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Latin American Economic Outlook 2011

Latin American Economic Outlook 2011. Brasilia, 8 th August 2011. How middle-class is Latin America?. Mario Pezzini OECD Development Centre. Significant impact of the crisis on Latin America. Source : OECD (2010), based on data from ECLAC and OECD. Outline. 1.

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Latin American Economic Outlook 2011

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  1. Latin American Economic Outlook 2011 Brasilia, 8th August 2011 How middle-class is Latin America? Mario Pezzini OECD Development Centre

  2. Significant impact of the crisis on Latin America Source: OECD (2010), based on data from ECLAC and OECD.

  3. Outline 1 Latin America’s middle classes 2 Avoiding downward mobility: social protection 3 Fostering upward mobility: education 4 Fostering new models of growth 5 Middle classes and fiscal policy: a new social contract?

  4. The “middle sectors” in Latin America Middle sectors: Proportion of the population earning between 50% and 150% of median income % Source: Castellani and Parent (2010) , based on national household surveys.

  5. Possibilities of moving up… and down Indices of “mobility potential” Potential to move up into the middle sectors Middle Sectors Resilience Potential to move up out of the middle sectors

  6. Outline 1 Latin America’s middle classes 2 Avoiding downward mobility: social protection 3 Fostering upward mobility: education 4 Fostering new models of growth 5 Middle classes and fiscal policy: a new social contract?

  7. Middle income workers: mostly informal Middle-sector workers by employment category Note: Percentage of total middle sectors’ workers (0.5 – 1.5 median household adjusted income) Source: OECD (2010), based on household survey data.

  8. Pension Coverage & income level Informal Workers Formal Workers Percentage of workers covered

  9. Policy recommendations: contents (ex post and ex ante) Minimum pensions: old affiliates, agricultural informal Universality vs. Looser eligibility Affiliation: Independents with tertiary education Compulsory for independent workers vs. Opt-out Flexibility (contributions, withdrawals) Public co-funding: Middle-sectors informal workers with savings Matching defined contributions

  10. Outline 1 Latin America’s middle classes 2 Avoiding downward mobility: social protection 3 Fostering upward mobility: education 4 Fostering new models of growth 5 Middle classes and fiscal policy: a new social contract?

  11. Intergenerational mobility in Latin America is low Correlation between parental and child education Source: Hertz el at. (2007)

  12. Probability of achieving a higher level of education than one’s parents, given parental educational achievement Low mobility in the middle Probability Parents’ level of education Source: OECD ( 2010), based on survey data from Latinobarómetro (2008).

  13. Social inclusion & PISA science test performance Equity and performance: No trade-off necessary PISA Science Score Note: Blue lines indicate OECD averages. Inclusion index measures proportion of variance of economic, social and cultural variance within schools. Source: OECD ( 2010), based on survey data from 2006 round of PISA

  14. Policies to enhance upward mobility Expand early childhood development programs More and better secondary education: focus on schools and teachers Better social mix within schools Financing tertiary education: grants and scholarships Redistributive policies and income support

  15. Outline 1 Latin America’s middle classes 2 Avoiding downward mobility: social protection 3 Fostering upward mobility: education 4 Fostering new models of growth 5 Middle classes and fiscal policy: a new social contract?

  16. Outline 1 Latin America’s middle classes 2 Avoiding downward mobility: social protection 3 Fostering upward mobility: education 4 Fostering new models of growth 5 Middle classes and fiscal policy: a new social contract?

  17. Índices de Gini antes y después de impuestos y gastos públicos Fuente: OCDE (2008) para los países de la OCDE no latinoamericanos, cálculos en base a encuestas de hogares para los países de América Latina

  18. Tax revenue as percentage of GDP Source: Revenue Statistics in Latin America (OECD, ECLAC, CIAT, 2011, forthcoming)

  19. Searching Better Taxation Tax revenue, as percentage of total taxation % Source: Revenue Statistics in Latin America (OECD, ECLAC, CIAT, 2011, forthcoming)

  20. Taxation and satisfaction with public services Source: OECD ( 2010), based on survey data from Latinobarómetro (2007-8).

  21. Main Messages The middle sectors in Latin America are economically vulnerable Labour informality – and low social protection coverage – are particularly prevalent among the middle sectors Education is a powerful motor of intergenerational social mobility: but one that isn’t working particularly well in Latin America The middle sectors might be disposed to pay taxes – if they receive public goods of reasonable quality in exchange.

  22. Latin American Economic Outlook 2011 www.latameconomy.org www.oecd.org/dev How middle-class is Latin America? Mario Pezzini, Director OECD Development Centre Thank you very much! Obrigado!

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