My opinion: Introducing universal family allowances for inclusive social protection
Children are among the most important resources Malaysia can count on to drive future growth. Unfortunately, children’s indicators on several dimensions show deterioration in recent years. The economic fallout induced by Covid-19 will further aggravate this situation if due attention is not given to reversing these trends.
This article argues that a universal child benefit (UCB) is a policy option whose time has come and which should be implemented in Malaysia. It presents the benefits of not only addressing childhood-related risks, but could also provide the right direction to address long-standing coverage gaps in building an inclusive social protection system in Malaysia.
Childhood is inherently a vulnerable stage of life, as children rely on adults to provide for them. Children are disproportionately affected by poverty, with data from the 2019 Household Income Survey showing a higher poverty rate among households with children, almost 9% compared to 2% for households without children. Children from the poorest households are more likely to experience inferior living conditions and receive poorer nutrition, health care and education. Such circumstances have long-term implications on physical, cognitive and socio-emotional development, and subsequently on future earnings.
Vulnerability during childhood is not limited to poverty alone, as issues such as nutritional challenges involve not only caloric undernutrition, but also obesity and micronutrient deficiencies, leading to an increase in non-communicable diseases (NCDs) related to diet in adulthood. Although we may think that undernutrition is more concentrated among the poor and obesity is more prevalent among the rich, the reality is that malnutrition is a problem that affects all income classes. Data from the 2019 National Health and Morbidity Survey shows that around 22% of children in the bottom 40% and 17% of the top 20% of households were stunted. The obesity rates of the two groups did not differ significantly, at 16% and 18% respectively. More worryingly, some indicators suggest that the situation has worsened over the years. Between 2011 and 2019, the rate of stunting among children under five rose from 17% to 22%, while obesity among children aged 5 to 17 rose from 6% to 15% .
Social security for children
As it stands, the provision of social security to children and their families in Malaysia has no legislative basis, unlike the legal provisions that protect social security schemes against work-related accidents and risks. unemployment benefits within the framework of the Social Security Organization (Socso), as well as the retirement savings scheme within the framework of the Employees’ Provident Fund (EPF).
While child welfare exists, the authorities only try to help the “deserving” poor. Eligible beneficiaries are identified using poverty measures such as the poverty income line (PLI) and the bottom 40% income lines (B40). Although targeting makes sense, the exclusion of poor children remains a serious problem. For example, the number of children enrolled in the Bantuan Kanak-kanak (BKK) program in 2019 was around 70,000, well below the estimated 160,000 children living in poor households based on the poverty measurement methodology. poverty of 2004. The exclusion rate is expected to be higher given the revised methodology of 2019. In the meantime, children in households living just above the PLI threshold are largely on their own.
Given that multidimensional deprivations during childhood create major obstacles to child development, a universal approach that provides child benefit as a social protection floor for all children deserves more attention than ever.
Ideally, the UCB scheme would provide an unconditional monthly income to each child until they reach the age of 18. Such a universal social protection floor would solve many problems, from preventing poverty and vulnerability to reducing stigma and maximizing the potential of every child, leaving no one behind. A universal scheme would also minimize excessive administrative costs for targeting and selecting beneficiaries.
Since universality means that the benefits go to both rich and poor children, one might wonder why the rich should also benefit. In fact, child benefits already accrue to children from high-income households, but not in the form of direct support. This occurs when taxpaying parents claim tax relief for several expenses related to raising children, including child support, child care expenses, and relief for education savings.
Between these two poles, middle-income children benefit the least. They are left behind because their parents are not “poor enough” to qualify for welfare, but do not earn enough to qualify for child tax relief. A universal approach would be effective in ensuring the inclusion of children ‘missing in the middle’, while simultaneously improving the progressivity of benefits across income groups.
Implementation of UCB can be done in stages, with annual expansion before reaching full coverage. Initially, it could start by covering children aged 0-12 at an estimated annual cost of around RM120 billion, for a benefit level of RM150 per month.
Although seemingly important, it is not impossible to implement. This can be achieved by streamlining and consolidating tax revenue foregone due to child-related tax breaks and existing social assistance expenditures such as BKK and BPN (BantuanPrihatin Nasional, which has an element of child assistance). Clearly, the program can be implemented within the existing fiscal space, as it is estimated that up to RM14 billion will be available to the government from the rationalization exercise alone.
The proposed investment in Malaysia would be around 0.7% of GDP, covering all children aged 0-12 (or 72% of the total number of children aged 0-17). This percentage share of GDP is slightly above the global median of 0.6%. In comparison, Mongolia, a lower-middle-income country, invested 0.6% of GDP, covering 85% of children. South Africa, a country with a higher proportion of children, invested 1.3% of GDP, covering 64% of children.
Universal coverage is essential to build an inclusive social protection system and the UCB scheme is an ideal entry point to achieve this goal. Universality would mean that the inclusion of all children is guaranteed from the day of their birth. Enrollment of newborns in the scheme is automatic when they register for a birth certificate. Once a comprehensive social protection register is in place, other needs-specific interventions can be better designed because information about each child is available in the register.
Additionally, the registry can be used to minimize protection gaps during subsequent life stages. When children are about to graduate from the UCB scheme at the age of 18, automatic enrollment can be extended for employment-related social insurance and pension schemes to prepare them for active life and later, to old age.
These recommendations were presented in the recently published report by the Khazanah Research Institute titled Building Resilience: Towards Inclusive Social Protection in Malaysia. In addition to rolling out universal child benefits, the report proposes extending social insurance to all adults of working age, including those in informal employment and the unemployed, as well as establishing an insurance pension social security for the income of the elderly. The report can be downloaded from http://www.krinstitute.org.
Hawati Abdul Hamid is a researcher at the Khazanah Research Institute (KRI)