The Changing Picture of Inequality in Latin America: Evidence for Three Decades
August 9, 2022
Inequality is one of the most distinctive characteristics of Latin American economies. It is also one of the main social and policy concerns. In a recent paper we document the main patterns and trends of inequality in income and other relevant variables such as earnings, education, housing and access to basic services. We do that by analyzing social indicators constructed with the answers to nationally representative household surveys from almost 30 million Latin Americans in 18 countries.
Improvement and deceleration
Income inequality has significantly changed in all the economies of the region over the recent decades. The pattern has been clear: increase in the 1990s, strong reduction over the 2000s and slowdown or even stagnation in the 2010s. The study does not include data for 2020, but all estimations and projections suggest that the COVID-19 pandemic has had an impact on economic inequality.
Although changes have been remarkable in some periods (most notably in the early-mid 2000s), they were clearly insufficient to transform the basic characteristics of Latin American income distributions. The region remains among the most unequal in the world, along with sub-Saharan Africa. Latin America has significantly higher income inequality than its degree of development would predict.
The labor market
Although there have been some improvements over the last three decades, the evidence suggests that changes toward lower dispersion in labor market outcomes have been slowing down in recent years:
- increases in labor force participation and employment among (mainly female) unskilled workers have decelerated since the mid-2000s
- the gap in hours worked continues growing
- the reduction in wage gaps has substantially slowed, and
- gaps in formality rates are falling very slowly and are still at levels higher than in the early 1990s.
The paper extends the inequality analysis to other variables beyond income: education, housing and basic services. In all countries there was a widespread and rather uniform rise in years of education: the gaps have remained almost unchanged. Instead, gaps in net enrollment rates have fallen at all educational levels. That reduction has been less impressive in the 2010s, even at the secondary and tertiary levels where enrollment rates are still far from 100%.
The paper stresses two additional concerns regarding education and inequality: (i) the wide differences in education quality, larger than in other regions of the world, and (ii) increasing levels of public-private school segregation, which raises concerns over the degree of social cohesion in the near future.
The patterns of economic inequality in Latin America over the last decades can be summarized with three simple conclusions: there were improvements; they were not enough; they have slowed.
 Indicators are taken from SEDLAC, a joint initiative of CEDLAS-UNLP and The World Bank.