Trinidad and Tobago: Economic Developments and Selected Background Issues

This paper examines economic developments in Trinidad and Tobago during 1990–94. Economic activity in 1992–93 was severely affected by a fall in output in the oil/gas sector, a sharp drop in the average oil export price, and persisting weakness in the nonpetroleum sector. As a result, real GDP declined further by a cumulative 3½ percent in the two-year period, and unemployment rose to more than 20 percent. Real domestic expenditure fell by 3½ percent a year, with declines in both consumption and investment.


This paper examines economic developments in Trinidad and Tobago during 1990–94. Economic activity in 1992–93 was severely affected by a fall in output in the oil/gas sector, a sharp drop in the average oil export price, and persisting weakness in the nonpetroleum sector. As a result, real GDP declined further by a cumulative 3½ percent in the two-year period, and unemployment rose to more than 20 percent. Real domestic expenditure fell by 3½ percent a year, with declines in both consumption and investment.

VI. Social Safety Net Programs

It is generally accepted that the level of poverty has been increasing in Trinidad and Tobago over the past decade of economic decline. Available data indicate households below the poverty threshold rose from 18.5 percent in 1988 to 22.5 percent in 1992. 1/ Another analysis identified 12 percent of the population as “extremely poor” in 1992. 2/ The Government has been committed to providing an effective safety net for its population. Transfers and subsidies to households and nonprofit organizations averaged 4.3 percent of GDP a year during 1982-91 and 4 percent of the GDP in 1994 (Table 12). 3/ The cost of the core social safety net programs targeted towards the poor averaged about 2.4 percent of the GDP a year during 1982-94. In recent years, the Government has taken several steps to focus the social safety net programs on meeting the needs of persons displaced during the period of economic decline and structural adjustment.

Table 12:

Trinidad and Tobago: Central Government Expenditure Targeted at the Poor

(In millions of Trinidad and Tobago dollars)

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Sources: Ministry of Finance; and Fund staff estimates.

1. Programs

The social safety net programs have focused traditionally on the provision of assistance to specific disadvantaged groups who may be unable to work--such as the old, disabled, and female heads of household with children. Three programs have provided the mainstay of the safety net: the National Insurance System, Old-Age Pensions, and the Public Assistance program.

The National Insurance System (NIS) is contributory with mandatory participation for all employed persons: enrollment in the NIS was about 82 percent of all paid employees in 1994. The NIS provides for benefits at the time of retirement and in the eventuality of sickness, invalidity, maternity and employment injury of participants. It is run by the National Insurance Board (NIB), a statutory body, without transfers from the government revenues apart from the employer contribution for the civil servants.

The Old-Age Pensions Program (OAP) complements the NIS with a noncontributory pension scheme targeted specifically towards those with annual incomes of less than TT$5,000 a year. The OAP provides pensions as well as a food subsidy grant equivalent to TT$4,272 to 80 percent of its target age group of 65 years and older. The OAP, in the budgetary allocation of TT$211 million (0.7 percent of GDP) in 1994, has emerged as the largest social security program accounting for almost one third of government expenditures targeted to the poor.

The Social Assistance Program (SAP) includes cash assistance and a food subsidy to persons with disabilities and to female headed households. Grants of TT$171 a month are provided for each adult and TT$158 a month for each child, up to a maximum of TT$632 per family a month. The level of benefits from this program is about 85 percent of the estimated income at the poverty line for an adult, falling lower for families with more than four children because of the ceiling on total family receipt. Budgetary allocation for the SAP was TT$54 million (0.2 percent of GDP) in 1994.

The issues facing the social safety net have become more complex with the emergence of the “new poor”--persons displaced during the period of economic decline. Many of these persons and their households subsist below the poverty line, but for various reasons would not be eligible for assistance under any of the traditional programs. 1/ The Government thus began to respond a few years ago to the needs of the “new poor” with new assistance programs. The needs of the “new poor” also are different from the traditional recipients of the safety net programs because many have long-term links to the labor force and are only temporarily displaced from their traditional work. In addition to short-term subsistence, they need rehabilitative assistance.

The Government has expanded the existing Unemployment Relief Program (URP) which provides temporary employment of two-to-four fortnights a year on infrastructure and other community-based projects. The URP currently provides 7,741 jobs a fortnight; limiting employment under this program to two-to-four fortnights has allowed its coverage to benefit 58,572 workers or about half of the unemployed in the past year. Weekly payments under this program are TT$310, which are adequate to keep a household of four above the poverty line during the period of employment. 2/ Budgetary allocation for this program was TT$130 million (0.5 percent of GDP) in 1994.

The School Feeding Program is designed to supplement the resources of needy families with nutrition assistance targeted specifically to primary school children. In mid-1994, about 62,750 meals a day were provided through the program, each equivalent to one third of the daily nutritional requirement. The coverage of the program reaches about one third of the primary school population and is being extended to pre-primary and secondary schools through an IDB supported program.

