Social welfare cannot reduce extreme poverty

The Gini Coefficient is an inequality indicator. It takes values between 0 and 1. In an egalitarian society, it tends to 0 and very unequal to 1. For reference, the advanced European countries have Gini coefficients in the order of 0.25 – 0.30. In Argentina, the INDEC recently reported that this indicator was 0.443 in the 3rd quarter of 2020. Before the current crisis, in the 3rd quarter of 2017, it was 0.427. This means that with the exchange rate crisis and the pandemic, inequality in Argentina, which was already high, is rising.

The current government has set itself the goal of reducing inequality. As soon as it took office, it implemented the Argentina Plan against Hunger, which aims to guarantee access to the basic food basket. Then, there was massive distribution of other welfare aid in the pandemic framework, such as additional on the Universal Child Allowance and food cards and the creation of the Emergency Family Income (IFE). 

The question is why inequality is increasing with such welfare payments roll-out. In this regard, it is useful to look at other indicators provided by the INDEC. According to this source, it can be seen that:   

• On average, indigent households have 4.7 members.
• Before the crisis, for every working indigent, there were 2.6 who did not work, and now there are 4.5 who do not.
• Before the crisis, for every indigent on welfare, there were 1.7 who did not receive assistance; now, there are 1.9.

These data show that welfare is far from replacing job losses. The households that are indigent in the third quarter of 2020 are those that have lost their jobs and have many members to feed. Secondly, it also shows that welfare administration requires, in addition to public resources, good management to reach indigent households and those who are falling into indigence due to job losses. At its three levels of government (national, provincial, and municipal), Argentina’s public sector has a lack of resources, but its greatest shortcomings are in public administration. Therefore, no matter how much welfare benefits are provided, many households will persist in poverty and deprivation. 

Several facts demonstrate Argentina’s public sector’s low management capacity. One is the inability to control the health and education Universal Allowance per Child (UAH) conditionalities. This is explained by the archaic method used by ANSES: a paper-based notebook which was later transformed into a digital medium but which follows the same logic as paper. It was never possible to agree with the provinces on the digitalization of school enrolment and health controls. Proof of the inefficiency is that since 2017 conditionalities are not being controlled. Even worse is the case of people who are excluded from welfare because they lack identification cards due to the Civil Registry malfunctioning.

Another demonstration of poor management in welfare is the growing dependence on social organizations to manage it. Instead of generating an institutional framework for coordination between the national, provincial, and municipal governments, so that the latter take over and manage welfare among the indigent population, political links are generated with social organizations to distribute the welfare help. This intermediation benefits the organizations, for the power they hold on their followers managing public resources, but wipe out the guarantee that welfare reaches the most vulnerable households.

Indigence is the last stage of poverty degradation. Households cannot even afford to eat. This can be alleviated by professionally managed welfare without social organizations meddling. But the solution is to create more productive jobs.