Toward an OpenEconomy Social Contract in Latin America GRADE Conference Investigacin, Polticas y Des - PowerPoint PPT Presentation

1 / 28
About This Presentation
Title:

Toward an OpenEconomy Social Contract in Latin America GRADE Conference Investigacin, Polticas y Des

Description:

GRADE Conference 'Investigaci n, Pol ticas y Desarrollo' Lima, Peru. November 17, 2005 ... Source: ECLAC, Panorama Social de Am rica Latina, 2004. Data are for 2002. ... – PowerPoint PPT presentation

Number of Views:27
Avg rating:3.0/5.0
Slides: 29
Provided by: GPe82
Category:

less

Transcript and Presenter's Notes

Title: Toward an OpenEconomy Social Contract in Latin America GRADE Conference Investigacin, Polticas y Des


1
Toward an Open-Economy Social Contract in Latin
America GRADE Conference Investigación,
Políticas y Desarrollo Lima, PeruNovember 17,
2005
  • Nancy Birdsall
  • President
  • Center for Global Development
  • Washington, D.C.

2
PowerPoint presentation based on
  • Toward a New Social Contract in Latin America
  • Policy Brief, Nancy Birdsall and Rachel Menezes
  • http//www.cgdev.org/content/publications/detail/2
    837
  • From Social Policy to an Open-Economy Social
  • Contract in Latin America
  • Working Paper, Nancy Birdsall
  • http//www.cgdev.org/content/publications/detail/2
    769

3
Why does Latin America need an open-economy
social contract?
  • Three grim realities
  • 1 Job growth has been extremely weak,
    increasing insecurity among middle-income
    households
  • 2 Middle-income households in the region are not
    middle class at all, but actually rather poor
  • 3 Middle-income and poor households benefited
    greatly from reduced inflation, but were squeezed
    by the structural reforms of the 1990s

4
1 Job growth has been extremely weak
  • Jobs and the labor market were not on the reform
    agenda of the 1990s..
  • Progress of reforms in Latin America
  • (extent of reforms as of total possible
    reforms)

Source Lora (2004)
5
..but lack of jobs (and low wages) are now the
main concerns in Latin Americaahead of
corruption, crime, and other social problems
  • What do you consider to be your country's most
    important problem?
  • ( respondents)

Source Latinobarómetro
6
Four worrying trends in the labor market
  • Rise in open unemployment
  • Lack of social protection
  • Weak job creation, concentrated mostly in
    low-productivity activities
  • Widening wage gap between workers with higher
    education relative to primary and secondary
    education

7
High unemployment ..
  • Unemployment rise in Latin America, 1990-2003 (in
    )

Source IMF WEO, 2004
8
.. and lack of social protection
  • There are fewer workers today covered by labor
    regulations and social protection (around 40 )
    than in the early 1990s.
  • In Mexico and Argentina, more than 60 and 80
    respectively of the unemployed that find jobs do
    not receive social security benefits.

9
Weak job creation, concentrated in
low-productivity activities
  • Between 1997 and 2002, employment expanded by
    less than 2 a year in the region. In the 1990s,
    the rate of increase in jobs (2.2) was lower
    than the rate of economic growth (3.2).
  • Most countries have seen an increase in the share
    of low-quality jobs (e.g., involuntary part-time
    work, temporary employment, self-employment, and
    jobs in very small firms).

10
Widening wage gap between workers with higher
education relative to primary and secondary
education
Wage Differentials in Latin America in the 1990s
  • Source Birdsall, Behrman, and Szekely (2001)

11
2 Middle-income households are not middle
class
  • Global markets brought economic insecurity to
    middle-income families everywhere,..
  • ..but the anxiety is particularly acute for that
    group in Latin America because middle-income
    people are far too poor to be called middle
    class.
  • In the U.S., median national income is about 90
    of average national income.
  • By contrast

12
In Brazil, median household income per capita was
about a third of average national income in the
1990s..
  • Source Birdsall (2002)

13
In Chile, median income has been about half of
average income..
Source Birdsall (2002)
14
Percentage of the population with per capita
income at or above average..
Average per capita income of each country listed
below country name, in 1995 U
Source ECLAC, Panorama Social de América Latina,
2004. Data are for 2002.
15
The poverty of middle-income households is
associated with low levels of health and education
  • The levels of health and education of
    middle-income households are well below what we
    would expect for the middle class in the Western
    sense
  • In Bolivia, the median level of education among
    adults is still below two years. In Argentina, it
    is just above five years.

