Volume 45 Number 177,
April-June 2014
Prospects for Universal Social Protection in Latin America:
A Contribution to the Current Debate
Luis Beccaria, Roxana Maurizio*
Date received: May 4, 2013. Date accepted: September 18, 2013

This work aims to contribute to the debate on progress towards achieving universal social protection in Latin America. It advocates a strategy emphasizing policies oriented towards obtaining full formal employment and consolidating protective labor regulations in conjunction with other policies, especially in the social realm, so that together, these ensure universal access to basic social services of the same quality for everyone and adequate income throughout the entire life cycle.

Keywords: Latin America, social protection, social policy, quality basic services, income levels.

This article aims to reflect on policy approaches that seek to guarantee the basic social and economic rights of Latin American citizens. Effective access to quality educational and health services, suitable working conditions and a decent income throughout the life cycle that guarantee adequate levels of consumption, among other social protections, is an ethical obligation of states, even when it is not made explicit in political and constitutional commitments. In a society with full formal employment, the majority of these rights could be achieved through a combination of social security mechanisms and standards of labor protection. However, full formal employment is not quite the “normal” state of capitalist economies, even among the most developed. Moreover, full formal employment exists alongside marked income gaps among various groups of workers, which can lead to differences in the types of goods and services to which they effectively have access, a reality that also tends to be reproduced from generation to generation. To address these situations, the states of advanced economies have traditionally deployed welfare systems with some non-contributory components, in this way aiming to achieve a situation in which these rights do not depend exclusively on the labor status of their citizens.

This protection scheme, in which universal measures work in conjunction with the nucleus of social security, has been subject to diverse challenges, motivated, in large part, by the persistent and chronic unemployment experienced by certain groups of workers.1 However, certain alternative proposals, besides social security, respond to a value perspective different from the point of view implicit in this arrangement, by proposing that a broad range of “effective freedom” should be given to citizens, even with respect to the choice to work (for the market) and with what intensity to do so. There are various approaches, to be sure, but one significant approach is that of the “guaranteed” or “basic” income,2 an unconditional amount that everyone should receive regardless of any other criteria, including labor status.

In Latin America, the gap in full formal employment is extremely wide and is mainly expressed in a high level of informal workers unregistered with social security, in the sense that they do not enjoy social security protections. In this context, efforts to guarantee full economic and social rights undoubtedly cannot depend exclusively on social security and labor regulations.

This work will advocate for implementing a strategy based on policies that aim to achieve full formal employment and consolidate a scheme of protective labor regulations, on the one hand, and, on the other, an articulated set of diverse social policies that guarantee universal access to homogenous quality basic services and adequate income levels throughout the life cycle. It should be reiterated that this text seeks only to contribute to the discussion on a reference framework for social and labor policy in Latin America, and does not pretend to serve as a guide for designing and implementing specific programs consistent with this general proposal. These further steps would require considering the specifics of each country, not only in terms of various restrictions (institutional, fiscal, labor, for example), but also the current architecture of public policies. Moreover, any efforts to redesign social policy are basically an exercise in the political economy, which would require taking into account the role of different social actors. In this sense, this work cannot advance to providing greater details on the specific paths to follow for each country, nor can it quantify the costs that would be associated with these reforms.

The objective of the universality proposed here does not mean aiming to achieve minimum levels of basic social and economic rights, but rather refers to progress towards a greater degree of homogeneity in these areas. Therefore, the policies proposed are not merely components of a safety net. The outline proposed in this work is rather closer to a guaranteed income approach, as it includes benefits not linked to a person's labor status. However, these proposals diverge radically by noting that a guaranteed income is not the nucleus of a protection scheme. This work gives great importance to generating quality jobs and ensuring universal access to goods and services, such as health care, education and others, which should not be guaranteed exclusively through the market.

