Cecilia Machado: Auxílio Brasil payment model generates distortions and harms the poorest

The creation of Auxílio Brasil apparently maintained some of the good principles of Bolsa Família. Among them, the household income criterion –which takes into account the size of the family when calculating the benefits received– and the prioritization of transfers to families with young children.

However, the recent publication of Provisional Measure (MP) 1.076/21, which instituted the extraordinary benefit for Auxílio Brasil, raised doubts about the maintenance of these principles. In general terms, the new MP establishes the end of the focus on fighting poverty in Brazil. And it is unclear whether this lack of focus will remain in 2022 as well.

The benefit guarantees a minimum payment of R$400 for all families as of this month. Despite having a “provisional” character, it may be extended until the end of 2022, subject to budget availability. Considering that the average payment of Auxílio Brasil in November was R$220, it is not difficult to see that the new rule establishes a minimum that overlaps the other transfers made by Auxílio Brasil, diluting all the advantage that a program focused on the poorest and targeted at children provides.

When the new minimum becomes greater than the average value of transfers, all families receive exactly the same amount. And the number of members and the age of the children become irrelevant in determining the benefit received.

Consider, for example, two families with equal per capita income. One is composed of a mother and an 8-year-old child, while the other is composed of a mother plus three children aged 4, 6 and 8 years. For Auxílio Brasil, the first family would receive R$65, while the second, R$195. With the extraordinary benefit, the two families now receive the same R$400, despite the second family having twice as many members as the first.

Similarly, consider a family consisting of a mother and a 2-year-old child, who receive R$430 corresponding to the Early Childhood Benefit and full-time daycare assistance, while the second is composed of a mother and a 20-year-old child, who receives R$65 for the Family Membership Benefit. In this case, the number of members is the same, but the returns from the program to the first family (with an early childhood child) are much higher.

The extraordinary benefit does not alter the transfer made to the first family in any way, but it sextuples the transfer made to the one with the adult child.

One of the two: either the financial benefits of Auxílio Brasil were poorly calibrated, or, in fact, a model of assistance without targeting is intended.

It’s hard to believe that after nearly two years of pandemic, all the time it took to improve the old Bolsa Família in somewhat promising directions, and the evident need to overhaul the social protection network, Auxílio Brasil continues to suffer from mistakes that make it closer to emergency aid than to Bolsa Família.

Nor does it make sense to infer that Auxílio Brasil is proposing to abandon targeting, given that the prioritization and differentiation of benefit values ​​by family composition are structural components of the new program. It is known to be positive to transfer more to the poorest (in per capita terms) and to prioritize families with children, where the returns to investments in education and health are greater.

The prolonged payment of emergency aid in its original form, and the absence of a deeper discussion about what we want from a social assistance network, had deleterious effects on the process of Auxílio Brasil. We spent two years renewing a poorly focused program, and now there is a huge reluctance to return to prioritizing who really needs the transfers.

The establishment of a minimum payment along the lines of the current Auxílio Brasil generates distortions and harms the poorest. The R$90 billion budget can be done better just by recalibrating the value of the benefits of the current program. This end of the year, my wishes are that MP 1.076/21 is really extraordinary and that the minimum benefit ends along with 2021. Happy holidays!