Social Risk Analysis

A Case Study of Mexico

Table 1: Managing Social Risk in Mexico: Main Risks Indicators, Size of At-Risk Groups, and Best Practice Policy Responses
Age Group/ Main Risk Indicator 0-5 -Malnutrition (0-4) -Access to ECD (0 4) -Preschool enrollment (age 5) 6-14 -Primary enrollment -Lower second. enrollment -Child labor -Inactivity 15-24 - Upper second. enrollment -Unemployment - Inactivity Size of Population at Risk* (Number of Poor Uncovered) Urban Rural 820,000 2,200,000 200,000 990,000 3,000,000 300,000 Role for Other Programs/Policies Role for Social Protection (SP) Policy Social Insurance Social Assistance

- Nutrition and educational programs - Publicly provided and/or regulated ECD programs and preschool services

--

- Behavior-conditioned income transfers (PROGRESA) - Targeted ECD and community based preschools - Behavior-conditioned income transfers PROGRESA) - Targeted, communitybased schooling services

Not at risk 625,000 180,000 160,000

430,000 1,300,000 515,000 Not at risk

- Improve primary school access /quality - Improve secondary school access/quality - Distance learning programs

--

1,000,000 1,100,000 2,000,000

1,200,000 Not at risk 1,600,000

- Improve secondary school access/quality - Improve university access/quality - Community colleges (terminal degrees, professional/semiskilled qualifications)

--

- Targeted (need based) scholarships, credit facilities, return-to-school (high-school equivalency) incentive programs

* Preliminary figures for population at risk calculated as the proportion of poor (deciles 1-3 in urban areas, deciles 1-6 in rural areas) in each age category uncovered (subject to revision), based on population estimates by age (Annex I) and risk indicator values by decile group (Table 2).

Table 1: Managing Social Risk in Mexico: Main Risks Indicators, Size of At-Risk Groups, and Best Practice Policy Responses
Age Group/ Main Risk Indicator 25-64 - Unemployment - Full-time employment, below poverty wages - Underemployment (hrs) 65 and Over - Low pension coverage General Population - Low housing quality Special Groups - Isolated villages - Indigenous people Size of Population at Risk* (Number of Poor Uncovered) Urban Rural 460,000 2,800,000 1,300,000 Not at risk 1,600,000 1,400,000 Role for Other Programs/Policies Role for Social Protection (SP) Policy Social Insurance Social Assistance

- Unemployment - Labor-intensive growth - Financial services development insurance - Income-risk pooling - Training, remedial education (crop insurance)

- Workfare (PET) - Targeted income transfers and/or negative income tax

1,000,000

1,250,000

- Financial services development Social security system

- Targeted income transfers

1,600,000 hds.

3,200,000 hds.

- Mortgage facilities - Infrastructure investment

- Targeted housing subsidies

Not at risk No data

2,600,000 - Community driven and 11,500,000 managed development programs

- Targeted investment in basic infrastructure services

* Preliminary figures for population at risk calculated as the proportion of poor (deciles 1-3 in urban areas, deciles 1-6 in rural areas) in each age category uncovered (subject to revision), based on population estimates by age (Annex I) and risk indicator values by decile group (Table 2).

Table 2a. Mexico: Leading Indicators of Social Risk by Age, Region, and Income Group, 1996
Population Group/ Main Risk Leading Risk Indicators Indicator Value, Urban Area Poorest 10 Poorest 30 percent percent Ages 05: Stunted development Chronic Malnutrition (stunting) ECD coverage Preschool attendance (age 5 only) Ages 614 Low human capital development Primary school enrollment (ages 611) Age-for-grade* (ages 611) Lower secondary school enrollment (ages 1214) Age-for-grade (ages 1214) Child employment (ages 1214) Inactivityneither work nor attend school (ages 1214) 53% 71% All Indicator Value, Rural Area Poorest 10 Poorest Poorest 60 percent 30 percent percent All

