The Economy of the Possible

Social protection coverage is quite low in Latin America. This situation, irrespective of the type of pension scheme, represents a challenge for public policy since these low levels of affiliation and irregular contribution histories indicate that pensions will be insufficient in the coming decades. This paper describes the relationship between pension protection and labour informality in Bolivia, Brazil, Chile and Mexico by income level, using several rounds of national household surveys. Our analysis highlights that labour formality is limited, even among the middle and the high income groups. Correspondingly, coverage rates (measured by contributors or affiliates over workers) range between 10% of the labour force in Bolivia to up to 62% in Chile. 76% of formal workers are covered on average, while coverage among the self-employed in agriculture is below 7%. Based on this prognosis, we discuss some alternative pension reforms.