Between exclusion and calculating solidarity? Preferences for private versus public welfare provision and the size of the informal sector

Abstract

This article examines how the informal sector, as a group of potential 'free riders' for public welfare goods, relates to individual social policy preferences in low-and middle-income countries. The exclusion hypothesis proposes that a large informal sector lowers the preferences from formal workers and the middle-and high-income groups for social services to be provided by the state, and raises these groups' preferences for public welfare goods to become club goods. In contrast, the prospect hypothesis argues that formal workers, particularly the middle-income group, ally themselves to the informal sector to insure against the risk of future employment in informality. The study examines individual preferences for the provision of pensions and health care by either the state or private enterprises. The two competing hypotheses are tested with a hierarchical model using survey data from Latin America for 1995, 1998 and 2008. The findings offer support for the exclusion hypothesis.

Labor Divides, Informality, and Regulation: The Public Opinion on Labor Law in Latin America

“…Holland (2016) and Feierherd (2017) reveal for the Latin American context that especially left parties benefit from varying the degree of labor law enforcement to reach out to both insiders and outsiders. This could explain why labor market segmentation does not seem to polarise on questions of social policy Mares, 2014, 2015;Berens, 2015aBerens, , 2015b nor to other clearly distinguishable voting patterns (Baker and Velasco-Guachalla, 2018). Would this also be true for the dividing line along the protective function of labor law?…”

“…This divide is extensively studied in Latin America (Perry et al, 2007;Portes and Hoffman, 2003;Portes and Sassen-Koob, 1987). More recently, scholars have used this divide to explain policies of redistribution and insurance, such as the recent move towards tax-financed minimal pensions (Carnes and Mares, 2013), or to analyse attitudes towards public versus private healthcare and pension provision (Berens, 2015a). One puzzling finding from this literature is, however, the "non-divide" on these issues (Berens, 2015b;Baker and Velasco-Guachalla, 2018).…”

Progressive tax policy and informal labor in developing economies

“…For example, in Brazil, the successful implementation of the conditional cash transfer program Bolsa Família , which now covers nearly a quarter of all households, had a significant effect on the vote share of incumbent Lula and his Workers' Party in the 2006 elections (Zucco & Power, ). As a result, members of both the formal and informal labor force are coalescing around support for noncontributory and universal forms of social spending (Berens, ).…”

Might Corporate Social Responsibility Hollow Out Support for Public Assistance in Europe?

“…Schmidt‐Catran ). This research line has been extended to exploring how support for welfare states might reflect development of related regulatory insurance or protections, such as employment protection legislation or voluntary firm‐level assistance (Berens ; Gingrich and Ansell ). And it has been extended also to the possibility that existing generosity of national welfare states affects support for European‐level social protections (Burgoon ) or support for foreign development assistance (Noël and Thérien ).…”