givers also feel the pinch of higher food prices. 10 Table 6: Food Budgets - Vuinerabillty and Coping All Quintiles Characteristic Jamaica 1 2 3 4 - FOOD CONSUMPTION Mean value in 1S 8,886 4,83S 7,023 8,676 9,789 11,090 Mean Value as a share of Total 40 50 47 44 40 31 Household Consumption - HOUSEHOLD - PRODUCED FOOD % Households producing 45 69 62 50 41 27 For producing households, 18 22 21 18 16 14 mean value as share of food budget -lFr FOOD % Households receiving 23 32 26 20 21 21 For receiving households, 9 13 7 9 9 8 mean value as share of food budget INTERNATIONAL REMrITANCES % of households receiving 10.8 14.9 2.5 2.7 3.3 4.3 FOR HOUSEHOIDS RECEIVING INTERNATIONAL REMTTTANCES Mean Value in USS 344 165 218 284 354 489 Mean Value as % Food Budget 37 45 33 32 35 40 Source: November 1989 SLC Internatoal remittances are received by only 15 percent of households in the poorest quintile, and 18 percent of households in the second quintile. They will not, therefore, provide a general cushion to the shock of inflation for most households. For those households that do receive them, however, they will be very important. For households in the poorest quintile who do receiv international remittances, they were equal to the value of 45 percent of the food budget. Exam Fees Ibe end of secondary schooling is marked by taking intemational exams - the Caribbean Exams Council (CXC) or the General Cambridge Exam (GCE) 0 or A levels - whose prices are set in inteional cucy. With the devaluation, therfore, exam fees have doubled. Fees for a full battery of tes would cost between JS1300 and JSS000. 11 Because of the lited accoss to the highest tiers of secondary education in Jamaica, the perctage of childe of test-taking age placed to actually take the international exams is small. We estimate It here by looking at the pecentage of youth age 17-19 who are in grade 1l of new secondary schools and grades 11 ansd 13 of high schools (see Table 7). Overall only 5 percent of youth 17-19 are so placed. The others are out of school or in a school type or grade from which it Is less common to take the CXC or GCE exams. While the numbers may be small overall, the importance of these exams may be critical to the students who are ready for them. Several years of preparation has been invested by the children and their families, and to be unable to take the exam due to unexpected fee increases at the end of the long period of preparation would be a blow. Pharmacetcal Costs Most pharmaceuticals are imported into Jamaica, so they are priced in international currency. With the deauation, their prices rise concomitandy. Access to them, of course, is important for humanitarian reasons. We estate the cost of pharmaceuticals from the health module of the SLC. About 7 percent of individuals report having purchased drugs because they were ill or injured during the month preceding the survey (see Table 8). The average cost for those episodic purchases was US$8. Ihus per individual an expected mean pharmaceutical bill is on the order of US$7 per year.' For a household of five, it would therefore be US$35. Per person, the poorest quintile spends US$3.50 while the richest quindle spends US$12.50. These lower expenditures by the poor are probably largely a reflection of the poor's greater use of public health services where drugs are greaty subsidized. Previous ana'ysis of SLC data showed that in July 1989 very few ill persons went without their medicines for lack of money (STATIN and PIOJ, 1989). An important caveat is that the survey design applies more to occasional episodes of acute illness than to chronic illnesses that require constant medication such as diabetes and hypertension. Given the niportance of these illnesses in the Jamaican disease profile, some thought should be given to these based on other Information sources. 4 This is cdclated by aing a 7 percet per month lielkhood of purchase times 12 months, tmes the $S8 mavae prhas. 12 Table 7: Exam Fees Vulneabilty in Jamaica All Quintiles Characteristic Jamaica - 2 3 4 5 % OF YOUTH AGE 17-19: New Secondary-Grade 11 2 3 3 2 2 1 High School-Grade 11 3 2 2 4 3 5 High School-Grade 13 0 0 0 0 0 1 In other grade or schooltpe 19 10 11 19 24 28 Outof School 10 l a 1 Z1 i TOTAL 100 100 100 100 100 100 Souree: November 1989 SLC Table 8: Pharmaceutical Vulnerability In Jamaica All Quintiles Characteristic Jamaica 1 2 3 -4 -% II nd Reporting Pharmaceutcal Expenditures in Last Month 7.4 5.6 6.0 7.7 8.6 9.1 Mean Value In USS of Pharmacetical Expendiures in Last Month Per Peson Reporting Such Expenditures 8.32 5.23 5.45 7.48 10.18 11.4 Mean Predicted Ammal Expenditure (Per Capita) In USS 7.39 3.51 3.92 6.91 10.50 12.45 (% ill and purchasing last mo. x 12 mo. x average expense per episode) Source: November 1989 SLC Tranport Costs Bus fare are, of course, heavily influenced by fuel prices. Jamaica imports all its fuel, so bus fares can be expected to increase concomitantly with the devaluation. The SLC, unfortunately, cannot shed much light on how