The rest of this text proceeds to discuss the proposal of a social protection scheme for Latin America. Section 1 discusses the limits of protection systems based on formal employment. The next section describes the basic components of the protection strategy that seems most relevant to Latin America. Section 3 explains the pillars of this system, which would be universal, but based on the labor market. Section 4 addresses various arguments related to the role of labor regulations in the context of universal social protection. Finally, this work provides some last reflections.3


Social protection regimes in Latin America are fundamentally Bismarckian, based on contributory logic. However, since the consolidation of the basic features that currently make up these regimes in Latin America, registered workers have, by tradition, accounted for less and less of the employed, a significantly lower proportion than in industrialized countries that have adopted this model of protection.

The persistence of high informality in the employment structure reflects the fact that even during phases of growth, significant progress has not been made towards reducing the presence of a productive structure with high participation of small enterprises and low productivity, a principal determinant of this high informality, in which concealing labor relations is more frequent and feasible. The increase in informality seen in the 1990s, when various countries made their labor regulations more flexible, at the very least casts doubt upon the argument that the strictness of these regulations is one of the reasons for their permanence.

By contrast, in 2000, there was improvement associated with sustained growth and more intensive labor. However, even after these advances, informality continued to be the defining feature of these economies.

Informal labor tends to be more prevalent among workers with low qualifications, who generally tend to earn lower wages. Specifically, households located in the lower part of the distribution are fundamentally composed of this type of worker.4 This is partly due to the fact that these types of occupations are accompanied by difficulties.5 The lack of coverage is also more of a problem in larger households with more children, low capacity to save and few resources to face future labor or health issues.

Due to the nature of certain risks covered by contributory systems, it is not possible to acquire insurance against them in the market; for example, the risk of unemployment. In addition, individuals in early stages of the life cycle tend not to voluntarily save part of their income to meet the requirements of old age later in life. Likewise, the demand for private health insurance is generally reduced among low-income groups.

In many counties, social security systems are financed by workers, business owners and the State. However, fiscal resources often contribute to mitigate the deficit, even in cases where workers and employers are the only ones sustaining the system. Even when formal salaried workers end up “paying” for this security with net remuneration lower than what they would receive if these non-salary related costs did not exist, the result would be: they would save more for old age, demand more health services and have greater protection in the face of certain events than informal workers, even if informal workers had a net salary greater than that of formal workers (due to the difference of transferring non-salary costs, which, as indicated above, is not the case in the Latin American region.

As has already been stated, high levels of informality reinforce the unequal distribution of monetary income throughout the life cycle. Many people that participated in the labor market during their active age periods did not manage to work enough years in registered occupations so as to be eligible for retirement benefits when they retire. Consequently, the proportion of older adults that receive contributory pensions is low in the majority of countries (Rofman and Oliveri, 2011: 26-27). In addition, it is the senior citizens with the lowest levels of education, those most likely to work informally, that have the lowest levels of retirement coverage (Rofman and Oliveri, 2011: 33). Only in some countries, such as Argentina, Brazil or Costa Rica, which have global aggregate coverage, are there no significant differences between educational groups.6

States have traditionally provided either free or low-cost universal health services to cover those that are not eligible for the contributory system. This has facilitated greater access, but in many cases, public services have quantitative limits in terms of supply and/or quality. In addition, not being covered by some type of insurance, including social security, is linked to lower usage of services, as shown by data available for Argentina.7

What is certain is that informal workers are not only exposed to lower labor stability,8 and therefore, lower income stability (Beccaria and Groisman, 2006: Albornoz and Menéndez, 2002; Fields et al., 2006), as well as to lower remuneration in general, but they also have decreased access to various social benefits and are not insured against events such as accidents and occupational illnesses.

It is useful to note, to conclude this section, that even if it were possible to verify favorable conditions in terms of economic growth, the process that would lead to modifying the structural state of high informality would take a long time. It is therefore convenient, in the short term, to address policies aiming to deal with the lack of coverage that generates a protection system fundamentally based on contributory logic and implement and/or expand and/or consolidate other mechanisms that operate with a universal approach. The following sections will propose some ways that this work believes are suitable for achieving this objective, around which consensus in the region is growing.


The skeleton of what we would consider a relevant protection strategy for Latin America contains contributory, non-contributory and labor regulation components. The second of these elements is necessary in light of the limits of traditional social security in heterogeneous labor markets, but it is also an appropriate way to equitably ensure that an extensive set of social and economic rights are effectively being met.

