This Conclusion aims to bring together the main strands of the argumentation in the book. It will perform two main functions.

First, it will draw out some pointers from the discussion in the book for the construction of a theory of social protection institutions in Latin America. The motivation for the book was to advance towards a general theory of social protection institutions. Researching Latin America’s social protection institutions is an important step in this direction because of its leadership among late industrialisers in the spread of occupational pension funds, individual retirement savings plans and social assistance. The confluence of diachronic, synchronic, and analytical dimensions of social protection institutions in the Latin American context support theory development. The study of social protection institutions in Latin America offers a range or insights into the parameters of a general theory of welfare institutions.

Second, this Conclusion contains a summary of the main findings emerging from the analysis reported in the book and, on that basis, speculates on implications for policy. Latin American researchers and policy makers are well provided with proposals for the reform of social protection institutions addressing their perceived shortcomings. The chapter ends with a discussion of potential insights from the research reported in this book that could inform reform proposals.

9.1 Pointers for a General Theory of Welfare Institutions

The analysis in the book offers some pointers for the development of a general theory of welfare institutions.

9.1.1 Causal Inference

A general theory of social protection institutions should explain their existence, configuration, and causal effects. Causal inference is at the core of the development of a theory of social protection in Latin America.

The discussion in the book distinguished between ‘causes of effects’ and ‘effects of causes’ as two distinct modalities of causal inquiry (Gelman & Imbens, 2013). A ‘causes of effects’ enquiry starts from a given phenomenon and seeks to find explanations for its existence. In the Latin American context, ‘causes of effects’ type enquiries would attempt to find answers for why did Bismarckian occupational insurance funds emerged in Latin American countries in the middle of the 20th century? Or why did conditional income transfers emerged and spread in Latin American countries in the new century? These are interesting and valuable enquiries to pursue, but they are unlikely to secure unique and precise answers.Footnote 1 This does not mean that ‘causes of effects’ enquiries are meaningless, on the contrary. Reducing the number of potentially valid explanations by excluding those that could be shown not to be valid, greatly improves our understanding of the issue. This recommends that, as researchers, we maintain an ‘ecumenical’ approach to ‘causes of effects’ enquiries and their findings. It is likely that competing enquiries might come to conclusions that overlap imperfectly, even after harmonising their methods and data (Flechtner & Sánchez-Ancochea, 2022).Footnote 2

‘Effects of causes’ inquiries study the effects of interventions, understood broadly as changes in policies or institutions. ‘Effects of causes’ enquiries have come to the fore in social protection with the spread of (quasi-)experimental research, for example research on the effects of conditional income transfer programmes. Experimental studies aim to control for sample selection and omitted variables by random allocation of the intervention to a homogeneous sample. There are considerable challenges to extending this approach in the context of dynamic processes and observational data (Acharya et al., 2016; Blackwell, 2013; Blackwell & Glynn, 2018) that characterising most of the topics studied in this book. This is a tall order for studies of social protection institutions because the effects of institutions are often diffused in time and across the population groups affected. This implies that great care must be exercised in addressing potential methodological issues, especially confounders and mediators. Implementing ‘effects of causes’ enquiries will rest on stronger grounds if a potential outcomes methodology is adopted. The potential outcomes assumption acknowledges explicitly the role of counterfactuals. Attention to the underlying causal model is essential. Graphical causal models offer an accessible tool to refine the causal associations hypothesised and offer guidance on empirical counterparts (Elwert, 2013).

Constructing a theory of social protection institutions requires engaging with both ‘causes of effects’ and with ‘effects of causes’ enquiries. ‘Causes of effects’ studies help identify the range of variables that can, or cannot, explain the emergence and configuration of social protection institutions. Research on the emergence of institutions in the region have significantly advanced our understanding of the political economy of social protection. ‘Effects of causes’ enquiries are becoming standard for the evaluation of the impact of social programmes, mainly through quasi-experimental studies. There are synergies here, ‘causes of effects’ studies often help identify up the issues which ‘effects of causes’ studies need to investigate.

