Social Protection and Informality in Latin America during the COVID-19 Pandemic

Abstract

Latin American governments swiftly implemented income assistance programs to sustain families' livelihoods during COVID-19 stay-at-home orders. This paper analyzes the potential coverage and generosity of these measures and assesses the suitability of current safety nets to deal with unexpected negative income shocks in 10 Latin American countries. The expansion of pre-existing programs (most notably conditional cash transfers and non-contributory pensions) during the COVID-19 crisis was generally insufficient to compensate for the inability to work among the poorest segments of the population. When COVID-19 ad hoc programs are analyzed, the coverage and replacement rates of regular labor income among households in the first quintile of the country's labor income distribution increase substantially. Yet, these programs present substantial coverage challenges among families composed of fundamentally informal workers who are non-poor, but are at a high risk of poverty. These results highlight the limitations of the fragmented nature of social protection systems in the region.

A Tale of Two Pandemics: Economic Inequality and Support for Containment Measures in Peru

“…These are commendable and necessary measures. However, precisely because these groups are often outside of the formal economy, not all the government help reached those most in need in a timely manner (Busso et al, 2020;Rauls, 2020). Moreover, many people who lack access to online banking had to wait in line for long hours, which increased their risk of exposure to COVID-19.…”

The Work, Economic, and Remittance Stress and Distress of the COVID-19 Pandemic Containment Policies: The Case of Venezuelan Migrants in Argentina and Chile

“…The COVID-19 pandemic and governmental efforts to contain contagion deteriorated the already fragile economies of Latin American countries [ 1 , 2 ], which we can reasonably expect to have generated various stressors for Venezuelan immigrants. The economies and labor markets in Latin American countries were among the worst impacted by the pandemic, largely because half of the workforce, on average, is in the informal labor market [ 1 , 2 , 45 ]. Informal jobs are unproductive and highly unstable and do not contribute to workers’ social security or provide them benefits, such as health insurance, social security, and severance payments [ 45 , 46 ].…”

“…The economies and labor markets in Latin American countries were among the worst impacted by the pandemic, largely because half of the workforce, on average, is in the informal labor market [ 1 , 2 , 45 ]. Informal jobs are unproductive and highly unstable and do not contribute to workers’ social security or provide them benefits, such as health insurance, social security, and severance payments [ 45 , 46 ]. Thus, in 2020, Latin American and Caribbean countries experienced an approximate 21% decrease in hours worked, the biggest lost worldwide [ 2 ] (p. 12).…”

“…Nonetheless, immigrants and informal workers had limited access to public COVID-19 assistance [ 45 , 46 , 49 , 51 ] because government officials could not reach these workers [ 46 ], and the programs had high requirements. In Chile, the pandemic aid programs required a valid RUT [ 53 ], which disqualified undocumented immigrants, those with expired RUTs [ 51 , 52 ], or those who were processing their lawful residency status and did not have RUTs.…”

Filling in the gaps: Expanding social protection in Colombia

“…Moreover, the minimum wage is around 2,7 times the poverty line. International evidence on the impact of minimum wages on employment is not conclusive (Broecke, Forti and Vandeweyer, 2017 [28]). However, evidence for Colombia clearly indicates that the relatively high minimum wage has a negative effect on employment, especially for workers earning close to the minimum wage (Maloney and Nuñez, 2000 [29]; Pérez Pérez, 2020 [30]; Mora and Muro, 2019 [31]), and induces informality (Arango, Flórez and Guerrero, 2020 [32]; Mondragón-Vélez et al, 2010 [33]; OCDE, 2019 [34]; Arango and Flórez, 2017 [35]; Olarte Delgado, 2018 [36]).…”