11%. n.a. 82%

30% n.a. 66%

44%

52%

62%

92%

94%

95%

86%

91%

93%

94%

1.07 41% 1.19 16% 21%

1.04 55% 1.13 13% 12%

1.01 68% 1.07 9% 7%

1.13 24% 1.36 40% 9%

1.12 24% 1.37 30% 14%

1.10 29% 1.31 28% 14%

1.08 37% 1.24 26% 13%

Violence/crime

(Highlighted areas signal prominent at-risk groups)

Table 2a. Mexico: Leading Indicators of Social Risk by Age, Region, and Income Group, 1996
Population Group/ Main Risk Ages 1524 Low human capital development Leading Risk Indicators Indicator Value, Urban Area Poorest 10 percent Low income Upper secondary enrollment (ages 1517) University enrollment (ages 1824) Unemployment (ages 1524) male 19% Poorest 30 percent 29% All Indicator Value, Rural Area Poorest 10 percent 6% Poorest 30 percent 6% Poorest 60 percent 7% All

46%

13%

2% 24% 12%

4% 23% 12%

15% 13% 10%

0.7% 4.4% 0%

0.2% 3.2% 6.9%

0.9% 5.2% 5.3%

2% 4.9% 5.2%

Violence/crime Ages 2564 Low income

female Inactivity (ages 1517) Inactivity (ages 1824) Unemployment: male female Part-time job (as % of all employed) No education or incomplete primary (low skills) (ages 2540) No education or incomplete primary (low skills) (ages 4164) Receives pension

37% 49% 6.5% 3.5% 37% 49%

28% 43% 4.9% 2.8% 32% 36%

18% 28% 3.2% 1.8% 26% 17%

31% 29% 0.6% 0.0% 52% 70%

30% 36% 0.9% 1.5% 50% 68%

29% 36% 1.5% 0.8% 46% 61%

27% 35% 1.5% 0.6% 42% 49%

78%

69%

42%

93%

90%

90%

85%

Ages 65+ Low income General population Low-quality housing

2%

7%

22%

0%

0.1%

0.2%

7%

No piped water No piped sewerage No electricity

18% 50% 5%

15% 37% 3%

7% 18% 0.9%

55% 96% 29%

53% 93% 24%

48% 89% 20%

38% 79% 14%

Table 2b. Mexico: Leading Indicators of Social Risk, Specific Population Groups
Population Group Leading Risk Indicators Isolated rural Lack of access to basic villages infrastructure, social (population 100 or services less, total 2.6 High dependency ratio million people) (large proportion of children and elderly relative to working-age population) Indigenous (total population Systematically higher 11,500,000 people, poverty rates and lower of which 80 social development percent indicators (9,200,000) among the extreme poor, and 1 million monolingual) Indicator Value, Rural Area - Without access to: electricity (59 percent), sewerage (90 percent), primary school (40 percent), secondary school (100 percent), health mobile unit (30 percent), access to temporary employment program (94 percent), free tortilla (99 percent), etc. - These villages represent 2.9 percent of total population, but 3.3 percent of youth (014) (all indicators for indigenous are and 3.4 percent of elderly (over 65), vs. 2.6 given in next columndata do not percent of working age population (2564). allow rural/urban breakdown) -Illiteracy rates, age 15 and over: 49 percent (women), 27.8 percent (men). In communities with over 70 percent indigenous populations (total pop. 4,000,000), 28 percent of children do not attend school, most living in communities with 100 or fewer inhabitants. Over 1 million school-age children speak indigenous language, 250,000 of which are monolingual. Only 38 percent of schools in indigenous communities offer all 6 grades of primary education. Indicator Value, Urban Area Not applicable

