Study Series on Humanitarian Vulnerability in Montenegro, FRY, Number 1: Social Welfare and Unemployment

OCHA United Nations Office for the Coordination of Humanitarian Affairs
Podgorica Sub-Office, Montenegro: Federal Republic of Yugoslavia
1. Introduction

1999 was a tumultuous year for humanitarian organizations working in Montenegro. Beneficiary profiles and numbers changed dramatically, from a peak influx of over 84,000 Kosovar Albanian IDPs in May, to their sudden and massive return in July, followed by a second influx of Serbian, Montenegrin, and Roma IDPs as a result of continued unrest in Kosovo. Internally, the socio-economic and political context of the Republic was equally turbulent. The dual-currency Deutschemark scheme was producing mixed results: greater Montenegrin control over monetary policy offset by a dramatic and unexpected jump in inflation. The introduction of the Deutschemark also intensified the trade war between Montenegro and Serbia, with irregular blockades interrupting the movement of goods between the two republics and leading to the blockage of all financial transactions. Tensions increased as cooperation between republican and federal authorities broke down, and for the first time there was talk of pro-Milosevic paramilitary units being formed within Yugoslav military structures in Montenegro. A brief standoff between Montenegrin police forces and the Yugoslavian Army at the Podgorica airport in December highlighted the potential for conflict in the Republic.

At the same time, humanitarian operations focusing on the refugee and IDP caseload in Montenegro had stabilized by the end of the year and a well-coordinated response mechanism was in place under the leadership of the Montenegrin Commissioner for Displaced Persons (MCDP) and UNHCR. With substantial amounts of aid flowing into the Republic, the focus of the humanitarian community widened to include the needs of Montenegro's social cases: social welfare recipients, institutionalized individuals, and others who are unable to provide for themselves. Estimates of the number of social cases in Montenegro range from 55,000 to well over 200,000, with the Ministry of Labor and Social Welfare estimating the number of those in need of assistance to be more than ten times the number actually receiving assistance. Estimates of the number of unemployed also vary widely, from 30 percent to 70 percent. When one considers the impact of high levels of inflation (complicated by the new dual-currency scheme) set against the weight of gray and black market income on household economy, it is difficult to come to a clear understanding of vulnerability within Montenegrin society.

This document is the first in a study series to be produced by OCHA Podgorica. The objective of the study series is to examine the many aspects of social vulnerability in Montenegro, and to attempt to match current levels of assistance with information on vulnerable groups within the Republic. The study series will address a broad range of social indicators, from hard macro-economic data and employment statistics to more subjective opinion polls and surveys. Because the study of social vulnerability is not an exact science, this merging of hard data with subjective but systematic information provides the most accurate tool possible for such analysis. This is particularly the case in a volatile, transitional environment such as that of Montenegro, where aid planning is increasingly geared toward development activities while the threat of conflict and a renewed emergency loom nearby.

2. Social Assistance in Montenegro

Social assistance provided by the Republic of Montenegro can be broken into two broad categories: social welfare and assistance to the unemployed.

2.1. Social Welfare

In 1995, social welfare legislation was passed which restricted eligibility to only those who were unable to work: children, elderly, disabled, and institutionalized. This restrictive definition was an attempt to match the provision of assistance to budgetary constraints and was not based on an assessment of need among vulnerable individuals. As a result of the new legislation, in one region alone the number of eligible beneficiaries dropped 70 percent. [The region referred to consists of four municipalities and covers roughly 30 percent of the Montenegrin population. According to the Center for Social Work in Podgorica, beneficiary numbers dropped from roughly 4000 to 1200 in this region as a result of the new legislation]

Material Support: As noted, the first criterion for eligibility for social welfare payments is the ability to work and earn income. Further criteria are based on household income thresholds which vary from month to month (dependent on changes in the average salary) and on family size, as well as taking into consideration the ownership of land [Ownership of more than 0.2 hectares makes one ineligible for social welfare support.]. The following example is from November 1999.

