Economy and Society

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Labour markets and the (hyphenated) welfare

regime in Latin America

Armando Barrientos

To cite this article: Armando Barrientos (2009) Labour markets and the (hyphenated) welfare
regime in Latin America, Economy and Society, 38:1, 87-108, DOI: 10.1080/03085140802560553

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Economy and Society Volume 38 Number 1 February 2009: 87
108

Labour markets and the

(hyphenated) welfare regime
in Latin America

Armando Barrientos

Abstract

This article deploys a welfare regime approach to examine changes in social policy in
Latin America since the ‘lost decade’. Before the ‘lost decade’ the welfare regime in
Latin America could best be described as ‘conservative/informal’. It was ‘truncated’
because the main welfare institutions, social insurance and employment protection,
did not extend beyond workers in formal employment. The article shows that the
structure of the labour market was the main stratification device, and argues that
labour market liberalization and new forms of social assistance are producing a shift
towards a ‘liberal-informal’ welfare regime, ‘hyphenated’ rather than ‘truncated’.

Keywords: labour markets; welfare regimes; Latin America.

Introduction

In the decade and a half since ‘the lost decade’ social policy, understood as ‘the
public management of social risk’ (Esping-Andersen, 1999, p. 36), has under-
gone large-scale change in Latin America. In many countries occupationally
stratified social insurance schemes, once a defining characteristic of welfare
provision, have been replaced, wholly or partially, by individual retirement
saving plans. Employment protection has been undermined by labour market
liberalization. More recently, new forms of social assistance have emerged, such
as Bolsa Escola/Familia, Progresa/Oportunidades and Chile Solidario. They

Armando Barrientos, Senior Research Fellow, Brooks World Poverty Institute at the
University of Manchester, Humanities Bridgeford Street Building, Oxford Road, Manchester
M13 9PL, UK. E-mail: a.barrientos@manchester.ac.uk

Copyright # 2009 Taylor & Francis

ISSN 0308-5147 print/1469-5766 online
DOI: 10.1080/03085140802560553
88 Economy and Society

reach large numbers of households in poverty and are fast developing an

institutional base.1 What do these changes mean for the structure and focus of
social policy in the region? This is the main question addressed in this article.
The diversity of country experiences within the region necessitates a
conceptual framework capable of revealing the essential dimensions of change.
The paper applies a welfare regime approach to focus on these dimensions.
Esping-Andersen’s (1990, 1999) welfare regime approach was intended to
distinguish within the realm of social policy the presence of different varieties
of capitalism in developed countries. It identifies enduring configurations of
social policy institutions and policies across developed countries. A focal point
for the identification of welfare regimes is the way in which social risks are
defined and addressed, and on that basis Esping-Andersen finds three main
welfare regimes among developed nations: liberal, conservative and social
democratic welfare regimes. Welfare regimes have three main components
(Gough, 2000): the welfare mix describes the specific articulations of states,
markets and households in addressing social risks. Different configurations of
the welfare mix can be associated with different welfare outcomes, which can
be evaluated according to the extent to which they are successful in protecting
and promoting welfare. Finally, stratification effects help to reinforce and
sustain the welfare mix, and therefore ensure a strong path dependence in
welfare regimes. As will be shown in the discussion below, the welfare regime
approach can provide a useful basis for the study of social policy in a
comparative perspective.
There is an emerging literature applying and extending the welfare regime
approach to the analysis of social policy in developing countries (Gough &
Wood, 2004; Kwon, 1997). Gough (2004) considers the difficulties involved
and discusses extensions and adaptations. In particular, Latin America
provides a fertile ground in which to deploy the welfare regime approach.2
Previous work has argued that in the period leading up to the 1980s the welfare
mix in the region was largely adapted from conservative welfare regime
institutions in southern European countries (Barrientos, 2004a).3 In line with
the conservative welfare regime, social policy focused on supporting families
by protecting the (male) breadwinner through occupationally stratified social
insurance schemes and job protection. In contrast with the European
experience, social insurance and job protection rarely reached beyond workers
in formal employment. This feature has led to social policy in Latin America
being described as ‘truncated’ (de Ferranti et al., 2000; Fiszbein, 2005), and
the resulting hybrid welfare regime as ‘conservative/informal’ (Barrientos,
2004a). The shift to individual saving plans and the weakening of employment
protection in the aftermath of the ‘lost decade’ suggested a shift in the welfare
regime, as in many countries occupationally stratified social insurance was
dismantled and replaced with individual saving instruments offered by private
providers. Using the Esping-Andersen classification, the welfare regime in
Latin America became ‘liberal/informal’ given the dominance of market
provision. Despite initial claims by proponents of the reforms, the new
 Armando Barrientos: (Hyphenated) welfare regime in Latin America 89

individual saving instruments failed to reach beyond formal workers, if

anything reinforcing the truncated nature of social policy. This paper argues
that labour market liberalization and new forms of social assistance are once
again changing the nature of social policy in a ‘liberal-informal’ direction

