27 October 2014
Social insurance has not succeeded in reducing fiscal deficits and expanding coverage to more beneficiaries in Latin America
Social assistance has had a greater impact on poverty and inequality than social insurance
In lower-middle-income countries, social assistance programmes have not expanded as rapidly as in middle-income countries
During the 1990s and 2000s, a number of changes were implemented to social protection programmes in Latin America. In the 1990s, social insurance reforms were instituted in a number of countries. In the 2000s, due to the recognition only one in every four workers made regular contributions to a pension fund, social assistance, as a parallel measure to social insurance, was greatly expanded throughout the region. The ultimate goal of both sets of reforms was to target poverty and inequality in the region through public subsidies to social protection. What is the result of this shift in policy focus, and what will be the implications for poverty, inequality and the future of social protection institutions in the region?
Social insurance reforms in the 1990s
Reforms to existing social insurance systems were largely based on pioneering pension reforms instituted in Chile in 1981. These changes introduced individual retirement accounts managed by private organizations, in contrast with the previous government-run pay-as-you-go pensions which had become reliant on a large amount of government support. In the new pension systems, formal employees were required to contribute a percentage of their earnings to a retirement account which would then be privately managed. At retirement, the balance of the account would be given to the worker as well as disability and survivor benefits.
Workers would also be able to make schedule withdrawals or purchase annuities. These social insurance reforms were ostensibly designed to reduce fiscal deficits and expand coverage to more people; unfortunately in many cases they have resulted in increased state subsidies to insurance schemes, and have failed to tackle poverty and inequality.
Social assistance expansion in the 2000s
Social assistance programmes have been increasingly prioritized by Latin American governments in the 2000s, mainly in the form of tax-funded direct income transfer programmes targeting the poorest segments of the population. These programmes have experienced significant growth, particularly in middle-income countries in Latin America, filling the...