9.1.2 Diachronicity, Synchronicity, and Analysis

The analysis revealed a helpful confluence of diachronic and synchronic dimensions in the development of social protection institutions in Latin America. Critical realignments led to the emergence in time of occupational insurance funds, individual retirement savings plans, and social assistance programmes. They are also the core institutions in place currently. Complementary social protection institutions fail to add substantive analytical insights. Occupational insurance funds changed over time, eventually becoming occupational pension schemes by dismantling the ‘cradle to the grave’ set of entitlements included in their original versions. Individual retirement savings plans were introduced in three distinct modalities and have been the object of large scale reforms and refinements including their termination in Argentina. However, the confluence of diachronic and synchronic dimensions enabled the research on this book to focus on the three main sources of social protection entitlements: membership (of occupational insurance funds), savings capacity (individual retirement savings plans), and citizenship (social assistance). It would be interesting to check whether the same confluence of dimensions applies in the development of social protection institutions in other late industrialisers.

Critical realignments are a critical tool to research the diachronic dimension of social protection institutions (Haggard & Kaufman, 2008).

9.1.3 Wage Earner Stratification

Wage earners are the object of social protection institutions. The evolution of social protection in the long century identified specific groups of workers as the primary object of social protection institutions, manufacturing workers in the early expansion of industry, workers in the public sector and in import substituting sectors in the middle of the twentieth century, and high skilled cognitive and manual non-routine workers since the turn of the century. Social protection institutions contribute to the stratification of groups of wage earners. The timing and speed of stratification varies across countries in the region, and by clusters of countries.

In the discussion above, two dominant dimensions of stratification were identified: sectoral and skill stratification. Factor stratification led to the emergence of an urban working class and preceded the emergence of government-supported social insurance funds. Sectoral stratification was associated with import substitution industrialisation policies and the political coalitions underpinning them. Skill stratification was associated with neoliberal policies and their aftermath. The suggestion, currently contested, is that social protection institutions support a degree of polarization in the labour force, with growth in cognitive non-routine and in manual non-routine jobs. Polarization is relatively more marked for female workers, in part because of rising labour force participation among them.

The main point is that social protection institutions influence the stratification of wage earners into distinct groups. The design and implementation of social protection institutions help define strata among wage earners. Identifying the effects of social protection necessitates paying attention to the intra-class differentiation of wage earners.Footnote 3

9.1.4 Actors

Research on social protection in Latin America suffers from an elite bias.Footnote 4 Studies on the first phase of social protection development in the region rightly focused on the primary role played by elites in the incorporation of selected groups of organised workers (Collier & Collier, 1991; Malloy, 1979). The fact that incorporation was top down in most countries in the region justified an initial focus on elites, but wage earners and their organisations grew in strength and influence over the following period. The neoliberal period involved disincorporation in terms of the exclusion of worker organisations from the design and management of social protection institutions. A wave of authoritarian government, many of which implemented pension reforms, again placed elites at the centre of decision making (O’Donnell, 1975). The second incorporation has challenged this elite bias in paying attention to the emergence of popular movements ad sectors and the stagnation and decline of traditional parties, but this is contested in the literature (Kapiszewski et al., 2021; Levitsky & Roberts, 2012; Lupu, 2017; Silva & Rossi, 2017). Research on social assistance has given disproportionate consideration to the view that the expansion of conditional income transfers and old age transfers was primarily an electoral strategy designed and orchestrated by governing elites and international organisations (Barrientos, 2020; Borges, 2019).

Broadening the range of actors under investigation will contribute to a more comprehensive theory of social protection institutions. The need to pay closer attention to wage earners and their stratification was covered above. Understanding social protection in Latin America where occupational and savings modalities dominate requires that attention is paid to the role of business, firms, and employers (Dorlach, 2020; Fairfield & Garay, 2017).

