LocationsReaping What We Sow: How Demographic Change and Social Protection Will Shape LAC’s Future
October 13, 2025
Social protection systems are a cornerstone of social policy in Latin America and the Caribbean (LAC). They reduce poverty, foster inclusion, and ensure a minimum level of well-being for targeted groups. At the same time, they protect people from shocks, reinforce social cohesion and strengthen democratic legitimacy. Yet, these systems face growing pressures from demographic and other structural changes that risk reshaping how societies can meet their needs in the years ahead.1
This #GraphForThought looks at social protection expenditure and the pace of population ageing to reflect on how demographic changes can impact social protection and long-term economic growth in LAC.
Social protection spending in most countries in the region has been heavily skewed towards old-age pensions, with far fewer resources directed at children. As Figure 1 illustrates, LAC allocates 0.8% of GDP to social protection for children (who represent 29.3% of the population), and 7.4% to older adults (who account for 9.4% of the population) - nine times more. Although prioritizing the elderly is a global trend, the imbalance in LAC is sharper than in other developing regions. In fact, the region’s spending on older people is comparable to that of high-income countries, despite having a much smaller share of its population over 65 (9.5% vs. 19.5%, respectively).
This imbalance in spending has visible consequences. Children experience extreme poverty at rates far higher than older adults, being disproportionately represented among the extremely poor (Figure 2). In 2023, the extreme poverty rate among children in LAC was 16.1%, nearly three times the rate for older adults (5.7%).
The current social protection systems will face increasing pressure in the coming decades. The demographic transition -the process by which societies shift from high fertility and high mortality rates to low fertility and low mortality rates, ultimately leading to an ageing population- is happening much faster in LAC than it did in developed countries (Figure 3). On average, it took 56 years in European countries for the share of people aged 65 and older to rise from 10% to 20% of the population. In LAC, this transition will happen in about half that time. Brazil, for instance, is projected to make this leap in only 25 years.
This accelerated shift means LAC will experience a shorter “demographic dividend.” Whereas developed countries enjoyed extended periods of growth with large working-age populations, many LAC countries risk growing old before reaching comparable levels of wealth. With labor productivity stagnated and economic expansion still reliant on a growing employed population, ageing adds a new layer of pressure on growth and development. It also strains pension and health systems: financing benefits and services for a growing number of older adults will fall on a shrinking working-age population, creating fiscal stress and risking exclusion of vulnerable groups from essential services.
Interestingly, part of the solution may lie in social protection itself. Increasing labor market participation, especially among women, can expand the workforce and boost the economy. Expanding access to quality care systems will be essential to this effort. Improving labor productivity is equally urgent. That requires investing not only in today’s workers and industries, but also in the next generation.
Such investments contribute to economic dynamism while also fostering resilience at the individual and community level -a crucial element of resilient human development. Moreover, by visibly responding to the evolving needs of families, these policies can strengthen citizens’ trust in state institutions, reinforcing the legitimacy of democratic systems.
In just a few decades, most of those reading these lines will belong to a large generation of older adults, reliant on a smaller workforce that will need to be highly productive. Yet this generation, today’s children, faces poverty rates far higher than those endured by adults or older people. Rethinking social protection and significantly increasing investment in both children and care systems is not just a policy option; it is a prerequisite for securing the region’s future.
Supporting the next generation while enabling today’s workers to thrive can help households build the assets -such as education, access to credit and adequate housing- that allow them to prosper and withstand shocks. Meeting these needs is also essential to protecting democracy, ensuring it is seen as a system effective to improve people’s lives. In an era of rapid demographic change and rising uncertainty, stronger and more inclusive social protection systems will be central to building resilient human development in Latin America and the Caribbean.
[1] This #GraphForThought was a joint effort of the Inclusive Growth and Poverty Reduction team and the SDG and Development Policy team. It draws on findings from the Regional Human Development Report 2025 and from UNDP’s Social Protection Offer for Latin America and the Caribbean.
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