Bolsa Família could reduce poverty and save BRL 100 billion – 06/16/2023 – Laura Machado

Given the urgency of eradicating poverty and the historical volume of public resources for this purpose, the Bolsa Família design can and should generate the greatest possible reduction in poverty.

Income transfer to the most vulnerable is an objective in itself and also the first step towards inclusion in work. The ultimate aim must always be the emancipation of the people. Our challenge at the moment is to adjust the program so that it actually reaches those most in need and does not discourage emancipation.

The new Bolsa Família establishes that families enrolled in the CadÚnico whose monthly per capita family income is equal to or below the poverty line, currently R$ 218, are eligible for the program.

The financial benefit that those eligible have access to is based on a floor of BRL 600 per family. For example, a family consisting of a mother and a small child receives R$750 per month. This is the most generous stable resource Brazil has ever had, a big step for social policy.

However, currently, Bolsa Família hinders the quest for emancipation. If the mother gets a job for BRL 450 and correctly declares this income, she will lose the BRL 750 as she is no longer eligible.

Would we like to enforce such a loss in this situation? No, not only is the family encouraged not to correctly declare their income, but it is also difficult to reverse long-term withdrawal from the labor market.

There are simple mechanisms that would correct this disincentive to work and correctly declare income. In the design of the program, this correction is also important due to the magnitude of the loss of public resources involved.

Applying the eligibility criteria and benefit value of the current program to the income of the 2022 National Household Sample Survey, the budget needed to eradicate poverty would be R$72 billion per year. For 2023, the government has BRL 175 billion available for the program, more than double the amount needed if we had perfect targeting.

Perfect targeting requires knowing the correct income of beneficiaries, something the program itself is discouraging. We will not achieve this savings of R$ 100 billion, in part, due to the disincentive to correct declaration by beneficiaries.

Another important point is that we know that doubling Bolsa Família resources or improving targeting by 35% generates the same reduction in poverty – the latter at no cost. There is no lack of evidence that corroborates that the most effective and least cost way to reduce poverty is by encouraging the correct reporting of information and targeting.

How can we make this adjustment? The implication for public policy is to return to the old model of Bolsa Família itself, called the extreme poverty benefit. We’re talking about something we’ve already done.

The previous version of the program supplemented the family’s income until reaching the poverty line, instead of granting a fixed amount, so as not to impose a loss when the beneficiary reached autonomy. The program can even encourage the generation of income by the family by adding a bonus when this happens.

In the case of a mother with a child who accepted a job for R$450, the program could supplement the amount up to R$750 and add a bonus for productive inclusion. In this way, the family is not disconnected from the labor market and has an incentive to properly declare their income.

This adjustment to Bolsa Família has a series of gains: it can make it more effective in combating poverty, encourages families to correctly declare their income, enhances inclusion in work and saves public resources to, who knows, be even more generous in the near future.

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