As such, the scheme includes: i) social security plans in certain areas, such as pensions, and others, as described below; ii) various policies — productive, financial, fiscal, currency, commercial and more — to promote formal employment, iii) consolidation of a set of protective labor regulations, means to achieve appropriate income and labor conditions and facilitate social integration; iv) institutions to ensure universal access to homogenous quality educational and health services and adequate income levels, even with unemployment and following retirement from the active life.

Beyond including mechanisms oriented towards achieving universal coverage as a basic element of the protection scheme, institutions linked to formal employment should continue to be a central component. In this sense, it is unrealistic to propose a path towards consolidating this or another protection system isolated from efforts to accelerate generating quality jobs and reducing inequality in the primary distribution of income.

More specifically, the scheme aims for the entire population to be able to access an adequate level of goods and services in a permanent way and seeks to reduce inequalities related to this topic. To do so, individuals would have guaranteed access to certain quality goods and services regardless of the labor market. In addition, individuals would be protected during their active lives from certain events in the labor sector, with the goal that this protection would be in place regardless of the characteristics of the job, especially the degree of formality. Monetary allocations not linked to the labor situation would be provided during this time period. Adequate monetary income would also be guaranteed for all those in retirement age without the need for a prior occupational history.

Health and education are the typical areas in which efforts are made to reach the entire population with high-quality homogenous services not linked to income levels of households. In other words, social security does not seem to be an appropriate scheme for the former of these fields.

Labor market regulations will continue to protect formal salaried workers, and there is scarce chance that these regulations extend to the rest of workers. However, unemployment is a risk where we should aim to extend coverage, and this text will return to this topic later.

Monetary benefits would contribute to achieving adequate income levels throughout the life cycle. For those that reach legal retirement age, the amounts should ensure adequate access to goods and services that can be obtained in the market, thereby protecting those that do not receive retirement funds or social security pensions or those that do receive this money in very low amounts.

It would be useful to point out again that the protection scheme outlined here is the result of articulating social security mechanisms with a plurality of programs and policies that, taken as a whole, aim to ensure universal coverage for social and economic rights. It would be difficult to find a single mechanism to achieve this objective. The specific components and relative importance of the various institutions involved will depend on the reality of each country and will surely evolve over time. This combination of various actions is necessary for two reasons. First, efficiency and political realism mean that certain areas must maintain social security mechanisms, which would be combined with non-contributory programs. Second, the objective of universalism will surely require instruments that focus certain actions or benefits on certain groups, specifically, disadvantaged groups that require special care.


This section will discuss the main features of some policies, institutions and programs that express the social protection system whose objectives and basic outline has already been proposed. Although this section will not address labor regulations, the following will, especially in relation to job stability and the minimum wage in the framework of a broader discussion with regards to the relationship between a universal social protection approach and labor standards.

It should be reiterated here that implementing this scheme, by deploying certain tools and/or adapting others, will only be possible if it is done so gradually, mainly due to the need to secure a political project that becomes its own, because it must overcome financial and institutional limitations, as well as restrictions related to resistance from economic and/or social sectors.

The analysis provided here of some components merely seeks to clarify some aspects of the global scheme, and will not address these issues in detail. Specifically, it will expand upon some cases in which the universalization of protection would imply linking social security instruments with other tools that serve those excluded from the scope of social security. Although the goal is to progress towards achieving the greatest homogeneity possible in protection, in certain circumstances it would be more useful, as has been mentioned, to have institutions (and levels of benefit) that may vary somewhat between these two groups of individuals. However, this should not lead to marked segmentation between the protection that one group and another receives.

The way to ensure universal and relatively homogenous benefits is to create a national system that covers all individuals, regardless of labor status, age or gender. Moving towards this direction will obviously bring difficulties in financing, and also issues related to the "political economy," as those who are served in contributory sub-systems, which provide adequate low-cost benefits, will tend to resist the integration of other components, especially a public component.

