Free SHS policy has modest impact on poverty reduction — Study

A recent study jointly conducted by three institutions has established that the Free Senior High School (Free SHS) policy, introduced by the government in 2017, has minimal impact on poverty reduction than initially anticipated.

This is due to the universal approach of the policy, as it fails to consider the significant disparities in access to secondary education between affluent and disadvantaged households.

This is one of the findings of the study conducted by the World Bank, Oxfam in Ghana and the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana to assess the impact of the government’s fiscal interventions on Ghanaian society.

The research was dubbed “Fiscal interventions and welfare in Ghana: A commitment to equity (CEQ) assessment using the Ghana Living Standards Survey (round 7).” The findings were made known at the launch of an analytical simulation tool to provide information for understanding and monitoring living conditions in the country.

It is known as the Microsimulation Tool on Fiscal Incidence Analysis built on the Ghana Living Standards Survey (GLSS).

Economic growth

Sharing findings of the study in Accra last Friday, the researchers, International Centre for Evaluation and Research, stated that Ghana experienced a relatively high and steady economic growth of over six per cent on average from 2005 to 2017 (World Development Indicators, 2022).

However, the Director of Research, International Centre for Evaluation and Research, Dr Kwadwo Danso-Mensah, said the benefits from that high growth had not been equitably distributed; a situation that had the potential to undermine the extent of poverty reduction and welfare improvement that could result from the high economic growth.

Dr Danso-Mensah said the trend in poverty rates showed a decline in poverty reduction, while inequality had been rising.

Govt as major agent

The Director said the fact that the government was a major agent in ensuring that economic growth yielded significant welfare gains in terms of improvement in income distribution and poverty reduction could not be overemphasised.

That was because the government exerted enormous control in any economy, particularly through fiscal (tax and spending) policy measures, Dr Danso-Mensah said. He added that the nature of the policy measures could undermine inclusive growth or indirectly lead to major changes and could directly benefit welfare outcomes both in the short and long term.

“This brings to the fore the need to investigate in a comprehensive manner, the extent to which various governments’ spending and taxation instruments independently or together impact on poverty and inequality.

“An analysis such as is done in this study, provides evidence on key factors that promote or limit the redistribution and poverty reduction effect of government's fiscals,” he said.

Methodology

Dr Danso-Mensah stated that the analysis in the study followed the commitment to equity (CEQ) assessment framework, developed by the CEQ Institute and presented in the CEQ Handbook.

He said unlike other approaches for fiscal incidence analysis only amenable for conducting incidence which are analysis for a specific tax or expenditure, the CEQ assessment framework could accommodate as many fiscal policy elements as possible at the same time and provide a comprehensive analysis of their redistributive impact.

Dr Danso-Mensah said this was made possible by allotting the benefits from the various fiscal interventions and individuals and/or government programmes to households enlisted in a micro-level socio-economic survey and comparing various income concepts in the CEQ building blocks of fiscal incidence analysis.

Findings

On the findings, the World Bank official said, the results of the simulation using the Free SHS policy indicated that in the short term (and without incorporating any behavioural response to the policy) poverty rates reduced marginally by 0.07 percentage points and 0.22 percentage points at the national lower and upper poverty lines.

He said the Gini coefficient also reduced by 0.10 percentage points compared to when households were taking some education expenses. The Gini coefficient is a commonly used measure of income inequality that condenses the entire income distribution for a country into a single number between 0 and 1: the higher the number, the greater the degree of income inequality.

However, Dr Danso-Mensah said the Free SHS policy was less progressive, compared to when there was no Free SHS.“This is to be expected, given the universal nature of the policy, where the form of targeting is considered, coupled with the fact that richer households may have higher access to secondary education than the poor at the time the policy started,” he added.

“This result, however, comes with a strong caveat that the analysis is static and does not incorporate behavioural responses which may reflect increased access or enrolment rates for the poor,” Dr Danso-Mensah said.

Microsimulation tool

For his part, the Senior Economist at the World Bank, Paul Coral, stated that the tool was built upon the GLSS seven which was the most recent available data on living standards in the country.

“The tool allows us basically to tell what the distributional impacts of policies and reforms are and how they impact the poor, the vulnerable and the population at large.“It allows us to see what would be a progressive type of performance and a regressive form,” he added.