Table 1: Material Support payment scheme and purchasing power

* The Federal Statistics Office (FSO) optimal food basket is an index of 65 food items selected for a family of four.

It is important to note that the criteria above apply only to those who are unable to work; no healthy individual between the age of 18 and 60/65 (dependant on gender) is eligible for social welfare. However, an individual with two children who becomes disabled and whose income drops below 1151 dinars (58 DEM) is entitled to a welfare payment of 1280 dinars (64 DEM). This payment, known as material support is made in dinars and in Montenegro is currently being paid two months behind schedule [The Montenegrin Government has announced that social welfare payments will be made in DEM as of February 2000.]. The per capita breakdown of the FSO food basket in the table above demonstrates the purchasing power of the social welfare payment.

Other Social Welfare Payments and Forms of Support: There are three other forms of financial support available to vulnerable individuals and families according to Montenegrin law, as well as a number of social services and in-kind contributions.

Other Person's Care: is paid to those who are unable to look after themselves due to illness, disability, or old age. These benefits are set at either 100% or 60% of the minimum wage : 100% if income is below the threshold from Table 1, and 60% if it is above the threshold.[The minimum wage is set by the Montenegrin Government, and was 50 DEM in November 1999.]

Child support - All families with children are entitled to receive child support payments regardless of household income. Payment rates per child (to a maximum of three children per family) are:

• 10% of the minimum wage for a pre-school child;
• 17% of the minimum wage for an elementary school child;
• 25% for a secondary school child;
• 30% for a child from a family already benefiting from material support and for children without parents;
• 40% for a physically or psychologically disabled child.

Momentary (emergency) support (50 to 100 dinars) and Occasional support (up to 3000 dinars): Vulnerable individuals and families may apply for one of these two forms of support, if they can prove extreme hardship conditions. In 1998, the inter-municipal Social Welfare Center of Podgorica made 2208 momentary support payments for a total expenditure of 320,792 dinars (16,040 DEM) and 926 occasional support payments totaling 1,120,500 dinars (56,025 DEM). In November 1999, the same Center paid out 37,580 dinars for momentary support, and 173,722 dinars for occasional support.

Social services available through various public institutions include counseling, child protection, and institutional help (orphanages, homes for the elderly, disabled, etc.) Children from most vulnerable families also benefit from in-kind support such as free educational materials, free holidays and recreation, etc. (funded by the Ministry of Labor and Social Welfare).

Number of Beneficiaries: After the redefinition of social welfare regulations in 1995 the number of beneficiaries declined sharply, as noted above. Since then, however, the numbers have increased steadily. The following table shows 1999 social welfare beneficiary numbers as cited by the Ministry for Labor and Social Welfare.

Table 2: Social welfare beneficiaries in Montenegro, by category

* September 1999
** In nine different institutions: elderly, orphanages, disabled, mentally retarded.

According to the Social Welfare Center of Podgorica, there was a 2.3% increase in the number of those receiving material support in the first six months of 1999 as compared to 1998 figures. More recently, the number of beneficiaries in November 1999 was 1.4% higher than in October 1999 and the same trend was expected to continue throughout the winter months. There is as yet no data indicating how the introduction of the dual-currency system will affect the poor and the number of those applying for social welfare assistance.

2.2 Assistance to the Unemployed

Individuals who lose their jobs (for other than personal reasons) are entitled to receive unemployment benefits provided they are registered with the Employment Institute [All individuals registered with the Employment Institute have health insurance, while pension insurance is only covered for those who are currently employed.] Payments are made on a monthly basis in the amount of 65% of the minimum wage, and last between three and twelve months depending upon years of work experience. Only those who have lost their job after 30 or more years of work are entitled to receive benefits permanently (i.e. until re-employed or retired). In addition to this standard policy there are a number of special programs which target the unemployed.

