Family Benefits in Poland How much do they alleviate poverty? Anna Ruzik (IPiSS. CASE). Marta Styrc (IPiSS. SGH) Research Seminar WNE 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 threshold net monthly income per household member ( PLN  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 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 % % Benefits for pregnant women and a parent taking care for a child 340.1%54 0.2% Alimony from the Alimony Fund % % Child-care benefits % % Total number of hh in the sample % %

Level of the family benefits Average level of different benefits per one HH entitled in 2003 and 2004 (in PLN) Family allowances Alimony from the Alimony Fund Child-care benefits

Incidence of family benefits by family type [%]

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

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

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 [%] Poverty gap [PLN] Poverty gap [% poverty line] Households with children Poverty rate [%] Poverty gap [PLN] Poverty gap [% poverty line]

Including family benefits Without family allowances Without 4 family benefits All households Poverty rate [%] Poverty gap [PLN] Poverty gap [% poverty line] Households with children Poverty rate [%] Poverty gap [PLN] Poverty gap [% poverty line] Impact on poverty rates and poverty gap in 2004

Poverty reduction impact of family benefit 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 %]

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 gr oups). 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 BS.E.WalddfSig.Exp(B) age_group % yrs % yrs % yrs % yrs % 1.37 Education % higher (Ba. MSc. etc.) % 0.10 secondary general % 0.37 woman % 1.21 single. widowed. divorced % 1.21 children below % 1 child % children % children % and more children % 5.74

Estimations results, cont. BS.E.WalddfSig.Exp(B) place % 200+ thousand inhabitants % 0.40 towns and cities thousand inhabitants % 0.47 towns below 20 thousand inhabitants % 0.63 family type % couple with children % 2.99 lone parent family % 1.31 couple. children. and other persons % 1.93 other (without children) % 1.40 income % farmers % 1.82 the self-employed % 1.33 employees % 1.22 disability pensioners % 2.98 non-earned income/social benefits % 8.27 Constant % 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

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