Why Cash Assistance

KOMPAS/ERIKA KURNIA

A line of dozens of drivers, street vendors, workers at Depok Terminal to receive lunch assistance on Wednesday (15/4/2020). Assistance is provided by the social organization Aksi Cepat Tanggap (ACT) and the Indonesian Volunteer Society.

More than two months after the Covid-19 outbreak began, the government has moved to prepare and distribute social assistance in the form of basic necessities. Funds of Rp 105 trillion have already been prepared. Unfortunately, the aid has not reached the target.

Although this is an old and classic issue, it turns out to have not yet been resolved by Indonesia. If only 5 percent goes to the wrong targets, it is still acceptable. However, if this number reaches the 20 percent level, all parties will be disadvantaged. The government that has good intentions will experiences losses and citizens who are in dire need will also be harmed. Those who are entitled to the assistance will not receive it, while some who receive it are actually not entitled. In text books, this is referred to as inclusion and exclusion error.

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In the midst of chaotic mistargeting of social assistance, various proposals have emerged, namely the need for the aid to be distributed in cash, which is directly received by the beneficiaries. The Prakarsa association and Indobignet have advocated for universal cash assistance. The reason is because cash assistance is simpler, faster to distribute and less likely to become embroiled in corruption.

Moreover, it is better for the government to learn from the history and origins of direct cash assistance (BLT), more specifically about how cash transfers to citizens are carried out in several countries. At the very least, it will enlighten us about three things: (i) who deserves; (ii) what is the form of its distribution; and (iii) on what basis will the cash assistance be effective and have a broad impact according to previous targets and plans.

History

In 1999, Prof. Bruce Ackerman and Prof. Anne Alstot from Yale University suggested proposals about the distribution of funds to citizens called "stake", as a form of equality of opportunity. The proposal was launched in 1999 when the United States economy was in a normal condition (The Stakeholder Society, 1999).

Previously, in 1997, Edmund Phelps, a Columbia University economist and Nobel laureate in economics, had advocated for wage subsidies for workers who received low wages (Rewarding Work: How To Restore Participation and Self-Support for Free Enterprise, 1997). Phelps\' proposal is also recommended when the US economy is in a normal state, with the aim of providing support to citizens. Two years earlier, in 1995, Prof. Philippe van Parijs from Louvain Catholic University, Belgium, had advocated for a guaranteed basic income for all citizens, called Basic Income, in order to improve the welfare state system. This proposal was proposed to strengthen welfare policies in developed countries even though the European economy was running normally (Real Freedom for All: What (If Anything) Justify Capitalism, 1995).

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All three proposals have the same view that social justice requires the state to help those left behind in the existing market system. The three drafted a proposal that state support should be issued in the form of cash directly received in the beneficiary\'s account. However, all three have significant differences in three aspects: the magnitude of benefits, frequency (once or every month), and the scope of beneficiaries.

Ackerman and Alstot recommend that the distribution of funds be aimed at all citizens when they turn 18 when they are at a crossroads between studying at university or working in whatever jobs are available in the job market, including low-paying jobs. This assistance would be given in the form of one-time cash savings.

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Van Parijs proposed that all citizens be given a monthly cash guarantee, as many residents who should have the right to social security, turned out not to get it, such as housewives and female heads of households.

Phelps proposed that cash assistance (wages) be distributed to all (formal) low-wage employees, and aid be channeled through the company. If an employee gets paid US$6 per hour and the company only pays $4, the government pays the rest. If the employee only receives $5, the government will pay the rest until he receives $6 per hour.

Outbreak

This COVID-19 outbreak is a catastrophe on a giant scale, the first of its kind in modern history, and the first in the history of modern Indonesia. The OECD estimates that the outbreak and social restrictions have caused a 2 percent drop in gross domestic product (GDP) every month.

In Indonesian nominal figures, it means the economy loses Rp 300 trillion-Rp 320 trillion per month or more than Rp 900 trillion if it lasts for three months. Projections from various institutions are similar, Indonesia\'s economic growth will shrink to zero percent or into the fall into the negative.

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Thus, the task of social assistance is not only as a social safety net, but also at the same time to maintain the purchasing power of citizens and further assist in preparations for faster recovery of the economy after the outbreak. Nevertheless, there are two questions about social assistance, namely the scope of recipients and the form of aid distribution.

Of the two, we are faced with two choices, if social assistance is only for certain groups of people (targeted), the availability and updating of data must be truly available. This is a luxurious condition for Indonesia these days and will most likely fail to be fulfilled. This is not an issue if the the social assistance is aimed at all citizens (universal).

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KOMPAS/BUDI SUWARNA

Warung Sardi in Gang Semanggi 2, Ciputat, South Tangerang who was appointed by the UIN Jakarta Social Trust Fund to provide free food for students affected by the Covid-19 pandemic, at Tuesday (7/4/2020).

Indonesia is not alone in trying to provide extensive and ambitious social assistance. Japan has issued cash funds to all of its citizens. In the US, the government has decided on the largest economic assistance package in history, including to provide funds to more than 22 million people who have filed claims for unemployment benefits.

Finally, inevitably, the government needs to pursue ambitious and extraordinary targets to respond to extraordinary circumstances. First, all assistance in the form of basic goods/materials should be stopped and diverted to cash, except for scholarship/SPP and electricity. At the same time, a benchmark of Rp 105 trillion for social assistance needs to be opened up to Rp 150 trillion-Rp 250 trillion in order to reach and protect people\'s purchasing power and economy on a wider scale.

Second, it will have more impact if and only if the scope and number of beneficiaries is broader than just the data of the Family Hope Program recipients. Thus, the data of beneficiaries (National Health

Insurance) and Integrated Social Welfare Data (Social Affairs Ministry) can be a reference. In other words, the target beneficiaries for assistance include 40-50 percent of families throughout Indonesia or 130 million-150 million people for at least three months, with a value of Rp 1.2 million to Rp 2 million per month.

Kompas

Sugeng Bahagijo

Third, in order to receive aid more quickly, distributing cash is very beneficial because it can easily and quickly be distributed to all beneficiary accounts. A consortium of state and private banks and post offices and so on can be invited to work together as partners to reach all beneficiaries.

Sugeng Bahagijo, Director of Infid.