Occasional support to special groups: (work invalids, long-term unemployed, physically handicapped youth, etc.) an example of such targeted government action is currently underway for those unemployed for more than five years, who are receiving food parcels worth 50 DEM. Occasional support programs usually consist of in-kind donations.

Maternity payments: unemployed women are entitled to payments of at least 50% of the minimum wage for one year after giving birth. If the unemployed mother is already receiving unemployment payments they will be extended until the baby is 18 months to two years old (dependent on if it is a first, second or third child).

Small business credits: in January 1999 a program was initiated by the Government to stimulate employment and entrepreneurship through credits of 4000 - 6000 DEM per new position created. Such credits can apply to existing businesses (to a maximum of five new positions created) or to individuals (self-employed). The repayment period is 3 years (plus a one-year grace period) at an interest rate of 3%.

Number of beneficiaries and impact of the system: Although exact figures are not available, the number of unemployed persons (aged 18 to 60/65) in Montenegro in the year 1999 was estimated to be 120,000 while the number of unemployed registered at the Employment Institute in November 1999 was 78,672 [Population between age 18 and 60/65 is 237,000. Those formally employed in 1999 were estimated to total 115,000 (source: Montenegrin Association of Independent Labor Unions). The difference between active population and formal employment is approximated at over 120,000.] . In contrast, the number of beneficiaries receiving payments was 2254 in November 1999, and of this figure 32% were physically handicapped youth [Physically handicapped youth who have participated in vocational training programs yet remain unemployed are given special conditions within the guidelines. Because they remain on beneficiary lists for long periods of time they account for over one third of all payment recipients.]

The huge gap between the estimated number of unemployed and those receiving assistance is explained in part by the restrictive legislation: in order to receive benefits an individual must have been employed previously and only then is eligible for benefits for a period of three to twelve months. After that, benefits drop off to zero. The difference between the number registered (78,672) and those currently receiving benefits (2254) has two explanations. First, many of these individuals received benefits at one point but are simply no longer eligible. Second, many individuals have registered with the Employment Institute in order to receive health insurance but have never actually held a job. The larger figure of 120,000 is based on estimates of the active adult population [This estimate, as calculated above, is considered accurate by the Association of Independent Labor Unions, the Republican Statistics Office, and the Ministry of Labor and Social Welfare.] and the difference between this number and the number registered (78,672) is simply the number of active adult who for whatever reason Reasons for not registering could include lack of information, lack of access for those in deeply rural areas, and lack of interest since in any case no benefits are paid to those who have not been previously employed. never registered. In any case, it is clear that unemployment benefits cover only a tiny portion of the unemployed population in the Republic. And since unemployment benefits are set at just 65% of the minimum wage, their impact on vulnerability is negligible.[For November 1999, 65% of 50 DEM makes for a monthly unemployment payment of just 33 DEM.]

3. International Assistance in 1999

In addition to addressing the ongoing needs of the IDP and refugee caseload, midway through the year international organizations stepped up their efforts in support of social cases and the unemployed. In June WFP donated food to the Montenegrin authorities for distribution to workers employed in fifty companies under liquidation, for a period of four months; these beneficiaries were identified and distribution carried out through the Labor Union. WFP also distributed food for 40,000 pensioners [Pensioners will not be addressed in any length in this document as the legislation and support structures for them do not fall within the social welfare system. However, as the economic decline of Yugoslavia deepens more pensioners are falling into social welfare categories of need. For this reason they are mentioned briefly here and below as a category receiving international humanitarian assistance.] (August and September), 20,000 work invalids and war veterans (October), 20,000 handicapped persons and family members (November), and 20,000 vulnerable households (December) [Lists were provided by the Ministry for Social Welfare which included the elderly, single-parent households, and families in need who did not meet social welfare criteria.]. Catholic Relief Services (CRS) and Mercy Corps International (MCI) began food distributions for all social cases (beneficiaries of material support and other person's care) for six months, beginning in June.

