Monday, November 23, 2015

A conversation on universalism and taxing the private option

My colleague and friend Ken Shadlen and I have begun a conversation on how to deal with the private option in social policy (much influenced in my case by my joint work with Juliana Martínez). Here you have the initial exchange. Feel free to join the conversation!

Ken: When I was in Brazil I was talking with someone about the "problem" of wealthy people leaving the SUS [the public health system] for private options and then coming back to the state system for expensive treatments. It got me thinking.... Why not put a special sales tax on private health care plans (like a higher VAT or something like that), and earmark the money for public health system. After all, if the rich people are leaving public sector for basic stuff, that actually could be good as it allows public resources to be used on smaller number of people, and the point that the rich people come back to public sector for expensive stuff is sort of irrelevant, because they'd be covered in the public sector anyway if they didn't leave. So those who want to go can go, but at a higher price, so there are not just fewer people left to treat in the pub sector but there's more money to treat the with too.

Diego: I think you are totally right and it is something that can be expanded to education. Expanding taxes on the private option is a way to expand revenues (although we had not thought about earmarking and I think it is a great idea) and reduce demand. However, this is much easier to do if the only ones leaving are the top 10% (or 15%) than if large parts of the middle class (say the top 40% of the population) are both in the private and public sector. In those cases, a tax on the outside option will be rather unpopular and very difficult to implement. At the end that is why confronting the outside option requires a commitment of the middle class to public services, which also require that those services are of relatively high quality.

Ken: I understand what you write, but if the top 40% of the population is leaving that suggests that the pub sector needs to be improved, which only makes a tax to acquire the revenues that much more important. I’m less sure about this line of reasoning for education, because the effects of segregation on those left behind less clear in education. The poor people in the public health system may benefit from the rich people not being there consuming doctors’ and nurses’ time and resources, and, provided the resources are available, the poor people left can be treated well. In contrast, the poor people in the public education system do benefit from having the richer people in their classroom, and the quality of education being delivered in a public education system that is almost all poorer kids will be worse. So here I think everything is different. To put it simply, I don’t think exit from the public system has to damage the system in health, but I do think it does so in education.

Diego: I agree that in terms of the delivery, the exit from the middle class is worse in education than health. Yet it is also quite problematic in health for two reasons: (a) The creation of tax specifically for these services will become politically challenging. The middle class will argue that "not only the public health is weak but we also need to pay for our private insurance! It is double payment!" If this tax affects the middle class, then it may be impossible to implement it. (b) Much of the argument about involving the middle class in public services is about voice: if public health care is poor, they are more likely to protest individually and collectively than the poor. This is why letting the middle class simply leave is quite problematic (the very rich are likely to leave almost by definition in much of Latin America).

Tuesday, October 20, 2015

Brazil pensions: has the time for change come?

Useful article on Brazil's pension system in the NYT. It clearly describes what is useful about the system but also its huge problems of inequality. The good comes from generous non-contributory pensions, particularly in the rural sector:
The pension system can ease extreme poverty. For instance, rural workers can retire five years before others even if they have never contributed to the public pension system, receiving a monthly payment equal to the minimum wage, about $210 a month.
The growth of the minimum wage has made these advances even more significant. Yet, at the same time, there are huge problems with inequality in the system--something that Hunter and Sugiyama explained well years ago. See this extreme case
In 2000, for instance, officials did away with rules allowing the daughters of military officials to receive the pensions of their fathers after they died. But the shift applied only to new entrants into the armed forces, so more than 185,000 women still draw military survivors’ pensions, often amounting to the full salary of their fathers upon retirement. Spending on such pensions is forecast to last through the end of this century, economists say.
There is little doubt that advances towards a more universal, redistributive system require a reduction of some of these benefits and an increase in other transfers and services. Yet this will be difficult as the upper middle class uses anti-austerity rhetoric to prevent reform. Here you have a former leader of the shopkeepers' associations:
Making retirees pay the price is just not fair,” said João Pimenta, 63, a former director of a shopkeepers’ association who retired at age 49 and regularly leads protests against pension cuts in Brazil’s capital, Brasília. “Why isn’t the economic elite being called upon to sacrifice? I’m sick of hearing that normal people need to pay the price with their pensions.”
How can we promote anti-austerity and, at the same time, reduce segmentation in social policy is one of the main challenges of Latin America in the post-commodity boom era.

Monday, October 19, 2015

How useful lectures are?

Molly Worthen offers a nice defence of the value of lectures in the NYT. Yet I have two problems with it: a. I am not totally convinced that this is a humanities vs "hard" science. Yes, lectures makes more sense in humanities but the lack of attention is a problem everywhere. b. What she never really demonstrate is that students are actually paying attention in the lecture. Moreover, as this useful set of videos show, the problem is that great students will truly benefit from lectures but many others accustomed to surface learning will not. c. Presenting lectures vs gadgets as a trade off does not make much sense. There is obviously space for lectures in the classroom but there is also room for all kinds of activities that may or may not involve computers.

Sunday, October 18, 2015

Horizontes: Latin American Centre Newsletter

The last issue was published some time ago and can be found here. It has a nice summary of the experience of key academics who were members of the LAC. It is quite funny!

Call for papers

Here a call for papers for a special section in the Revista de Economia Mundial /World Economic Journal that I am co-editing. We are looking for short (5,000 words) contributions on income inequality in Latin America both historically and contemporarily. Send us your contribution or, if you have any questions, email me.

Role of fathers in transforming families

Let me return to my blogs one more academic year with a topic that is far from my research on Latin America. In recent feminist discussions on how to transform society in a women-friendly way, men are mentioned but occupy a background role. In Lean In, Sheryl Sandberg , highlights the need to have supporting partners... but nothing else. This is rather disappointing because without more men actively demanding change, things are going to move slower than many of us would love. Now we have an interesting contribution from Andrew Moravcsik, Anne-Marie Slaughter's husband, in the Atlantic. He rightly highlights the need to have committed fathers if women are going to be successful in the labor force. Implicitly, he also shows the need to recognise the value of fatherhood and praise it. Many of the problems he discusses and the need to have a "lead parent" can resonate with many others in different circumstances. Nevertheless, like Sandberg and like Slaughter, his class-bias is obvious and limits the usefulness of the analysis. How many husbands have a wife who is Dean or NGO president? How many are full professors but still playing the role of lead father? Of course, having really successful women of the type Moravcsik is discussing is important. Yet most other families are in a different situation: some will have parents struggling to make ends meet. Others will be made of professionals with busy but workable lives. Do we need a lead parent in all those cases? Or is the big question there how do you negotiate so that both parents can lead? And is the real challenge to increase the number of Deans or to simply shift the distribution of effort in the household in all cases?

Friday, August 7, 2015

Central America's supposed bad performance

I am currently working with Juliana Martínez and Salvador Martí on a project for CEPAL on social policy in El Salvador, Guatemala and Nicaragua. I just calculated growth rates for the last 25 years and was surprised once again by one fact: Central America has not performed any worse than the rest of Latin America. Of course, this is still disappointing as this means that two of the countries have not been able to catch up with the regional average. Nevertheless, I think the idea (which I have also written about) that the last few years were much better for commodity exporters than for the rest may not be totally warranted. Just a thought based on this table: Annual average rate of growth. GDP per capita (dollars 2005), 1990-2014