iSEEK - Education

Nanak Kakwani, H yun H . Son and Richard H inz 7 countries to strengthen and develop social protection policies and program s in response to econom ic crises and rising vulnerability am ong the elderly (Asian D evelopm ent Bank 2001, W orld Bank 2001, United Nations 2002). The initial step in assessing an appropriate design and im plem entation path for the potential enhancem ent of the social protection system in Kenya to address the prevalence and consequences of old age poverty is to

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POVERTY, OLD-A G E A N D SOCIA L PEN SION S IN KEN YA &lowast; Nanak Kakwani,&lowast;&lowast; H yun H . Son&lowast;&lowast; and Richard H inz&lowast;&lowast;&lowast; A BSTRA CT This study is concerned with old-age poverty in Kenya. It is also concerned with strengthening and developing social pension program s for the elderly. In this study, we develop precise socioeconom ic and dem ographic profiles of the elderly in Kenya from the viewpoint of providing policy-m akers with inform ation that m ay be useful in the reform and expansion of the

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large, and poverty rates of the elderly increased between 1994 and 1997, the period for which there is household survey data available. In 1994, 44% of persons over the age of 55 reported incom es below the official poverty lines com pared to 37% of the total population. The differential is even greater than these num bers suggest because the elderly are included in the overall num bers. In 1997, the poverty rate for the elderly was nearly 50%, com pared to 45% overall. In addition, the severity and depth

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national incom e would cost about 1% of G D P. Expanding this to 50% of per capita G D P would raise the cost proportionally to just above 2% of G D P. This represents a sizable but feasible portion of current tax revenues that are now just above 20% of G D P. If a pension program provided cash transfers to all elderly 55 years old and over, there would be about 1.5 and 1.7 m illion beneficiaries in 1994 and 1997, respectively. Such a program would have a m ajor im pact on poverty rates and levels for the

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Nanak Kakwani, H yun H . Son and Richard H inz 7 countries to strengthen and develop social protection policies and program s in response to econom ic crises and rising vulnerability am ong the elderly (Asian D evelopm ent Bank 2001, W orld Bank 2001, United Nations 2002). The initial step in assessing an appropriate design and im plem entation path for the potential enhancem ent of the social protection system in Kenya to address the prevalence and consequences of old age poverty is to

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14 International Poverty Centre W orking Paper nº 24 2.7 PO VERTY SIM ULATIO N The study sim ulates several alternative designs of a non-contributory social pension system for the elderly. These are intended to illustrate the relative effects of alternative program design and associated costs on poverty reduction. O utcom es are estim ated not only for the elderly, but also for national poverty. To evaluate the potential im pact of a social pension, several alternative designs for such a

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Nanak Kakwani, H yun H . Son and Richard H inz 17 For instance, the Central province is dom inated by com m ercial farm ers. This feature of the province can be attractive for both retirees starting com m ercial farm ing and for elderly seeking for em ploym ent. O n the other hand, Nyanza province has a high percentage of subsistence farm ers. Pastoralism is prevalent in certain districts in the Rift Valley, Northeastern and som e parts of the Coastal and Eastern provinces. Pastoralist

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livelihood opportunities. In this context, pensions for the elderly could be of great im portance. Pension incom e is usually likely to be pooled within households, and younger m em bers have been dem onstrated to benefit from it. Table 3.7 illustrates one of the m ain effects of elderly caring for children by exam ining the school attendance of children from elderly headed households. School-age children are defined as those aged between 6 and 17, which corresponds to the current Kenyan education system

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20 International Poverty Centre W orking Paper nº 24 children living in other households. This suggests that children living in elderly headed households suffer greater financial hardship compared to those living in non-elderly ones. “O ther” as a reason other than the specific six reasons, is the next highest cause after fees cited by the children for not com pleting the education cycle. The children who responded no interest as a reason for not attending school is also significant, at 8.8 percent

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private dispensaries. For those under 60, the m ost frequent action when sick is also to visit a pharm acy (74 percent), followed by consulting a dispensary (12.4 percent). Attending a health centre or hospital is m ore com m on for the non-elderly group com pared to the elderly one. The 1994 W M S show s that nationally, 10.16 percent of the elderly over 60 w ho are sick do not receive treatment. The corresponding figure increased to 19.10 percent in 1997. For the w hole population, the figures for not

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Nanak Kakwani, H yun H . Son and Richard H inz 27 FIGURE 4.4 Literacy status of elderly pensioners 74.5 25.5 79.1 20.9 74.1 25.9 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 All pensioners Pensioners 55 & over Pensioners 60 & over Literate Illiterate Source: Authors’ calculations based on the 1994 W M S. 4.4 PENSIO NERS LIVING W ITH CH ILD REN In Kenya, the m ajor roles of older people can be identified as: child care givers for em ployed fam ily m em bers with children; and care

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the asset ownership of those without access to pensions. The results reveal that elderly-headed households with pensions tend to own large land parcels, and it was observed that m ost households own no land or little land, seriously disadvantaging their ability to earn a livelihood. Land holding is defined as land owned or operated by a household used either for crops or livestock rearing. In terms of mean land holding size, the difference betw een the elderly-headed households w ith and w ithout

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in Kenya. The elderly without pensions tend to have m ore access to cars than their counterpart elderly. Radios and TV sets are m ore com m only owned assets com pared to assets like cars. This m ay not only be a reflection of affordability, but also the practicalities of daily life. O n average, elderly having access to pensions own m ore radios and TV sets than those without pensions. In the case of life insurance, 2.89 percent of the population in 1994 had life insurance. O f the elderly, there is a