The SHARE program provides food baskets to needy families who are not eligible for assistance under the OAP or the SAP and presently covers about 6,500 households. The program also includes a rehabilitative component involving counselling, job search and limited retraining. The program is implemented by NGOs and is financed by the IDB.

Programs also have been designed to target the unemployed, especially the unemployed youth, providing them training opportunities and enhancing their career prospects. These include the Youth Training and Employment Partnership (YTEPP), the National Apprenticeship Program (NAP) and the Civilian Conservation Corps (CCC). 1/

The Government has also undertaken to support the development of micro-enterprises. The Small Business Development Corporation, in particular, has been set up to assist small entrepreneurs with credit, equity capital and business support. Also, the Government helps retraining displaced workers and single heads of households through the Retraining for Displaced Workers Program.

In addition to the programs described here, there are several smaller programs that address the needs of the vulnerable groups of society. 2/ Moreover, significant social support is provided by the activities of almost 500 NGOs in the country, some with government financial assistance.

2. Issues

Although the social safety net is extensive, it has been challenged in recent years by emerging new needs that have highlighted some weaknesses in its design and implementation. These relate to an absence of an overall policy framework and administrative structure that continuously prioritize and evaluate existing programs. Also, the system appears to have a bias towards amelioration rather than rehabilitation, and its effectiveness could be improved by better targeting. Eight different ministries deliver the various programs in the safety net with no effective agency to lead and coordinate their activities. 3/ As a result, the overall social safety net has been slow to respond to changing economic circumstances. The social safety net also needs to be re-evaluated to provide incentives for people to move off public assistance as there is no time limit to receipt of such assistance. While sustainable employment opportunities will ultimately depend on diversified economic growth, it is important that the safety net programs include adequate facilities for retraining, extension and technical support services.

One of the most urgent issues in the social security system at present is the imbalance between the contributory and the noncontributory systems of retirement incomes. Over the years, the relative importance of the contributory pension system provided by the NIS has declined with an erosion in the real level of benefits provided. The last actuarial review of the NIB questioned the continuing relevance of the Board given the low level of actual benefits, and cautioned about financial unsustainability of the Board if the level of contributions to the NIS were not increased. 1/ The legal and institutional framework governing the NIB has constrained its management effectiveness and contributed to the present problem.

In contrast, the noncontributory, means tested Old-Age Pension Scheme has lost its targeting edge and has expanded to cover 80 percent of the population over 65 years of age, benefitting twice the number of pensioners covered by the NIS. It also provides benefits marginally higher than the highest pension paid by the NIS. The projected doubling of the population in the over 65 age group in the coming decade would raise further the imbalance that has emerged between the contributory and the noncontributory system of social security. This problem needs to be addressed without delay because it would not be financially sustainable to provide such coverage from the general revenues of the Government. One approach would be to restructure and strengthen the contributory social security system while targeting more efficiently the noncontributory system.

Targeting mechanisms in most social safety net programs are largely informal, with few objective criteria defining eligibility. In many programs, the choice of beneficiaries is left to the delivering agency. While there is no indication of widespread leakage of program benefits to nontarget populations, there is little systematic information on the effectiveness of targeting.

The absence of monitoring, coupled with the administrative fragmentation of the social safety net system, also has led to many duplications in service delivery (knowledgeable recipients often benefit from several different programs run by different ministries) with increased administrative costs. The problems of duplication of services and equity in access underscore the importance of the explicitness of eligibility criteria and effective monitoring systems.


Henry and Melville, Poverty Revisited: Trinidad and Tobago in the late 1980, 1989; and as estimated by the IDB in An Overview of Social Sector Conditions in Trinidad and Tobago, 1993.


That is with insufficient incomes to purchase a minimum cost food basket that provides an average nutritional requirement of 2400 calories a day according to World Bank estimates based on a Survey of Living Conditions conducted by the Central Statistical Office of the Government of Trinidad and Tobago in May-June 1992.


Calculated from Trinidad and Tobago: Policy Agenda for Sustained Development, World Bank, June 1992.


For example, male-headed households, where 65 percent of the poor live, do not receive assistance under the transfer programs described above unless the head of the household had a disability or was over 65 years of age. Nor does the National Insurance System offer any form of unemployment insurance or extend coverage to the self-employed, though one third of the poor live in households where the head is unemployed and another 15 percent of the poor live in households where the head is self-employed.


For more details, see the section on developments and policies in the labor market.


For detail description of these programs, see the section on developments and policies in the labor market.


These include youth camps, free bus passes, burial assistance, child guidance clinics, legal aid and advice, homes for the aged, day care centers for the elderly, emergency grants, urgent temporary assistance grants, and education grants.


Ministry of Social Development, Ministry of Community Development, Culture and Women’s Affairs, Ministry of Education, Ministry of Works, Ministry of Sport and Youth Affairs, Ministry of National Security and the Ministry of Housing and Settlements.


The highest pensions provided constitute only 21 percent of average earnings.