Truman G. Packard

Keeping the Promise of Social Security in Latin America

Nations around the world (both large and small, rich and poor) are engaged in debate over how to reform their social security systems and care for the aged. For many countries this debate requires speculation on hypothetical scenarios, but in Latin America a rich body of experience on social security reform has been accumulating for more than a decade (for Chile, more than two decades). This report, entitled, Keeping the Promise of Social Security in Latin America, takes stock of those reforms, evaluates their successes and failures, and considers the lessons that can be drawn for the future of pension policy in the region. The authors draw on a series of background papers and surveys commissioned specifically for this inquiry, as well as existing research conducted by themselves and other pension experts. In the debate on pension reform there is no orthodoxy, as reflected in major differences of opinion among leading experts. Despite more than a decade of experience with pension reform in Latin America, although undoubtedly a major step forward, reforms are still works in progress. This report furthers enrich the policy dialogue that is of crucial importance to the future of the region.

In From the Shadow : Integrating Europe's Informal Labor

This book is about Magda and Jacek and millions of others like them, who earn a living working full- or part-time in Europes untaxed markets for goods, services, and labor. Magda was certified as a hairdresser years ago, and shes very proud of the salon apprenticeship she did shortly after. She learned a lot and made good friends but was never fully comfortable working for somebody else. Jaceks clients pay him in cash, and he pays his men in cash as well. He sometimes needs to show a license to get the trade price on parts and materials. But he can keep it up-to-date by declaring only part of what he actually earns to the tax office. This book ventures a general conclusion about what policy makers can do to bring more economic activity in from the shadow: Although it may be necessary to improve the structural incentives created by taxation, social protection policies, and labor market regulation, doing so is not sufficient for substantive improvement to be achieved. To back up this general conclusion, the book presents a large body of evidence indicating that much more than the fairly mechanical incentive structures of taxation, social policy, and labor market regulation is at work in shaping the circumstances that lead people into the shadowy unregulated and untaxed markets for goods, services, and labor.

Revealed Preference and Self-Insurance: Can We Learn from the Self-Employed in Chile?

Financial sector development is a critical area of effective social protection policy. A well-regulated financial sector can complement government efforts to keep households from falling into poverty - by supplying the instruments needed to pool risks, or to self-insure against losses because of the death, or disability of a household member, unexpected loss of employment, or inability to work in old age. But many of the policy recommendations that can be drawn from the social risk management framework, rest on the strong assumption that risk, and time preferences are uniform across individuals, or households. Policies meant to encourage participation in public pension systems, and to reduce evasion where such systems are mandatory (by more closely aligning benefits with payroll contributions, or introducing individual retirement accounts) implicitly attempt to emulate the savings behavior of individuals, and households faced with fully functioning capital markets, and perfect information. If no allowance is made for variation in preferences, however, the welfare effects of policy reforms will vary across the target population. Mandated social security, even if actuarially fair for most, is likely to impose welfare losses on those less inclined to save, and insure. That said, a clearer picture of individual and household preferences, and how they vary across the population, can help governments design social security systems that complement private savings, and insurance instruments. The authors present the results of a field experiment, designed to produce an empirical measure of risk aversion, and time preferences of selected groups in Chile, which in 1981 pioneered social security reform with a transition to individual retirement accounts. The experiment was designed primarily to establish whether the time, and risk preferences of the self-employed differ significantly from those of wage, and salaried workers. They find no significant differences in mean risk, and time preferences between the self-employed, and employees, or between the contributing, and non-contributing employees. But they find significant differences in these preferences between the contributing, and non-contributing self-employed. Among the self-employed, those who are more patient choose to contribute to the pension system. However, the contributing self-employed are significantly more tolerant of risk than the non-contributing self-employed, a finding that conflicts with the assumption that the formal pension system is the only source of insurance against poverty in old age. The Chilean pension system may be viewed with some trepidation by its pool of potential clients. Since risk aversion declines with education, the participation of the economically active who are free to choose, could be enhanced by a campaign carefully designed to raise awareness, allay fears, and inform people of the benefits of saving for retirement in the formal pension system.