9.1.5 Stratification Effects

The analysis in the book focused on three main stratification effects: on employment; on protection; and on incorporation. As the relevant discussion noted, the effects of social protection institutions on employment and protection are well understood and have been extensively covered in the literature. The critical issue raised in the discussion was that the assumed direction of causality was often fuzzy or reversed. Studies on the relationship existing between employment and social protection often take it for granted that changes in the structure of employment or changes in demand for will effect a change in social protection institutions.Footnote 5 The argument developed in the book demonstrates it makes sense to study the effects of social protection institutions on employment and skills. The protection effects of social protection are also well understood and extensively covered in the literature, but the direction of causality is often uncertain, especially in the policy arena. The spread of impact evaluation studies in social assistance has improved our understanding of the effects of conditional income transfers and old age transfers. However, discussions on the features of social assistance, targeting for example, often offer contrasting teleological and deontological understandings of social assistance (Barrientos & Villa, 2015). Teleological approaches focus on the poverty and vulnerability reduction effectiveness of transfers. Deontological approaches, on the other hand, take transfers are confirmation of rights, independent of any effects. The discussion on old age income security demonstrated that prevalent understandings of the protection effects of pension schemes are defective. The protection effects of pension scheme participation for less advantaged workers are exaggerated.

The effects of social protection institutions on incorporation have not received the attention they deserve. Researching the incorporation effects of social protection is an essential component of the work needed to construct a general theory of social protection.

9.2 Prospects for Change

The limitations of social protection institutions in Latin America are well understood (Abramo et al., 2019; Mesa-Lago, 2007). From their origins in mid twentieth century, social protection institutions have evolved into dual structures, with insurance/savings institutions aimed at protecting skilled workers in large firms and the public sector, military and police; and assistance institutions supporting less skilled own account workers and workers in small firms and (Barrientos, 2019). Even within these two sets of institutions, protection is segmented meaning that conditions of access and entitlements are themselves stratified (Arza et al., 2022). What are the prospects for change?

9.2.1 Universalism?

Proposals for reforms are a constant in social protection research and policy debates, usually under the banner of universalism. The reference point in global debates is Nordic universalism, describing social programmes provided to all citizens under the same institutional structures (Brady & Bostic, 2010). Esping-Andersen’s description applies to programmes in which all “ …citizens are endowed with similar rights, irrespective of class or market position” (Esping-Andersen, 1990, p. 69). The influential Cepalista approach to social policy borrowed much of its original universalism from the Nordic approach. Retrenchment in the neoliberal period, the stagnation of occupational insurance, and the expansion of social assistance, have led to more nuanced versions of universalism. Filgueira et al. (2005) advocate a ‘basic universalism’ with a focus on ensuring a scaled down form of public protection for all, but maintaining selective social protection institutions supporting the better off. Huber and Stephens (2012) reluctantly support this ‘basic universalism’ as a way forward. Martínez-Franzoni and Sánchez-Ancochea (2017) have moved further by advocating for a form of universalism which incorporates stratified protection. Their universalism has as its central objective to make sure that some form of protection reaches all workers and their dependents even if this is achieved through multiple programmes with stratified institutional structures, access, and benefits.

It is hard to disagree with the intention behind universalism, especially the Nordic version. In the context of social protection however, one of the central arguments developed in the book was that social protection institutions are mechanisms for stratification of wage earners.Footnote 6 This argument does not run counter the ideal of universalism, but suggests there is no underlying process leading to it in Latin America. It challenges the view that, however imperfect, social protection institutions are designed and implemented with the objective of achieving universalism. It also challenges the Polanyi assumption that social protection institutions follow a solidaristic logic in direct contradiction to the commercial logic under capitalism.Footnote 7 The main argument developed in this book is that an understanding of social protection institutions could only be achieves by paying close attention to their stratification effects.

In recent work Garcia-Fuente (2021) argues that the starting point matters for the success of universalistic policies. In his view, countries that began to develop social policies starting from institutions supporting low income groups, as in European welfare states, have a good chance to build upwards by integrating better off groups in social insurance schemes. On the other hand, countries that developed their social policy institutions starting from better off, privileged, groups of workers will find it hard to grow by integrating low income groups. Universalism from below, he argues, generate synergies by expanding the pool of the insured with groups with higher income and lower social risks. Universalism from above is a zero sum game for privileged groups of workers who are asked to agree to higher contributions and less generous services. Whether this applies more generally, Gracia-Fuente assumes an insurance model at work, the fact of the matter is that resistance to the expansion of social protection in Latin America has been strong among insured workers (Garay, 2016). It is also the case that weak preferences for redistribution among non-insured workers could be explained by their low expectations they would benefit from it (Holland, 2018). In the Latin American context, there are significant practical and financial barriers to the expansion of occupational insurance (Barrientos, 2014).

