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How Middle-Class is Latin America?

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Apresentação de Mario Pezzini, representante da OCDE, sobre Classe Média na América Latina, durante Seminário A Nova Classe Média Brasileira, realizado dia 08 de agosto de 2011, pela Secretaria de Assuntos Estratégicos da Presidência da República.

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How Middle-Class is Latin America?

  1. 1. Latin American Economic Outlook 2011 <ul><li>Brasilia, 8 th August 2011 </li></ul><ul><li> How middle-class is Latin America? </li></ul><ul><li>Mario Pezzini </li></ul><ul><li>OECD Development Centre </li></ul>
  2. 2. Significant impact of the crisis on Latin America Source : OECD (2010), based on data from ECLAC and OECD.
  3. 3. Outline <ul><li>1 </li></ul><ul><li>Latin America’s middle classes </li></ul><ul><li>2 </li></ul><ul><li>Avoiding downward mobility: social protection </li></ul><ul><li>3 </li></ul><ul><li>Fostering upward mobility: education </li></ul><ul><li>4 </li></ul><ul><li>Fostering new models of growth </li></ul><ul><li>5 </li></ul><ul><li>Middle classes and fiscal policy: a new social contract? </li></ul>
  4. 4. The “middle sectors” in Latin America Source: Castellani and Parent (2010) , based on national household surveys . Middle sectors: Proportion of the population earning between 50% and 150% of median income %
  5. 5. Possibilities of moving up… and down Potential to move up into the middle sectors Middle Sectors Resilience Potential to move up out of the middle sectors Indices of “mobility potential” Notes: DMP , RES and MSMP are defined in Box 1.2. Source : OECD (2010), based on 2006 National Household Surveys analysed in Castellani and Parent (2010).
  6. 6. Outline <ul><li>1 </li></ul><ul><li>Latin America’s middle classes </li></ul><ul><li>2 </li></ul><ul><li>Avoiding downward mobility: social protection </li></ul><ul><li>3 </li></ul><ul><li>Fostering upward mobility: education </li></ul><ul><li>4 </li></ul><ul><li>Fostering new models of growth </li></ul><ul><li>5 </li></ul><ul><li>Middle classes and fiscal policy: a new social contract? </li></ul>
  7. 7. Note : Percentage of total middle sectors’ workers (0.5 – 1.5 median household adjusted income) Source : OECD (2010), based on household survey data. Middle-sector workers by employment category Middle income workers: mostly informal
  8. 8. Pension Coverage & income level Formal Workers Informal Workers Percentage of workers covered
  9. 9. Policy recommendations: contents ( ex post and ex ante ) <ul><li>Minimum pensions: old affiliates, agricultural informal </li></ul><ul><li>Universality vs. Looser eligibility </li></ul><ul><li>Affiliation: Independents with tertiary education </li></ul><ul><li>Compulsory for independent workers vs. Opt-out </li></ul><ul><li>Flexibility (contributions, withdrawals) </li></ul><ul><li>Public co-funding: Middle-sectors informal workers with savings </li></ul><ul><li>Matching defined contributions </li></ul>
  10. 10. Outline <ul><li>1 </li></ul><ul><li>Latin America’s middle classes </li></ul><ul><li>2 </li></ul><ul><li>Avoiding downward mobility: social protection </li></ul><ul><li>3 </li></ul><ul><li>Fostering upward mobility: education </li></ul><ul><li>4 </li></ul><ul><li>Fostering new models of growth </li></ul><ul><li>5 </li></ul><ul><li>Middle classes and fiscal policy: a new social contract? </li></ul>
  11. 11. Intergenerational mobility in Latin America is low Correlation between parental and child education Source: Hertz el at. (2007)
  12. 12. Probability of achieving a higher level of education than one’s parents, given parental educational achievement Low mobility in the middle Source: OECD ( 2010), based on survey data from Latinobarómetro (2008). Parents’ level of education Probability
  13. 13. Social inclusion & PISA science test performance Note: Blue lines indicate OECD averages. Inclusion index measures proportion of variance of economic, social and cultural variance within schools. Source: OECD ( 2010), based on survey data from 2006 round of PISA Equity and performance: No trade-off necessary PISA Science Score
  14. 14. <ul><li>Expand early childhood development programs </li></ul><ul><li>More and better secondary education: focus on schools and teachers </li></ul><ul><li>Better social mix within schools </li></ul><ul><li>Financing tertiary education: grants and scholarships </li></ul><ul><li>Redistributive policies and income support </li></ul>Policies to enhance upward mobility
  15. 15. Outline <ul><li>1 </li></ul><ul><li>Latin America’s middle classes </li></ul><ul><li>2 </li></ul><ul><li>Avoiding downward mobility: social protection </li></ul><ul><li>3 </li></ul><ul><li>Fostering upward mobility: education </li></ul><ul><li>4 </li></ul><ul><li>Fostering new models of growth </li></ul><ul><li>5 </li></ul><ul><li>Middle classes and fiscal policy: a new social contract? </li></ul>
  16. 16. Outline <ul><li>1 </li></ul><ul><li>Latin America’s middle classes </li></ul><ul><li>2 </li></ul><ul><li>Avoiding downward mobility: social protection </li></ul><ul><li>3 </li></ul><ul><li>Fostering upward mobility: education </li></ul><ul><li>4 </li></ul><ul><li>Fostering new models of growth </li></ul><ul><li>5 </li></ul><ul><li>Middle classes and fiscal policy: a new social contract? </li></ul>
  17. 17. Índices de Gini antes y después de impuestos y gastos públicos Fuente: OCDE (2008) para los países de la OCDE no latinoamericanos, cálculos en base a encuestas de hogares para los países de América Latina
  18. 18. Tax revenue as percentage of GDP Source: Revenue Statistics in Latin America (OECD, ECLAC, CIAT, 2011, forthcoming)
  19. 19. Searching Better Taxation Source: Revenue Statistics in Latin America (OECD, ECLAC, CIAT, 2011, forthcoming) % Tax revenue, as percentage of total taxation
  20. 20. Taxation and satisfaction with public services Source: OECD ( 2010), based on survey data from Latinobarómetro (2007-8).
  21. 21. Main Messages <ul><li>The middle sectors in Latin America are economically vulnerable </li></ul><ul><li>Labour informality – and low social protection coverage – are particularly prevalent among the middle sectors </li></ul><ul><li>Education is a powerful motor of intergenerational social mobility: but one that isn’t working particularly well in Latin America </li></ul><ul><li>The middle sectors might be disposed to pay taxes – if they receive public goods of reasonable quality in exchange. </li></ul>
  22. 22. Latin American Economic Outlook 2011 <ul><li>www.latameconomy.org </li></ul><ul><li>www.oecd.org/dev </li></ul><ul><li> How middle-class is Latin America? </li></ul><ul><li>Mario Pezzini, Director </li></ul><ul><li>OECD Development Centre </li></ul>Thank you very much! Obrigado!

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