East Asia Pacific at work : employment, enterprise, and well-being

Talent, skills, and the ability to work are peoples most important assets. The majority of people realize the value of these assets in the labor market, whether they sell their time to others or pursue their own enterprise. Work is often the channel through which the benefits of economic growth spread and living standards improve. This has been especially evident since 1990, as the share of the worlds population living in poverty has declined by half. The prospects of working people in East Asia Pacific are better than those of many living elsewhere. The flow of goods and services within the region, integration with the global economy, price stability, rule of law, and relatively unfettered markets all foster opportunities for advancement through work that people in other regions regard with envy. In East Asia Pacific, work has brought more people out of poverty and closer to middleclass prosperity faster during the past three decades than in any other place and at any other time. The first (chapters 1, 2, and 3) describes the context: what is unique about East Asia Pacific, how diverse are the profiles of households and firms within the region, and how is the contribution of work to well-being changing. The second part (chapters 4, 5, and 6) reviews policy and takes stock of the prevailing models in East Asia Pacific and how they affect the prospects of and outcomes for working people. The third part (chapters 7, 8, and 9) looks at the policies that governments in East Asia Pacific economies may wish to consider sustaining the transformative impact of work, even as growth in the region begins to moderate.

Is There a Positive Incentive Effect from Privatizing Social Security? Evidence from Latin America

There is increasing concern among policymakers that social security reforms that involve a transition to individual retirement savings accounts may exclude certain groups of workers from coverage against the risk of poverty in old age. While most public pay-as-you-go systems pool the risk of interrupted careers and periods of low earnings over the covered population, the reformed systems shift the burden of these risks to the individual. Adequate coverage under a system of individual retirement accounts depends critically on accumulating sufficient savings through regular contributions. In developing countries where opportunities for unregulated employment abound and workers can easily escape mandated social insurance, theory suggests that reforms will increase the number of contributors to social security by reducing distortions and improving incentives in the labor market. Motivated primarily by fiscal pressures stemming from the deficits of overly generous, poorly administered public pension systems, many governments are going ahead with reforms as if this theory is correct. Does a shift to individual retirement accounts improve the incentives to contribute to social security? Almost a decade after reforms to national social security systems in Latin America (two decades, in the case of Chile), existing evidence is mixed. Several studies have found that the share of the Chilean workforce covered by the national pension system has increased since individual retirement accounts were installed in 1981; others have shown that there has been no change in this share. But these studies rely on simulations or on casual observation of data on the sectoral allocation of the labor force and relate only to Chile. Sufficient time has now passed since reforms in several Latin American countries to allow more rigorous testing of the theory. The author estimates the impact of social security reform-specifically, the transition from a purely public pay-as-you-go system to one with private individual retirement accounts-on the share of the workforce that contributes to formal retirement security systems. To test the predictions of a simple model of a segmented labor market, he exploits variation in data from a panel of 18 Latin American countries, observed from 1980 to 1999. Results show that introducing individual retirement accounts has a positive incentive effect that, other things equal, increases the share of the economically active population contributing to the reformed system. But this effect occurs only gradually as employers and workers become familiar with the new set of social security institutions put in place by reform.

Are there positive incentives from privatizing social security? A panel analysis of pension reform in Latin America

The paper estimates the impact of social security reform – specifically, the transition from a purely public pay-as-you-go (PAYGO) system to one with private individual retirement accounts – on the share of the workforce that contributes to formal retirement security systems. Using a simple model of a segmented labor market, the paper exploits variation in data from a panel of eighteen Latin American countries, observed from 1980 to 1999. Results show a positive incentive effect after the introduction of individual retirement accounts that, ceteris paribus, increases the share of the economically active population who contribute to the reformed system. However, this takes place only gradually as employers and workers become familiar with the set of new social security institutions that reforms put in place.