much households spend. Transportation in all its fonms is given a weight of 6 percent in the CPI. 13 Housing Although housing costs are not directly influenced by devaluation, as are the inported goods we look at here in detail, housing is obviously a very important element of living standards and a major expense. The news from the housing sector is, perhaps, more positive than that for the other items examined. Of the poorest quintile, 85 percent live in housing that is their own and paid for (see Table 9). For the next poorest quintie, 80 percent live in paid for, owned housing. Thus they don't have the wonry of trying to scrape ring rent payments out of a shrinking pay packet. The housing, to be sure, less often has electricity, piped water or sewerage, but an immediate fall in standards of shelter may not be a major concern. Table 9: Housing - Vulnerability and Quality In Jamaica All Quintiles Characteristic Jamaica 7 3 4 |T TENANCY Own Home - Paid for 63 18 20 19 21 22 Own Home - Mortgaged 8 3 3 14 25 25 Rent 30 6 11 16 25 42 % WITH ELECTITY 60 22 38 57 68 84 WATER SOURCE Individual Piped 56 15 35 53 65 82 Public Piped 21 42 32 21 18 7 Not Piped 23 43 32 26 17 10 SEWERAGE W.C. 45 8 18 38 54 76 Pit Latrine 52 88 78 58 44 23 Otherinone 3 4 4 4 2 1 Source: November 1989 SLC Section V: Targeting and Coverage of Selected Social Programs Food Stamps Coma Of households in the poorest quintile, 34 percent receive food stamps (see Table 10). Of households in the next poorest quintile, 27 percent receive food stamps. ITis is very low coverage of the needy population. One way of making the fod stamp program a more effective safety net woud 14 be to allow it to cover more of its target population. An assessment of how easily this can be accomplished from an administrative and financial point of view needs to be looked at. A priori, we expect that because budgetary constraints have required caps on the number of entra in each eligibility category, the budget problem Is the first consaint. Administrative constraints may also have to be addressed if significant expansion is planned. Table 10: Jmaican Food Stamps Progrm - Participation Rates, Value and Incidence All Quintiles Characterihc Jamaica 1 2 3 4 5 PARTICIPATION RATES % of HH Rceiving Food Stamps 15 34 27 17 10 4 % of HH B Recivg Fd Stmps 85 66 73 83 90 96 CONTRIBUr-ON FOR PARTICIPATING HOUSEHOLD Mean # of Allotnents per HH 1.2 1.3 1.2 1.2 1.1 1.1 Mean value of Receipt Annualized from Sept/Oct 1989: in JS 337 366 330 324 324 294 As share of RH food budget 1.5 2.5 1.4 1.0 1.0 .7 As share ._f total budget .5 .9 .5 .3 .3 .2 INCIDENCE OF BENEFIIS % of Food Stamps Budget Accruing to Each Quintile: Overall 100 29 29 20 14 8 Pregna Women 0 27 13 27 27 6 Lactaing Women 3 53 18 24 6 0 Child under S 40 29 30 21 13 6 On Relief 54 33 30 19 12 6 Other 3 37 32 10 21 0 Source: November 1989 SLC Ya.ue. Ihe value of the food stamps as of September 1989, was very low relative to the cost of food. For the poorest households, the mean receipt was only 2.5 percent of their food budget. Thus a second obvious way of improving the impact of the food stamp program is to raise the value of the stmp. This requires no administrative effort, just money. lncidtene. The tagetng of the food stamp program is relatively good. Overall, 58 percet of bnefi accrue to member of the poorest two quintles. The family plan category of eligibility is 15 somewhat better targeted than the child health portion. Note that this was not true In 1988 (see STAT1N and World Bank, 1988) prior to the reformulation of the eligibility for the family plan and the re- registration of beneficiaries. The extremely good targeting shown here for the lactating women category may be an arfct of the small sample. Because the progran was experiencing administrative problems with the registration of pregnant and lactating women preceding and during the survey period, the survey picked up very few recipients In these categories. The results may therefore not be very representative of how the progrm operates normally. School Feeding Coverage. Of children in school, about half get some kind of school lunch (see Table 11). The Nutribun progrm reaches 30 percent; the cooked meal program 18 percent. For the poorest quintile, coverage Is higher, at twohirds of children. It is the Nutribun program that accounts for much of the increase. In the poorest quintile, 43 percent of school children get Nutribuns, and 20 percent receive school lunches. Incidenc. Of all Nutribun lunches, 57 percent go to students in the pocrest two quintiles. The cooked lunch program Is not quite so well targeted - 48 percent of lunches go to students in the poorest two quintiles. It is interesting to note that for the Nutribun program, the portion serving children age 13-17 is somewhat better targeted than the portion serving children age 6-12. The cooked lunch program shows no difference in incidence by age group. Incidence by school type is also revealing. The benefits are most progressive in new