Social Insurance, Informality and Labor Markets: How to Protect Workers while Creating Good Jobs

Oxford University Press, 2014.

Under the general editorship: M. Frölich, D. Kaplan, C. Pagés, J. Rigolini, D. Robalino

Most countries implement social protection programs to help individuals manage income shocks and reduce poverty. Programs can be divided into two broad categories: social insurance and social assistance. Social insurance (SI) focuses on consumption smoothing. The most common programs include unemployment benefits, old-age, disability, and survivorship pensions, as well as health insurance. Social assistance (SA) programs focus on poverty prevention and mitigation. These usually take the form of in-cash or in-kind transfers allocated on the basis of means and/or individual characteristics (e.g., age, disability), and sometimes conditioned on behaviors (e.g., regular pre-natal checkups or public works). While few would argue against the need and social merits of these programs there are growing concerns about their unintended consequences on labor markets because of poor design. The programs can distort incentives and individual behaviors in ways that either reduce employment levels and/or promote informality, ultimately affecting productivity and economic performance. For instance, high social security contribution rates can reduce formal employment; badly designed unemployment benefits can reduce incentives to keep, search, and take jobs; and fragmented social assistance programs can become a tax on formal labor and encourage informality. This book reviews the evidence regarding the effects of SI and SA programs on labor market outcomes and discusses options to improve their design and implementation. The book focuses particularly on middle income countries in Latin America and Asia with a large informal sector. These economies are characterized by a huge informal sector (often bigger than the formal sector), where workers and firms operate, often voluntarily, outside of legal regulations, and labor market structures that are different from the US and Western Europe.

Chapters

Labor Market Institutions and Informality in Transition and Latin American Countries

Lehmann H., Muravyev A., , in: Social Insurance, Informality and Labor Markets: How to Protect Workers while Creating Good Jobs.: Oxford University Press, 2014.

This chapter analyzes, using country-level panel data from transition economies and Latin America, the impact of labor market institutions on informal economic activity. The measure of informal economic activity is taken from Schneider et al (2010), the most comprehensive study to date. The data on institutions, which cover employment protection legislation (EPL), the tax wedge, ...

Added: September 11, 2024

Keywords: social security, employment, insurance, inequality, poverty, informal sector, middle-income countries, Latin America