Despite Poland’s progress in reducing poverty in the last two decades, the job is not yet done. Most importantly, child poverty remains one of the highest in the EU. This is damaging for social and economic reasons and has long-term consequences since children growing up in poverty usually end up with deficits in education attainment and skills. In order to prevent this, governments across Europe provide support to low-income families. This support takes on varying forms, either directly through income support or indirectly through the tax code or specific social services. The scale and composition of the support can vary enormously across countries.
While Poland provides support to low income families like its EU peers, there is significant scope to strengthen this support. Low-income families in Poland are supported by a fairly large number of social programs. Nevertheless, compared to other European countries, total spending on social assistance remains low at about 2% of Poland’s GDP compared to 4% or 5% in Hungary and Germany, for example.
Recent work by the World Bank has highlighted that spending programs in support of low-income families in Poland are well targeted, meaning that they mostly benefit low-income households. However, they could do more for poverty reduction if they reached more of those in need. In other words, the effectiveness of social assistance is reduced by large gaps in coverage. Simulations with household survey data suggest that only 50 percent of households with children and consumption below the legal threshold receive family benefits.
The combination of high coverage gaps and relatively low benefit levels explain why s.This is low by European Union standards.
Families in Poland also receive support through the tax system. Child tax credits play an important role benefiting households with more children which in Poland, as in many other countries, tend to be relatively poorer households. However, benefit support to low income families and the child tax credit together lead to a moderate level of redistribution, while the resources needed to administer two parallel redistributive systems are significant.
Several measures could provide more effective support to low-income families in Poland.
- First and foremost, it is important that more families living below the poverty line receive support from the government. To close this coverage gap, work is needed to develop a better understanding of the factors that explain non-take-up of the family benefit and the temporary benefit, both of which represent the basic safety net for the very poorest in Poland. Reasons for non-take-up could include complexity of the application process, lack of awareness of entitlement among some households, rationing of the benefit in municipalities with high poverty and limited resources, or dislike of the mandatory case management process.
- Second, policy makers could consider increasing the generosity of the benefit. Current benefit levels do not allow most beneficiaries to escape poverty. Moreover, simulations suggest that the total benefit amount could be significantly increased without causing disincentives for labor market participation.
- Third, family benefits and last resort social assistance are currently designed to assist only families below or just above the extreme poverty line; they generally do not reach those who are not extremely poor but still vulnerable. A small increase in the eligibility threshold could help address this issue while keeping in check public spending increases. Moreover, fiscal space could be freed up by reforming untargeted tax expenditures, including in VAT.
The proposed introduction of a new universal benefit such as the family cash bonus “Rodzina 500+” is one way of tackling the problem of improving coverage and generosity of benefits for families. The proposed reform also provides an opportunity to revisit the architecture of the low-income family support system. For instance, it will be important to ensure that social welfare offices – which are already stretched - have the capacity to administer the expanded demand on their services.
Given the importance of social assistance in improving the opportunities for Poland’s children growing up in poverty, there is a clear rationale for investing dedicated resources at the central level for greater monitoring of social benefits' performance. More analysis is also needed on the non-financial support for low-income families in Poland.
Improving the opportunities of children growing up in poverty takes multiple interventions, including expanding social services and social work, increasing access to early childhood education and care programs, and promoting school-based activities focused on poorer pupils. But improving income support to low income families is a critical first step.