How countries can help those living in extreme poverty get jobs and participate more fully in the economy.
One of the most difficult development challenges we face is how to break the cycle of poverty. In particular, how can children from the poorest families grow up to live better lives than their parents?
“Well-structured safety nets represent some of the best investments developing countries can make ”
I’m talking about Mexico’s Oportunidades safety net program. Founded in 2002, Oportunidades was one of the world’s first programs to tie income support for poor families to their children’s school attendance, medical checkups, and nutrition.
A little over a decade later, Oportunidades has been credited with improving the lives of millions of Mexico’s poorest people.
The successor to Oportunidades—Prospera—promises to do much more to bring poor and marginalized people into society and the formal economy.
I was just in Mexico for Prospera’s launch, and what I saw convinced me that this program will not only help improve children’s health and education. It will give poor families access to the services, vocational training, and financial literacy programs they need to build income and improve their economic security over the longer-term.
My organization, the World Bank Group, is supporting Prospera with a $350 million low-interest loan. We believe that helping the poor learn skills and find good jobs will help raise their income levels and promote economic growth, both of which are vital to our broader goal of ending extreme poverty.
A Progressive Investment
We also think well-structured safety nets represent some of the best investments developing countries can make — and a growing number of countries agree.
“Social safety nets cost on average about 1.6 percent of countries’ GDP. ”
Evidence shows that safety nets can ensure children from extremely poor families go to school, get health checkups, and eat nutritious food—all of which enhances their opportunities later in life. Safety nets can also help those living in extreme poverty get jobs and participate more fully in their country’s economy.
Social safety nets cost on average about 1.6 percent of countries’ GDP. Less effective alternatives, such as fuel subsidies, can often cost three to four times as much – and do not effectively target the poor. In fact, most fuel subsidy schemes primarily benefit upper-middle-income and wealthy households.
The World Bank Group has helped develop safety net programs in 122 countries and seen some significant results from this work. For example:
- Morocco’s primary school dropout rate fell by 57 percent after a safety net program was established in 2008. The program has now been expanded to more than 800,000 students.
- Ethiopia ensured that 3.1 million vulnerable people had an adequate food supply by quickly expanding its existing safety net program when a drought hit the Horn of Africa in 2011.
- In South Africa, a safety net program increased labor force participation and employment, as beneficiaries were able to afford bus fares to commute to more vibrant labor markets.
We need to expand safety net programs like these to an even greater scale. Today, 870 million people living in extreme poverty still lack access to any kind of social assistance.
Research shows that, where this support is absent, many families tend to keep their children out of school and struggle to provide them with basic nutrition, which has long-term negative consequences on their children’s health.
Breaking the cycle of poverty is within our reach, and Mexico’s Prospera program provides an important example of how we can get there. In the video below, I’m joined by Arup Banerji, our senior director for labor and social protection, who explains how Prospera can help countries around the world.