9.2.2 Continued Change and Resilient Dualism?

The discussion in the book underlined the fact that large changes in social protection institutions have taken place since the middle of the last century. Far from social protection institutions in the region representing ‘frozen landscapes’, their main feature is change—although not always in a positive direction. The last three decades are a case in point. Since the return to democracy in the 1990s, Latin American countries have embraced remarkable policy activism and innovation in social protection. The implementation of individual retirement savings plans and the emergence of large-scale social assistance programmes are the most salient changes. Institutional change is far reaching. Whereas at the beginning of the 1980s occupational insurance funds monopolised social protection, by the second decade of the new century, they have become just one of its components. Perhaps most significantly, whereas at the beginning of the 1980s the sole gateway to social protection was membership of an insurance fund, today there are three sources of social protection entitlements: group membership, savings, and citizenship.

There are firm signs that institutional change in social protection will continue in the region. Occupational insurance pensions are under secular pressure from demographic trends, volatile labour markets, shallow financial markets, and fiscal policy (Arenas de Mesa, 2019; Bosch et al., 2013; CAF, 2020; IMF, 2018). Parametric reforms will continue to be deployed to address these challenges and fine-tune institutional capacities. Individual retirement savings plans were acutely affected by COVID19 due to the suspension of economic activity and the demands to release savings to support participant households (Arenas de Mesa, 2020; Kay & Borzutzky, 2022). Before that, the 2008 financial crisis seriously undermined their rationale and credibility. Demands for reforms to individual retirement savings plans, in countries where they are expected to transition to full institutional supremacy, have become stronger.Footnote 8 Further reforms to individual retirement savings plans in Chile, for example, have been recently advocated by an ex-President who already reformed them when in power.Footnote 9 Social assistance, especially conditional income transfers, have been successfully transformed into child transfers and schooling subsidies in Argentina and Mexico. Improved institutional infrastructure will continue to facilitate gradual reforms and fine-tuning. Old age transfers are expected to become a basic pension provision institutions in several countries in the region, and perhaps the only reliable means of addressing demographic change and the selectivity of pension benefits. Change will continue to be a feature of social protection in the region.

Dual social protection institutions in the region are likely to stay (Barrientos, 2009, 2012, 2014, 2016, 2019). There are strong barriers to a downward integration of social insurance and assistance. In countries where individual retirement savings plans replaced social insurance schemes, as in Chile, public old age support has greatly expanded.Footnote 10 In countries that retained occupational insurance pensions, marked inequality in the generosity of old age pensions they provide will strengthen opposition to integration. Brazil offers a telling example. Public subsidies to the civil service social insurance fund accounted for between 2 and 2.5 percent of GDP in 2008–2009 helping finance one million pensions (Barrientos, 2014). Extending the same deal to the rest of the labour force and population, around 16 million pensioners at the time, is unfeasible. Downward integration requires diluting the generosity of social insurance transfers, but will be strongly challenged by powerful insiders.

The emergence of social assistance as an independent component has led to institutional building and innovation. Dual institutional structures are the norm. Most governments in the region have a Ministry of Labour and Social Security alongside a Ministry/Agency charged with Social Development (Cecchini & Martínez, 2011). Social development agencies have contributed essential capacities within governments, including social registers and programme evaluation, development and implementation. COVID19 has amply demonstrated their effectiveness. The new institutional structures will reinforce growing dualism in social protection institutions in the region.

Perhaps consideration of granular change could work as a Plan B. This would involve the intensification of current trends, sustaining efforts to reduce gender and age bias in social protection, for example. Pace the growth of old age transfers contributing to improving women’s income support in later age. Or reaching children through conditional income transfers, child benefits, and scholarships. A further expansion in the reach old age transfers, and the associated rise in public spending, will continue to exert political pressure towards the gradual withdrawal of public subsidies to occupational and private pensions. Greater transparency in the substantive share of resource revenues in current government financing will continue highlight their origins in the commonwealth and support redistributive policies.