Full employment: a distant dream for Europe

Today, Europe is a continent of low participation, low employment labor markets. Many observers would like to blame poor employment outcomes on the Euro or on austerity. But these are dangerous distractions from real problems that constitute imperatives for structural reform. There are differences across countries, but there is a “European model” of work: almost every European economy has more stringent employment protection and more generous social benefits than peers in North America, Oceania, and East Asia. This has led to low labor force participation and high unemployment, especially among young Europeans. Layered on top of these weak labor markets is the rapid onset of aging; if policies are not changed, Europe will lose about a million workers every year for the next five decades, especially in the 2030s. In short, Europe has to increase both the demand for and supply of labor. To do so, Europeans have to begin viewing competition as a necessary good, not an unnecessary evil. Restructuring unemployment and pension benefits will help to increase participation and reverse the decline of the workforce, but policies that promote competition for jobs and mobility of job-seekers are needed to increase the demand for labor. To get to full employment, Europe has to alter the employment protection laws that give too much power to those with jobs while marginalizing others to the fringes of the economy. Europeans will have to reduce and restructure the generous social benefits that simultaneously discourage young people from searching seriously for work and encourage older workers to quit work too early. Europeans will have to view mobility of workers as a prerequisite of European integration, not just a possible consequence of it. If all this is augmented by reforms to reduce public debt, encourage enterprise and innovation, and stabilize finance, Europe will have a vibrant economy, with high participation and full employment.Jel codesI38 - Government Policy; Provision and Effects of Welfare Programs, J08 - Labor Economics Policies, J21 - Labor Force and Employment, Size, and Structure, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, J32 - Nonwage Labor Costs and Benefits; Private Pensions, J42 - Monopsony; Segmented Labor Markets

Extending the Risk Pool for Health in Developing Countries: The Challenges of Moving to General Tax Funding

Increasing participation in effective health risk-pooling arrangements in developing countries is an essential component of the package of policies designed to protect vulnerable households from the impoverishing consequences of health shocks. People who are poor, those at high risk and self-employed/informally employed workers are three groups that raise particular issues in the formulation of health risk-pooling policy. In this paper, policy options for extending risk-pooling in developing countries are discussed, with particular attention to the merits and disadvantages of overcoming the shortcomings of payroll-tax-financed insurance through a greater role for general tax financing in the health sector.

The Jobs of Tomorrow

Policy makers throughout Latin America and the Caribbean (LAC) will like to understand how best to leverage recent and ongoing global, business-relevant technologies to support productivity upgrading with inclusion. This report discusses technology adoption and its impact on inclusive growth through productivity, jobs, types of skills, and wages in Latin America. The report focuses particularly on two dimensions of inclusive economic growth: overall job growth, and how less-skilled, less well-off workers can also benefit from technology adoption. The book’s focus on five middle-income countries - Argentina, Brazil, Chile, Colombia, and Mexico is dictated both by the availability of high-quality data and by the differentially paced penetration of digital technologies in the LAC region. The evidence and conclusions presented in this report are relevant for lower income countries in the LAC region and for helping to understand the impacts of the adoption of other types of technologies beyond information and communication technology (ICT) that reduce costs and expand firms’ sales opportunities. This report investigates three channels linking technology adoption with more inclusive growth: a sufficiently large firm-level output expansion effect, a market access effect that increases smaller firms’ relative demand for lower-skilled workers, and a worker mobility effect that lowers cross-sectoral and cross regional worker mobility costs through better Internet access. This report is organized around the following issues: chapter one gives introduction. Chapter two provides a succinct context underpinning the importance of fostering productivity with more inclusive growth through digital technology adoption. Chapter three lays out the core assumptions and implications of a conceptual framework for technology adoption that realistically assumes that both firms and workers are heterogeneous agents. Chapter four discusses new learning from the region on the impacts of technology adoption. Chapter five discusses the main policy implications related to improving the broadly defined business environment, including technology diffusion support policies, product market policies, and education, skills, and labor market policies. Chapter six concludes by summarizing the main findings and outlining some questions for further research.

A Conceptual Framework

contexts such as cognitive frameworks for mental representations arising from neuro-biological substrates, including phenomenological, epistemological and ontological models and frameworks Physical contexts that map to (3+1 dimensional) real-universe spatial coordinate systems Virtual contexts that model digital representations of abstract, virtual or real-universe entities arising from digital circuitry Cyberphysical contexts that span physical, abstract and virtual contexts Visualization perspectives The program methodology supports use of multiple perspectives for visualization of abstract conceptual models. Where appropriate, the methodology relies on projections and layers to represent multi-dimensional models in two-dimensional space. Network framework : the network framework employs graph modeling primitives to represent entities (nodes) and relationships (edges) Contextual framework : the contextual framework employs construction of multiple distinct views, or aspects, of a domain based on intersections or overlays of dimensions or contexts. Spatial framework : the spatial framework supports representation of twoand three-dimensional spaces within the physical universe, employing layered structures as appropriate to separate domains or contexts that map to a common coordinate system. Portfolio : | , Development Ecosystems, Regions, Communities Human, , Habitat Grid | Engineering