liberal because of its continued reliance on market provision and hyphenated
because of a weakening of the previously strict segmentation in provision.
Previous research has focused on the welfare mix in the region, its changes
over time and on welfare outcomes, but has not attempted an assessment of
stratification effects. Yet these are an essential component of the welfare regime
approach, and hold the key to understanding the conditions under which a
welfare regime shift becomes possible. In his 1999 book, Esping-Andersen
discusses the resilience of welfare regimes in the developed world. Surveying
the extensive changes to welfare production in the 1980s and 1990s there, he
finds no example of a welfare regime shift. In fact, he finds that changes in the
way in which developed countries have addressed the changing pattern of
social risk in the last two decades have strengthened the specificity of welfare
regimes. Liberal welfare regimes respond to changes in social risk by increasing
their reliance on market welfare production, while conservative regimes
deepen their reliance on the family, as social democratic regimes resort to the
welfare state (Powell & Barrientos, 2004). By contrast, Latin American
countries have undergone a fundamental transformation of their welfare
institutions. The argument advanced here is that labour market segmentation
has facilitated this welfare regime shift.
In Latin America the labour market plays a key role in the welfare regime as
its main stratification device. The ‘truncated’ feature of social policy in the
region was in large measure a consequence of labour market segmentation.
The primary stratification device was the type of employment workers had,
especially as accessing social insurance schemes and job protection was
dependent on formal employment. Formal employment acted as a gatekeeper
to accessing welfare institutions, making the structure of employment and
labour markets the dominant stratification device. However, changes in the
labour market4 and, more recently, the emergence of new forms of social
assistance, have undermined the stratification device sustaining the ‘con-
servative/informal’ welfare regime. Focusing attention on changes affecting
the stratification device can therefore cast light on the nature and direction of
the emerging welfare regime in Latin America.
The article is organized as follows. The first section outlines and discusses
the main components of the welfare regime approach and explains the role of
stratification effects. The next section characterizes Latin America’s welfare
regime and charts its changes over time. The third section focuses on labour
market structures as a stratification device for welfare provision. The fourth
section reviews new forms of social assistance in the region and their
contribution to welfare regime shift. The fifth section speculates on the
distinguishing features of an emerging liberal welfare regime in Latin America.
A final section draws out the main conclusions.
90 Economy and Society

Welfare regime analysis and main components

Esping-Andersen (1990, 1999) presents a typology of welfare regimes for

developed countries. In this approach, welfare regimes are understood as the
articulation of welfare programmes and institutions
including the state,
markets and households
insuring households against social risks, and
therefore promoting and protection welfare. In this section the main
components of welfare regimes and Esping-Andersen’s typology are discussed
briefly.
Gough (2000) distinguishes three main components in the welfare regime
analytical framework: the welfare mix, welfare outcomes and stratification
effects. This distinction helps to operationalize the analysis of welfare regimes.
Figure 1 provides a representation of these components and their linkages.
The welfare mix describes the specific configuration of state, market and
household welfare production and protection. This is essentially a descriptive
component. Esping-Andersen is keen to show that specific articulations of
welfare-producing institutions can be associated with specific welfare outcomes.
He is concerned with two main outcome indicators: decommodification and
defamilialism. Decommodification describes the extent to which households’
welfare is independent from their labour market status, while defamilialism
describes the extent to which individuals’ welfare is independent of household
status. These are evaluative components of the welfare regime approach.5
Stratification effects are an important third element of welfare regimes linking
welfare outcomes back to the welfare mix. Stratification effects are ‘an active
force in the ordering of social relations’ (Esping-Andersen, 1999) and reflect
interests, power and incentives, sometimes embedded in institutions or political
and economic forces. The welfare mix generates specific welfare outcomes
which in turn reinforce the welfare mix through stratification effects.

Figure 1 Components of the welfare regime

 Armando Barrientos: (Hyphenated) welfare regime in Latin America 91

Stratification effects are essential to explaining the reproduction of welfare

regimes and, in developed countries in particular, their path dependence. The
stylized relationships between the different components are captured by the
arrows in Figure 1, although the components are likely to interact with each
other more freely.
Esping-Andersen identifies three main welfare regimes among developed
nations, according to their specification of social risks and their hierarchy of
welfare-producing institutions. A liberal welfare regime is characterized by a
narrow specification of social risks, a preference for market welfare production
and a residual role for the state. Welfare provision by the state is restricted to
covering bad risks through needs-based social assistance. A conservative welfare
regime places the family at the centre of welfare production. Conservative
regimes are stratified by gender and occupation, and are strongly associated
with employment protection. A social democratic welfare regime is character-
ized by a comprehensive specification of social risks. Social democratic regimes
give human development centre-stage and state welfare provision is develop-
mental in nature, and therefore universalist and egalitarian. Some researchers
have suggested that a group of southern European countries (Spain, Portugal,
southern Italy, Greece and, to a lesser extent, France) constitute a distinct
fourth welfare regime (Ferrera, 1996; Leibfried, 1993). These Mediterranean
countries have welfare regimes combining features of the liberal and
conservative welfare regimes. Welfare states are under-developed and residual,
as in the liberal case, but welfare provision is family-centred, as in the
conservative case. An interesting feature of the welfare regime in these
countries is that there is no explicit basic income maintenance provision;
instead, programmes not designed for this purpose, such as disability pensions,
partially fulfil this function. This is of particular relevance to Latin America.
Esping-Andersen’s work has provoked an extensive literature. His typology
has been subject to methodological, empirical and conceptual criticism, which
he himself reviews and responds to in his 1999 Social foundations of
postindustrial economies.6 The typology of welfare regimes sketched above
represents an important development in the comparative analysis of welfare
institutions.7 This approach takes in all institutions protecting individuals
and households from social risk, and therefore moves beyond a narrow focus
on the welfare state and towards a more comprehensive analysis of welfare
production.

Latin America’s welfare regime: from conservative/informal to

liberal-informal?

