New Crop Poverty Brief 14: Current trends in Poverty Reduction in Latin America
Latin America experienced six years of sustained economic growth from 2003 to 2008, before the international crisis.This performance was accompanied by a positive behaviour of social and labour market indicators as well as of income distribution. Less inequality and higher incomes resulted in lower rates of poverty and extreme poverty and a decrease in the number of poor people. These improvements are in stark contrast to the situation in the 1980’s and 1990’s. But the reduction in poverty and inequality is not a simple consequence of economic growth as this brief shows.
Therefore, it is worth analysing the factors associated with poverty reduction in Latin American countries during the last decade. In particular it is relevant to:
(1) assess the role of the labour market, social policies and demographic changes in transitions into/ out of poverty;
(2) evaluate whether the observed differences in households’ poverty flows can be mostly explained by differences in the probability of certain types of events (such as obtaining a job) occurring or by these events having differing impacts;
(3) determine to what extent the composition of households affects poverty dynamics.
This Poverty Brief argues that:
• Although many poor households in Argentina, Brazil, Costa Rica, Ecuador and Peru have experienced events that would potentially allow them to exit poverty, very few have in fact exited. For most, income increases have not been sufficient to change their poverty status
• Events linked to the labour market were the most important in producing income movements. These events include changes in employment rate, worked hours and hourly wages. However, most new jobs were informal, which implies low earnings and, in turn, a limited impact on poverty exit rates.
• Public cash transfers and events associated with demographic changes did not prove influential in poverty entries or exits
• Households with children not only have a higher probability of falling into poverty when exposed to negative events, but also lack the necessary means in order to exit from poverty rapidly
• Two main pillars arise as guide for policy design: systematic improvement of labour conditions and construction and/or extension of a social protection system based on contributory and noncontributory components.