Roma and Social Benefits: Do Roma Citizens Represent a Problem for Slovak Public Finance?

Several parts of Slovakia experience problematic coexistence of Roma people and majority population, without any successful solutions in sight¹. As a result, there is growing dissatisfaction of majority living in the areas with Roma minorities, because of this problematic coexistence. Dissatisfaction was expressed in regional elections at the end of 2013². But besides real issues, which deserve our attention and effort in finding solutions, the public discussion involves many proofless economic statements and myths that are constantly repeated by politicians and the public. Roma people are often referred to as the abusers of social system who create a significant burden on public finance. As a consequence, limiting social benefits to Roma is often proposed by many as a solution for public deficits. This analysis focuses on estimating how much of the social welfare system actually ends up in the regions with high proportion of Roma community.

Roma and social benefits

There is no record-keeping of ethnicity of social benefits beneficiaries in Slovakia, which is why we implemented complementary techniques to identify Roma beneficiaries. Common assumption is that Roma people have large families, so we evaluated the proportion of public resources supplied to multi-child families (families with more than 4 children), or districts with highest proportion of multi-child families.

We have also examined absorption of benefits by the “Roma“ districts – i.e. districts with two-thirds of Slovak Roma population, as identified by Atlas of Roma Communities.

We have studied the absorption ratio of selected social benefits, bonuses and subsidies, focusing on benefits supplied to low income individuals and families, specifically:

1. Benefits in material need and related allowances

2. Child allowance

3. Parental allowance, Childbirth allowance, Additional payment to childbirth allowance

4. Disability pension, Youth disability pension

According to Atlas of Roma Communities, 403-thousand Roma lives in Slovakia (7.4 % of Slovak Republic population). Through our data analysis (data was provided mainly by Central Office of Labor, Social Affairs and Family and Social Insurance Agency) we have come to these conclusions:

1. Roma issue is primarily social, not fiscal (budgetary) problem. Fiscal costs to districts with two-thirds of Roma population contribute to 2.2 % of public expenditures (€ 578 million). That approximately equals the sum of what the government spends inefficiently on public procurement or public transfers, according to website plytvanie.sk.

2. Benefits in material need represent less than 1 % of Slovak public expenditures (approximately € 270 million) and includes both Roma and majority population.

3. Families with more than 3 children receive less than € 27 million a year in benefits in material need. This equals the sum that has been assigned for construction of National football stadium.

4. Families with more than 3 children receive € 30 million a year in child benefits. Likewise in the case of benefits in material need it is only a drop in the ocean of public finance; government would have to cut 67-fold of this sum to balance the budget in 2014.

5. Families with more than 3 children receive € 15 million a year in Parental allowance. Year-to year indexation of old age pensions accounts for almost 12 times of this sum.

6. Following our assumptions we have estimated that child benefits are paid out for more than 160 thousand Roma children in total amount of around € 44 million per year. We have also estimated that of all the parental allowance beneficiaries 24-thousand were of Roma community with estimated costs of € 57 million in 2012. For comparison, the taxpayer has to pay additional € 65 million for annual Christmas allowance to pensioners.

In our publication we argue against conventional stereotypes and myths about Roma being a burden for public finance in Slovakia. Total annual fiscal costs of “Roma“ districts amount to less than a month and a half expenses on old age pensions, while public support used by multi-child families being even more marginal, amounting to a little fragment of this sum. Roma issue is a social, not a fiscal problem, and so should be concerned as such.

Benefits in material need

Benefit in material need is the basic benefit of the social system for the poorest people with no income.. Primary condition for the benefit eligibility is a state of a material deprivation of an applicant. Providing of the benefit is thus conditional and means-tested by law and government only provides it to the people with income lower than subsequent minimum who are unable to insure an income by their own actions (job, sell of property). Government also provides additional allowances to benefits in material need which can be claimed if the applicant meets defined conditions by law³.

€ 270.7 million was spent on benefits in material need in 2012. There were 183 341 registered beneficiaries. Together with common assessed persons (usually family members in a household), 357 765 individuals were dependent on benefits in material need, which is 6.6 % of Slovak population.

Following graphs show distribution of beneficiaries of benefits in material need split by the number of family members (2012 numbers).

Source: Central Office of Labor, 2012                                                                      Source: Central Office of Labor, 2012

Geographically, there is a visible correlation between higher proportion of Roma population and higher sum paid out in benefits in material need.

47-thousand people in multi-child families (with more than 4 children – corresponding to common perception of multi-child Roma family) were receiving benefits in material need in 2012, representing 13.2 % of all beneficiaries. There were 9 436 multi-child families (with more than 4 children) in Slovakia in 2012, of which 5 762 (61 %) were receivers of the benefit.