In considering the extent to which the welfare regime approach can be usefully
extended to other parts of the world Gough (1999) argues that, providing the
specificity of developing countries can be appropriately incorporated, the
welfare regime approach can fruitfully be applied to them.8 He also proposes
92 Economy and Society

to expand the range of welfare-producing institutions to include those with a

supranational reach, such as multilateral lending institutions, global markets
and international non-governmental organizations, and international house-
hold strategies, including migration and cross-national income transfers. This
is very important in the context of developing countries.
Previous work attempted to demonstrate that the welfare regime approach
developed by Esping-Andersen can usefully be applied to Latin American
countries (Barrientos, 2004a). A particular concern was to examine changes in
the welfare mix in Latin American countries following from the acute crises
and structural adjustment in the 1980s. The welfare mix in Latin America
prior to the 1980s was characterized as conservative/informal. It was argued
that Latin American countries exhibited many features present in the southern
European variant of the conservative welfare regime. Social policy relied on
stratified social insurance and employment protection supporting families
through a male breadwinner. In contrast to European countries, in Latin
America these forms of protection applied to workers in formal employment
only, and excluded workers in informal employment who relied mainly on their
households and the labour market as the main sources of protection against
contingencies. Some features of the liberal and social democratic welfare
regimes could also be observed but were found to be weak and under-
developed. As regards those left outside social insurance and employment
protection, reliance on the market could be taken to resemble the outcomes of a
liberal welfare regime, but Latin American countries did not develop means-
tested social assistance programmes, which are such an important feature in
the USA, UK or Australia. A ‘truncated’ social policy consisting of
conservative features for formal workers and their dependants and reliance
on informal employment and family support for the rest appeared to be the
most accurate way of characterizing Latin America’s welfare regime.9
In the late 1980s and 1990s, fundamental welfare and labour market reform
recomposed the welfare mix, de facto dismantling employment protection,
replacing social insurance with individual saving plans offered by private
providers and increasingly private health insurance, and reforming and
decentralizing education and health provision. As the conservative components
of social policy fell away, the emerging pattern was characterized as liberal/
informal (Barrientos, 2004a). As a result of the reforms workers in formal
employment had weaker job protection, while the state role in social insurance
changed from provider to regulator and insurer of last resort. The conservative
component thus increasingly became a liberal one. However, in the Latin
American context means-tested social assistance, a key characteristic of liberal
welfare regimes in developed countries, continued to be absent. The informal
segment of the welfare regime did not change significantly in the 1990s. For
the majority of the labour force and the population outside formal employ-
ment, the main source of welfare protection continued to be their capacity to
work and the support of their families and communities.
 Armando Barrientos: (Hyphenated) welfare regime in Latin America 93

The changes in the welfare mix after the ‘lost decade’ did not apply
uniformly to all countries in the region. Indeed there is considerable diversity
in the institutional responses to the crises across countries in Latin America.
Twelve countries have moved to replace occupationally stratified social
insurance institutions, but others have not. Brazil and Costa Rica, for example,
opted not to follow this path. Some low-income countries lacked social
insurance institutions in the first place, and there was not much to reform.
Diversity is even greater as regards labour market regulations and their
reform, especially as in many countries labour reforms took place de facto. In
any event, the broad direction of change in the welfare mix is unmistakeable.
It has been questioned, with some justification, whether it is sensible to
place Paraguay in the same welfare regime as, say, Brazil. Some researchers
have proposed that multiple welfare regimes might be more appropriate to
capture the diversity of social policy institutions in the region. Filgueira
suggests that Latin American countries can be classified into three groups.
Countries like Uruguay and Argentina fit into a group with stratified, but
universalist, social institutions; Nicaragua and other lower-income countries
reflect highly exclusionary institutions; while the remaining countries must be
placed into a hybrid group (Filgueira, 1998). Martı́nez Franzoni analyses
several indicators of commodification, decommodification and defamilialism,
and finds three main clusters: a state-targeted group of countries (including
Argentina and Chile), a state-stratified group (including Brazil, Costa Rica,
Mexico, Panama and Uruguay) and an informal-familialist regime (which
includes the remaining countries) (Martı́nez Franzoni, 2008). These contribu-
tions are valuable and map out a promising research programme for the future.
However, they do not invalidate consideration of a Latin American welfare
regime. It is important to keep in mind that the usefulness of the welfare
regime approach is to construct ‘ideal types’, reflecting, within the ambit of
social policies and institutions, varieties of capitalism. In Esping-Andersen’s
approach welfare regimes are heuristic devices supporting further theoretical
development in circumstances where theoretical constructs are lacking or are
significantly under-developed. As Arts and Gelissen note, ‘typology is a means
to an end
explanation
and not an end in itself ’ (2002).10 The focus of the
present paper is on regimes not countries. The aim is to facilitate
conceptualization of welfare production and its changes in the region. At
the same time, there is enough commonality in the changes in social policy
institutions in the region to warrant consideration of a single welfare regime
shift.
The main welfare outcomes associated with the shift to a more liberal
welfare regime have been largely adverse (Barrientos, 2004a). Unemployment
has risen and has become persistent. Inequalities in income, and especially
labour income, have steadily increased. The incidence of poverty rose steeply
in the 1980s and has declined very gradually despite subsequent economic
growth. Social protection coverage has fallen significantly for all countries
except Colombia. Despite advances in access, the coverage and quality of
94 Economy and Society

public provision of education and health programmes remain highly unequal.

