Prillaman, Soledad: Target in Motion: The Micro-Foundations of Non-Contributory Social Policy in Latin America

(PDF) Social policy in Latin America has long been marked by a division between policy "insiders" and "outsiders", as defined by highly segmented labor markets. P

rior to the late 1990's, social policy in Latin America was dominated by social insurance programs targeted exclusively at workers within the formal economy. As a result of this formal sector targeting, over 20% of the labor force in Latin America was not covered by social insurance programs. In the late 1990's and early 2000's a major shift in the targeting of social policies occurred with the introduction of non-contributory pensions, universal health coverage, and conditional cash transfer programs. What allowed for this erosion of traditionally cemented boundaries and the expansion of benefits to the informally employed? This paper argues that the end of protectionist economic policy led to a restructuring of industry and employment that broke down the barrier between the formal and the informal labor markets. As a result, the entrenched interests of the "insiders" saw marked changes in recent decades as formal labor force employees faced greater risk of unemployment and movement out of the formal labor force. This increased uncertainty over formal employment opportunities shifted the preferences of this politically salient population towards less corporatist social policies and instead towards more universal and redistributive social policies. Coupled with the surge in political participation of the "outsiders" as a result of democratization, this created a new left coalition capable of fundamental social policy change. Ultimately, this paper argues that non-contributory social policy implementation was the result of a shift in preferences of a politically pivotal group -- at-risk formal workers -- reacting in an economically self-interested way to changes in the structure of the economy, rather than a shift in power as the result of democratization.