Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/223700
Authors: 
Palacios, Robert
Robalino, David A.
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13258
Abstract: 
Given the prevalence of informal labor, most countries have combined contributory social insurance programs (pensions, unemployment benefits, and health insurance), with non-contributory insurance programs and several types of "safety nets." All of these programs involve different types of subsidies and taxes, sometimes implicit. Because of design problems and the lack of coordination/integration between programs, these subsidies/taxes tend to cause four problems: 1) they can reduce incentives to contribute to mandatory insurance programs and to create formal jobs; 2) they can be regressive since redistribution often benefits middle/high income workers more than low income workers 3) they do not provide continuous protection as workers change occupations and constrain rather than facilitate, labor mobility; and 4) coverage tends to exclude many informal sector workers in the middle of the income distribution. As such, existing programs are not well prepared to deal with a world of labor characterized by persistent low productivity jobs, more frequent labor market transitions including across sectors and geographic regions and higher equilibrium unemployment rates for some groups of workers. This paper develops a policy framework to integrate, in a transparent way, the insurance function (actuarially-fair risk pooling or savings) and the redistributive function (transfers) of the social protection system in order to expand coverage, improve equity, and reduce labor market distortions. We illustrate this type of integration with the case of old-age pensions which is typically the most important intervention, at least from a fiscal perspective.
Subjects: 
social insurance
social assistance
universal basic income
jobs
pensions
future of work
COVID-19
JEL: 
H24
J26
J46
J65
J32
I13
H53
H55
Document Type: 
Working Paper

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