Table 3. Coverage and Incidence of Social Programs Targeted to Key Social Risks, by Region and Income Decile Groups, Mexico, 1996
P o p u la tio n G ro u p / M a in risk P ro g ra m C o v era g e In d ica to r V a lu e, U rb a n A rea P o o rest 1 0 p ercen t A g es 0 5 : S tu n ted d ev elo p m en t A g es 6 14 L o w h u m an cap ital d ev elo p m en t V io len ce/crim e A g es 15 24 L o w h u m an cap ital d ev elo p m en t L o w in co m e A g es 2 5 64 L o w in co m e A g es 6 5+ L o w in co m e G e n era l p o p u la tio n L o w -q u ality h o u sin g L o w access to sav in gs/cred it facilities F am ily receiv es P ro g resa tran sfers E C D co v era g e R eceiv es sch o larsh ip to atten d sch o o l (6 1 1 ) R eceiv es sch o larsh ip to atten d sch o o l (1 2 1 4 ) R eceiv es sch o larsh ip to atten d sch o o l (ag es 1 5 1 7 ) R eceiv es sch o larsh ip to atten d sch o o l (ag es 1 8 2 4 ) H as atten d ed train in g p ro g ram H as access to so cial secu rity system R eceiv es a yu d a a lim en ta ria o d isp en sa R eceiv es pen sio n n.a n .a. 2 .8 % 2 .0 % 2 .0 % 3 .1 % 3 .4 % 3 .9 % 4 .1 % P o o rest 3 0 percent A ll In d ica to r V a lu e, R u ra l A rea P o o rest 1 0 p ercen t P o o rest 3 0 p ercen t P o o rest 6 0 p ercen t A ll

1 .6 %

1 .7 %

2 .2 %

3 .4 %

5 .6 %

5 .0 %

4 .5 %

3 .6 %

1 .5 %

3 .6 %

1 .9 %

1 .3 %

1 .3 %

1 .3 %

0%

5 .6 %

5 .0 %

0%

0%

3 .3 %

2 .8 %

0% 9% 1 .6 %

2% 19% 4%

12% 43% 12%

0% 0 .2 % 0%

0% 0 .9 % 0 .1 %

0 .2 % 3% 0 .7 %

2% 11% 3%

2%

7%

22%

0%

0 .1 %

0 .2 %

7%

A ccess to h o u sin g cred it

0 .7 %

4%

16%

0%

0 .1 %

0 .4 %

Table 4. Federal Social Protection Programs in Mexico

Type of Program Number of Programs 4 3 1 29 18 5 2 4 7 1 6 54 1 2 51 5 1 5 105 Budget 2000 (million pesos) 170,539.0 158,687.0 11,760.0 15,861.9 6,622.8 4,740.7 3,779.6 718.8 14,765.2 9,635.0 5,130.2 15,531.8 3,997.7 1,683.9 9,850.2 2,250.1 4,839.9 202.8 223,990.7 Percent of total Budget 76.1 70.8% 5.2% 7.1% 3.0% 2.1% 1.7% 0.3% 6.6% 4.3% 2.3% 6.9% 1.8% 0.7% 4.4% 1.0% 2.2% .09% 100% Major Beneficiaries

1. Social Insurance Social Security Negative Income Tax 2. Sectoral Social Assistance Education Health Housing credit Other 3. Income Transfers and Subsidies Progresa (conditioned income T) Food Programs 4. Income Generation Temporary Employment Labor Training Rural Development 5. Social Infrastructure 6. Natural Disaster Protection 7. Other TOTAL

- Formal sector employees - Formal sector employees - Poor, low educated - Rural poor - Public sector employees - Various vulnerable groups - Rural poor - Poor - Poor unemployed - Low income - Rural communities -- Communities with low access to basic infrastructure -- Communities hit by natural disasters -- Poor communities

