To remind the reader, this research project is a comparative study of market-centred social policy reforms in Mexico at the household level in two moments in time. The thesis seeks to contribute to the literature on Mexican social policy by offering a comprehensive assessment of the reform process and its vertical and horizontal redistributive effects. Whilst this project is about Mexico, the results could serve as a reference of the potential impact that similar social policy reforms
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can or have had, not only in other Latin American countries, but also in countries outside the region where similar reforms of taxes and benefits have been implemented.
The research will identify the potential effects at a household level of the shift that has been undertaken in Mexican social policy during the past two decades. More specifically, to determine if the reforms implemented across the social protection system have potentially augmented or diminished the levels of support offered by the state to households from different socioeconomic groups, and if such a variation has occurred, then to identify the extent in which those different types of households could have been benefited or affected by the policy changes. The levels of support are operationalised in terms of the disposable income of model families after the payment of taxes and the reception of benefits. The research is based on the hypothetical simulation of taxes and benefits according the established rules in the year prior to the reforms, 1994, and the last year available, 2012. Model families selected for the study are meant to illustrate different population groups and the distribution of taxes and benefits as established by the tax/benefit system’s rules.
By covering a period of 18 years, the project will yield a comprehensive evaluation of the reform social policy process and will reveal which have been the socio economic groups on whose welfare the state has put more or less emphasis. Results will exhibit the horizontal and vertical redistributive potential of social policies before and after the reforms, hence illustrating the consequences for different types of families of the policy changes, and revealing if there has been a variation in the population groups prioritised by the state, and if so what has been the extent of such variation.
The main research question that the thesis attempts to answer is the following:
How did the fiscal and social policy reforms undertaken in Mexico between 1994 and 2012 modify the redistributive potential of the tax/benefit system?
The redistributive potential is operationalised in terms of a family’s income after the payment of benefits and the reception of benefits according to the rules set by the policy architecture, especially the eligibility criteria, benefit levels and funding sources of different social programmes. The thesis will estimate disposable cash income after the payment of taxes and the
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reception of cash benefits, and final income which also includes the usage of benefits in-kind. The tax/benefit system refers to all direct taxes paid at the national level and the benefits of the major social programmes operated by the federal (national) government, from the main social policy areas, namely pensions, employment benefits, family benefits, healthcare, housing and education. Taxes and benefits are calculated on an annual basis.
Since the purpose is to evaluate the reform process, the study will calculate and compare the effects of the tax/benefit system on family income at two moments in time, before and after the reforms. The moment before the reforms is the year 1994, the first year of the government that started the reform process, and 2012, the year of the last government and the last year available. The research covers the last three governments. In Mexico presidential administrations last six years, with no possibility of re-election. As explained above, before 1994 the development of social policy shows a great stability, based on the gradual expansion of social insurance through the incorporation of new programmes or the extension of coverage.
The research will seek to answer three sub-questions:
How were the changes in the system’s rules expected to benefit or affect households from different sectors of the population? In other words, who were the winners and losers of the reforms? Which were the family types most affected or benefited by the reforms?
How were changes or continuities in the redistributive potential of the tax/benefit system obtained? In other words, what specific changes in the system’s rules benefit or affect households from different sectors of the population? Which programmes affected or benefited different family types?
How can the emerging architecture of the tax/benefit system be characterised? In other words, what are the main features of the country’s social protection model that emerged from the reform process?
The thesis then aims to identify the consequences of the social policy reforms at the family level. The data analysis seeks to reveal how the reforms of the tax/benefit system have impacted the welfare of Mexican families, expressed in terms of their income after taxes and benefits, which policy changes have favoured or affected different families and to establish the main features of the welfare model that has emerged in the country after the transformation of social policy.
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The research rationale, scope and expected contributions were presented in chapter 1. It was mentioned that contrary to the trend observed in other Latin American countries, poverty and inequality rates in Mexico have remained at extremely high levels. According to the United Nations Development Programme (UNDP), most countries in the region have registered steep decreases in the percentages of poor and vulnerable people during the current century, whilst in Mexico the fall has been of only a few percentage points. These measurements differ from the official poverty measurements published by the national statistics office of Mexico. This thesis is then justified because it is considered that a better understanding of how the social protection system has been functioning is needed to discern the reasons behind the persistent high levels of poverty in the country. The analysis of the architecture of the tax/benefit system is necessary to reveal its failures and achievements and to identify areas of opportunities where the system can be improved to enhance its potential to fight poverty and inequality.
Figure 7. Poor and Vulnerable Population in Argentina, Brazil, Chile and Mexico (% of Total Population)
Source: UNDP (2014)