WASHINGTON, D.C. – A report released last week by the World Bank announced findings that inequality has fallen in Latin America; in 2011, more people were part of the middle class than living in poverty. This news was well-received in a region where high levels of inequality have prevailed for decades.
The report entitled “Shifting Gears to Accelerate Shared Propensity in Latin America and the Caribbean” acknowledges that a decade of strong economic growth within the region was responsible for and increase in employment and decrease in wage inequality. In addition, average real incomes have risen by more than 25% since the turn of the millennium, and since the lower wages have been increasing at a faster rate than the regional average, it is the poorest 40% of people who have benefitted the most. Together, these factors have contributed to an unprecedented reduction in poverty and an increase in prosperity for all levels of society.
Embracing this new age of increased equality is especially important in order to promote economic growth rates. The report details that, “Equity-oriented policies can enhance a region’s capacity to grow in a sustained manner. Enabling people who are currently marginalized to improve their living conditions will unleash their inherent economic potential, increasing overall productivity and thus spurring growth.” In addition, the region has reduced their Gini coefficient, which measures the difference between the highest and lowest income in a country on a scaled of 1 to 100. Latin America now records a 50 on the scale, down 4 points from 54.
Challenges still remain for the region. With 80 million people still living in poverty in Latin America, the risk of those now considered to be in the middle class falling back into poverty is high. The region faces threats from unstable economic markets and the effects of climate change, and the levels of growth need to continue to rise if they are to meet the U.N. Millennium Development Goal of eradicating poverty by 2030.
Realistically, however, it is believed that it will be much longer before Latin America reaches the level of stability of rich countries. Louise Cord, director of the Gender and Development Group at the World Bank, explained that, “Latin America is two generations away from reaching the welfare system of the most developed nations in the OECD.”
Despite the fact that Latin America still has a long way to go, the report produces promising statistics that show the region is heading in the right direction. By maintaining a sustainable fiscal policy, strengthening institutions, enabling well-functioning markets and improving risk management, the report predicts that the region will be able to continue its upward growth trend, and in turn reduce inequality, thus lifting even more people out of poverty.
– Chloe Isacke