Thursday, February 6, 2014

Generational conflicts and the welfare state: are developing countries different?

Two policy briefs of Policy Network highlight the generational conflicts within welfare state reform in many European countries. With the crisis, most of the cuts have concentrated (once again) in young people: we have the example of scholarships or reductions in unemployment insurance payments.  Maccinnes and Spijker argue that population aging is not as problematic as it is normally argued because life expectancy has increased and people can work longer.  Bruno Palier argues that unskilled workers, women, children and other groups are now more at risk of poverty than the elderly.  All these authors call for a more future-oriented welfare state that pays more attention to education, skills, youth unemployment and even pre-school education.

This is extremely important in countries like Spain where youth unemployment is so high and, therefore, market incorporation so difficult to start with.  Yet how does it translate to Latin American countries? In many ways, a welfare state for the elderly should be less of a problem because the population is still younger. There should be more room to invest in education and skills without crowding out any other investment.  At the same thing, there is a paradox in these countries: relatively too much expenditure on pensions for some interest groups (think about Brazil) together with high poverty levels among the elderly.

What is the conclusion of all of this in developing countries?  First, securing universalism is sometimes about reducing the benefits of the upper middle class--a point Hunter and Sugiyama made a few years ago for the case of Brazil.  Second, we also need to promote non-contributory pensions which secure a minimum living standards not only for the poor but for large segments of the middle class as well.  This should be less expensive than in other countries.  Third, because unemployment insurance is harder to organize in a highly informal context, maybe the concentration should be on children at all ages from pre-school to primary and secondary education.  This would mean creating a welfare state that focuses in the two extreme of lives and on low income groups and the middle class simultaneously.

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