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pensions, a higher proportion of elderly-headed households w ith pensions have access to safe sanitation and electricity. These findings suggest that elderly-headed households receiving pensions tend to have a better quality of living standards than those w ithout pensions. O n the whole, the lim ited pension system of Kenya appears to provide a m eaningful source of incom e support for the sm all proportion of elderly persons that receive benefits. Those who report pension receipt indicate far better

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current pension system for form al sector workers, although sm all, is reaching persons within the lowest incom e groups. 5.2 PENSIO NS AND TH E PRO BABILITY O F BEING PO O R As a second step in identifying the im pact of current pension incom e on poverty a probit m odel was developed to evaluate the determ inants of the probability that a household m em ber living in a household headed by an elderly person will be poor. A m ultivariate setting enables the identification of the im pact of having a

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This study has also calculated the PPP index in the hypothetical case of a universal pension program for the elderly. Suppose that every elderly person over 55 or 60 years old receives a non-contributory pension from the governm ent. Is this scenario likely to be m ore pro-poor than the actual pension program ? Using both the 1994 and 1997 W M S, Table 6.2 attem pts to seek the answer to this question. TABLE 6.2 Pro-Poor Policy index for universal pensions to elderly living in rural and urban areas

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in Table 6.4. If a pension program had been designed to reach elderly 55 years old and over, there would have been m ore than 1.5 and 1.7 m illion beneficiaries in 1994 and 1997, respectively. O f those, 93-94 percent cam e from rural areas in that period. If the coverage of the pension program was reduced, the num ber of beneficiaries would be expected to fall. This is the case for a pension schem e, if designed for those older than 60. In com puting pensions given to each beneficiary, we should

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pensions. The results show that such a universal pension schem e would have cost 1.16 and 1.38 percent of G D P in 1994 and 1997, respectively. As expected, when eligibility is reduced to elderly over 60, costs fall to less than 1 percent of G D P per capita in both periods. For com parison, in India, the total expenditure on various safety net program s including old age pensions am ounted to 1.5 – 2 percent of G D P. Brazil, Nam ibia and South Africa spend 1, 2, and 1.4 percent of G D P, respectively, on

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42 International Poverty Centre W orking Paper nº 24 show s, a given level of pension w ould have a more significant impact on poor individuals living far below the poverty threshold rather than those clustered around the threshold. This point is further highlighted w hen it comes to poverty among elderly. Finally, as expected, the pension transfer leads to substantial reduction in poverty among elderly and also in non-negligible poverty reduction for children under 15 (at the national level

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provides som e prelim inary assessm ent of several key issues that should be included in the consideration of approaches to expand and reform the pension system . The policy analysis is prim arily directed at evaluating the costs, design and projected outcom es of providing a universal “dem ogrant” type social pension that would provide basic subsistence benefits to citizens reaching a specified retirem ent age. This review of the status of the elderly in Kenya indicates a pressing need for som e expansion

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the poverty line com pared to 45% of all children. Children in the care of the elderly indicate m uch lower rates of school attendance. D espite the greater risk and associated social consequences of the low econom ic status of the elderly, the form al pension system in Kenya rem ains very lim ited. O nly 3.1% of people over the age of 55 in 1994 reported the receipt of any pension incom e and 90% of these recipients were m ale. The lim ited data precludes any ability to determ ine patterns for the

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Nanak Kakwani, H yun H . Son and Richard H inz 45 The analysis also suggests that due to the prevalence of poverty am ong the elderly, there will be lim ited gains from m eans testing such a system relative to providing benefits for all at a specified age. Several of the m ain design param eters of such a system can be considered in the context of basic inform ation on incom e distribution and poverty levels derived from the household data. The key threshold question of affordability can be

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Ageing and poverty in africa and the role of social pensions

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1.7 -6.7 -2.2 Kenya -3.0 -2.4 -15.3 -2.8 Madagascar -3.4 -3.0 -26.4 -2.9 Mozambique -1.5 -1.3 -8.9 -1.3 Malawi -1.5 -1.3 -9.5 -1.5 Nigeria -3.1 -2.5 -14.0 -2.7 Uganda -3.3 -2.7 -14.1 -2.5 The simulations also assume that the pension, though delivered to the elderly person, is shared within the household – a realistic assumption in the African context. The poverty reduction impacts of targeting to all elderly persons, all poor elderly persons, are shown in Table 10 (for head count poverty) and

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1.7 -6.7 -2.2 Kenya -3.0 -2.4 -15.3 -2.8 Madagascar -3.4 -3.0 -26.4 -2.9 Mozambique -1.5 -1.3 -8.9 -1.3 Malawi -1.5 -1.3 -9.5 -1.5 Nigeria -3.1 -2.5 -14.0 -2.7 Uganda -3.3 -2.7 -14.1 -2.5 The simulations also assume that the pension, though delivered to the elderly person, is shared within the household – a realistic assumption in the African context. The poverty reduction impacts of targeting to all elderly persons, all poor elderly persons, are shown in Table 10 (for head count poverty) and

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Old-Age Poverty and Social Pensions in Kenya

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increased between 1994 and 1997 (the period for which there are household survey data available). These poverty rates have various secondary consequences. There is a high rate of grandparents caring for children because of the HIV/AIDS epidemic. This exposes children to the consequences of old age poverty. A higher proportion of children living in elderly headed households are poorer than for the average. Also, children living in these households have lower rates of school attendance than others. The current

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increased between 1994 and 1997 (the period for which there are household survey data available). These poverty rates have various secondary consequences. There is a high rate of grandparents caring for children because of the HIV/AIDS epidemic. This exposes children to the consequences of old age poverty. A higher proportion of children living in elderly headed households are poorer than for the average. Also, children living in these households have lower rates of school attendance than others. The current

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