1 The Elderly in Africa: Issues and Policy Options K. Subbarao
2 The scene prior to 1990s The elderly were part of the extended family and as such enjoyed care and protection. The informal old age support system was strong. Evidence assembled by Deaton and Paxson (1997) show that for Ghana, South Africa the elderly were not overrepresented among the poor in 1988.
3 The scene has vastly changed in the 1990s. A number of trends in developing African countries could well make matters worse as regards old age poverty. First, changes in household structures brought about by AIDS have undermined informal old age support.
4 The scene in the 1990s. AIDS has in fact reversed the traditional role of the extended family: far from supporting the elderly, the opposite is now true: the elderly (grandparents) have now become care givers for grandchildren and families. Figure 1 shows how the middle age cohort is disappearing due to AIDS.
5 Projected population structure with and without the AIDS epidemic, Botswana, 2020 Age in years Males Females Projected population structure in 2020 Deficits due to AIDS Population (thousands) Source: US Census Bureau, World Population Profile 2000
6 In 10 countries of sub-saharan Africa more than 15% of all children were orphans in 2001
7 Risks faced by OVC Most common risks associated with orphanhood: Loss of educational opportunities Risk of abuse and exploitation Health and Psychological risks Risks of stigma and discrimination
8 Understanding old age poverty is now critical.. Apart from AIDS, economic adjustments due to globalization, changes in labor market conditions, social sector reforms (including such policies as cost recovery) have adversely affected older people. Contributions of older people are systematically under-valued.
9 Understanding old age poverty Perceptions that older people are largely dependent on their households, communities or the state have not changed, though in reality AIDS pandemic has proven these perceptions wrong. One should expect poverty incidence to be higher among the old today.
10 Evidence on elderly poverty Unfortunately very few data sets in post- AIDS pandemic exist, and these have not yet been analyzed. However, many qualitative and participatory studies provide a broad picture of the elderly in Africa. Help Age International has done pioneering work in Tanzania, Ghana and South Africa.
11 Poverty among the elderly. The studies by Help Age International confirm that poverty in later life is deep and enduring; widowed elderly women are among the poorest; in the surveyed African countries the elderly poor lacked family and social support, income security and health care.
12 Poverty among the elderly. According to W.Bank Ghana Poverty Assessment, the combination of age, widowhood, and lack of adult education was frequently associated with chronic vulnerability among elderly women. Because of AIDS, older women were twice as likely as men to be widowed
13 Tackling Poverty in Later Life: Policy Options Households and community organizations do continue to provide the greater part of old age support in much of Africa; so it is important to develop policy initiatives that complement community initiatives. In this context, what is the role and what are the implications of non-contributory social pensions for very poor countries of Africa?
14 Non-contributory Pensions: Design issues Essentially three design options: In countries which already have these pensions, increase coverage In countries with currently no noncontributory old pensions, consider: Universal pensions regardless of income levels Means-tested pensions only for the indigent elderly
15 Design options In this presentation, I focus on the latter two issues: universal versus means-tested old age pensions. What are the issues: Fiscal cost Information requirements Administrative issues: fraud prevention Political economy
16 Fiscal cost: affordability issue This issue is not specific to old age pensions: it applies to all social assistance programs. Cost depends on (a) level of support, and (b) age cut-off point, and (c) numbers covered. If universal, (b) determines (c).
17 Level of support There are two ways of addressing this issue: Consider a norm such as $1 a day and assess total cost, given a cut-off point. This is relatively easy arithmetic if we know the demographic picture. Typically unaffordable for most poor countries:
18 Affodability issue. For 60+ coverage, as per cent of GDP, it works out to 9.8% for Malawi, 9.2% for Mozambique, 16.7% for Ethiopia, 12.2% for Sierra Leone, 4.7% for Nigeria, 5.4% for Rwanda. The proportions are high for 65+ coverage: 5.9%, 6.3%, 10.6%, 7.2%, 2.9%, 3.2% respectively.
19 Affordability issue Maintaining a cut-off point beyond 65 may render the program not relevant in some AIDS-ravaged African countries where life expectancy levels have fallen before 45. The level of support, however, may be too generous (1$ day) in countries where the average per capita consumption expenditure below poverty threshold is less than a $1 a day.
20 Affordability. It is probably desirable to assess the cost by looking at poverty thresholds, and estimate the cost by scenerios such as: how much does it cost to fill 50% or 75% of the poverty gap ratio among the elderly; how much does it cost to bring the elderly poor s threshold to the average below the pov.threshold, or to the national average poverty threshold. Such estimates are not available for any African country, but work is in progress.
21 Affordability. Can means-testing reduce the fiscal cost? Depends on a variety of considerations In countries where informal support is still very strong, means-testing may be necessary in order not to crowd out community/household support system. In countries where numbers of large, means-testing may be necessary.
22 Means-testing. Yet means-testing in African countries is not easy. Information constraints are severe. Community-driven targeting might work: e.g., which grandparents in a given community are currently providing care to children, and how effectively.
23 Means-testing In this context, age-cut-off may be supplemented with exposure to risk and vulnerability: a grandparent aged 58 might be vulnerable if sick and has to provide care to grandchildren, whereas another 65 year-old may not be vulnerable if living in an extended family receiving proper care.
24 Means-testing Because of these considerations, community-driven approaches might work rather than mechanical age cut-off points. Moreover, age cut-off may be difficult to implement in countries with no tradition of birth certificates or even birth registration.
25 Means-testing Because of these limitations, it is not surprising Case and Deaton found no difference in cost-savings between means-tested and universal social pension in South Africa. One option is to consider a proxy means-test, for all elderly below a lower age limit (say 55 or 60).
26 Means-testing Proxy means tests could include an asset test, children s current condition, in-residence status, age and health status of the recipient, etc. all assessed by the community with a simple, field-tested questionnaire. Finally, means-tests are not generally politically popular: so it is necessary to build appropriate constituency before launching a means-tested program.
27 Concluding remarks. So what options should low income countries consider? Perhaps begin with a universal pension at an (advanced) age determined by the current and future demographic structure, but provide minimal benefits. Size of benefits needs to vary depending on the current other benefits/coverage under health, education, and other social protection programs.
28 Concluding remarks Independently of fiscal costs and targeting options, it is essential to do a proper risk and vulnerability assessment, and check if (a) the elderly are in fact a vulnerable group that can be targeted with an age-cut off criterion, and/or (b) if a small benefit to elderly poor may lead to significant poverty relief, and if that small benefit is affordable. Pilot test to if community-driven approach target the elderly Never ignore the multi-faced vulnerability of the poor in policymaking! Thank you.
29 Multi-faceted Vulnerability of the Elderly Morbidity and mortality; Psychological distress; Poverty; School drop-out; Malnutrition and foodinsecurity; of inheritance; Fear, isolation and stigma; Abuse and neglect; Risk of HIV/AIDS.