The welfare regime shift in Latin America has resulted in a measurable decline
in protection.
Such fundamental change in social policy as is occurring in Latin America
provides a rare example of a shift in welfare regime.11 The resilience of welfare
regimes, observed by Esping-Andersen for developed countries, has been
largely absent in Latin America, and arguably in other developing countries.
Barrientos (2004a) discusses in more detail possible explanations for the shift
in welfare regime in Latin America, emphasizing the influence of changes in
the development model from import substitution industrialization to export-
oriented growth, which strengthened authoritarianism and weakened oppo-
nents to the reforms; and the features of the political system in the region, with
weak mechanisms for preference aggregation, frequent military and emergency
governments, and sharp inequalities of income, wealth and power. Welfare
regime shift suggests that stratification effects might not be as stable or strong
in Latin America as in developed countries. The next section focuses on the
labour market as the dominant stratification effect in the region.

Labour market liberalization undermines welfare segmentation

As noted, the labour market, especially through its sectoral segmentation,

provided the main stratification device in the conservative/informal welfare
regime. This section considers the extent to which the liberalization of the
labour market in Latin America in the aftermath of the ‘lost decade’ has
weakened its role as stratification device for welfare provision. It will be helpful
to begin by outlining the main labour market trends in the region, before
considering any changes in stratification. Table 1 provides summary indicators
that are discussed below.
Recovery from the ‘lost decade’ has been punctuated by repeated financial
crises, resulting in variable rates of economic growth over the last decade and a
half. Employment creation has been patchy and insufficient to absorb the
growth in the working population. In fact, employment-to-population ratios
show a declining trend over time. Open urban unemployment has risen from
an average of 4 per cent in the period 1950
70 to an average of 10.3 per cent in
the period 1997
2005. Most employment growth in the 1990s was informal,
with around eight in ten new jobs arising in self-employment or micro-
enterprises (ILO, 2001). As a result, the share of informal workers in the
labour force as a whole increased steadily during the 1990s. In the period since
2000 the growth of informality has slowed down but one in two workers in the
region is in informal employment (ILO, 2006). There has been a sustained rise
in women’s labour force participation, though admittedly from a low base.
According to ECLAC, the rate of urban female labour force participation in
Latin America increased from 37.9 per cent in 1990 to 49.7 per cent in 2002
(CEPAL, 2006). This is a very large change in a short period of time, although
 Armando Barrientos: (Hyphenated) welfare regime in Latin America
Table 1 Labour market indicators for Latin America 1990
2005

1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

GDP growth per capita 2.1 3.8 0.9 1.2 2.3 1.3 2.3 0.5 4.4 3.0
Employment to population rate (urban)a 54.2 52.8 52.5 52.8 52.8 52.1 52.6 52 51.7 52.3 52.8 53.3
Participation rate (urban)b 57.6 58.1 58.1 58.3 58.5 58.2 58.5 58 58.7 59.1 59.1 58.8
Informality (ILO measure, urban)b 42.8 46.1 47.9 46.4 46.9 46.5 49.2 48.5
Informality (uncovered, employees)b 33.4 34.8 38.4 34.1 35.4 36.3 30.4
Unemployment rate (urban)b 7.1 9.2 9.9 9.4 10.4 11.3 10.5 10.4 11.4 11.3 10.6 9.3
Poverty headcount ratec 48.3 45.7 43.5 43.9 42.5 43.2 44 44.2 42 39.8

Sources: a ECLAC (2006); b ILO (2006); c CEPAL (2007).

Note: Informality (ILO measure) is the share of the urban labour force working in micro-enterprises, in domestic employment or as non-professional
own-account workers. Informality (uncovered, employees) is the share of waged employees who are not covered by social insurance schemes.

95
96 Economy and Society

there remains a large gap in earnings and participation by men and women
(Barrientos, 2004b). Lower rates of participation among poorer households
suggest significant social exclusion in the labour market (CEPAL, 2006). This
is especially marked among women who show lower rates of labour force
participation. There is no evidence showing any improvement in the exclusion
of poor households from access to employment.
Labour market indicators demonstrate that the labour market has not
improved significantly since the 1990s, especially as a source of protection.
Along key dimensions of employment, earnings, protection and inclusion,
there are few signs that trends have changed in significant ways, except for a
promising improvement in the last two years.
The changes in the conservative component of the welfare mix after the
1980s combined with the liberalization of the labour market to weaken social
protection for formal-sector workers (Lora & Pages, 1996; Márquez & Pagés,
1998). The liberalization of employment protection was explicitly rationalized
as a shift in policy orientation from the protection of jobs to the protection of
workers (Edwards & Lustig, 1997). The argument was made that, by reducing
the non-wage costs of employment, it was possible to improve the respon-
siveness of the labour market to shifts in product demand, and strengthen firm
resource allocation (Márquez & Pagés, 1998; Marshall, 1996; Rama, 1995;
Weller, 1998). Protecting jobs was perceived to be costly to the economies of
Latin America, especially in the context of structural adjustment. There was a
measure of agreement that employment protection in the region was excessive
(Amadeo & Horton, 1997; Cox Edwards, 1997; Weller, 1998).
There was much less agreement about what protecting workers, as opposed
to jobs, would mean in practical policy terms. Proponents of individual saving
accounts argued that they had the potential to be a more effective means of
protecting workers than social insurance, in no small part because of their
stronger link between workers’ contributions and their future benefits. Some
went further in arguing that individual saving schemes could reduce
informality (World Bank, 1994). These claims proved unfounded: individual
savings plans have everywhere resulted in a decline in the coverage of the
labour force and especially among the self-employed. As a consequence, the
liberalization of the labour market and the employment relationship has helped
reinforce reliance on market forms of protection.
The combination of welfare reform and labour market liberalization has
eroded the premium attached to formal employment, with the result that the
margins separating formal and informal employment are now wider and
mobility across these forms of employment is on the increase. Marcoullier
et al. (1997) examine the formal
informal and gender premiums for El
Salvador, Mexico and Peru and find that the significant formal earnings
premium dissipates once they control for worker characteristics, region, and
occupation. In fact, they find that the gross formal employment earnings
premium becomes a net informal employment earnings premium once these
factors are controlled for. Reviewing the findings of a number of studies on
 Armando Barrientos: (Hyphenated) welfare regime in Latin America 97