An intermediary stage on the way to achieving greater equality would be to improve the quality of services provided to those with neither private nor social security coverage, which would require increasing public healthcare spending. Some countries in Latin America have already taken steps in this direction with different mechanisms and scopes. In 1993, Colombia introduced a reform aiming for universal insurance,9 which sought to set up access to a basic package of benefits for the entire population. In that plan, those not covered by social security (excluding members of high-income households), could enroll in insurers that receive funds from the State to finance the mandatory service plan (Giedion and Acosta, 2011: 32-33). In Argentina, there is a program that gives incentives to public sector providers to increase effective coverage, and quality of services, in maternal and infant health care. The free maternity care program in Ecuador is based on a similar objective and logic. Chile has a fully functioning program that ensures timely care for anyone with a broad set of health issues. Although the beneficiary makes a co-payment, it varies depending on the level of resources (people with very low incomes do not pay it) and an annual maximum is stipulated depending on monthly income (Drago, 2006: 37).

These are efforts to broaden effective coverage and improve the quality of health services, but their effect on the global inequality of services and outcomes is still limited. System segmentation still persists; for example, in Colombia, although insurers with subsidies from the state can contract the same providers that serve other sub-systems, there is no greater integration (Giedión and Acosta, 2011: 139-141).

Costa Rica has traditionally had a system that provides homogenous services through a social security agency, the Costa Rican Social Security Fund (ccss), to a broad population (86 percent). Registered salaried workers and formal freelance workers are affiliated to medical insurance, as well as pensioners and retirees from the contributory and non-contributory regimes. Since 1984, the State has also financed the affiliation of members of low-income households. Brazil has also taken steps in this direction, starting with its 1998 constitutional reform upon which the Single Healthcare System (sus) was created, which covers all people, regardless of whether or not they contribute to social security. This process has facilitated effective integration and rationalization of the system and has made progress towards greater equality. However, differences persist in terms of the quality of services provided versus privately financed services. As a result, the majority of the population combines sus care with private insurance or direct payments (Becerril Montekio, 2011: 124-125).

Consequently, methods to advance towards universal health care, not only in terms of coverage but also in reducing disparities in quality and care, vary widely. Some means of effectively increasing access and improving the benefits received by low-income households may, however, crystallize the differences between components of the health system, while others are designed to seek greater integration and reduce segmentation. Specifically, the latter type of method requires strategies that take into account the degree of coordination between sub-systems and allow efficient use of available resources.

Aiming to achieve horizontal equality, which, in practice, implies vertical equality, a contributory unemployment benefit should be accompanied by a mechanism that protects individuals in the event of unemployment resulting from the loss of an informal job, as a central element of the protection system.10 This would be a tool that would transfer income to those in this type of situation and would provide incentives similar to contributory insurance. However, due to a variety of reasons that will be explained below, it will not be possible to provide this insurance for all informal workers, and as such, a specific mechanism must be created.

A crucial aspect to consider in designing this mechanism is how to identify the condition of unemployment. One alternative would require the beneficiary to perform some activity during the period covered (training or occupation) and the beneficiary would have to disclose this condition.

However, given the characteristics intrinsic to Latin American labor markets, there is no clear differentiation or discontinuity between open unemployment and employment in certain unstructured and informal units. The latter are frequently refuges from open unemployment that generate very low income, which in many cases does not ensure access to basic goods and services. It is therefore not possible to restrict the program to openly unemployed people not covered by the contributory system, because it would also be useful for many that work in an informal job and receive very low incomes. As such, the latter group must also be eligible for this mechanism. A program of this type would meet the objective of ensuring a certain level of income to all those who desire to work and cannot find a job that allows them to reach this level. Because the number of applicants would be high, this objective would be difficult to meet in its entirety with the above-described mechanism, due to, among other reasons, difficulties that may arise in relation to its management. In this sense, it could be complemented with programs to directly generate jobs. In reality, if the requirement imposed upon those that apply for this benefit to reveal their condition of unemployment is to perform a job, the mechanism does not differ substantially from an active job program.

In terms of the amount of the benefit, it should be somewhat lower than the minimum for contributory insurance, so as not to affect certain supply decisions. However, it must last a significant amount of time, or more strictly speaking, a time period that takes into account that unemployment and under-employment associated with informality are frictional or related to the economic situation. The structural nature of under-employment in Latin America would retire a longer protection time period.