A number of agencies (InterSOS, IOCC, SCF UK, SCF US) provided various in-kind supports for social welfare beneficiaries in 1999 as well, mainly hygiene items and clothes. InterSOS distributed over 30,000 hygiene parcels to low income families, those unable to look after themselves, and orphans while SCF UK provided clothing for the most vulnerable children and youth. Generally speaking, distributions of non-food items for social cases were sporadic, and their continuation in the year 2000 is dependent on availability of funds.

4. Social Welfare for the Year 2000

Food aid provided by the international community for pensioners and social cases will follow the same pattern as in 1999. WFP will continue to support 20,000 pensioners with the lowest incomes by providing a monthly distribution through the Montenegrin Red Cross. CRS will provide a monthly food ration to registered social cases (those already receiving material support and those receiving other person's care), up to a total of 20,000 per month. And MCI will support up to 15,000 workers from companies that are currently under liquidation, with distributions going through the Ministry and/or the labor unions. As in 1999, non-food support will continue on a largely ad hoc basis, depending on available stocks and financial resources.

From the budgetary perspective, the Montenegrin Government has allocated 36,010,618 DEM for the entire social welfare budget for the year 2000 (the largest single line item covers child support benefits). An additional 6,561,764 DEM has been allocated for unemployment benefits, permanent solutions for redundant workers, and other schemes aimed to increase employment in Montenegro. On the revenue side, the budget depends on taxes, contributions and customs fees collected by the Republic [The ongoing Budget War between Federal and Republican authorities has resulting in a serious disruption of budgetary payments in both directions. A highpoint was reached in August 1999, when the Montenegrin Government took over the collection of customs fees - a traditional income of the Federal Budget.] , and on external budgetary support. The most significant external budgetary injection earmarked for the social welfare system in the year 2000 is the EC grant of EUR 10 million. The grant will be disbursed in phases, with the first installment of EUR 2.5 million to be used to support redundant workers.

Conclusion

The figures cited above paint a clear picture of the formal aspects of the social welfare system in Montenegro. First, legislation restricts the number of individuals eligible to receive social welfare and unemployment benefits; this has been done for budgetary reasons and does not correspond to an analysis of need. Second, benefits received are minimal and cover only a small portion of average household needs. A good example of this is the fact that only 2254 individuals receive unemployment benefits from an estimated 120,000 unemployed, and the payment itself in November 1999 was 33 DEM, enough to purchase just 18% of the FSO food basket for a family of four.

The Ministry of Labor and Social Welfare offers a pragmatic analysis of vulnerable groups in Montenegro. Acknowledging that legislative guidelines do not accurately reflect the number of individuals in need, they cite the following approximate figures:

As we have seen, "material support: beneficiaries and their family members are registered and clearly identifiable. The same applies to beneficiaries of "other person's care" who by definition have no one to care for them (no dependents), and the numbers in the table above correspond roughly to the exact figures cited earlier. The last four categories cited above represent, in the opinion of Ministry officials, individuals in need who are not covered by existing social welfare or employment legislation. The figures are approximate, however, and there is little supporting evidence about the socio-economic conditions of these individuals. Even so, a few observations can be made. First, OCHA research in Serbia has shown that pensioners are the least able to benefit from gray and black market income due to their advanced age. Since their fixed incomes (pension payments) are more susceptible to inflation, that many in this category should be considered vulnerable is realistic. As for the unemployed, it is more difficult to ascertain their levels of vulnerability. They have more flexibility to relocate, to learn new skills, and to seek out alternative sources of income. On the other hand, individuals in this age bracket are likely to have more dependents and greater household expenditures, and therefore experience more strain on their household economy. Without concrete data about incomes, expenditures, and the sustainability of coping mechanisms that have been strained (but also strengthened and refined) during the last decade of hardship, it is impossible to come to any conclusion about the true condition of the unemployed listed in the table above. The complex equation of household vulnerability clearly warrants further study, and future editions of this study series will specifically address these questions.