informality, Maloney concludes that patterns of mobility across the two

‘sectors’ and lack of sensitivity of self-employment to the macroeconomic cycle
undermine the view of informality as a rationed sector. In fact, he goes further
and argues that, instead of a hard sectoral divide, there is a continuum of jobs
along a mix of characteristics. Within this continuum, he argues, workers find
the appropriate package to fit their assets and needs. As he put it, ‘we need to
think less dichotomously about the state of protection and more in terms of a
broader continuum of jobs that offer different packages of qualities’ (Maloney,
2004, p. 1160).
This resonates with ongoing discussions around the definition and
measurement of the informal ‘sector’. For some time, measures of informality
focused on occupational categories associated with vulnerability and lack of
protection. Informal workers comprised the self-employed, workers in micro-
enterprises with five workers or fewer, domestic workers and unwaged
workers, whereas formal workers included employees in medium and large
enterprises, employers and self-employed professionals. There is a growing
realization that conventional measures of informality in the region are failing to
capture the actual levels of vulnerability in the labour force. Labour market
liberalization has encouraged workers in formal employment to avoid, or
evade, participating in individual saving plans. The increasing heterogeneity in
the employment relationship, with a wider variety of possible contracts, has
encourage a growth in the number of workers who fit into the ‘formal’
employment category described above, but who are not covered by pension or
health insurance plans. Another issue is that the occupational formal
informal
categorization above has no room for unemployed workers. Alternative
measures are being developed and tested to bring the underlying concept of
informality as lack of protection more in line with current conditions (ILO,
2003).
The main implication of this discussion is to suggest that the role of the
labour market as the main stratification device for the conservative/informal
welfare regime has been significantly weakened through a combination of
poorly-performing labour markets, welfare reform and labour market liberal-
ization. Compared to the situation before the ‘lost decade’, the share of the
labour force working in informal employment has risen in the region and
employment in formal occupations does not guarantee access to welfare
support to the extent that it did in the past. Heterogeneity in employment
relationships and contracts has loosened the link between formal employment
and welfare protection.

New forms of social assistance further weaken welfare segmentation

The rapid expansion of anti-poverty programmes in Latin America within the

last decade signals the emergence of new forms of social assistance, with some
implications for the role of labour markets as stratification device (Barrientos,
98 Economy and Society

2007a). These programmes range from pure income transfers (non-contrib-

utory pensions such as Chile’s PASIS or Bolivia’s Bonosol), to income
transfers combined with basic services, sometimes conditional on human
development objectives or the supply of work (Mexico’s Progresa/Oportuni-
dades, Brazil’s Bolsa Escola/Familia, Ecuador’s Bono de Desarrollo Social,
Argentina’s Jefes y Jefas, Colombia’s Familias en Acción), to integrated
poverty programmes (Chile’s Chile Solidario). They are predominantly
focused on the poorest, through strict selection criteria, and combine the
alleviation of poverty with investment in human capital directed at breaking
the persistence of poverty across generations (Morley & Coady, 2003; Rawlings
& Rubio, 2005).
Entitlements under these new forms of social assistance are not dependent
on occupational status, but are instead based on households’ socio-economic
profiles.12 Because entitlements are not based on occupational status, these new
forms of social assistance weaken the role of labour market structures as a
stratification device for welfare provision. Income transfers aim to raise
consumption among poor households independently of their occupational
status and, aside from transfer programmes with a work requirement, their
employment status.13 Insofar as social assistance programmes ameliorate the
impact of adverse circumstances on household consumption they ensure a very
limited form of decommodification.14
In conventional social assistance schemes in developed countries, especially
in countries with a liberal welfare regime, programme design responds to a
strong concern with minimizing the impact of social assistance on work
incentives for the unemployed with economic capacity. Entitlement to support
under these schemes is usually restricted to individuals with low economic
capacity, and work requirements are sometimes imposed on individuals with
some economic capacity. The main objective of these rules is to minimize the
impact of social assistance on employment and the labour market.15 In
developed countries, social assistance schemes act as a stratification device for
welfare production.16 The new forms of social assistance in Latin America
emphasize stronger, and more positive, linkages with the labour market. Social
assistance programmes targeting poor and the poorest households have the
potential to support a range of labour market effects, extending to human
capital investment, labour supply, labour migration and occupational choice
(Barrientos, 2007a). New forms of social assistance can reduce child labour,
which is an important source of lifetime informality, and facilitate human
capital accumulation. They can also provide an important source of protection
for vulnerable workers and their households. New forms of social assistance in
Latin America have conflicting outcomes as far as decommodification is
concerned, and there is need for further research on this point. On the one
hand, by supplementing household consumption independent of occupational
and sometimes employment status they deliver a very limited form of
decommodification. However, in the medium and long run, by strengthening
human capital among young members of the household, they are likely to
 Armando Barrientos: (Hyphenated) welfare regime in Latin America 99

strengthen both commodification, in the sense of improved insertion in the

labour market, and decommodification, in the sense of improved life
prospects.17
Labour market liberalization and the emergence of new forms of social
assistance have the effect of weakening the previously dominant role of the
labour market as a stratification device for welfare provision. What are the
implications of this weakening of the stratification device for the shift in
welfare regime in Latin America? The next section addresses this question.

