The United Nations Economic Commission for Latin America and the Caribbean (CEPAL) announced yesterday in a press release that a Social Protection Plan will be unveiled on March 22, 2006 during the 31st meeting of the Commission in Montevideo, Uruguay. According to CEPAL, only four out of every ten employed people in Latin America and the Caribbean are contributing to any sort of health or retirement plan.
CEPAL’s press release argues that
the reforms that were initiated in the nineties did not resolve the financial or coverage problems of the social protection systems. The designs of the reforms were not adapted to the realities of the labor markets of the region, to low and volatile growth, slow job creation and the increase of informality, which reached 47% of total employment at the beginning of this decade.
While CEPAL’s critique of the problems of the pension and health systems in the region is valid, it is not clear that the proposed Social Protection Plan will offer the right solution. CEPAL argues that it is necessary to strengthen “mechanisms of solidarity and coverage for those that do not contribute to the system.” CEPAL further explains that “we cannot wait for employment to be the only mechanism to ensure coverage for the majority in the short and medium term.”
Hopefully the document will highlight the need to focus attention on reducing the barriers to entry into the formal economy for those entrepreneurs who have been forced to operate in the informal sector. While it is important to have solidarity with those in need, it is more important to help people help themselves. Reforms to the pension and health systems should focus on how these systems have become barriers for people to be able to improve their current condition. Unable to pay the high contributions to failing pension and health plans, “social systems” have become more of a burden than a real safety net for the poor.
Published Date: March 21, 2006