The high potential demand for these programs and the fact that they need a longer duration would imply a significant fiscal burden. The amount allocated would have to constitute a basic parameter, because feedback would mean that the lower the amount, the lower the proportion of people in formal positions that would apply for the system. Entry criteria could also be included, taking into account certain individual or household features, and these could be progressively relaxed.

There are few examples of unemployment care for informal workers. Argentina has sought to address this situation with its Training and Employment Insurance (sce). Its beneficiaries receive a monetary transfer for a maximum of two years and must undergo training while in the program. The amount of the transfer is, however, very low (10 percent of the minimum wage in 2012), in part related to the low amount of contributory insurance.11 Although the program targets unemployed people that are not eligible for contributory insurance, in practice, the majority of those receiving it are beneficiaries of other social programs that are being scaled back or eliminated. Other programs that provide training to under-employed or unemployed people in Mexico, Chile and Uruguay exist with shorter durations and/or are aimed at workers in certain activities.

Other mechanisms to address under-employment or unemployment include the State intervening to directly generate jobs and other active policies, such as promoting self-employment. An example of this sort of mechanism would be the Support for Labor Insertion Program in Panama, the Program to Support Productive Entrepreneurship in Uruguay or the National Program for Entrepreneurs in Mexico.

To achieve the objective of adequate income levels for all senior citizens, there must also be mechanisms to reach those that are not eligible for the contributory regime. It would therefore be useful to structure a pension system with various components besides the contributory element. One of these new pillars could provide a benefit for those that have not made any contributions to social security. Another might address those that have made contributions for a certain time period, but have not reached a minimum that would have to be defined. They would receive a benefit, but they would also be eligible for an amount that would be calculated as a function of the contributions they have made.

In this type of scheme, the contributory pillar would still be principal, which would maintain a certain incentive to work and register in the program. In any event, though, the difference in benefits provided by the different components should not be significant, as eligibility for the contributory path is often a result of labor trajectories that have involved essentially involuntary movements. Again, for fiscal reasons, a change in this direction would generally have to proceed progressively.

Concern with extending some type of monetary benefit to senior citizens not eligible for the contributory regime in Latin America is relatively recent, except in the case of Brazil. In the majority of cases, this has been done by creating non-contributory mechanisms. For example, around 2008, Chile set up a scheme12 to progressively cover the poorest 60 percent of the population. As a result, approximately half of those older than 64 years of age that did not receive contributory pensions began to benefit from some type of non-contributory plan (Rofman et al., 2010: 98). As a consequence of introducing a broad non-contributory program, the proportion of the senior citizen population that received some sort of benefit went from 20 percent in the mid-1990s to 90 percent by the end of 2000. Ecuador also introduced a scheme aiming to care for those that are not eligible for the contributory regime in 1998 (nearly 80 percent of whom are older than 64 years of age), bringing total coverage to 50 percent. Costa Rica also has a non-contributory regime. Brazil has been a pioneer in these efforts. At the end of the 1980s, Brazil introduced rural pensions, which were meant to benefit a segment of the population particularly absent from social security.

Argentina has not created any mechanisms, as such, but it has lowered the requirements to access the contributory system. The Social Security Inclusion Plan has allowed people of retirement age who have not made contributions, or who did not make contributions for enough years, to access retirement rights. The rate of coverage for senior citizens rose from an all-time low of around 67 percent in 2004 to 90 percent in 2009 (Curcio and Beccaria, 2011: 86-88). Uruguay has also relaxed the conditions to join the contributory system by lowering the minimum number of years of contribution (from 35 to 30), while also expanding its non-contributory program.13

However, besides these countries,14 and in others like Panama, coverage in the rest of Latin America is still below 30 percent, and is generally around 20 percent.15

In summary, the scheme described up to this point would guarantee a minimum monetary income for all people or households based on a retirement system with contributory and non-contributory elements, the minimum wage and unemployment benefits for formal workers, as well as a benefit for the unemployed and for low-income informal workers. This set of mechanisms, however, still does not provide monetary benefits to people of active age, who are not handicapped, but do not wish to work. Because this situation may exist because these individuals are caretakers or volunteers, there should also be a basic universal subsidy for all people or households. But the suitability of this benefit as part of the scheme lies in its role to mitigate monetary income gaps between those receiving minimum monetary benefits and those satisfactorily involved in the labor market or who receive contributory pensions. This amount would not pretend to cover basic needs, however, as these can only be met by adding this benefit to unemployment benefits or the minimum wage.

