Institute for Market Economics Examines Social Assistance Programmes in Bulgaria

The Institute for Market Economics has published a study of the structure and dynamics of the main mechanisms for social assistance in Bulgaria. The analysis looks into programmes, funded by the state budget, and social insurance payments effected through the public social insurance system, informs Bulgarian Telegraph Agency.

Between 2015 and 2019, total public expenditures through the programmes at issue grew by 27 per cent, but as a share of GDP they edged down from 1.9 per cent in 2015 to 1.8 per cent in 2019. To a certain extent this can be expected given the high economic growth, employment and growth of wages and pensions. However, the dynamics of the programmes' scope, the number of beneficiaries and the amount of compensation and benefits is extremely uneven.

Regardless of the extremely favourable economic indicators, a large portion of households continue to be at risk of poverty and suffer serious material deprivation.

Maternity benefits for children up to two years' of age has grown by a mere 12 per cent. In 2015 it was equal to 92 per cent of the minimum working wage and dropped to 68 per cent in 2019. The monthly child benefits grew by between 6 and 14 per cent until 2020, while all other family allowances remain unchanged.

The guaranteed minimum income, which determines the scope and the amount of social assistance, increased by 15 per cent, while at the same time the monthly heating allowance grew by nearly 38 per cent. The average allowance for children with permanent disabilities doubled, and reforms in the financial support for children with disabilities lead to a considerable one-time increase in incomes. However, monthly allowances for permanently disabled children are not subject to means testing, which makes support imprecisely targeted with regards to the financial situation of households. Around 26,000 disabled children are eligible for support and their number has remained relatively constant throughout the past five years.

Meanwhile, because of the considerable increase of the allowances after 2017, in 2019 total expenditures nearly doubled compared with 2015.

Expectedly, in a favourable environment of growing employment, the scope of the social insurance programme has gradually expanded.

In a more long-term deterioration of the labour market indicators, an even greater part of the vulnerable groups of the work force do not have access to compensations and need to be supported by other programmes for social assistance, which, however, at the moment provide considerably lower incomes.

Spending for support of families with children has dropped by 6 per cent in nominal terms and is now under 46 per cent, against 61 per cent in 2015.

Spending for integration of people with disabilities increased nearly two and a half times, and its share in 2019 almost doubled to 40.3 per cent, from 20.7 per cent in 2015.

The means test criteria for monthly welfare benefits, as well as the government-set amount of the minimum guaranteed income leads to targeting the aid to an extremely narrow scope of persons in the gravest economic situation. Annual spending is no more than 28 million leva.

It can be argued that in its current framework, the programme does not provide adequate support to the target group it is intended for. Together with this, due to the strongly restrictive eligibility criteria regarding the potential recipients, the scope is considerably narrower and misses a big share of households living in poverty, including such with the lowest incomes.

According to official Statistics on Income and Living Conditions (SILC) for 2019, 10.7 per cent of households with two adults and one kid are below the poverty threshold, as are 16.9 per cent of households with two adults and two kids. At the same time, the share of those living in poverty among households with one adult and two or more kids is 41.4 per cent, and 62.3 per cent among households with two adults and three or more children.

The trend persists of growing social spending in programmes with broad scopes and target groups, defined according to different criteria regarding poverty risk, incomes and support needs. In key programmes, child benefits, disability benefits and heating benefits attain growing importance.

At the moment the prevailing approach is to channel budget funds in programmes with a very wide scope instead of making efforts to create precisely targeted instruments which, however, provide adequate support to people who actually need it.