Inclusive social development: The next generation of policies for overcoming poverty and reducing inequality in Latin America and the Caribbean

Inclusive social development: the next generation of policies for overcoming poverty...
rate (2.6%); consequently, formal employment rose as a proportion of total employment, from 51.1% to 53.4%. 18 In
addition to encouraging entries into the world of work that were more productive, more protected and equipped with
greater rights, this process of formalization also helped reduce disparities in workers’ incomes, since the formalization
of people with fewer years of schooling took place at a faster rate than among those with higher levels of education
(ECLAC/ILO, 2014).
At the same time, according to the same study, this formalization had a mixed impact on the earnings gap between
men and women. Brazil, Ecuador, Panama and Paraguay reported favourable results in reducing their differentials,
with formalization expanding more swiftly among women than men. In contrast, in the Plurinational State of Bolivia
and Colombia, the effect was the opposite: income disparities rose. In the first case, this was because formal male
employment expanded while female formality fell, and, in the second, because more formalization took place among
men than among women (ECLAC/ILO, 2014).
The possible impact on the labour market of the current global and regional economic slowdown (lower creation
of jobs and potential job losses and, as a result, increased unemployment) sets the challenge of maintaining this drive
towards formalization, given that increased labour flexibility and the resulting heightened precarity of contracting
and recontracting conditions are common phenomena at times of economic contraction.
3. Increase in social protection coverage
In recent years, numerous countries have expanded the health and pensions components of their social protection. This
was driven by the positive evolution of the labour market, particularly reduced unemployment, higher employment
rates and the process of formalization, which helped expand revenue gathering.
The coverage of social security membership in the region is uneven. There are many inequalities between
the countries, in terms of both the population covered and not covered as well as disparities within the covered
population. 19 As the figure clearly indicates, there are countries with high, low and intermediate levels of membership
in their health and pension systems.
Recent increases in coverage have been more modest in those countries that already had high rates, while some
intermediate-coverage countries have displayed an interesting dynamism —and even significant progress— in the
areas of health and pensions. In some cases, increases were reported in both systems; in others, there were divergent
trends between the two, which could point to differences of emphasis or, perhaps, different levels of effectiveness
in terms of the coverage of solidarity-based or individually funded social protection mechanisms. 20 Of particular
concern is the virtual stagnation noted in those countries that have very low coverage rates, reaching less than half
the total wage earning population. In addition, in three countries with different levels of coverage, there was a decline
in pension system member numbers (see tables I.1 and I.2).
18
Weighted average for the nine countries (Argentina, Brazil, Colombia, Ecuador, Mexico, Panama, Paraguay, Plurinational State of
Bolivia and Peru), covering the employed population aged 15 years and older.
19
Social security membership is a proxy for coverage: one that must be brought into play when household surveys are used to analyse
social protection, and one that fails to examine several important aspects of the issue. For example, workers whose employers have
failed to pay their contributions, even though the corresponding amounts were deducted from their wages, may appear as members.
Participation in a pension scheme does not per se mean that the participants are actually making contributions; if they are not, they
will be generating contribution gaps that, depending on their size, could seriously compromise their future pensions. Wage earner
participation in pension schemes only indicates that they expect to receive a pension at the age prescribed by law; it reveals nothing
about the amounts they will receive, which will depend on their employment histories, the structure of the pension system and other
variables related to the economic, macroeconomic and demographic contexts, etc., and those amounts can also be determined through
those surveys. Similarly, membership of a health system does not guarantee access to services and shortfalls may arise: these can be
seen, for example, in waiting lists for specialist treatment and other services. Surveys from two points in time have been selected; as
can be seen, these are not identical for all the countries examined and are presented in the figures as “around 2002 and 2013”.
20
For example, in Colombia the health system reform encompassed different solidarity-based components, while the pension reform
chose the path of individual funding. Affiliation patterns followed a different course in each.
Chapter I
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