Given the difficulties that would arise in expanding coverage for the benefits described above for informally employed and unemployed people, as well as economically inactive people, it would perhaps be useful to advance towards the objective of ensuring a minimum wage for individuals in active ages (and their households) through a combination of these mechanisms with a universal benefit. This is a reference to similar schemes recently implemented in Argentina and Uruguay that extend family benefits to households without formal employees when there are minors. This work believes that the benefit should be unconditional, which is not the case for the programs just mentioned. Because increasing coverage for a program of this type would be simpler, at least from a management perspective, one objective could be to universalize its coverage and then advance more gradually towards applying non-contributory mechanisms that address the risk of unemployment.

Targeted means-tested monetary benefits would not be part of the scheme outlined here, because the framework of mechanisms proposed would end up having universal coverage. However, precisely because of the situation described in the above paragraph and also due to what we have mentioned here at various points, the objectives set forth in this text should be maximum and long-term. Even so, targeting could play an instrumental role in a process that will surely be progressive. Some of the benefits would effectively have to be applied gradually, considering targeted criteria.

But this targeting, as already mentioned, also fulfills another role. Systematically, or at least during prolonged periods of time, effective homogeneity in access and quality (and in achieved results) for people receiving care will require policies that specifically address certain groups that face greater difficulties. For example, the type of support required to ensure that children stay in school, or the measures to ensure intensive quality improvement for certain segments of the population, more so than for other groups.


This section addresses a topic that will provide more clarity to this proposal. There may be conflicts between a protection scheme that, on the one hand, aspires to ensure that all citizens can fully enjoy their economic and social rights, and, on the other, a dense labyrinth of labor market regulations. If guaranteeing rights ultimately does not depend on the labor status of a person, why would it be necessary to create jobs and, more importantly, create jobs protected by diverse regulations that ensure, among other objectives, adequate levels of labor stability and minimum remuneration? It could be argued that guaranteeing rights outside of the labor market would give an individual more freedom and allow the person to be (more) selective in the type of job he or she accepts; in other words, it would increase the reserve salary. In the same way, the harm of labor instability is mitigated by providing certain income guarantees. Consequently, some labor standards would appear to be redundant. As such, they could be eliminated or made more flexible, which would lead to increases in efficiency and growth in employment. This would especially be the case for regulations related to job security and the minimum wage.

What has essentially been claimed frequently is that the first of these two institutions discourages hiring, limits the introduction of technology and weakens mobility in response to changes in the sectoral and/or regional distribution of production. But the difficulties would be even greater, because the system of benefits that grow according to seniority has no relation to the risk of unemployment linked to the phase of the economic cycle (Velásquez Pinto, 2010). This risk would also de-incentivize the firing of workers with the greatest seniority and, as such, would cause the cost of the adjustment to fall mainly on the youngest workers. Labor turnover would also allow an increase in productivity due to the spread of knowledge and better assignment of the work factor, and unemployment, as a status that facilitates the search for employment, would lead to ascending mobility and greater assignative efficiency. In summary, the central argument in favor of protection systems that consist of a universal guaranteed income and/or the universalization of access to certain basic services is the favorable effect of reducing the labor cost over assignative efficiency and job creation.

However, these arguments are far from having enough empirical evidence to support them and there still exists widespread debate regarding the effects of increasing flexibility on job levels and quality. In Latin America, since the beginning of the 1990s (and in some cases, even earlier), there have been deregulation reforms that have reduced non-salary labor costs but have not managed to improve the labor market (Marshall, 1996; or Weller, 2001).

