Expanding Social Protection in the Pacific

Social insurance expenditure dominates other social protection categories, but benefits a narrower range of beneficiaries.

The average public expenditure on social protection increased to the equivalent of an estimated 6.0% of aggregate gross domestic product (GDP) in 2015 from 4.1% in 2009. This translated into an increase in the estimated per capita social protection expenditure for each intended beneficiary from 3.3% GDP per capita in 2009 to 5.3% in 2015.

Increased financing for social protection was possible due in part to oil revenues in Timor-Leste and fish license revenues in the Federated States of Micronesia (FSM), Kiribati, the Marshall Islands, and Palau. It is also a reflection of the commitment by Pacific governments to strengthen social protection.

Social insurance dominates spending on social protection in the Pacific, with an estimated average spending equivalent to 3.4% of GDP. Social assistance spending was smaller, at 2.1% of GDP. Spending on ALMPs, which comprise cash- and food-for-work programs as well as skills development and training programs, was the lowest in the region, at 0.5% of GDP. All three social protection categories reported improvements over the period 2009–2015. Especially notable was the increase in expenditure on social insurance in the Marshall Islands and Solomon Islands, and in social assistance in Nauru and Timor-Leste. The number of programs and level of expenditure remained very small for ALMPs, however.

Social insurance expenditure and benefits are provided primarily through “defined contribution” provident funds and social security administrations, while social assistance and ALMP benefits are funded through national budgets.

Coverage is improving but needs to be extended further.

Social protection covered 31.2% of intended beneficiaries in 2015, nearly doubling from 2009. Social assistance achieved the widest coverage, reaching 20.0% of intended beneficiaries. These results demonstrate important improvements but also that around two-thirds of eligible persons in the Pacific remain uncovered by any form of social protection. Social insurance programs, while found in all the countries, remain very narrowly based on those in formal employment. Social assistance programs reach only a fifth of intended beneficiaries.

Social insurance coverage should be broadened to reach those in the informal economy, and should also include those working overseas especially those in the expanding seasonal work schemes in Australia and New Zealand. By instituting innovative financing and institutional arrangements, it is possible to enable these persons with an easier and more flexible access to the various national provident funds and social security administrations. For example, Fiji allows existing members and those not covered by the regular provident fund scheme to voluntarily contribute up to 12% of their gross income as additional contributions.

It is important to expand coverage of social assistance programs to better reach vulnerable groups, such as children, older persons, and persons with disabilities, as explained in more detail below.

Benefits remain limited for the poor majority.

The average social protection benefit received by each beneficiary in the Pacific was equivalent to an estimated 54.1% of the regional average GDP per capita. Social insurance benefits were the largest, with average benefits equivalent to 144.6% of GDP per capita ($4,068.08), substantially exceeding benefits for social assistance (16.4% of GDP per capita; $627.91) and ALMPs (17.9% of GDP per capita; $391.28). The high levels of social insurance benefits were provided primarily through the lump-sum payments from provident funds upon retirement and through pensions from social security administrations.

Social assistance in the region has a relatively higher rate of coverage than social insurance, but offers smaller benefits. Most Pacific island countries need to establish clear social protection policies and to substantially build financial and institutional capacity to attain an optimal combination of benefits and coverage that would have a real impact to those who are most in need.

Active labor market programs remain underdeveloped.

In 2015, average expenditure for ALMPs was equivalent to a mere 0.5% of aggregate GDP and of GDP per capita. Eight (including the Cook Islands, Fiji, the FSM, Nauru, and Papua New Guinea) do not have ALMPs. Of the five countries with ALMPs, Kiribati and the Marshall Islands provide cash-for-work schemes for their outer island copra producers.

ALMPs had the lowest coverage among the three social protection categories—only 2.4% of intended beneficiaries. Further investment in ALMPs is clearly needed to help address the needs of the unemployed and underemployed through skills development. It can also help support the poorest segments by involving them in food- and cash-for-work programs and providing them with immediate relief.

Social assistance does not fully support vulnerable groups.

