Past experience suggests that raising labor market incomes could also be a policy focus against vulnerability, so as public transfers that have also played a significant role in achieving improved social outcomes and enhancing household resilience to shocks.<sup>20</sup> In rural areas, de la Fuente (2009) showed that conditional cash-transfer programs like _Progresa/Oportunidades_ hold some potential to reduce vulnerability to poverty, especially to cope with temporary misfortunes.<sup>21</sup> _Progresa/Oportunidades_ was, above all, a human-capital-conditional cash-transfer program, and the sheer number of evaluations has confirmed its relative accomplishment in this respect. However, it also had relative additional success as an income-supplementing program. According to some studies, the program’s transfers reduced households’ vulnerability while they remain in the program through asset acquisition and more stable income flows that allowed them to better plan their expenses, pay their debts and get credit more easily, impacting on consumption of goods and services (Latapí, 2005).

This is why effective social-security and social assistance programs in combination with insurance and appropriate risk management instruments are needed to prevent vulnerable households from falling into poverty. Cash transfers, conditional and unconditional, workfare programs, food/nutrition aid, health, weather and unemployment insurance, and labor market policies could support the poorer and vulnerable by strengthening their assets and livelihoods, as well as improving their capacity to manage risk. Some of these social policy instruments already exist in Mexico. Yet, social protection is typically targeted towards the poorer, so the question remains as to what extent social policy reaches the vulnerable.

With the identification of vulnerable households at a national scale based on the methodology employed in this paper it is possible to explore the incidence of various social protection programs on the vulnerable and other groups in Mexico.

# **4.2. Public transfers and vulnerability to poverty**

This section presents incidence results of some of the principal safety nets instruments in the form of direct transfers in Mexico over the first decade of the 2000s. The programs analyzed include basic social programs and direct monetary transfers,<sup>22</sup> and their information was retrieved from questions contained on a module of social programs within the ENIGH which asked whether households

> 20 Azevedo et al. (2012) show that changes in labor income per hour and public transfers accounted, on average, by 45 and 14 percent, respectively, of the decline in inequality in Latin America during the last decade.

> 21 The conditional cash-transfer program known as _Progresa/Oportunidades_ has been recently redesigned as a program of social inclusion now called PROSPERA. This new program aims at linking beneficiaries of the traditional cash transfers in exchange of improving human capital to a number of other interventions; for instance, financial literacy, inclusion in the labor market and productive activities for beneficiaries.

> 22 Following Scott (2013), for the purposes of this paper public transfers are defined to include public spending on education, health, direct cash transfers, and smaller in-kind transfers (food programs and day care centers). These programs represented 8.7 percent of GDP in 2010. Mexico's official functional classification of social spending includes, in addition to the above, spending on contributory pensions, housing, and water and sewage. At this stage, in-kind transfers and all of the latter are not analyzed here for lack of the required information.

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