Family Benefits in PolandHow much do they alleviate poverty?

Anna Ruzik (IPiSS. CASE). Marta Styrc (IPiSS. SGH)

Research SeminarWNE UW

May 29th, 2008

Motivation and aim of the research

The fact:

In Poland poverty rate among households with children is relatively high, especially compared to older people households

Research questions:

What was the impact of family benefits paid to hh with children on the poverty rate and the poverty gap in 2003 and 2004?

What was the effect of the 2004 reform of family benefits?

What types of households are more probable to be poor in Poland?

Reform of the family benefits (selected changes)

Implemented in 2004, rules in force since 1st May 2004 Various benefits paid to families were replaced with one benefit

and additional payments to it Aim of the reform - better targeting of the benefits

Decreasing the thresholdnet monthly income per household member(548.00 PLN 504.00 PLN)

Small increase in the level of benefits Movement from the level of family allowances dependent on

the number of children to the one dependent on the children age

Data and definitions

HBS 2003 and 2004 4 categories of family benefits

Family allowance Social assistance benefit for pregnant women and a parent

taking care for a child Child care benefit Alimony benefit (from the Alimony Fund)

Definition of poverty Monetary poverty (income) Poverty line: subsistence minimum

Incidence of the family benefits

 

No. of hh in the

sample with the benefit 2003

As a share of

all hh 2003

No. of hh in the

sample with the benefit 2004

As a share of

all hh 2004

Family allowances 5 622 17.3% 5 334 16.6%

Benefits for pregnant women and a parent taking care for a child 34 0.1% 54 0.2%

Alimony from the Alimony Fund551 1.7% 770 2.4%

Child-care benefits375 1.2% 308 1.0%

Total number of hh in the sample 32 452 100% 32 214 100%

Level of the family benefits

Average level of different benefits per one HH entitled in 2003 and 2004 (in PLN)

2003 2004

Family allowances 97.43 114.06

Alimony from the Alimony Fund 408.80 356.23

Child-care benefits 375.49 417.98

Incidence of family benefits by family type [%]

0

10

20

30

40

50

60

70

80

C withoutCh

C+1Ch C+2Ch C+3Ch C+4+Ch Lone P withCh

C+Ch+O O (withoutCh)

Total

[%]

2003 - Family allowance

2004 - Family allowance

2003 - Alimony

2004 - Alimony

2003 - Child-care benefit

2004 - Child-care benefit

Avg monthly benefits per hh by family type in 2003 [PLN]

0

50

100

150

200

250

300

350

400

450

500

550

600

650

C withoutCh

C+1Ch C+2Ch C+3Ch C+4+Ch Lone P withCh

C+Ch+O O (withoutCh)

Family allowance

Alimony from the AF

Child-care benefits

Family allowance-avg

Alimony from the AF-avg

Child-care benefits-avg

Avg monthly benefits per hh by family type in 2004 [PLN]

0

50

100

150

200

250

300

350

400

450

500

550

600

650

C withoutCh

C+1Ch C+2Ch C+3Ch C+4+Ch Lone P withCh

C+Ch+O O (withoutCh)

Family allowance

Alimony from the AF

Child-care benefits

Family allowance-avg

Alimony from the AF-avg

Child-care benefits-avg

Poverty calculation

Poverty line: subsistence minimum: 355 PLN in 2003 and 371 PLN in 2004

The measure of household’s welfare: disposable income

OECD equivalence scale: 1; 0.7; 0.5 Poverty rate - the percentage of people with income

below poverty line Poverty gap - the mean income shortfall below the

poverty line (expressed in currency unit or as a share of the poverty line)

Impact on poverty rates and poverty gap in 2003

Including family benefits

Without family allowances

Without 4 family benefits

All households

Poverty rate [%]9.6 11.0 11.9

Poverty gap [PLN]109.0 115.5 120.7

Poverty gap [% poverty line]30.7 32.5 34.0

Households with children

Poverty rate [%]12.3 14.4 15.7

Poverty gap [PLN]104.1 112.8 119.1

Poverty gap [% poverty line]29.3 31.8 33.6

Including family benefits

Without family allowances

Without 4 family benefits

All households

Poverty rate [%]10.5 12.0 12.9

Poverty gap [PLN]111.9 120.4 126.4

Poverty gap [% poverty line]30.2 32.4 34.0

Households with children

Poverty rate [%]13.8 16.0 17.1

Poverty gap [PLN]108.9 119.1 126.5

Poverty gap [% poverty line]29.3 32.1 34.1

Impact on poverty rates and poverty gap in 2004

Poverty reduction impactof family benefit

2,1

3,4

2,2

3,3

0

1

1

2

2

3

3

4

withoutfa

without4 fb

withoutfa

without4 fb

2003 2004

Change of the poverty rates due to the elimination of family benefits from the hh’s income [in percentage points]