A Latin liberal welfare regime in the making? From truncation to

hyphenation, and ‘productivism’

In the aftermath of the ‘lost decade’, welfare reforms and labour market
liberalization helped replace the conservative component in the conservative/
informal welfare regime with liberal counterparts. The changes in welfare
provision applied more directly to workers in protected employment, and
involved little change for the rest of the population. The conservative/
informal welfare regime shifted in the direction of a liberal/informal one. In
the intervening period, the emergence of new forms of social assistance has
produced changes to the informal component by introducing forms of
protection not grounded on sectoral labour market attachment. We have
characterized the emerging welfare regime as hyphenated liberal-informal,
intended to reflect a change in the articulation of the two components. The
rest of the section explores some features of this articulation.
With regard to state involvement in welfare protection, public expenditure
on social insurance (mainly financing entitlements for workers in formal
employment) continues to dwarf expenditures on social assistance (mainly
accruing to vulnerable households) (Castañeda, 2002; Lindert et al., 2005).
However, it is possible to detect a gradual shift in the distribution of social
protection expenditures. In Brazil, as Figure 2 shows, the extension of Bolsa
Familia has raised social assistance expenditure while reforms have reduced
government subsidies to social insurance (Governo Federal do Brasil, 2005). In
Mexico, the current administration is committed to shifting resources from
social insurance to social assistance.18 It is noteworthy that the administrations
in these two countries are at different ends of the political spectrum. It should
be kept in mind that this rise in social assistance expenditure is from a very low
base, and that the disparity in public subsidies to social insurance and those
going to social assistance is huge in most Latin American countries. The
expansion of social assistance will involve a re-balancing of government
spending in Latin America (Barrientos, 2007b).
This raises the important issue of potential trade-offs and complementarities
in the financing of social assistance and social insurance. On paper, social
insurance is financed from payroll contributions by workers and employers,
and in Mexico social insurance contributions by government are important too.
100 Economy and Society

180000 18000
social insurance
160000 social assistance 16000
Bolsa Familia

140000 14000

120000 12000

100000 10000

80000 8000

60000 6000

40000 4000

20000 2000

0 0
2001 2002 2003 2004

Figure 2 Federal government expenditure on social insurance and assistance

2001
4 (R$m)
Source: Orçamento Social do Governo Federal 2001
4, Brasilia, 2005.
Note: Low-vulnerability workers are employers, professionals and workers in
enterprises with more than five workers. High-vulnerability workers are the self-
employed, workers in micro-enterprises and the unwaged or unemployed.

In practice, the deficits in social insurance schemes require an important

measure of support from public revenues. Even in supposedly private
individual saving accounts, public support for minimum guarantees and
reinsurance can be significant, as in Chile. In the short term, a re-balancing of
public expenditure is overdue, but, in the medium term, a challenge will be to
find ways to exploit synergies in the financing of social insurance and
assistance.19
A further insight into the linking of the liberal and informal components of
the emerging welfare regime comes from a brief analysis of the reach of both
social insurance and social assistance. The above discussion on the definitions of
informality provides an entry point into this issue. It is well documented for
Latin America that coverage of social insurance schemes reaches some groups
of workers in informal employment, for example spouses of formal-sector
workers. It is also acknowledged that workers in formal employment may not be
covered by social insurance. Figures 3 and 4 take these into consideration. The
figures show respectively the coverage of formal pension or health insurance
plans and receipt of social assistance transfers across two categories of the
labour force (ILO, 2003). Coverage includes all respondents who are able to
access social insurance schemes through other household members. These were
estimated from household survey data for selected countries in the region. The
figures distinguish coverage and receipt across two groups of workers: first,
workers with high vulnerability (self-employed non-professionals, workers in
 Armando Barrientos: (Hyphenated) welfare regime in Latin America 101

100

90
1992
share of waged workers in category 80 1996
2001
70

60

50

40

30

20

10

0
Argentina - low Argentina High Chile - Low Chile - high

Figure 3 Share of waged workers contributing to a pension plan

Source: ILO (2003).
Note: Low-vulnerability workers are employers, professionals and workers in
enterprises with more than five workers. High-vulnerability workers are the self-
employed, workers in micro-enterprises and the unwaged or unemployed.

micro-enterprises and the unemployed); and, second, workers with low

vulnerability (professionals, workers in medium and large enterprises). High-
vulnerability workers, plus the unemployed, mirror the occupational definition
of informality, while low-vulnerability workers represent formal employment.

