Recommendations for social protection for the Brazil of the future – 01/05/2023 – Pablo Acosta

Brazil has made progress in reducing poverty and inequality since the return to democracy in the 1980s. The expansion of social protection policies has played an important role in this process. However, poverty reduction has stalled over the past decade and the rate of informality remains high.

In addition, demographic aging, climate change and new technologies and ways of working generate needs and risks for the population. How can the social protection system continue to play a central role in a context so different from the one in which many of these policies were conceived?

In a new report, the World Bank and UNDP (United Nations Development Program) discuss the matter. In two decades, the majority of the Brazilian population will be of working age, but they will no longer be young; many will need to navigate the job market with low education. The number of children will have declined, but meanwhile nearly half of them are growing up in poverty. The number of adults over 65 will double, making current pension promises fiscally unsustainable even after the recent reform.

Another trend is climate change, the effects of which include more frequent natural disasters and structural change in the economy. Finally, new technologies will change the way companies use their workforce. There will be more opportunities to take advantage of global services markets, but also a greater risk of workers moving to new tasks, and they – more than ever – will work as freelancers.

The ability of Brazilians to navigate these changes will depend in part on how the social protection and labor system adapts its set of institutions, programs and expenditures to new needs. The report identifies weaknesses in the current system. Four-fifths of spending on social protection is allocated to programs that mainly target the elderly, as if Brazil were a country with as many elderly people as Europe.

Furthermore, formal sector pensions disproportionately benefit households in the top income quintiles, although they are subsidized to different degrees from general income. On the other hand, only few social protection programs promote human capital and opportunities. One of them is Bolsa Familia.

The report recommends a set of ten reforms for the medium and long term, with a view to Brazil in 2040. It will be important to increase the efficiency of unemployment insurance programs, expand the financial instruments available to families to manage income volatility and make the most effective social assistance programs in reaching families impacted by climate shocks.

The system would also have to find more and better ways to deliver early childhood development programs, and create policies aimed at supporting workers in job transition or entering the workforce for the first time, as well as expanding economic inclusion in rural areas. .

To strengthen poverty reduction, the note proposes consolidating transfers directed at working families into a single program, with a component for children and one for low-income families. It will be essential to invest in improving systems such as the Single Registry and in the ability of the Social Assistance Reference Centers (CRAS) to provide more complex social services and to refer beneficiaries to other programs.

And, in order to be able to finance these changes, it will be necessary to increase the efficiency and equity of expenditures, mainly in Social Security. In this regard, the report proposes a more direct coordination of non-contributory pensions (such as the Continuous Cash Benefit) with a redesign of the minimum contributory pension with incentives to contribute throughout the working cycle. However, it will be important to reduce the differences in contributions and taxes paid between self-employed and CLT, which today contribute to pejotization because this option is less costly for employers.

We recognize that these proposals are ambitious and therefore the debate has to start today.

This article was written in collaboration with my colleagues Asta Zviniene (senior specialist in social protection), Josefina Posadas (senior economist), Matteo Morgandi (senior economist) and Raquel Tsukada (consultant in the field of social protection)

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