Towards better social protection for more workers in Latin America: Challenges and policy considerations

Jens Matthias Arnold, Aida Caldera Sánchez, Paula Garda, Alberto González Pandiella and Sebastián Nieto Parra

No 1804, OECD Economics Department Working Papers from OECD Publishing

Abstract: Informality is a long-standing structural challenge of Latin American labour markets, as almost half of people in the region live in a household that depends solely on informal employment. Informal workers are often insufficiently covered by social protection policies, for which the eligibility is often tied to formal-sector employment. The need to reform social protection systems across Latin America to make them more effective and fiscally sustainable has become more salient after the COVID pandemic. This paper argues that a basic set of social protection benefits available to all workers, whether they work in the formal or the informal sector, should and can be put in place, although it would require the ability to raise additional tax revenues. Moreover, the incentives for formal job creation would be strengthened if its principal source of financing for such basic social protection were shifted towards general tax revenues, as opposed to social security contributions, which tend to increase the cost of formal job creation. Reforming social protection systems will not be easy, but these reforms can provide the basis for both stronger and more inclusive growth in Latin America.

Keywords: Labour Markets; Latin America; Pensions; Poverty; Productivity; Social Protection (search for similar items in EconPapers)
JEL-codes: I38 J32 J46 O17 O43 O54 (search for similar items in EconPapers)
Date: 2024-05-30
New Economics Papers: this item is included in nep-iue, nep-lam and nep-lma
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