Spending on each of the social assistance programs is inadequate to address poverty and vulnerability. Welfare assistance and assistance to the elderly were the dominant social assistance programs, but their expenditure was only equivalent to 1.1% and 0.7% of GDP. Child welfare programs were present in most countries, but their expenditure was just 0.2% of GDP. Disability assistance was equivalent to 0.1% of GDP and was present only in two countries: Nauru and Timor-Leste. Health assistance was present in four countries—Samoa, Timor-Leste, Tonga, and Vanuatu, but the combined expenditure was negligible at 0.01% of GDP. It may be noted however that all the countries provide free primary health care.

Financial considerations are critical when determining policy design, and it may be assumed that any social protection measures targeted at the elderly and those living with a disability are likely to experience rapidly increasing levels of expenditure from growing numbers of beneficiaries.

Child welfare assistance needs to be expanded.

Relatively high levels of basic-needs hardship and poverty persist, with an estimated one-quarter to one-fifth of the population of the Pacific falling below the national basic-needs poverty lines. For children, this can reach around one-third in some countries. Poverty in childhood can have detrimental impacts lasting long into adult life, perpetuating the cycle of poverty and vulnerability.

The challenges for policy-makers are to identify appropriate eligibility and targeting arrangements (e.g., targeted or universal), the amount of the benefits, whether cash or in kind, the delivery mechanism, and the manner in which the delivery is to be monitored and its impact evaluated. While a universal program will benefit the well-off and the poor alike, it will minimize the administration costs and eliminate issues related to targeting. This mechanism may be feasible in the long run especially as the proportion of children in the population is declining in most Pacific countries as fertility rates fall and migration increases.

Progress in pro-poor spending is slow.

The average expenditure on the poor in 2015 was lower than that on the nonpoor in all three social protection categories, and the gap in spending between the poor and nonpoor increased from 1.7 percentage points in 2009 to 2.5 percentage points in 2015. Few countries, led by the Marshall Islands, showed a progressive trend from 2009 to 2015.

Governments should give more attention to improving the targeting of social assistance benefits. Some social assistance programs in the Pacific are universal, and only a few programs are actually poverty targeted. These include the Bolsa da Mãe program in Timor-Leste, the Poverty Benefit Scheme in Fiji, and the destitute allowance program in the Cook Islands. Yet, the nonpoor still received more than the poor in the Cook Islands and Timor-Leste. In Fiji, the expenditure going to the poor was slightly higher (0.1 percentage points) than that going to the nonpoor.

Social protection needs to be more gender sensitive.

Average social protection expenditure on women in 2015 was lower than that on men in all three social protection categories, with the gap in spending widening from 0.9 percentage points in 2009 to 1.3 percentage points in 2015, although a few countries showed a progressive trend in some programs. For example, the Marshall Islands increased social insurance spending for women by 1.0 percentage point and Palau by 0.9 percentage points in 2015. The Cook Islands raised social assistance spending for women through the caregivers allowance and targeted maternity benefits.

Governments need to make social protection more inclusive and gender sensitive. Women are largely concentrated in the informal economy and therefore have fewer economic resources. Social protection can address female poverty and vulnerability if programs are designed and implemented to address the gender-specific drivers of poverty and vulnerability.

Social protection policy frameworks need to be strengthened.

Strengthening social protection requires not only financial commitment but also efforts to develop broad-based and comprehensive social protection policies and systems. Governments should develop comprehensive policy frameworks for coordinated provision of social protection to the poor and vulnerable. The Cook Islands, Fiji, and Timor-Leste are among the few that have broad-based and reasonably comprehensive social protection systems that target the elderly, vulnerable children, and those living with a disability.

An increasing number of ad hoc and uncoordinated social protection measures across the region have given rise to inconsistencies in targeting beneficiaries and in the levels of benefits provided. Greater policy coordination would help ensure that increasing levels of social protection expenditure benefit the poor, women, and the vulnerable.

It is also critical to strengthen the monitoring of social protection programs. National monitoring and evaluation tools tend to focus on individual programs rather than the overall system.

^[1] The 13 Pacific countries are the Cook Islands, the Federated States of Micronesia (FSM), Fiji, Kiribati, Nauru, Palau, Papua New Guinea, the Marshall Islands (RMI), Samoa, Solomon Islands, Timor-Leste, Tonga, and Vanuatu.

Asian Development Bank (ADB). 2019. The Social Protection Indicator for the Pacific: Assessing Progress. Manila.

ADB. Social Protection and Labor.