secondary schools, followed by those in all-age schools, then primary schools, then high schools. Exam Fee Waivers If exam fees were to be waived for all students placed to take the exams (assumed here to be those in grades 11 or 13 of new secondary or high schools), the incidence of this program would be approximately neutral, with each quintile getting about 20 percent of the benefit (see Table 12). If the fees were waived only for students in new secondary achools, the waiver's incidence would be progressive, with 60 percent of benefits going to the two poorest quintiles. If fees were waived only for high schools, the inciden would be regressive, with 26 percent of the benefit going to the two poorer quiies. Bus Toke Subsidies The SLC was not designed to cover transport issues, but we can tease out some notions about the Incidence of a targeted bus tare subsidy. We know how each household would get to clinics, schools, post offices and other public facilities. We focus here on transportation to public hospitals and public health centers as proxies for relatively far and near destinations. We then weight the household responses by the average household size and see what the distribution by quintile of users of public transport is. I should be noted that the survey question has three answer categories - public transport, private transport and walking. We assume here that public transport refers mainly to busses. It could, however, also include taxis. If other sources can provide better information on bus use, they should be used in preference to his informtion. 16 Table 11: JamaIan School Feeding Progam Particpation Rats and Incidence All Quineles Characteristc Jamaica 1 2 3 -4 1 - ii'l---=- - - - --- .=.. . ,,__ .- PARTICIPATION RATES % of All Students Receivlng Nutrlbuns 30 43 35 27 24 16 Cooked Meal 18 20 19 19 15 20 OLher 5 2 5 5 6 5 None 47 X 40 42 a 52 _____. ___ .__ 100 100 100 100 100 100 INCIDENCE Nutribuns Pton Overall t00 33 26 19 15 7 Students 6-12 84 31 24 20 16 8 Students 13-17 16 36 31 16 11 6 Primary School3 41 23 27 20 19 11 All-Age 37 38 23 23 11 47 New Secondary 6 43 25 1S 14 3 High School 1 22 33 0 22 22 INCIDENCE Cooked Lunch Overall 100 25 23 22 15 14 Students 6-12 68 26 22 21 15 1S Students 13-17 32 25 21 23 12 19 Primary Schools 28 26 20 19 19 17 All-Age 29 29 29 24 10 8 New Secondary 14 28 29 13 1S 15 High School 13 15 7 22 22 34 .~- - Source: November 1989 SLC Public transport is so commonly used that it camot be considered a *self-targeting good, that is, one that only the poor use. For travel to public hospitals, which on average are further from households than the health centers, 86 percent of households report they would take the public transport, 8 percent that they would walk, and 6 percent that they would use private transport (see Table 13). To get to the more numerous public health centers, 46 percent of households report that they would take the bus, half would walk, and 4 percent would use private tansport 17 Table 12: Predicted Inddence of Exam Fee Waivers Quintles Characteristic 1 2 3 4 5 All Youth Place to Take Exams 19 21 22 21 19 New Secondary Students 28 32 16 20 4 High School Students 13 13 26 21 26 Note: Tbis simuation is based on the assumption that children 17-19 in grades 11 or 13 of new secondary or high schools will take exams. Source: November 1989 SLC Table 13: Bus Tranport: Incidence Quintiles Characteristic 1 3 4 - Would Use Public Transport to go to: Public Hospital (far away) 22.1 21.0 20.0 20.4 16.5 Publlc Health Center (nea) 19.1 22.8 20.3 20.7 17.1 Sonrce November 1989 SLC Among all those who would use public transport to get to public hospitals, 22 percent are in the poorest quintile, 21 percent in the next poorest, 20 percent in the next two quintiles and 17 percent in the richest. This is very close to the uniform 20 percent that strict proportionaity would give. If our identification of upublic transport with busses is not too far wrong, then a uniform subsidy to bus fares would not effectively target th poorjust by virtueof being for bus fare. Some other element would need to be buUt in to the subsidy to improve its targeting. For aeample, i tokens were to be sold at discount prices, the important element of targedtg would be the location of the places where the tDos are sold, the number that may be purchased at one time, the length of the line to buy them, etc. While those at the middle or upper end of the ilcome distribution do appear to use the bus system, they are presumably less willing to stand in lines in poor neighborhoods to buy a few discount tokens than would the poor who live in those neighborhods anyway. 