Towards better social protection for more workers in Latin America
Challenges and policy considerations
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.
Available from May 30, 2024
In series:OECD Economics Department Working Papersview more titles