18
low High
16 15.3

14

12
% of workers

10

6 5.4
4.7
4

2 1.7

0.1 0.3
0
Argentina - income Chile - PASIS (2000) Chile - SUF (2000)
transfers (2001)

Figure 4 Share of workers in receipt of social assistance

Source: ILO (2003).
Note: Low-vulnerability workers are employers, professionals and workers in
enterprises with more than five workers. High-vulnerability workers are the self-
employed, workers in micro-enterprises and the unwaged or unemployed.
102 Economy and Society

Figure 3 shows that coverage of pensions or health plans is higher for low-
vulnerability workers, but a significant proportion of these workers remain
uncovered. A small proportion of high-vulnerability workers are covered by
these plans. Coverage declines over time. Figure 4 shows receipt of social
assistance transfers in three countries with such programmes in the years
covered by the data. Here, high-vulnerability workers are much more likely to
be in receipt of these transfers than low-vulnerability workers, but many among
the latter do. It should also be noted that social assistance reaches only a very
small number of workers. In Argentina, the data cover the period just before the
rapid expansion of the Jefes y Jefas programme in 2001 (ILO, 2003). The
information presented in the figures can be interpreted as indicating a relative
dissolution of the ‘truncation’ in welfare provision, and the presence of a small
area of overlap in the reach of these programmes (‘hyphenation’?). This is an
issue that requires urgent research in countries where social assistance schemes
have expanded.
Social assistance is central to liberal welfare regimes, as noted earlier. New
forms of social assistance in the region diverge in important respects from
similar programmes in liberal regimes in developed countries. These new
forms are strongly ‘productivist’ in that they seek to ensure that beneficiary
households strengthen their productive capacity and link up more directly to
markets. This is in part because many of these programmes were introduced as
a response to economic transformation, especially in agriculture, as was the
case with Mexico’s Progresa. Social assistance programmes are therefore
expected to make a contribution to economic and social development, as well
as to poverty and vulnerability reduction. They have both decommodification
and commodification objectives. In this context, they are very different from
‘compensatory’ social assistance programmes which used to feature in
developed countries (Gough et al., 1997). New forms of social assistance in
Latin America transfer on average around 20 per cent of household
consumption, and are insufficient to take beneficiaries above the poverty
line, whereas in developed countries social assistance transfers normally cover
the difference between household income and the poverty line. The different
nature and scope of new forms of social assistance in Latin America suggest
that the liberal component of its welfare regime will remain sui generis. Further
integration between the liberal and informal components of the welfare regime
is likely to produce a well-defined variant of the liberal welfare regime, perhaps
a Latin liberal welfare regime?20

Conclusions

This discussion applies a welfare regime approach to examine changes in social

policy in the Latin America region since the 1980s. The regime approach helps
to identify the dominant features of welfare production in a comparative
perspective, through an investigation into the way in which societies address
 Armando Barrientos: (Hyphenated) welfare regime in Latin America 103

social risk. In Esping-Andersen’s approach, welfare regimes have three main

interlinked components: the welfare mix, welfare outcomes and stratification
effects. The welfare mix represents the articulation of state, markets and
households in addressing social risk. Welfare outcomes, mainly decommodi-
fication and defamilialism, measure the extent to which the welfare of
households and individuals is insulated from market and family factors.
Stratification effects reflect the influence of welfare regimes on social orderings
and ensure the reproduction of the regime. It was argued that, properly
adapted, the welfare regime approach can generate important insights into
changes in welfare production in the region, and the focus was in particular on
an examination of stratification effects as a key to explaining and characterizing
these changes.
In the welfare regime approach, stratification effects are essential to
sustaining the welfare mix and therefore provide important clues about
dynamics. The role of the labour market was examined as a stratification
device for welfare provision in Latin America. Prior to the reforms, it played a
crucial role in reinforcing a conservative/informal welfare regime, defining a
‘truncated’ social policy. Formal employment constituted a gateway for
accessing welfare protection. Labour market liberalization and welfare reform
have helped replace the conservative segment with a liberal one, with the
emerging welfare regime best described as a ‘liberal/informal’. More recently,
the emergence of new forms of social assistance (conditional income transfer
programmes, social pensions, public works, integrated anti-poverty pro-
grammes) further undermines the role of the labour market in stratifying
welfare protection. Entitlement to social assistance is largely independent of
employment status. There is now a wide margin between formal and informal
employment, with increasing cross-sector mobility. Over time, traditional
measures of informality based around occupational status have become less
effective in capturing vulnerability and lack of protection, and new measures
are being developed to replace them. The emergence of new forms of social
assistance supporting households in poverty further weakens the role of the
labour market as a stratification device for welfare protection. Labour market
liberalization and the spread of new forms of social assistance suggest a further
shift in the welfare regime to ‘liberal-informal’, with hyphenation replacing
truncation.
The use of the term ‘hyphenated’ is intended to underline the fact that the
segmentation in welfare production characteristic of Latin American countries
is gradually changing. This is not necessarily good news for the region. The
reduction in segmentation in welfare production has not been achieved
through the extension in the coverage of protective institutions to informal
workers and their households, as had been the widely shared expectation of
older generations of policy-makers. Instead, hyphenation reflects a down-
grading of protection for workers in formal employment and the emergence of
weakly institutionalized social assistance programmes. The discussion above
shows that the weakening of the stratification devices is key to explaining the
104 Economy and Society

shift in welfare regime. The weakening of sectoral segmentation in the labour

market, which previously supported the reproduction of the old ‘conservative/
informal’ welfare regime, is essential in explaining the feasibility and direction
of the welfare regime shift in the region.
This weakening of the main stratification device in the Latin American
context, a product of labour market liberalization and the emergence of new
forms of social assistance, indicates the shift to a liberal-informal welfare
regime. Given the specific nature and scope of new forms of social assistance in
Latin America, it is unlikely that the welfare regime in Latin America will
replicate the type of liberal welfare regimes in place in developed countries. It
is therefore likely that the liberal welfare regime in Latin America will remain
distinctive.

Acknowledgements

I am grateful to the editors and to Ian Gough and Juliana Martı́nez Franzoni
for insightful comments on an earlier version of this paper. The errors that
remain are mine alone.