Percentage change in poverty gap due to subtracting family benefits from the hh’s income [in %]

8,4

14,4

9,4

16,1

0

2

4

6

8

10

12

14

16

18

withoutfa

without4 fb

withoutfa

without4 fb

2003 2004

Conclusions from the first part of the analysis and next research question

Differences in the poverty rates and poverty gaps do not allow for the conclusion that family benefits in Poland are an effective tool in alleviating poverty

Although they reduce poverty rate and poverty gap, their impact is small due to the low benefit level

The 2004 family benefits reform has enhanced the poverty reduction impact of the benefits but only with regard to poverty gap

But Is the presence of dependent children in a

household crucial for the risk of poverty?

What influences probability that the household is poor? 2004 HBS data Binomial logit model with an odds ratio of those households that are poor

to those that are not poor The explanatory variables are either characteristics of the household

head or of the household:

AGE – age of a household head (5 age groups). EDU – level of completed education of a household head (3 groups). SEX of a household head. MARITAL – marital status (not married or married). PLACE of living (4 types). CHILD17 – number of children aged up to 17 in a household. FAMILY_TYPE (couple without children. couple with children. lone parent

with children. couple. children and other persons. other without children). INCOME – the main source of household income. (employees, farmers, the

self-employed, old-age pensioners, disability pensioners, non-earned income/ social benefits)

Estimations results

B S.E. Wald df Sig. Exp(B)

age_group     151.13

4 0.0%  

15-24 yrs 0.31

0.08

16.48

1 0.0%

1.36

25-34 yrs 0.09

0.06

2.66

1 10.3%

1.09

35-44 yrs- 0.04

0.05

0.64

1 42.5%

0.96

45-54 yrs 0.32

0.05

46.31

1 0.0%

1.37

Education     1 380.86

2 0.0%  

higher (Ba. MSc. etc.)- 2.29

0.09

585.71

1 0.0%

0.10

secondary general- 1.00

0.03

921.32

1 0.0%

0.37

woman 0.19

0.03

39.30

1 0.0%

1.21

single. widowed. divorced 0.19

0.05

15.09

1 0.0%

1.21

children below 17     1 544.25

4 0.0%  

1 child 0.41

0.04

102.41

1 0.0%

1.51

2 children 0.63

0.04

219.13

1 0.0%

1.87

3 children 1.20

0.05

662.23

1 0.0%

3.33

4 and more children 1.75

0.05

1211.45

1 0.0%

5.74

Estimations results, cont.

B S.E. Wald df Sig. Exp(B)

place     711.24

3 0.0%  

200+ thousand inhabitants- 0.92

0.04

441.63

1 0.0%

0.40

towns and cities 20-200 thousand inhabitants

- 0.76

0.03

470.62

1 0.0%

0.47

towns below 20 thousand inhabitants- 0.47

0.04

136.60

1 0.0%

0.63

family type 421.10

4 0.0%  

couple with children 1.10

0.08

206.68

1 0.0%

2.99

lone parent family 0.27

0.11

5.91

1 1.5%

1.31

couple. children. and other persons 0.66

0.08

70.02

1 0.0%

1.93

other (without children) 0.34

0.08

19.15

1 0.0%

1.40

income     2756.93

5 0.0%  

farmers 0.60

0.06

87.38

1 0.0%

1.82

the self-employed 0.28

0.08

13.29

1 0.0%

1.33

employees 0.20

0.06

9.48

1 0.2%

1.22

disability pensioners 1.09

0.06

354.29

1 0.0%

2.98

non-earned income/social benefits 2.11

0.06

1078.50

1 0.0%

8.27

Constant- 3.49

0.07

2212.55

1 0.0%

0.03

Conclusions

Benefits for families decrease the poverty rate and the poverty gap and their impact is stronger in households with children

2004 reform caused stronger reduction in the poverty gap than in the poverty rate

Presence of dependent children in the household is an important factor increasing probability of the household to be poor (even after 2004 reform)

However, education of the household head (correlated with his/her employment potential) seems to be even more important

That suggests another possible way of helping families with children, i.e. by helping parents to increase their human capital and to find a good job

Thank you for your attention