18 Section VI: Condusions lTis brief analysis enabled us to draw several conclusions about how the currency devaluation will affect the poor, and how some existing social programs might mitigathe impact. These conclusions can be used as the basis for guiding policy-makers in designing a comprehensive safety net progm for the poor. Whee the Pain will be Felt * Inflation will be more of a concen than the dislocation of labor. * Transitional labor movements may occur out of the govenment/social services to the formal primary and secondary sectors. The welfare levels of these sectors are approximately equivalent. * Unemployment is structurally concentrated among the youth age 14-24 and among women. PFood prices will be greatly affected. Jamaican households have some room through substitution to buy cheaper foods rather than settling for fewer calories. Foods produced at home, or received as gifts will provide some cushion to higher food prices. About two thrds of poor households produce food at home. For them it is worth about one fifth of the value of their food consumption. About one third of poor households receive food as gifts. Their value is lower, about 13 percent of food consumption. * Intenational remittances are received by less than a fift of the poorest households, though they can account for more than a third of the food budget in those households. * Higher fees for the end of secondary school international examinations will affect few students as a percent of age group, but may be important, nonetheless. * Inflation in the prices of phmaceuticals for acute illnesses may not be a big problem because they constitute a small share of household budgets. More thought needs to be given for pharmaceuticals for chronic conditions. * Inflation in housing costs will not be a major new problem for the poor in the short rn as the vast majority of them already own their own home and are making no payments for it. P1¶OgA* Indicat ions * Employment generation programs under the SESP should be reviewed to se whether they taget the youth and women who are the core of the unemployment problem, or the government/social service workers most likely to be displaced as the economy responds to the devaluation. e lTe coverage and the value of the benefits of the food stamps program are severely limited. The program is ttih best targeted of the opdons studied here. It is a promising candidate for expansion. 19 * Sbchool lunch programs are fairly extensive and almost as well targeted as the food stamps program. The Nutribun program is better targeted than the traditional cooked lunch program. * Exam fee waiven for all international exams would be neutral in incidence. Waivers given to students In new seowndary schools only would be progressive. Given in high schools only, they would be regressive. Targeting to rutal schools, or within schools based on the principal's knowledge of needy pupils would be other promising options. * Bus ridership is distributed almost neutrally across the income distribution. A discount token system should use the mechanics of buying the tokens to induce self-targeting among token purchasers. For example. outlets should be placed In poor neighborhoods only, and a limit set on how many tokens can be purchased at one time. 20 Referencu Andrson, Paticia and Michal Witter (1991) Cdsis, Adjustment and Social Change: A Case Study of Jamaicae nlo. Kingstof. Gordon. Derek (1989) 'Identifying the Poor: Deoeloping a Poverty Line for Jamaica' Jamaican Poverty Line Project Working Paper No. 3 Plarning Institute of Jamaica, Kingston. Lout, Frederic, Margaret Grosh and Jacques van det Gaag (1993) 'Welfire Implications of Fenale Headship in Jamaica Households" LSMS Working Paper No. 96, Washington, D.C. Planning lnsti of Jamaica and Statistical Institute of Jamaica (1989) Jamaica Survey of Living rawitions- buZy I2 ° ˘Knon. Stattical l te of Jamaica (1991) Consu_er Price 1Inces. Annual Reve 122 Kingston. Statistical Instiute of Jamaica (various years) Labo Force Survevs Kingston. Witter, Michael and Patricia Anderson (1991) 'The Distribution of the Social Cost of Jamaicaes StructWal Adjustment 1977-1989' mimeo. Kingston. Human Resources Development and Operations Policy Working Paper Series Contact for Title Author Date paper HROWP1 Social Development is Nancy Birdsall March 1993 L Malca Economic Development 37720 HROWP2 Factors Affecting Achievement Eduardo Velez April 1993 B, Washington- in Primary Education: A Ernesto Schiefelbein Diallo Review of the Uterature for Jorge Valenzuela 30997 Latin America and the Caribbean HROWP3 Social Policy and Fertility Thomas W. Merrick May 1993 0. Nadora lIansitions 35558 HROWP4 Poverty Social Sector Norman L Hicks May 1993 J. Abner Development and the Role of 38875 the World Bank HROWPS Incorporating Nutrition into F. James Levinson June 1993 0. Nadora Bank-Assisted Social Funds 35558 HROWP6 Global Indicators of Nutritional Rae Galloway June 1993 0. Nadora Risk (pl) 35558 HROWP7 Making Nutrition Improvemrents Donald A.P. Bundy July 1993 0. Nadora at Low Cost Through Parasite Joy Miller Del Rosso 35558 Control HROWP8 Municipal and Private Sector Donald R. Winkier August 1993 E De Castro Response to Decentralization Taryn Rounds 89121 and School Choice: The Case of Chile. 1981-1990 HROWPS Poverty and Structural Ishrat Husain September 1993 M. Ybussef Adjustment: The African Case 34614