Table 5. SP Strategy & Major Social Risks: Seven Key Problems and Best Practice Options
Problem 1. Low preschool and EC D Program coverage D iagnosis Public services not widely available, private services cost-prohibitive for the poor. B est Practice Policy O ptions M exicos exem plary E C D education services for parents (PRO D EI) and com m unity-based pre-school services (CO N AFE ) illustrate bestpractice techniques, but offer insufficient coverage and should be expanded. C om m unity-based rural schooling (CO N A FE), combined with scholarships and training for indigenous students to becom e teachers, bilingual education, distance learning and mobile education units. E xpand demand-side subsidies (for example P RO G RES A scholarships) complemented by increased access and quality of secondary schooling; special education p rograms to bring dropouts back into education system , and highschool equivalency program s. Self-targeted workfare program for the poor unem plo yed (M exicos PET ), complem ented by targeted incom e-support (reformed negative income tax is an option) for poor working fam ilies, within m acroeconom ic and labor m arket fram ework pro moting labor-intensive gro wth, along with financial services for the poor. E xpanded options for informal sector participation in public and/or private contributory pension plans, complemented by targeted nonco ntributory pension system for elderly poor. T argeted subsidies to finance small-scale hom e improvem ents, complem ented by expanded financial services (mortgages) and basic infrastructure networks serving poor areas.

2. Pocket of low prim ary school attendance in rural areas

In rural areas, 15 percent of 614 yearolds in the poorest incom e decile (largely indigenous) do not attend school.

3. Low secondary school enrollm ent rates

O pportunity cost of schooling, poor quality, and low access yield high youth employm ent in rural areas and inactivity in urban areas.

4. Low earnings a m ong the poor, w orking-age population

Lo w education/skill levels yield higher unem plo ym ent and underemploym ent among the poor; but majority of poor (over 60 percent) are emplo yed full time at below poverty wages. Current negative incom e tax program excludes poorest (inform al sector). Pension system only recently open to informal sector; current access to pensions regressive with extrem ely low (0.2 percent) incidence am ong rural poor. Restricted or access to savings and borrowing m echanism s for the poor, existing public subsidies largely targeted to m iddle class (public sector em ployees).

5. Low access to pension (incom e support) am ong the elderly poor

6. Low housing quality a m ong the poor

7. C oncentration of indigenous people am o ng the chronically poor, and in isolated rural villages

G eographic and social isolation, low access to basic infrastructure, few public interventio ns specifically designed to foster local control or driven b y indigenous cultural norm s.

T argeted investm ent to reduce basic infrastructural deficiencies of these com m unities (i.e. water), co m bined with specific, com m unity-driven and managed development program s (see Indigenous P eoples C hapter).

Table 6: Cost of Implementing SP Initiatives in Seven Major Categories of Risk

Problem 1. Low ECD and preschool coverage Size of population at-risk (coverage gap) ECD: 4.6 million poor children ages 0-4; Pre-school: 375,000 poor children age 5 270,000 rural poor children ages 6-12 not attending primary school 1,900,000 poor youth ages 1214 not attending lower secondary; 2,200,000 poor youth ages 1518 not attending upper sec. 4,400,000 poor ages 25-64, employed full time SP policy initiative Expand ECD services (PRONEI) to all poor children 0-4; Expand CONAFE preschool coverage to all poor children age 5 Expand CONAFE primary-school coverage to all poor Offer secondary scholarships ( PROGRESA?) to non-attending youth ages 12-14 (lower sec.), and to youth ages 15-18 (upper sec.) Annual cost per person (pesos) 540 3,510 3,735 Estimated cost to cover gap (million pesos) 2,500 1,300 1,000

2. Pocket of low primary school attendance in rural areas 3. Low secondary school enrollment rates

3,090

5,900

3,600 1,710

7,900 7,500

4. Low earnings among the working poor

Expand/reform negative income tax ( ISR negativo ) to cover all fullyemployed working poor ages 25-64 5. Low access to 2,250,000 elderly poor (over Provide minimum old-age pension pension (income age 64) to all current elderly poor support) among elderly 8,800,000 current workers w/o Expand access to social security poor access to social security pension system to all informal sector workers 6. Low housing quality 4,800,000 households Offer subsidized housing credits to among the poor all poor households with low housing quality (PASVP) 7. Remote villages with 1,300,000 people in remote Install potable water service in all low access to basic villages without access to isolated communities currently infrastructure water without water Total Annual Cost of Implementing the Above SP Interventions

1,200 780

2,600 6,900

2,383 per family 10,000 per person (avg.)

11,500

13,000

60,100