Social assistance spending contained pandemic poverty, but gap widened between rich and poor countries

A new report released by the United Nations Development Programme (UNDP) shows that cash assistance policies significantly reduced the number of people who might otherwise have fallen into poverty during the COVID-19 pandemic.

The report – ‘Mitigating Poverty’ – offers new data on how social assistance spending prevented people from being pushed into poverty.

In the 41 countries for which data is available, 80 percent of people -12 million of 15 million -who would have fallen below the US$1.90 poverty line did not as a result of social assistance measures.

When the impact of social assistance policies is measured at higher poverty lines in the same 41 countries – i.e. on everyone living on US$5.50 a day or less in these countries – 31 of 42 million people were prevented from falling into poverty since March 2020.

While the overall mitigation effects were strong, the study also reveals that this impact was largely circumscribed to high and upper-middle-income countries, as richer countries could afford to spend more on social protection measures.

For low middle-income countries, social assistance spending was insufficient to prevent an increase in the number of poor people, and in low-income countries, it could not prevent income losses at all.

“The COVID-19 pandemic triggered the roll-out of an unprecedented number of new and often innovative social protection measures. That included social assistance spending, which played a critical role in keeping people out of poverty. Yet access to this lifeline depends on where you live – with richer countries spending as much as 212 times per capita more on social protection during the pandemic than their poorer neighbors. The challenge now is to expand the fiscal space to allow all countries to implement and sustain social assistance spending measures, which is proven to be a highly cost-efficient and effective way to keep people from falling into poverty, ” says UNDP Administrator Achim Steiner.

The data available reveals that there have been massive differences in income support mobilized by rich and poor countries to mitigate poverty. Globally, US$2.9 trillion was invested in social protection policies, but only US$379 billion were spent by developing countries.

While high-income countries have allocated an average of US$847 per capita on all social protection policies (social assistance and insurance), low- and middle-income countries have spent a per capita average of just US$124. Among low-income countries only, the amounts of total social protection per capita are as low as US$4.

The authors took existing estimates of how many people became poor during the pandemic – estimated at between 117 million and 168 million people — and went a step further to understand how social assistance spending actually impacted these numbers.

The study also estimates that a temporary basic income could have prevented the number of new extreme poor globally if applied to all poor and vulnerable households in the developing world.

Projections in the report show that this could have been achieved by dedicating just 0.5% of developing countries’ GDP, spread over six months for income support-related measures.