ECLAC: High Levels of Inequality in Latin America Constitute an Obstacle to Sustainable Development

Between 2008 and 2015, income distribution inequality among people in Latin America decreased thanks to countries’ prioritization of social development objectives, but the pace of decline slowed between 2012 and 2015 and current levels remain very high for the goal of achieving sustainable development, the Economic Commission for Latin America and the Caribbean (ECLAC) warned today.

Income distribution is just one of the dimensions of inequality analyzed in the annual report entitled Social Panorama of Latin America 2016, presented by ECLAC’s Executive Secretary, Alicia Bárcena, at a press conference in Santiago, Chile. The study also addresses inequalities between men and women in the use of time, those associated with ethnic-racial status, and others related to different stages of the life cycle.

“Inequality is a historical and structural characteristic of Latin American and Caribbean societies, which manifests itself via multiple vicious circuits. Advancing toward its significant reduction is one of the goals of the 2030 Agenda for Sustainable Development, signed by all the countries of the region in 2015. This agenda advocates for leaving no one behind,” Alicia Bárcena stated.

In 2015, the Gini coefficient on personal income showed an average value of 0.469 for 17 countries in Latin America (0 represents the absence of inequality and 1 maximum inequality), a level considered to be high. Although the index fell 1.2% annually on average between 2008 and 2012, the pace of decline halved between 2012 and 2015 (0.6% annually).

This progress was driven by a relative improvement in wage income among the lowest-income sectors, thanks to active policies carried out in various countries, such as the formalization of employment and real increases in the minimum wage, ECLAC explains. Also noteworthy was the increase in monetary transfers toward lower-income strata.

Nonetheless, through a complementary analysis of functional income distribution in the region, it can be seen that the recent distributive improvements were not necessarily associated with a more equitable division of capital and labor.

This edition of the Social Panorama also calls attention to the structure of property (physical and financial assets) as a fundamental factor for reproducing inequality in the region. Through a case study, it verifies that wealth distribution is even more unequal than what is measured by people’s income alone.

For that reason, ECLAC insists on the need to foster a progressive structural change in Latin America and the Caribbean that generates quality jobs, with rights and social protection; greater levels of productivity; and better recompense of the labor factor.

Furthermore, the report warns that women continue to be overrepresented in the lower-income quintiles and that their total work time (which is equivalent to adding the hours dedicated to unpaid domestic and care work to those dedicated to paid work) is greater than that of men, which limits their economic autonomy.

Women dedicate up to one third of their time to unpaid domestic and care work, versus just 10% for men. What’s more, the economic value of the unpaid work carried out in households – which is not accounted for in the GDP – is equivalent to approximately one fifth of Gross Domestic Product, the regional body underscores.

Ethnic-racial status is another factor of structural inequality in Latin America, ECLAC affirms. About 130 million Afro-descendant people are living in the region (2015), or approximately 21% of the total population. Although Brazil and Cuba concentrate 91% of the regional total, the Afro-descendant population is present in all Latin American countries. In 14 of these, government institutions and mechanisms have been created to fight racism and promote racial equality while legislation to protect their rights has been strengthened.

This population group is overrepresented in the lowest-income socioeconomic stratum and suffers deep inequalities in all areas of social development, which are expressed, for example, in higher rates of infant and maternal mortality, of teenage pregnancy and of unemployment, and lower wage income (in comparison to non-Afro-descendants), the study reveals.

The chapter focused on social spending indicates that it reached a historic high in 2015: 10.5% of GDP for the central government and 14.5% of GDP for the public sector (as a simple regional average). Social protection (5%), education (4.6%) and health (3.4%) continue to be the areas of greatest importance in relation to GDP.

Despite this, budgets for social spending in 2016-2017 are contracting in the majority of countries, while GDP estimates generally indicate moderate growth. As a result, ECLAC is calling on countries to protect and safeguard the financing of social policies to give sustainability to the progress made and to confront current challenges.

It is necessary to take a systemic approach to deactivate the vicious circuits of inequality, the Commission highlights. Public policies must guarantee the entitlement to rights; productive and quality work must be recognized and advanced as the key to equality and the quintessential instrument for forging well-being; and social protection must be made universal over the course of the life cycle (childhood and adolescence, youth, adulthood and old age), with a perspective that is sensitive to differences, ECLAC recommends.