Latin America's Social Policy Challenge: Education, Social Insurance, Redistribution

Abstract

Long regarded as a region beset by macroeconomic instability, high inflation, and excessive poverty and inequality, Latin America has undergone a major transformation over the last 20 years. The region has seen improved macroeconomic management and substantial and sustained reductions in poverty and inequality. In this paper, we argue that social policy, including human capital and education, social insurance, and redistribution, need special attention if achievements of the last two decades are to be sustained and amplified. Starting in the mid 1990s, many governments in the region introduced a variety of programs, including noncontributory pensions and health insurance, and cash transfers targeted to the poor. Social spending in Latin America increased sharply. These policies have been widely praised, and we believe they have resulted in substantial improvements in the lives of the poor in the region. However, a more nuanced view shows some worrisome trends. Moving forward, we believe it is necessary to pay much closer attention to the quality of services, particularly in education; to the incentives generated by the interplay of some programs, particularly in the labor market; to a more balanced intertemporal distribution of benefits, particularly between young and old; and to sustainable sources of finance, particularly to the link between contributions and benefits.

The Effects of a Noncontributory Pension Program on Labor Force Participation: The Case of 70 y Más in Mexico

“…In terms of purchasing power, such transfers cover 72 percent of the monthly per capita cost of the basic food basket used to measure extreme poverty in rural areas. 12 Regarding the fiscal cost of the program, Levy and Levy and Schady (2013) estimate that it was about 0.09 percent of Mexican GDP in 2011. The program started in 2007 by covering about a million age-eligible individuals living in localities with up to 2,500 inhabitants, and it expanded rapidly afterwards.…”

Skill Premium, Labor Supply and Changes in the Structure of Wages in Latin America

“…Inequality declined sharply in Latin American countries after the turn of the century, a contrast with its own history and global trends (Ferreira et al, 2008;Kahhat, 2010;López-Calva and Lustig, 2010;Gasparini and Lustig, 2011;Levy and Schady, 2013;Lustig et al, 2013). Redistribution through progressive fiscal policy, the emergence of conditional cash transfer programs for the poor, and changes in household demographics played a role in this transition.…”

How conditional cash transfers work

“…CCTs have been unquestionably effective at increasing the consumption of beneficiary households, as well as at reducing the incidence and, especially, the intensity of poverty and inequality (Fiszbein and Schady, 2009;Stampini and Tornarolli, 2012;Levy and Schady, 2013). Not only have CCTs increased household consumption, but they have also improved its composition in terms of the quality and variety of food consumption (Ruiz-Arranz et al, 2006).…”