Inclusive social development: The next generation of policies for overcoming poverty and reducing inequality in Latin America and the Caribbean

Inclusive social development: the next generation of policies for overcoming poverty...
Economic and social development analyses conducted by ECLAC have determined that the economies of Latin
America and the Caribbean have historically been defined by a pronounced structural heterogeneity, which makes
a significant contribution to social inequality in the region’s countries.
As long ago as the 1960s and 1970s, those analyses revealed pronounced differences in productivity between
and within different productive strata and sectors (Pinto, 1965 and 1975). Four decades later, while some features
have changed, the evidence confirms that phenomenon (ECLAC, 2012b): the region’s economic structure is still
characterized by a high level of heterogeneity, which can be analysed by examining three strata in terms of company
size, productivity and access to technology and markets. The high stratum —where productivity per worker is similar
to the averages found in developed economies and which is characterized by greater intensity in the use of capital
and technology and by more formalized labour relations— accounts for 66.9% of GDP and only 19.8% of total
employment. The middle stratum, which is one step down in terms of technical advances, generates 22.5% of GDP and
employs 30% of the workers. Finally, the low stratum, with a minimal density of capital and out-of-date technologies,
accounts for 50.2% of employment and contributes only 10.6% of GDP (ECLAC, 2012b).
This unequal distribution of the labour force among productive strata is due to the low capacity of the more
modern, advanced sectors to absorb workers. The pronounced disparity between each sector’s contributions to GDP
and to employment has one main consequence: a highly unequal distribution of productivity, which, in the final
analysis, leaves room for an extremely unequal appropriation of gains among workers (ECLAC, 2012b).
In this way, the heterogeneity of the production structure is replicated in the labour market and, from there,
transmitted throughout society. Productivity gaps both reflect and reinforce gaps in capacities, in job quality and
income, in bargaining power, in access to social protection systems and in opportunities for occupational upward
mobility in the course of one’s working life. This leads to vicious cycles not only of poverty, inequality and slow
growth, but also slow learning and structural change (ECLAC, 2010b).
The importance of the labour market in distributing the benefits of economic growth and in reducing poverty can
be seen by analysing the relative weight of labour incomes in total household income. ECLAC calculations made for
17 Latin American countries around 2013 indicate that on average, labour income accounts for 80% of total household
income, for 74% of the incomes of poor households and for 64% of the incomes of households in extreme poverty.
This shows, on the one hand, that a high percentage of the region’s poor and extremely poor participate in the labour
market, but that the incomes they earn there are insufficient to extract them from those levels of poverty, 14 and, on the
other, that improved working conditions and incomes have the potential for overcoming poverty and extreme poverty.
Figure I.12
Latin America (17 countries): share of labour income in total household income
by poverty status, a around 2013
(Percentages)
100
90
80
35.8
25.9
19.3 19.6
70
60
50
40
30
64.2
74.1
80.7 80.4
20
10
0
Indigent households Total poor households b Non-poor households Total households
Labour income
Other income
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulations of data from household surveys conducted in the countries.
a
Simple average for the countries
b
Includes indigent households.
14
ILO defines the working poor as those engaged in the labour market but whose incomes are insufficient for risig above the poverty line (ILO).
In and around 2013, it was calculated that 18.9% of all those employed in Latin America were in that situation (see CEPALSTAT database).
Chapter I
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