Social protection institutions in Latin America show deep inequality in access and provision for different groups of workers and their families. This article discusses research on their stratification effects.
Social protection consists of income transfers to individuals or households with the goal of protecting their living standards. Together with basic services like education or healthcare they account for the bulk of social spending in most countries.
Yet, as shown in Figure 1 below, inequality in access and provision is the defining feature of social protection in Latin American countries. The Figure shows the distribution of transfers across deciles of household income in early 2010s. Social assistance transfers support low-income households in unprotected employment, while occupational pensions and individual retirement savings plans support better-off workers in large firms.
My book Social protection in Latin America: Causality, Stratification and Outcomes delves deeper into these patterns and argues that stratification is a causal outcome of the matrix of social protection institutions in the region.
Causality and institutions
Quasi-experimental methods applied to the study of social protection interventions have greatly improved our understanding of their causal effects. There are at least two reasons why we should seek to extend this approach to study social protection institutions.
First, conditional income transfers are not one-off interventions. Impact evaluations can generate precise estimates of short term effects but are not well suited to study medium- and long-term effects. In Latin America, social assistance programmes have become institutions. They are managed by permanent public agencies implementing rules-based transfers and accountable to parliament.
Second, impact evaluations focus on the effects of interventions on beneficiaries. Social protection institutions have broader effects on society, the economy, and politics. A theory of social protection must account for these broader effects.
There are methodological challenges to extending the experimental approach to the study of institutions, but its core focus on causality remains essential to understand social protection institutions.
Institutional Matrix
Three main institutions define the social protection matrix in Latin American countries. ‘Bismarckian’ occupational pension funds became prominent during the state-led development phase in the 1960s and 1970s. Individual retirement savings plans were introduced in some countries during the neoliberal phase in the 1980s and 1990s. Social assistance transfers were implemented to scale in the 2000s. These three main institutions remain the largest in terms of participation and budgets. They are distinct analytically as the root source of protection can be found in insured group membership, personal savings capacity, and citizenship respectively.
Stratification
Three types of stratification effects stand out.
Stratification effects on protection are shown in Figure 1, comprising occupational insurance, retirement savings plans, and conditional income transfers support different groups of workers and households. Stratification by gender, type of employment, and age are also significant.
Figure 1: Distribution of transfer budgets across deciles of household income.
Source: Commitment to Equity (CEQ) Standard Indicators v. 4.0 (2022). The source data combines household survey responses and aggregate economy data.
Stratification effects on employment are prominent in the labour economics research literature. Occupational insurance supports larger firms’ efforts to recruit and retain workers and to raise productivity. Personal retirement savings plans facilitate worker mobility and sidestep labour organisations. Social assistance supports less skilled workers and their families in conditions of labour market and employment volatility.
Stratification effects on workers’ political inclusion or incorporation are central to theories of social protection dynamics in the region. Occupational insurance facilitated the political co-option of urban industrial workers later reversed through their replacement with personal retirement savings plans. Social assistance transfers have strengthened the political inclusion of low income workers by connecting social movements and social policy.
Theory and the ordering of stratification effects
Focusing on employment, protection, and incorporation stratification effects offers a framework with which to organise and sharpen theoretical and empirical perspectives on social protection. Competing theoretical perspectives turn on the ordering of these effects.
Power resources theories of social protection follow a politics-first approach, in which class interests shape political coalitions able to secure protection and employment. Varieties of capitalism theories emphasise an employment-first approach in which employment in the high-tech sector are guaranteed protection by governments commited to growth. By contrast, basic protection for workers in the traditional sector is dependent on their participation in broad governing coalitions. The latter is more likely in proportional representation political regimes than in mayoritarian ones. Neoinstitutional approaches to social protection emphasise a protection-first approach in which social protection institutions shape beneficiary groupings and networks able to support institutional expansion and resist reforms.
Research on social protection in Latin America has combined strands of these, and other, approaches to put forward a range of hypotheses regarding the ordering of the three main stratification effects.
Policy?
The stratification effects of social protection in Latin America pose challenges for policy. There is broad consensus among researchers and policy makers in the region on the need to make current social protection institutions more inclusive. Universalism runs deep in social protection debates. However, this is challenging if the institutional matrix helps reinforce stratification. Radical proposals for a new start, like universal basic income, seem attractive on paper but appear unfeasible in practice. Gradual reform proposals face significant opposition from powerful interest groups.
In the past, political realignments re-shaped social protection althought not necessarily in a positive direction. The spread of individual retirement savings plans began under authoritarian rule in Chile. The expansion of social assistance in the new century was supported by a ‘pink tide’ of left governing coalitions helped by growing resources revenues. A firm grasp of the stratification effects of social protection institutions will be key to ensure reforms move in a positive direction.
This article draws on findings from the book Social Protection in Latin America. Causality, stratification, and outcomes. The book is part of the series Global Dynamics of Social Policy and is open access.