16
In Peru in the 90s, almost 20 of children under
5 in middle-income households were stunted..
Source Demographic and Health Survey data at
World Bank Country Reports on Socio-economic
Differences in Health, Nutrition, and Population
(2002)
17
Because middle-income households are so close to
the poverty line..
  • .. even short-term economic downturns can drive
    them into poverty.
  • Economic troubles in Argentina and Venezuela
    created an entire class of the newly poor, with
    as many as 41 of all households in Argentina,
    and 69 in Venezuela, now counted as poor.

18
3 Middle and low-income households benefited
from lower inflation but were squeezed by 1990s
structural reforms
  • Analyses suggest Latin America would be worse off
    without structural reformstrade and financial
    liberalization, opening of capital markets,
    privatization, and deregulation.
  • But benefits have been small in terms of growth,
    and largely concentrated among those with higher
    education and initially higher assets.

19
Estimated effects of policy reforms of 1990s on
inequality and poverty from existing studies..
20
Reminder The benefits of growth and reform have
been concentrated largely among those with higher
education
Wage Differentials in Latin America in the 1990s
21
So what to do?Job-oriented growth policies
  • 1. A radical fiscal policy aimed at creating a
    strong fiscal base and lower interest rates
  • Fiscal surpluses support lower real interest
    rates for job creation..
  • ..and permit countercyclical policy to protect
    the poor and middle-income households during
    economic downturns.

22
Why radical..?
Because the standard for Latin America, with its
bad history of inflation and poor debt
management, is higher than that for the U.S. and
Europe..
Source World Bank and IMF. Data for total debt
are for 2002. Data for interest/taxes are for
2001.
23
The elements of an open-economy social contract..
2
  • 2. A fair fiscal system that makes taxes and
    expenditures more progressive
  • Implement more visible and more progressive tax
    policies (e.g., reducing evasion, eliminating
    loopholes, improving tax administration, etc.)
  • Reduce pension and other expenditures that are
    regressive.

24
The elements of an open-economy social contract..
3
  • 3. Job-creation and protection of workers rights
  • .. emphasis on creating rather than protecting
    jobs, and encouraging worker mobility..
  • Protect job mobility, not job stability.
  • Protect all workers rights collective
    bargaining (firm level), democratic unions,
    social protection to informal sector workers.

25
Reminder Labor market reform is the least
advanced compared to other economic reforms
Progress of reforms in Latin America(extent of
reforms as of total possible reforms)
Source Lora (2004)
26
The elements of an open-economy social contract..
4
  • 4. Access to rich country markets
  • .. would help reduce instability costly to
    middle-income and poor households
  • .. jobs created in agriculture, shoes, and
    textiles would increase demand for less-skilled
    labor
  • Latin American countries need to unite behind in
    the context of negotiation of the FTAA, adhering
    to a set of common goals at the multilateral
    trade rounds.

27
Conclusion
  • Latin America has undertaken one set of changes
    in the direction of more open and competitive
    market economies..
  • .. now the benefits of that first step need to be
    complemented and reinforced by a second step a
    social contract adapted to the opportunities and
    vulnerabilities of open economies..
  • .. and geared to the aspirations of the regions
    vast majority of near poor middle households,
    whose participation is key to achieving growth
    and strengthening democracy.

28

Conclusion cont.
  • Along with traditional pro-poor policies, a
    broader social contract would help address deep
    sense of injustice caused by the regions high
    inequality,..
  • .. and rekindle hope that open markets and
    democratic institutions can reinforce each other.
Write a Comment
User Comments (0)
About PowerShow.com