“The real complaint of the worker is the insecurity of his existence. He is not sure he will always have a job, he is not sure he will always be healthy, and he foresees that one day he will be old and unable to work.”
Although these words sound like they were written for today, they were penned over a century ago by Otto von Bismarck, the German chancellor known for leading the unification of Germany—and for laying the foundation of modern social security systems.
His idea was simple and powerful: to create a common fund to which both workers and employers would contribute, so that in times of illness, unemployment, or old age, people could count on a secure income. The logic behind this model—which still exists in many countries across Latin America and the Caribbean (LAC)—was based on a key assumption: that most people worked as formal salaried employees in companies.
A Model That Never Fully Materialized
In Latin America, the first social security systems began to take shape in the 1940s and 1950s. In the Caribbean, this process began later, mostly after countries gained independence. But the labor reality of our nations never quite matched the one Bismarck had in mind.
Of the more than 300 million workers in Latin America and the Caribbean, only 45% are affiliated with any social security system. This is largely because a significant portion of workers do not have—or have never had—a formal salaried job.
The following chart, which describes employment patterns in 10 countries in the region, shows this clearly: only 34% of workers are formal salaried employees in private companies, and another 9% work in the public sector. In other words, less than half of workers are employed under the conditions envisioned by the Bismarckian model.
The challenge lies in the predominant types of work in our region
- 5% of people working in family businesses report not receiving direct pay for their work. Typically, these workers are not legally required to contribute to social security systems, and the vast majority of them (96%) don’t.
- 4% of workers are employed in domestic work. Despite the fact that nearly all countries grant social security rights to domestic workers, in practice, very few are covered.
- 15% are paid salaried workers in informal private businesses that are not registered with tax authorities. A mere 1% of these workers are covered by social security.
- 26% of the region’s workforce are self-employed, with no direct employer.
In countries like Honduras, Mexico, or Peru, social security affiliation is voluntary, which results in very low coverage rates. In others, like The Bahamas, Colombia, or Ecuador, affiliation is mandatory. Still, a large portion of self-employed workers remain outside the system. This is due to factors such as the high cost of contributions relative to income, the lack of effective enforcement mechanisms, and the perception that the benefits of affiliation do not outweigh the cost. Even among those registered with tax authorities, a significant share still lacks social security coverage.
What Happens to Workers Without Social Security—and How Can We Move Toward Greater Protection?
The situation of unaffiliated workers varies by country and by type of risk. In many cases, they lack any form of protection. In others, they are covered through non-contributory systems funded with public resources. These programs, which have expanded across much of the region, usually offer lower levels of protection than contributory systems and are targeted toward people living in poverty.
Expanding social security coverage in Latin America and the Caribbean means moving in multiple directions to address different causes. This includes strengthening enforcement mechanisms, lowering hiring costs, making registration easier, and simplifying procedures.
It is essential that social security becomes an attractive and valuable option for workers. That means offering concrete benefits that help them face the risks that, as Bismarck warned over a century ago, are inherent to life.
Social security systems must also adapt to the region’s diverse labor realities. That means providing more flexible mechanisms to facilitate the affiliation of self-employed workers and improving the integration between contributory and non-contributory pillars.
A Regional Commitment to Transform the Future of Work
At the IDB, we are working alongside countries in the region to take on this major challenge. We know that expanding access to social security not only improves people’s quality of life, but also boosts productivity and economic development.
That’s why, at the end of 2025, we’ll be publishing our next book: “Produce More, Distribute Better: How to Solve the Labor-Market Challenges in Latin America and the Caribbean.” In it, we will share ideas, findings, and proposals to help build modern, sustainable social security systems that reach more people. Because the need to protect all workers remains just as relevant today as it was in Bismarck’s time.
Check out this video to learn why strong social security systems are essential for workers across the region
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