Beyond evaluating these experiences, this work would like to emphasize that reducing labor costs should not be the central objective of policies that aim to universalize protection. This approach is founded in basic principles, like citizen rights and the fact that in order to fully exercise one's rights, one requires access to certain basic resources. Citizens are holders of rights and society must put in place mechanisms to ensure that these rights are effectively guaranteed.

In this context, the design of labor regulations must respond to the relative merits of its different components in terms of worker welfare. This design, of course, must not be independent from protection mechanisms, such as health and social security. Without universal health care and pensions, flexicurity proposals, for example, may affect the quality of life of workers. However, the balance between components that promote job stability and those that provide income security must be evaluated in terms of the objectives and effects of each. Although the latter, which seek to de-incentivize firing, increase the stability of remunerations, an objective similar to that of unemployment benefits or a basic income, regulations on job security target a broader set of goals, both in terms of welfare and productive efficiency.

In this way, losing a job could lead to breaking the important sociability links generated in the labor world. Nor are the advantages of long-term labor relations for efficiency emphasized, as these relations are more suitable for training people for jobs than fleeting relationships, and also promote greater cooperation between workers and employers. Although companies could, per se, decide for greater stability, the existence of costs or limitations on firing constitute incentives that influence the behavior of companies towards promoting more stable labor relations.

A benefit that guarantees a minimum income for households also tends to be seen as a substitute for the minimum wage. The most efficient option is for the market to set remuneration and therefore reach full employment, an objective that cannot be achieved if that labor institution is still in place; its influence would also lead to substituting certain types of workers for others. For example, unskilled for skilled, young for adult and women for men, because it is more likely that the salaries of the former would be equal to or near the minimum wage. If the equilibrium salary set by the market is not enough to guarantee an adequate standard of living for the household of the worker, the gap should be covered by the benefit.

However, on the one hand, there are alternative conceptual schemes, such as the monopsony market model, by which an increase in the value of the minimum does not necessarily imply reduced employment, as there could be a neutral effect or even an increase (Manning, 2003: 3-28). On the other hand, research on the region shows, in general, a low negative effect or no effect of the minimum wage on aggregate employment levels.16

Similarly, increases in minimums may promote changes in labor organization that lead to gains in productivity. From the side of demand, increasing the salaries of workers with a low propensity to save can lead to an increase in internal consumption with positive effects on overall job creation.

Although it is reasonable to evaluate the relationship between the minimum wage and employment levels, in developing countries that have a broad labor surplus (not only reflected in open unemployment), it would not be appropriate to eliminate the minimum wage or let it fall to extremely low levels, even for reasons of efficiency. A development strategy that bases job growth on low salaries is hardly attractive.

To summarize, this text has argued that progress towards universalizing the basic social and economic rights of citizens cannot automatically be constituted on the justification to eliminate or relax labor regulations. In the framework of applying this strategy, labor market regulations may require adjustments, but the overall effects of these standards should not be disregarded, both in terms of efficiency and equality.


The high welfare inequality that characterizes Latin America reflects a marked concentration of the primary distribution of monetary income and the presence of protection systems that fail to moderate the effects of this distribution and, in many cases, even reinforce it. This is partly due to the fact that these systems respond, in large measure, to social security mechanisms, which naturally do not cover the broadest swath of the population, which is not linked, or weakly linked, to formal employment.

In response to this situation, this work advocates for changing the protection system with various approaches, such as those that would completely modify the architecture of social security-based programs or alter it with networks that serve groups facing the most difficult conditions.

This study has provided the general outline of an approach that would lead to progress towards universal coverage for health care, social security, compensation for unemployment and adequate incomes, using both contributory and non-contributory mechanisms, which, taken as a whole, would ensure that the entire population enjoys basic social and economic rights.

This work emphasizes the need to increase coverage through various instruments and social protection policies; it also highlights the relevant role of the labor market as the axis of social integration and believes that a decent job is the means to improving the welfare of the population and reducing inequality. It is useful to keep in mind that the universalization strategies proposed here will not eliminate all gaps between the quality of life of formal and informal workers. Some of these gaps may be temporary, but others will be more persistent, as it is difficult to entirely extend coverage for certain risks, such as occupational safety and hygiene. Other gaps likely to remain will be between the benefits received by those in contributory and non-contributory pension programs.

