OECD/ECLAC REGIONAL CONSULTATIONInclusive Growth in Latin America and the Caribbean

Inclusive social policies

Simone Cecchini, ECLAC

2

Inclusive social policies have contributed to reduce poverty and inequality

• Different factors explain the decline in poverty and inequality in LAC– Economic growth with job creation in the formal

sector

– Higher (and more progressive) taxes and social investment

– Adoption of counter-cyclical policies

– Longer-term trends such as demographic and labour participation trends; decline in unsatisfied basic needs

– Positive impact of social protection programmes

Steady growth of non-contributory social protection and social investment

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CCT COVERAGE(Percentage of total population)

CCT INVESTMENT(Percentages of GDP)

SOCIAL PENSIONS COVERAGE(Percentages of population aged 65 and above)

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Disincentives to labour insertion?

• Some argue that these programmes are creating dependency instead of fostering families’ autonomous efforts to overcome poverty– Disincentive to the labour supply on the part of the poor

• However, the amounts of the cash transfers have a quite limited capacity of covering poor families’ income deficit– Difficult for poor people to stop looking for work simply

because they receive public cash transfers

• Impact evaluations from 6 LAC countries do not find empirical evidence of CCTs’ disincentives to beneficiaries’ labour insertion

Incentives to informalization?

• Levy (2010) has argued against a “vicious circle” of non-contributory social programmes that generate subsidies to the informal sector, incentivizing workers to look for low-productivity jobs (in order to avoid compulsory social security savings) – Programmes are lowering the productivity of labour and capital, and

contributing to the generation of low-quality employment

• However, most CCTs are not directed to working-age adults, but rather to children, nor are they targeted according to the working conditions of beneficiaries

• In Brazil, Medeiros, Britto and Veras Soares (2008) find that the Continuous Benefit Programme (BPC), a social pension for older adults and people with disabilities, has not been a cause for lower contributions to social security

• Latin America’s informality rate has decreased while CCTs and social pensions expanded, going from 54.6% of employed workers in 1990 to 49.1% in 2009

From a “vicious” to a “virtuous” cycle

Cash transfers

Guaranteed level of minimum subsistence

Resources available to cover labour insertion

costs (job search, transport, etc.) and to

access better-paid jobs

Productive investments (agriculture,

micro enterprise)

Multiplier effect: stimulus to local economies and

growth

Simone CecchiniSocial Affairs OfficerSocial Development Division, ECLACsimone.cecchini@cepal.org