Total costs on benefits in material need for multi-child families amounted to € 16.8 million in 2012. Even though multi-child families represent 13.2 % of population in material deprivation, they received only 6.2 % of total € 271 million assigned for the benefit and related allowances.

Source: Central Office of Labor, 2012                                                                   Souce: Ministry of Finance, 2012

We have explored absorption of various benefits and allowances related to social assistance, family benefits and disability benefits by multi-child families and by districts with high number of multi-child families (group „15 counties “) and districts with high number of Roma (group „20 counties “). Multi-child family is defined as a family with more than 4 children in our study.

Public spending on monitored groups

Table: Absorption of selected social benefits by defined groups 

Total sum paid out on all monitored benefits, allowances and payments to multi-child families represented approximately 0.2 % of total public expenditures (€60 million). That is less than government spends on Christmas allowances to pensioners annually.

Multi-child families represent 13.2 % of all persons dependent on benefits in material need while at the same time they receive only 6.2 % of the total benefit spending.. In addition, multi-child families were not eligible for supplementary childbirth allowance (only family with the first-born, second-born, or third-born child was eligible).

Total sum absorbed by the group of “15 districts” in the form of all monitored benefits, allowances and payments represented 1.8 % of total public expenditures (€482 million). That approximately equals the sum that the government spends inefficiently on public procurement or public transfers. Moreover, these payments were neither used by the multi-child families exclusively, (mostly by families with two or three children), nor were they received only by Roma community.

15 districts, in which more than 1000 children live in multi-child families (with more than 4 children), represent 24 % of Slovak population. 36 % of benefits in material need beneficiaries live in these districts, and 45 % of all persons dependent on the benefits in material need (that is including common assessed persons).

Total sum paid out in all monitored benefits, allowances and payments in 2012 in the group of „20 districts“ represented 2,2 % of total public expenditures (€ 578 million), which is less than a half of expenses the taxpayers pay every year on public debt service.

Following our assumptions we have estimated that child benefits are being paid on more than 160 thousand Roma children in total amount of around € 44 million per year. We have also estimated that 17 % of all the parental allowance beneficiaries were from Roma community with the total amount benefit absorption of € 57 million.

In 20 districts with the highest number of Roma residents (67 %, that is 271-thousands of total 403-thousands Roma according to Atlas of Roma Communities) live 29 % of Slovak population. At the same time, 45 % of all benefits in material need beneficiaries and 54 % of people dependent on benefits in material need live in these 20 districts.

Discussion

Roma issue is primarily a social, not a fiscal (budgetary) problem. Fiscal expenditures paid out to multi-child families (or to 20 districts with high Roma population rate) represent 0.2 % of public expenditures (or 2.2 % of public expenditures, respectively). It is not very critical sum in the perspective of public finances consolidation. Discontinuation of benefits in material need to its beneficiaries would cause a social disaster, while at the same time it would reduce the public deficit by only 25 %. However, government should consider advanced incentives to accept even a low paid job (for example, unemployed person accepting a job for a minimum wage could be receiving the benefit in material need for some time while working)..

Concerning the level of payment of the benefits we should ask a question if it is motivating for a multi-child family beneficiary to take up a low paid job. This should also be a question for lawmakers, as payment of a fraction of benefits (decreasing with increasing income) even after taking up a job could be profitable for both beneficiaries and public budget.

What also needs to be remembered is that there are relatively less Roma old age pensioners compared to non-Roma population (only 4 % of Roma are more than 60 years old, compared to 19 % in the majority population) and are also receiving less health care⁴.

World Bank study⁵ shows that 20 % of Roma men and 9 % of Roma women aged 15 – 64 are employed in Slovakia, compared to 66.6 % of all men and 53 % of all women in the same age group. Roma employment rate is thus at about 25 % level of employment rate of non-Roma population. However, the statistics is affected by the segregated communities, whose unemployment rate exceeds 75 %, according to UNDP.

Benefits, allowances and payments are paid out of social system in accordance with correspondent laws, ratified by parliamentary majority. If the social system is being abused or has lack of incentives to look for a job, it is partly a consequence of wrong system adjustments, or inefficient state control. Work incentives are strongly influenced by high rate of executions because wages unlike social benefits are subject to execution.

As 20 % employment rate of Roma men suggest, we should not attribute the lack of interest to work to all Roma. One of the solutions for this issue could be lowering the social contributions burden of low paid employees and improving labor market flexibility. This would help the labor market to “absorb“ more unemployed people including many Roma people.

Ján Dinga, Radovan Ďurana, INESS 2014

(This is an excerpt from publication with the same title published by INESS in Slovak in July 2014. The project was supported by Open Society Foundations)