Social Policy and Job Creation in Mexico

1. Social Policy and Job Creation in Mexico Gustavo Merino Deputy Minister of Social and Human Development MEXICO Policy Forum: Creating More and Better Jobs OCDE-World Bank Rabat, Morocco. May 7, 2008

2. Mexico finds itself in a demographic transition that demands continuous and abundant job creation The Economically Active Population will reach 50 million people this year, and will continue to rise over the coming decades. The country needs to generate approximately 1 million jobs annually. However, in the last few years, the creation of jobs in the formal sector (with job-linked social security) has fallen short of the 1 million benchmark. Percentage of the Population (by age) Source: CONAPO (National Population Council) ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 Source: Ministry of Finance and Public Credit

3. More new jobs are created in the informal sector • Recent evidence suggests that the labor market is not fully segmented and that costs associated with formality (taxes and fees) plus the availability of alternative social protection programs may create incentives for informality and mobility within sectors (Levy, 2006) • However, this does not rule out that many workers, especially those with low skills and education may have few options for formal employment Source: CONEVAL estimates, based on the Mexican Family Life Survey 1992-2006

4. Insufficient job creation in the formal labor market has grave implications • 58% of the population lacks coverage through the social security institutions • Social security benefits are linked to formal employment • Among the self-employed and agricultural workers, over 90% have no social security and 93% of heads of household in the first income quintile lack social security. • Being outside the framework of social security and benefits has negative consequences such as out of pocket health expenditures and lack of pensions, that can entrench or exacerbate poverty conditions • Expansion and creation of new social programs provides protection to those without social insurance, such as health insurance, child care options, housing and non contributory pensions for the rural elderly, but may perpetuate labor market distortions.

5. Creating more and better paid jobs is imperative for poverty alleviation Spreading the benefits of growth requires an approach that simultaneously Uses targeted social assistance programs to alleviate poverty and increase productivity while facilitating access to the labor market and economic opportunities Source: CONEVAL

6. Mexico´s New Social Policy Strategy places considerable attention on employment opportunities Mexico just launched a social policy strategy that joins specific social and economic policies to increase incomes for the poor and promote job creation and employment Social Safety Net Economic Development and Well-Being Access to Basic Social Rights Bridges Development of Basic Capacities

7. Development of Basic Capacities Tools that raise individuals’ and families’ productivity and promote their free and full participation in society. Nutrition: Increase access to food, as well as conditions that improve nutrition, specifically amongst children and women of child-bearing age. Education: Implement reforms to guarantee universal access to quality basic education. Health: Provide universal access to healthcare. Housing and Basic Social Infrastructure: Broaden reach of existing programs, guaranteeing services for the least advantaged families. Examples: Oportunidades, Food support programs (Programa Alimentario, Leche, Diconsa) Housing programs for the poor (Fonhapo, Conavi)

8. Social Safety Net Tools that help individuals throughout the life cycle to overcome contingencies and situations of vulnerability. Health insurance program “Seguro Popular” to the uninsured population Aid to families and localities affected by natural disasters. Social and financial assistance to persons in situations of vulnerability, such as: the temporarily unemployed (Temporary Employment Program) migrant agricultural workers (Programa Jornaleros Agrícolas) senior citizens (Programa 70 y +)

9. Bridges Bridges are necessary to ensure that social development translates into larger incomes and better well-being of the population It requires coordination and actions from both social and economic policies. From Social Policy, actions that strengthen capabilities, raise productivity and facilitate access to employment opportunities From Economic Policy, conditions conducive to economic and employment growth Brides

10. Social Policies to improve individual earnings Facilitate entry into the labor market Access to childcare through the Childcare Center Program Information to link job seekers and employers (ex. job banks) Build human capital Job training High school and university Formal certifications for diverse job skills Support for productive projects and self-employment (training, micro-credit etc) Install adequate infrastructure for economic activity (e.g. roads wide enough for trucks, electricity adequate for powering tools and machinery, rural roads, telecommunications) Improve urban planning Improved earnings Social Policy 10 10 10

11. Economic Policies to improve individual earnings Increase flexibility and mobility in labor market and reduce labor costs. Develop and strengthen savings mechanisms and ensure that poor families can access them. Stimulate competitiveness: Administrative and sectoral deregulation Effective anti-monopoly policies Create direct and indirect employment through large-scale infrastructure projects. Promote regional development: Encourage companies to establish branches in excluded areas. Take advantage of existing competitive advantages and develop new ones. Ensure rule of law and public safety. Improved earnings Economic Policy 11 11 11

12. Examples of Successful Policies • Child Care program: Estancias Infantiles • Health Insurance: Seguro Popular

13. Affordable & Accessible ChildcareBridge • Prior to 2007, childcare options were primarily (and insufficiently) offered through the social security institutions for affiliated persons or much less so, through other public institutions in addition to more expensive private services • In Mexico, two thirds of women report not working for income (vs. 12% of men). • Women workers tend to live in higher income households (although 25% are poor) because these are households with two earners. • Childcare availability can increase women’s participation in the labor force, and consequently help to tackle poverty. • The new Childcare Center Program (Programa Estancias Infantiles) helps establish privately run local daycare centers for the children of low-income working mothers: • Subsidizes the creation of such centers by eligible individuals, provides training for the owner and her assistants and supervises the operation of the centers to ensure safety and quality care. • Helps low income working or students mothers to pay for child care services with a voucher-like mechanisms that allows choice of day care center • Generates opportunities for employment and self employment

14. Affordable & Accessible ChildcareBridge Some results (since january 2007) • 97% of beneficiaries are women • 24% report working on their first job. 76% of them were not working previously for lack of child-care options

15. Health Insurance: Seguro PopularSocial Safety Net • Seguro Popular is a public health insurance financed through general revenue, which is free and voluntary, and offers a specialized package of healthcare services. • Seguro Popular covers the medical expenses of poor families that lack alternative sources of social security. • Seguro Médico para una Nueva Generación, a component of Seguro Popular, provides health insurance for all children of uninsured families born after December 1st, 2006. • Covers all medical procedures for the child, and • Provides regular Seguro Popular coverage to the other family members.

16. Universal Health InsuranceSocial Safety Net • The goal by 2010 is universal health coverage, through a combination of Seguro Popular and the Social Security Institutes. It is estimated that Seguro Popular will cover almost 50% of the population. • Seguro Popular currently has over 7 million families registered as beneficiaries. • Seguro Médico para una Nueva Generación has 1,000,000 children as beneficiaries.

17. www.sedesol.gob.mx www.presidencia.gob.mx