Notes

1 In December 2006, there were 30m contributors to individual saving pension plans
in ten countries in the region. A conservative estimate would put the number of
households reached by new forms of social assistance in the region at over 20m.
2 Especially as social policy has a common historical link to Mediterranean countries
with a distinctive approach to social policy (Ferrera, 1996) and because of the influence
of the ILO in shaping common social protection institutions extended across the region
(Usui, 1994). At the same time diversity across countries in the region in terms of their
welfare institutions poses some limitations to the welfare regime approach. A premise of
this paper is that there is enough commonality in the basic structure of social policy
across countries in Latin America to support the kind of generalization adopted. This is
a challenging premise
3 The conservative welfare regime is explained in more detail below.
4 Throughout the paper the labour market stands for the institutional structures that
support different forms of employment and protection (Barrientos, 2003).
5 On decommodification see Room’s (2000) critique and Esping-Andersen’s (2000)
response. On defamilialism see Lewis’s (1993) and Esping-Andersen’s (1999) extensive
response. Bambra (2006, 2007) provides a recent examination of these two concepts and
their empirical counterparts.
6 Several reviews update on subsequent progress (Arts & Gelissen, 2002; Castles &
Obinger, 2008).
7 An important feature of Esping-Andersen’s welfare regime approach is the
empirical identification of welfare regimes. This involves identifying appropriate
measures of the relative significance of state, markets and household welfare production
across countries. The literature has also sought to identify and refine appropriate
statistical tools (Esping-Andersen, 1999; Janoski & Hicks, 1994; Pitruzzello, 1999;
Shalev, 1999).
 Armando Barrientos: (Hyphenated) welfare regime in Latin America 105

8 In low-income developing countries in particular, formal institutions of social policy

are rudimentary, and the main sources of protection against vulnerability are extended
households and communities. In middle-income countries, the absence of social
contracts, which underpin welfare regimes in developed countries, results in very
fragmented social policy. Few developing countries have reached a point at which
welfare states (providing protection ‘from the cradle to the grave’ on a citizenship basis)
could become an option. International organizations constitute a fourth important
source of social policy. These are some of the issues emerging from applying the welfare
regime approach in developing countries.
9 Interestingly, Jaeger notes that in a conservative welfare regime ‘the opposition
between labour market ‘‘insiders’’ and ‘‘outsiders’’ is predominant’ (Jaeger, 2006, p.
160).
10 They add that the ‘construction of ideal-types can be fruitful under the condition
that these will eventually lead to theory’ (Arts & Gelissen, 2002, p. 140). See also an
emerging literature aimed at identifying global welfare regimes (Abu Sharkh & Gough,
2008).
11 Other factors are also important in explaining a welfare regime shift. The role of
fundamental change in the development model from import-substitution industrializa-
tion to export-led growth and the demise of its associated political settlement are
explored in Barrientos (2004a). On the politics of social insurance reforms, see also
Mesa-Lago (1999) and Kay (1999).
12 Except for public works programmes, which are usually focused on unemployed
heads of household.
13 Insofar as programmes are means-tested, employment status may have an indirect
influence on entitlements through the contribution of labour earnings to household
income.
14 For a discussion on whether new forms of social assistance reduce familialism, see
Molyneux (2006).
15 The incidence of direct taxation on low-income households in developed countries
requires that transfers and taxes be made consistent with maintaining work incentives.
In Latin America, due to the relative weight of indirect taxation, and low capacity for
enforcing direct taxation given the spread of informality, social assistance transfers are
unlikely to attenuate work incentives significantly.
16 Esping-Andersen notes the dualism present in liberal welfare regimes: ‘at its core,
liberalism’s ideal of stratification is obviously the competitive individualism that the
market supposedly cultivates. However, liberalism has had great difficulties in applying
this conception in state policy. Its enthusiasm for the needs-tested approach, targeting
government aid solely at the genuinely poor, is inherently logical but creates the
unanticipated result of social stigma and dualism’ (1990, p. 64). The main stratification
device in the liberal welfare regime in developed countries is social assistance, not the
labour market.
17 On this point it is useful to note Room’s (2000) critique of Esping-Andersen’s
notion of decommodification. He counterposes Esping-Andersen’s focus on decom-
modification ‘as consumption’ with a Marxian-influenced notion of decommodification
‘as self-development’. In the latter view, investment in human development supports
decommodification.
18 The Economist (16 November 2006) reported that since 1998 ‘public spending on
social protection for informal workers has expanded by 110 per cent; the figure for the
social security system is only 21 per cent’.
19 For example, in Mexico the government provides incentives to beneficiaries of
Oportunidades to engage in pension saving, and in Costa Rica social insurance
contributions finance non-contributory pensions.
106 Economy and Society

20 In Latin America recent forms of social assistance have been defined by the time
window imposed by their reliance on external financing from the World Bank and the
Inter-American Development Bank. Bolsa Familia is the exception as regards the time
window but not its reliance on external funding (Barrientos & Santibanez, forth-
coming). The entitlements that are generated by these programmes are therefore
significantly weaker than those of social assistance schemes in developed countries.

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Armando Barrientos is Senior Research Fellow and Associate Director at

the Brooks World Poverty Institute at the University of Manchester in the
UK. His research focuses on the linkages existing between welfare pro-
grammes and labour markets in developing countries, and on poverty and
vulnerability reduction. His recent publications include Insecurity and welfare
regimes in Asia, Africa and Latin America, with I. Gough, G. Wood, P. Bevan, P.
Davis and G. Room (Cambridge University Press, 2004) and Social protection
for the poor and poorest: Concepts, policies and politics, edited with David Hulme
(Palgrave, 2008).