Consequently, progress towards universal protection should be accompanied by, on the one hand, regulations that maintain, and where possible improve, the working conditions of formal jobs and, on the other, policies that foster the creation of good quality jobs in terms of stability, labor conditions and productivity. The enormous differences that persist in the quality of jobs in the region require sustained action with regard to the primary distribution of income as a method to reduce inequality and allow having a job to become an effective method to overcome poverty and join a protection scheme.

The discussion surrounding the blueprint for a social protection scheme does not seek anything more than to contribute to reflections regarding the paradigm that could provide guidance in altering the current systems in place in Latin America. But all social protection paradigms constitute a central aspect, whether explicit or implicit, of any policy proposal and not only respond to the ideological perspective and approach to other components of the project, but also to the real possibilities for implementation, which fundamentally refer to political elements but also speak to the economic and institutional reality of each country.

Regardless of the general proposal that emerges, it must be implemented gradually, because specific agreements may not always be easy to reach and restrictions must be overcome, especially institutional and fiscal limitations. As a result, expanding protection would begin with the most vulnerable households, aiming to mitigate the inter-generational transfer of poverty.


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* Researchers at the Universidad Nacional General Sarmiento, Argentina, lbeccari@ungs.edu.ar and rmaurizi@ungs.edu.ar, respectively.

1 Also due to other factors, such as issues with fiscal sustainability.

2 For example, see Van Parijs (1992).

3 This document does not address education or housing, as guaranteeing these rights is not traditionally linked to social security mechanisms.

4 For example, while, as a simple average, 28 percent of salaried workers of households in the poorest quintile of the per capita family income distribution are formal workers, this percentage grows to 76 percent among salaried workers of the wealthiest quintile (estimations based on the database of household surveys by country).

5 Estimates of Mincer equations for salaried workers made by the authors for Argentina, Brazil, Chile, Mexico and Peru with household survey data close to 2008 reveal that the income gap associated with informality varied between 0.278 for Brazil and 0.524 for Argentina.

6 See section 2.

7 For example, data from the Living Conditions Survey of 2001 in Argentina reveal that among the set of households that suffered illnesses and did not consult a doctor, the proportion of those that did not do so due to lack of money was much lower among those not affiliated with a social security, or who did not have a private insurance, than among those served in the public sector (http://www.trabajo.gov.ar/left/estadisticas/otia/estadisticas/verFuente.asp?Fuente=ECV.01).

8 Beccaria and Maurizio (2003), Kugler (2000) and Paes de Barros and Leite Corseuil (1999), among other studies.

9 The General System of Social Security in Health (sgsss).

10 Even for formal workers, the concern for unemployment care has not been priority in Latin America. Only six countries have contributory insurance and in these countries, coverage is reduced (between 10 and 20 percent of unemployed). See, for example, Velásquez Pinto (2010: 11).

11 The maximum amount of unemployment benefits is equivalent to 19 percent of the minimum wage.

12 This scheme replaced other similar programs and even guaranteed a minimum pension to those who had made contributions for 20 years but had failed to accumulated the amount needed to be eligible.

13 In 2008, a non-contributory benefit was set up for people aged 65 to 70 years of age in situations of poverty and unable to access the contributory system. See Bertranou et al. (2011: 40).

14 The Basic Universal Pension in El Salvador and Pension 65 in Peru are also non-contributory mechanisms, but they still have limited coverage (caf, 2012: 76).

15 The above paragraphs on the experiences of non-contributory programs in Latin America is based on Rofman and Oliveri (2011: 26-35).

16 Neither Bell (1997: 24) for Mexico, nor Lemos (2007: 219) for Brazil, found significant effects of the minimum wage on employment. These results differ from those found by Lemos in previous studies that suggested a long-term negative effect, although of reduced magnitude (Lemos, 2004: 1). Gindling and Terrell (2007: 22) estimate total job elasticity for the minimum wage of -0.10 in Costa Rica.

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